[Federal Register Volume 59, Number 136 (Monday, July 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16886]


[[Page Unknown]]

[Federal Register: July 18, 1994]


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Part III





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 880, et al.




Preferences for Admission to Assisted Housing; Final Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Parts 880, 881, 882, 883, 884, 885, 886, 889, 904, 905, 906 
and 960

[Docket No. R-94-1671; FR-3122-F-03]
RIN 2501-AB35

 
Preferences for Admission to Assisted Housing

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: This document revises the tenant selection preference 
provisions of regulations of several project-based assisted housing 
programs. The rule implements a statutory change that decreases the 
number of families that must be admitted on the basis of qualifying for 
a federal selection preference and specifically authorizes adoption of 
local selection preferences by housing agencies to be used in admitting 
some applicants. If a housing agency wants to use such local 
preferences, the rule requires the agency to adopt ones that respond to 
local housing needs and priorities after conducting public hearings. If 
the owner of a project assisted under one of the covered Section 8 
programs wants to admit applicants that do not qualify for the federal 
preferences, the owner would be required to use the housing agency's 
duly adopted local preferences for the Section 8 Certificate and 
Voucher program.
    With respect to the public housing, Indian housing, and Section 8 
Moderate Rehabilitation programs, the rule also disqualifies from a 
selection preference for three years any individual or family that has 
been evicted from certain HUD assisted housing for drug-related 
criminal activity.

EFFECTIVE DATE: August 17, 1994, except for Secs. 905.303(b)(2)(i) and 
960.211(b)(2)(i), which become effective January 18, 1995.

FOR FURTHER INFORMATION CONTACT: For the public housing and Section 8 
Moderate Rehabilitation programs (Parts 882, 904, and 960), Edward 
Whipple, Director, Occupancy Division, Office of Public Housing, (202) 
708-0744 (voice); (202) 708-9300 (TDD).
    For the Section 8 programs except for the Moderate Rehabilitation 
program (Parts 880, 881, 883, 884, 885, 886, and 889), Barbara D. 
Hunter, Acting Director, Planning and Procedures Division, Office of 
Multifamily Housing, (202) 708-3944 (voice); (202) 708-4594 (TDD).
    For the Indian housing programs (Part 905), Dominic A. Nessi, 
Director, Office of Native American Housing, (202) 708-1015 (voice); 
(202) 708-0850 (TDD).
    For the Section 5(h) homeownership program (Part 906), Gary F. Van 
Buskirk, Office of Resident Initiatives, (202) 708-4233 (voice); (202) 
708-0850 (TDD).
    None of these telephone numbers is toll-free. All of the 
individuals listed are located at the Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410.

SUPPLEMENTARY INFORMATION: The information collection requirements for 
the preference provisions of the assisted housing programs are included 
in the paperwork burden of the application procedures and have been 
approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1980 (42 U.S.C. 3501-3520) under approval 
numbers 2502-0372, for the programs administered by the Office of 
Housing, 2577-0105 for the Indian housing and public housing programs, 
and 2577-0169 for the Section 8 Moderate Rehabilitation program.

Table of Contents

I. Background
II. Response to Public Comments
    A. Overall System of Preferences
    1. Counting Federal Preference and Local Preference Admissions
    2. Management of Waiting Lists; Ranking Preferences
    3. Non-Preference Selection Issues
    4. Preference Disqualification for Eviction Based on Drug-
Related Activity
    5. Eligibility of Public Housing Residents for Federal 
Preference
    B. Preference for Working Families
    C. Broad Range of Incomes
    D. Residency Preference
    E. Other Local Preferences
    F. Definitions of Federal Preferences
    1. Flexibility
    2. Substandard Housing
    3. Involuntary Displacement
    4. Rent Burden
    G. Interaction of Section 8 and Public Housing
III. Transition
IV. Findings and Certifications
    A. Impact on the Economy
    B. Impact on the Environment
    C. Federalism Impact
    D. Impact on the Family
    E. Impact on Small Entities
    F. Regulatory Agenda
    G. Public Reporting Burden
    H. Catalog

I. Background

    This final rule is being issued pursuant to the Housing and 
Community Development Act of 1992 (Pub. L. 102-550, 106 Stat. 3672, 
approved October 28, 1992). Section 104 of that Act requires that the 
Department give notice and opportunity for public comment before 
issuing a rule for effect. That section also requires issuance of a 
final rule to implement the tenant selection preference provisions 
originally enacted by the National Affordable Housing Act (Pub. L. 101-
625, 104 Stat. 4079, approved November 28, 1990), no later than April 
26, 1993, to take effect upon issuance.
    Although the deadline for issuance of a final rule had passed, the 
Department published a proposed rule, as required by the statute, on 
August 25, 1993 (58 FR 44968) to solicit public comments on its 
content. See the final rule published elsewhere in this issue of the 
Federal Register for the provisions dealing with the tenant selection 
preference provisions enacted in 1990 that are not covered by this 
rule.
    One additional statutory amendment enacted since the publication of 
the proposed rule has been implemented in this final rule. That is to 
add to the examples of owner action that qualifies an applicant for the 
involuntary displacement federal preference, ``displacement because of 
disposition of a multifamily housing project under section 203 of the 
Housing and Community Development Amendments of 1978,'' in accordance 
with the amendments made by section 101(c) of the Multifamily Housing 
Property Disposition Reform Act of 1994 (108 Stat. 342).
    This rule will take effect 30 days following publication, except 
for the provisions requiring that a housing agency must adopt local 
preferences for admission of families that do not qualify for federal 
preference only after conducting public hearings. Those provisions, 
Secs. 905.303(b)(2)(i) and 960.211(b)(2)(i), do not become effective 
until 6 months after publication of this rule, because it may take HAs 
that long to comply with the hearing requirement. Other provisions of 
the rule, such as the use of ranking preferences for organizing an 
owner's list of applicants who are federal preference holders, may be 
implemented without conducting public hearings. Since the review of 
residency preferences is to be handled in a separate rulemaking, 
residency preferences are unaffected by this rule.

II. Response to Public Comments

A. Overall System of Preferences

1. Counting Federal Preference and Local Preference Admissions
    There were several criticisms of the way the proposed rule provided 
for counting an admission as either a federal preference admission or a 
local preference admission. Permitting admission of an applicant who 
does not qualify for a federal preference to count as a federal 
preference admission when there is no federal preference holder 
eligible for the assistance (so long as the applicant is not chosen 
using a local income-based preference) was criticized as unjustified 
under the statute. Concern was expressed about the difficulty of 
maintaining the data necessary to document that, on the date of 
admission, there were no similarly situated applicants who qualified 
for a federal preference.
    The language of the final rule dealing with this issue differs 
somewhat from that of the proposed rule. It frames the ``counting'' in 
terms of a limit on the number of ``local preference'' admissions that 
can be made during a one-year period. Only 30 or 50 percent of annual 
admissions, depending on the program involved, may be families selected 
on the basis of local preference. Under the rule, a family that 
qualifies for a ``federal preference'' is not precluded from being 
admitted on the basis of its ``local preference,'' but the admission 
would be counted against the HA's local preference limit.
    This method of counting was developed to respond to the situation 
that occurs with some frequency, particularly with respect to the 
project-based Section 8 programs. There may not be the required 
percentage (70%) of federal preference holders available to occupy a 
project. Since the concept of a ``preference'' operates when there is 
competition between a family that qualifies for it and one that does 
not, it is incongruous to apply the limit when there is no such 
competition. This method of counting may provide somewhat of a 
documentation problem, but it offers infinitely more flexibility in the 
admissions procedures in areas where there is not an abundant supply of 
federal preference holders.
    One commenter asked at what
point the percentages must be met--throughout the year, end of calendar 
year, end of fiscal year. The final rule continues the practice of 
referring only to annual admissions. The housing agency or owner may 
determine what 12-month period is used for this purpose.
    One commenter asked why the percentage of local preference 
admissions is different in the various programs, and, in particular, 
why the percentage for Indian housing (30%) is different from the 
percentage for public housing (50%). The percentages were specified in 
sections 501 and 545 of NAHA: 10% for tenant-based assistance, and 30% 
for project-based assistance. In the Housing and Community Development 
Act of 1992, the percentage was increased for public housing to 50%. 
However, since this change did not specifically refer to its 
applicability to Indian housing, it did not apply (by virtue of section 
201(b)(2) of the 1937 Act, 42 U.S.C. 1437aa(b)(2)). Therefore, the 
percentage that still applies to Indian housing is 30%.
    While the Department believes that this difference in percentages 
of local preference admissions between public housing and Indian 
housing is the result of an oversight on the part of Congress, it does 
not have the discretion to change the law and expand the percentage for 
IHAs without legislative change.
2. Management of Waiting Lists; Ranking Preferences
    Several commenters urged the rule to specify one particular way of 
managing waiting lists. They suggested that there should be three 
categories of applicants on the waiting list: those with federal 
preference, those with local preference, and those with no preference. 
Within each group, the applicants could then be ordered by date and 
time of application. If no other ``ranking preferences'' were applied, 
the system would be easier to understand for applicants, Housing Agency 
(HA) employees, and anyone attempting to audit the system. The 
commenter suggested that this system be described as an option.
    The Department agrees that such a system is permissible under the 
rule and may be suitable for many HAs. No HA or owner is required to 
use ranking preferences to select among federal preference holders. 
However, many HAs may have goals with respect to their own 
circumstances that warrant the use of ranking preferences. For example, 
if an HA determined that applicants were refusing offers of units 
because of the racial composition of the project or the location, it 
could adopt a ranking preference for applicants that had not previously 
been offered a unit or who had not refused an offer other than for good 
cause. As another example, an HA or owner may have determined that it 
wants to provide role models for children living in its developments, 
where most families are on public assistance, and therefore adopts a 
preference for working families.
    Other commenters suggested that HAs should not be allowed to rank 
federal preference holders through the use of local preferences, 
because that practice would defeat the purpose of requiring federal 
preferences. Under current regulations, HAs and owners are permitted to 
use their own system to select among applicants who qualify for a 
federal preference. The use of these ``ranking preferences'' has 
allowed HAs and owners to address local objectives while meeting the 
statutory requirement to serve federal preference holders. ``Ranking 
preferences'' is the term used in this rule and preamble for factors 
used only to distinguish among federal preference-holders, whereas 
``local preferences'' is used to refer to those factors adopted after 
the hearing procedure to use in admitting applicants as an alternative 
to admission of federal preference holders.
    This rule continues to permit selecting among federal preference 
holders according to ranking preferences. Permitting different elements 
of federal preference to be given differing weight, which the current 
rule has permitted, is similar to permitting the use of other ranking 
preferences.
    The statutory change that is being implemented in this rule is one 
that opens up the admissions process to more flexibility for local 
choice and increasing the percentage of locally based admissions 
preferences for other programs. The Department believes that it would 
be contrary to the spirit of that statute to use this rule to limit the 
existing practices of using ranking preferences or to prescribe one 
method of managing a waiting list.
    Another commenter stated that date and time should not be 
considered independently for federal preference holders and for local 
preference holders. The rule does not prescribe such a result. An 
applicant should be placed on every preference's waiting list (federal 
and local) for which the persons qualifies, one commenter suggested. 
This is a permissible method of administering preferences under the 
rule.
    Ranking preferences should be the subject of public hearings, one 
commenter advocated, suggesting that HUD should review these 
preferences for their impact on fair housing goals. Another commenter 
expressed the view that ranking preferences should not be required to 
be the subject of a public hearing.
    In fact, HUD does periodic monitoring reviews of HA activities to 
assure that there are no violations of fair housing requirements. 
Owners' preference systems are also subject to review for fair housing 
impact, if they use residency preferences or any system of local 
preferences. If citizens in a particular jurisdiction wish to challenge 
the ranking preferences used by an HA, they may raise the issue in the 
required public hearing if the HA chooses to use a system of local 
preferences.
3. Non-Preference Selection Issues
    Commenters praised the recognition given to the question of 
matching family characteristics to the unit. That provision of the 
proposed rule is retained in the final rule.
    One commenter recommended that the rule be more specific about the 
minimum and maximum family sizes for units. It suggested that the 
Occupancy Task Force's recommendation that HAs inform applicants of the 
minimum and maximum sizes for which they qualify and let them decide 
the size of unit(s) for which they would like to be considered be 
embodied in the rule. Although the Department believes this approach 
may be useful, the Department intends to address it in a separate 
proposed rulemaking to be instituted in the near future.
4. Preference Disqualification for Eviction Based on Drug-Related 
Activity
    There was general approval of the disqualification from a 
preference for persons evicted from housing assisted under United 
States Housing Act of 1937 (``1937 Act'') for drug-related criminal 
activity. A suggestion was made that the disqualification should be 
extended to evictions from State-aided housing, as well. There was also 
a complaint from one HA that it should not be required to research 
evictions from housing programs that it does not administer. The rule 
provides only what the statute requires: disqualification from a 
preference for families evicted on this basis from housing assisted 
under the 1937 Act. However, the statute does not limit the use of 
general screening criteria that an HA may apply to all applicants.
    This disqualification applies to the public housing, Indian 
housing, and Section 8 Existing Housing programs. The Section 8 
Existing Housing programs covered by this rule are the Moderate 
Rehabilitation program (Part 882, Subparts D and E), the Loan 
Management Setaside program (Part 886, Subpart A), and the Property 
Disposition program (Part 886, Subpart C). The other Section 8 programs 
covered by this rulemaking are not subject to this disqualification.
    One question raised by commenters was when the three year 
disqualification starts to run--from the date of eviction or the date 
the family applies for assistance. The statute states that the 
disqualification is based on the eviction. Another question was whether 
a family can be prevented from applying for assistance until the three 
years has expired. There is no legal basis for a refusal to accept an 
application, but such an applicant would not qualify for a preference 
until the expiration of the three year period. In addition, an owner or 
HA may screen applicants for previous criminal activity as well as 
disruptive behavior and other factors at any point, so long as it 
considers mitigating circumstances, if it has a stated policy to that 
effect.
    One organization suggested that an eviction for drug use, as 
distinguished from drug distribution, should not be considered an 
eviction for drug-related criminal activity. However, the rule covering 
when such evictions are authorized (24 CFR 966.4) specifies that drug 
use is a ``drug-related criminal activity'' for which eviction is 
appropriate.
    The issue of what is successful completion of an approved 
rehabilitation of a person evicted for drug-related criminal activity 
was also raised. A few HAs suggested that HUD should provide examples. 
One example suggested by another commenter was completion of a drug 
rehabilitation program that is federally funded. As a test of 
``successful completion'' of a program, an HA could require 
certification from a health professional that the person was tested and 
found drug free on a particular date before admission. On this issue, 
as on a number of others, the Department prefers to give maximum 
flexibility to HAs to adopt standards that make sense in their own 
communities.
    Guidance was also sought by a commenter for adequate proof that an 
individual did not participate in or have knowledge of drug-related 
criminal activity--a basis for permitting members of a family that had 
been evicted to distinguish themselves from the family member who had 
been the cause of a previous eviction. Again, the Department leaves 
this type of determination to the HA's best judgment.
    One commenter suggested that persons undergoing such rehabilitation 
or who have completed it are entitled to reasonable accommodation as 
``disabled persons.'' Even if such persons are ``disabled persons,'' 
the specific statutory disqualification applies unless the HA or owner 
has determined that there has been successful completion of an 
appropriate program by the person evicted for drug-related criminal 
activity.
5. Eligibility of Public Housing Residents for Federal Preference
    One commenter expressed concern about a resident of an assisted 
project never being able to establish eligibility for a federal 
preference because of an assumption that all assisted housing is not 
substandard. The commenter asked that HUD at least prohibit a housing 
provider from categorically refusing to consider applicants residing in 
assisted housing based on presumptive ineligibility for a federal 
preference. The Department agrees that each family's application should 
be considered on the facts presented by its own situation, rather than 
automatically treated in a particular way because of residency in 
another type of assisted housing. The rule has been revised to include 
such a provision.
    The commenter also sought assurance in the rule that an applicant 
for the Section 8 program who had accepted a unit in a public housing 
development who had originally qualified for a federal preference would 
be permitted to retain that preference on the Section 8 waiting list. 
That issue is addressed in the rule being published concerning 
admissions issues in Section 8 tenant-based assistance.

B. Preference for Working Families

    Public comments addressed the question of a preference for working 
families in several respects. One comment requested that HUD clarify 
whether a local preference can be given for working families, designed 
to achieve a broad range of incomes, to permit admission of a higher 
income working family before a lower income non-working family whose 
place on the waiting list is higher. Other comments were received on 
the proposed language of Sec. 960.205 permitting a preference based on 
a family's employment status. One housing agency and two organizations 
of housing agencies expressed approval of the change, and a legal 
services organization expressed disapproval of this change.
    The Department is convinced that housing agencies must have the 
flexibility to give preference to working families to assure diversity 
in the residency of projects and to include families who can serve as 
role models for other families. Consequently, the final rule preserves 
the removal of the current rule's prohibition on using employment as a 
selection criterion.
    Moreover, an HA is free to adopt a preference for working families 
as a ``local preference'' for admission of families who do not qualify 
for a ``federal preference'', as well as to use such a criterion as a 
``ranking preference'', to be used to select among applicants who do 
qualify for a ``federal preference.'' Housing owners also may use this 
criterion as a ``ranking preference'', and as a ``local preference'' if 
it is included in the local preference system adopted by the relevant 
HA for the Section 8 Certificate and Voucher programs.
    There are, however, two limits on the use of a preference for 
working families. First, the preference may not be administered in a 
way that will violate the legal prohibitions against discrimination. 
Second, the preference may not be used in a way that will violate the 
legal prohibition contained in section 16 of the United States Housing 
Act of 1937 (42 U.S.C. 1437n) against selecting a higher income 
applicant before a lower income applicant who is higher on the waiting 
list.
    Both of these limits are expressed in an example of the use of a 
ranking preference in the rule: this type of preference may be used so 
long as the prohibition against selection of higher income families and 
the nondiscrimination provisions that protect against discrimination on 
the basis of age or disability are not violated. If such a preference 
is used, it may not give greater weight to an applicant based on the 
amount of employment income, and an applicant household shall be given 
the benefit of the preference if the head and spouse, or sole member, 
are age 62 or older, or are receiving social security disability or 
supplemental security income disability benefits, or any other payments 
based on an individual's inability to work. The owner also could give 
preference to graduates of, as well as active participants in, 
educational and training programs that are designed to prepare 
individuals for the job market.
    When used as a ``local preference'' instead of as a ``ranking 
preference,'' the concern about selection of a higher income applicant 
is not a limitation if it is being used in the public housing program 
or the Indian housing program. In these programs, a local preference 
for working families, designed to achieve a broad range of incomes, may 
be used to admit a higher income working family over a lower income 
non-working family whose place on the waiting list is higher.
    The distinction between programs is made because of specific 
language found in section 16 with respect to public housing that 
exempts such projects when ``local preferences'' are being used (to 
attain a broad range of incomes, presumably), and because the section 
16 restriction does not apply to Indian housing. The nondiscrimination 
limitation does continue to apply when such a preference is applied as 
a local preference. It should be noted that section 16's exception for 
IHAs permits them to use income ranges as a local preference, ranking 
preference, or both.
    Housing agencies are not the only entities that may avail 
themselves of a preference for working families. Private owners may 
also adopt such a preference as a ranking preference--with both limits 
described above applicable to them.

C. Broad Range of Incomes

    The statutory requirement for an HA to seek a tenancy that 
represents a broad range of incomes applies to public housing and 
Indian housing, but not to the Section 8 program. The rule's 
elimination of the requirement for studies of the income level of 
families in an HA's jurisdiction was praised as beneficial, while the 
rule's retention of the requirement that an HA's admission policies 
further selection of families with a broad range of incomes was 
praised. One commenter also commended the rule for recognizing that the 
goal of attaining residents with a broad range of incomes might be 
furthered through means other than local preferences.
    One commenter sought approval of a practice of selection of 
applicants from waiting lists of federal preference holders organized 
by income within the category of very low-income families where higher 
income families would be selected ahead of lower income families--all 
from the category of very low income families. The commenter argued 
that section 16 of the 1937 Act does not prohibit such use of income 
categories for federal preference holders so long as the family 
selected is a very low-income family. The Department's legal 
interpretation is that selection of higher income families over lower 
income families that are higher on the waiting list is permitted only 
pursuant to admission on the basis of a local preference. Therefore, a 
practice as described above, which involves federal preference 
admissions, would violate our interpretation of the law.
    One commenter asked what is meant by the term ``project'' in the 
requirement that families with a broad range of incomes be sought for 
each project. The term ``project'' is used in the public housing 
program to mean the entity with a single project number.
    When an HA has only scattered sites or small concentrations of 
assisted units, how is the requirement to be applied? It can be applied 
to the project that includes several sites. The regulatory language 
focuses on the goal to be achieved, rather than the specific method 
used by the HA.
    Can a rural HA use each waiting list (for a geographical area) as a 
project? If so, the rent range policy can be implemented in a manner 
that would obviate the need for operating subsidy. If an HA determines 
that it can achieve the broad range of income in each project result by 
applying an income range local preference for a group of projects, HUD 
would not object to that procedure.
    The language of Sec. 960.204(a)(2)(i) on avoiding concentrations of 
families with serious social problems should be revised to eliminate 
the reference to ``low-income families'' and to emphasize preventing 
concentrations of ``the most economically deprived families [with 
serious social problems].'' The Department agrees, and the rule has 
been revised accordingly.

D. Residency Preference

    There was great praise for and great criticism of the requirement 
for advance HUD approval of the use of residency preferences in all of 
the programs covered by this rule. The praise was based on the greater 
assurance the procedure would give to furthering fair housing goals, an 
objective that HUD is charged with advancing. The criticism focused on 
the lack of stated criteria to be used for disapproving residency 
preferences and the lack of a mechanism for HAs to challenge a 
disapproval action.
    The Department agrees with the commenters that residency 
preferences need to be reviewed for their impact on fair housing goals. 
The Department also agrees that more specific criteria need to be 
provided for HAs to use in assessing the impact of any residency 
preference they might consider adopting. Therefore, a separate 
rulemaking is being initiated to provide the opportunity for public 
comment on criteria that the Department is developing. Until that rule 
takes effect, the current requirements with respect to residency 
preferences will continue to apply.

E. Other Local Preferences

    Commenters suggested that the rule text should list the statutory 
examples of local preferences. Since the list is only advisory, the 
Department believes it unnecessary to include it in the rule. However, 
the examples (from section 545 of the Cranston-Gonzalez National 
Affordable Housing Act) are repeated here, for reference:

--Assisting very low-income families who either reside in transitional 
housing assisted under the McKinney Act or participate in a program 
designed to provide public assistance recipients with greater access to 
employment and educational opportunities;
--Assisting families identified by local public agencies involved in 
providing for the welfare of children as having a lack of adequate 
housing that is a primary factor in the imminent placement of a child 
in foster care, or in preventing the discharge of a child from foster 
care and reunification with the child's family;
--Assisting youth, upon discharge from foster care, in cases in which 
return to the family or extended family or adoption is not available; 
and
--Assisting persons displaced by the rental rehabilitation program.
--Assisting disabled veterans who are being discharged from a medical 
facility but do not have an accessible unit to which to return.
--Achieving other objectives of national housing policy as affirmed by 
Congress.

    Another commenter suggested that the preamble should give more 
useful examples of local preferences. Additional examples of local 
preferences would be preferences for working families, veterans, and 
category of time on the waiting list (such as more than two years).
    While one commenter advocated that any local preferences should be 
required to be consistent with the goal of promoting access to assisted 
housing by those most in need and the objectives of national housing 
policy, another stated that local preferences need not further any of 
the objectives of national housing policy. Yet another commenter urged 
that the local preferences be required to be consistent with the needs 
identified in the jurisdiction's Comprehensive Housing Affordability 
Strategy, unless the HA justifies a variation. Under current policy for 
the public housing program, the Department does not purport to review 
local preferences for approval, despite a suggestion by a commenter to 
the contrary. Therefore, HAs, in consultation with the public in 
hearings, will make the decision about what needs and priorities local 
preferences should serve.
    Various arguments were advanced for circumstances that would 
warrant an exemption for an HA from holding public hearings on the 
adoption of local preferences:

--Date and time for non-federal preference admissions;
--Preferences based on income, to advance the broad range of income 
goal;
--Adoption of preferences, such as a veteran's preference, that are 
required by State law;
--When cost of hearings is high, low response is typical, and the HA is 
a ``high-performing housing authority.''

    The statute requires that an HA establish its written system of 
local priorities after conducting a public hearing to respond to local 
housing needs and priorities. The hearing provides citizens an 
opportunity to suggest alternatives. Since it is required by the 
statute, this rule provides no exemptions from the requirement.
    Some commenters wanted the rule to give more specific requirements 
concerning the hearing: specific requirements for notice to the public 
and public participation in the hearing, and more detail about the 
purpose of the hearing. The Department believes that each HA will 
conduct its hearing in accordance with the federal statute, and with 
State and local laws. Many localities have ordinances concerning the 
conduct of public hearings. The Department has no desire to add to such 
requirements.
    A comment was made that the three month period given in the 
proposed rule for HAs to conduct a public hearing on local preferences 
after the effective date of a final rule was insufficient time. The 
period of time has been lengthened to six months. Of course, HAs are 
encouraged to act as soon as possible after the effective date of this 
rule to establish any system of local preferences in accordance with 
the hearing requirement. However, existing local preferences that have 
not been approved in that manner by the expiration of six months after 
the effective date of this rule will become invalid. Thereafter, until 
the procedure is followed, the only authorized preferences used in 
admitting applicants will be the federal preferences (including any 
ranking preferences).
    One organization recommended that the rule provide that applicants 
denied eligibility for a local preference be given an opportunity to 
contest the denial. The Department believes that this suggestion has 
merit. The final rule extends to denials of local preferences the same 
informal meeting/review process that the current rules provide for 
federal preference denials.
    In the preamble to the proposed rule, an example of a valid local 
preference was stated to be one that would prefer members of one Indian 
tribe over members of other tribes and over non-Indians. Some 
commenters stated that such a preference violates nondiscrimination 
laws. An Indian Housing Authority commented that such a preference 
presumes that all such persons are eligible for its programs, which 
they may not be if tribal law limits eligibility for housing operated 
by the tribal housing authority.
    Under the Indian housing program, there are federal statutory 
provisions that recognize limits to the eligibility of some types of 
housing. (In the Mutual Help Homeownership Opportunity program, non-
Indians may only be admitted under very limited circumstances.) 
Moreover, in recognition of the status of IHAs created under tribal 
law, tribal law as well as federal law governs the operation of the IHA 
programs. Therefore, the example still stands as a legitimate type of 
local preference, but there may not be any need for such a preference.

F. Definitions of Federal Preferences

1. Flexibility for HAs To Define Terms
    One legal services organization stated that HAs should not be 
allowed to adopt their own definitions of the federal preference 
categories because there should be uniformity. Most HAs, as represented 
by an organization of housing administrators and one HA, like this 
flexibility. The statute being implemented by this rule is not a cause 
for a change to the Department's longstanding policy of permitting this 
flexibility.
    Two legal services organizations suggested that HAs be given 
standards for exercising the discretion and that they not be permitted 
to adopt more restrictive definitions (or verification procedures) than 
those set forth in the regulations. In HUD's experience, HAs do not 
seek approval of more restrictive definitions.
    One HA asked for examples of acceptable expansions of the 
definitions. HUD would consider favorably such an expansion as a 
definition of ``income'' for purposes of the rent burden preference to 
use adjusted income instead of annual income. This change would benefit 
larger families, families with large medical expenses, and elderly and 
disabled persons. The Department would also give favorable 
consideration to a definition of ``substandard housing'' that included 
overcrowding, as requested by two commenters.
    A legal services organization advocated that HAs be able to adopt 
their own definitions with respect to all Section 8 programs, as well 
as for their public housing or Indian housing and Section 8 moderate 
rehabilitation programs. HAs have a different role with respect to any 
project-based Section 8 program. In such a case, there is still a 
project owner who is responsible for tenant selection.
    HUD field offices must be directed to give great weight to local 
conditions when reviewing an HA's revised definitions, one organization 
urged. This type of instruction is appropriate for inclusion in the HUD 
handbook, which provides operational guidance, rather than in this 
rule.
    The verification procedures that have been included in the Indian 
housing and public housing rules for federal preferences have been 
optional, and the rule has specifically stated that HAs could adopt 
different procedures. These programs have traditionally given HAs the 
discretion to adopt verification procedures with respect to eligibility 
issues. Only the regulations with respect to federal preferences have 
attempted to specify verification procedures. Therefore, the Department 
is taking this opportunity to deregulate by removing the suggested 
procedures from the regulations for these programs.
    The provision that purports to give HUD authority to specify 
special conditions that would satisfy federal preference definitions 
for owner-administered housing (comparable to the HA's flexibility), 
Sec. 880.614(l), is of no effect, one commenter argued. Any change 
other than an interpretation would require advance publication and 
opportunity for comment.
    Under this rule, HAs administering the public housing and Section 8 
Moderate Rehabilitation programs may adopt local definitions of the 
individual federal preferences. These definitions must be approved by 
HUD, within the requirements of the statute. For Section 8 programs 
where tenants are selected by a private owner, the rule provides that 
HUD may specify additional conditions under which the federal 
preferences can be satisfied, referring to HUD Handbook 4350.3. This 
procedure is comparable to the action taken with respect to HAs in 
approving their proposed definitions that may vary from those specified 
in the regulation.
2. Substandard Housing
    Several HAs and a management agent supported the Department's 
decision not to include overcrowding in the rule's definition of 
``substandard housing.'' They agreed with this position since the term 
is traditionally used (for census purposes, for example) to deal solely 
with the condition of the unit and not its ability to properly house 
the number of occupants residing in it. On the other hand, one HA and a 
few organizations advocating including overcrowding in this definition, 
at least where the extent of overcrowding constitutes a housing code or 
health code violation. Another commenter suggested that overcrowding 
could amount to imminent displacement.
    The final rule maintains virtually the same definition of 
substandard housing. If an HA wants to include overcrowding, it may. If 
an HA believes overcrowding constitutes imminent involuntary 
displacement, it may submit such a definition to HUD for approval. The 
HA may include overcrowding as a ranking preference without HUD 
approval.
    With reference to a person with mobility impairment, one commenter 
urged that the definition of substandard housing should include housing 
that is inaccessible. Since a bathroom that cannot be entered or used 
by a person with a mobility impairment causes the unit to be without a 
``usable flush toilet'' or ``usable bathtub'' for that person, it 
constitutes substandard housing for that person, the commenter argued. 
Given the Department's preference for dealing with the fit of a unit 
with an individual family under the category of involuntary 
displacement, we would prefer to permit qualification under that 
category of preference for a person whose mobility impairment renders 
the person's current unit significantly deficient and the owner cannot 
make changes to the unit as a reasonable accommodation for the disabled 
person. The rule has ben amended to reflect this decision.
    The same commenter also urged coverage under the substandard 
housing category of preference of a person in an institution who is 
ready for discharge but cannot be released because the person's prior 
unit is no longer available. If that person has no housing unit to 
which to return, the person would qualify under the definition of a 
``homeless person,'' discussed below.
    Two organizations urged that the definition of ``homeless person'' 
in the definition of substandard housing be revised to require either 
that the person lacks a fixed, regular and adequate nighttime residence 
or that one has a primary nighttime residence that is a temporary 
shelter, an institution that is a temporary residence for individuals 
to be institutionalized, or a place not intended as habitation for 
human beings. The statute and implementing regulations now require 
satisfaction of both sets of conditions. Therefore, this rule also 
requires that they both be satisfied.
    Commenters advocated that the definition of ``homeless person'' 
should explicitly include persons living in transitional housing, since 
it is temporary housing. The definition has been revised to include 
transitional housing in the examples of temporary living 
accommodations.
    One commenter also had a suggestion with respect to deferring the 
effectiveness of a preference for a family in transitional housing. 
When an applicant in transitional housing reaches the top of the 
waiting list and is selected for housing, the commenter suggested that 
the family be given the option of being admitted or remaining at the 
same place on the waiting list while completing the transitional 
program. The Department agrees that if the applicant is not ready or 
able to leave the transitional housing unit when an offer is made, the 
applicant's rejection of the unit would be for good cause and the 
applicant's qualification for preference would continue. However, the 
rule does not require any change to reflect this position.
3. Involuntary Displacement
    Comments were submitted dealing with the qualification for this 
preference if displacement is anticipated within six months. Some HAs 
erroneously believed that if displacement had occurred more than six 
months before the applicant applied and the applicant had been living 
in temporary quarters, the applicant would lose preference status. 
Another commenter stated that the six month period might present 
insurmountable verification problems. Nothing about this six month 
period is new. It reflects the current rule.
    The language concerning domestic violence victims was praised. One 
commenter wanted acknowledgement in the rule that the HA has a ``right 
to exercise prudent judgment and to establish reasonable criteria for 
determining, on a case-by-case basis, the legitimacy of a claimed 
preference.'' Any standards that an HA wants to establish as part of 
its admissions policy are welcome. Moreover, the language of the final 
rule excluding the alleged abuser from the unit has been made stronger. 
The new language responds to comments by making it clear that the 
alleged abuser may not be included in the household without the advance 
written approval of the HA or owner. Violation of the applicant's 
certification that this person will be excluded is stated as grounds 
for denial or termination of assistance. These revisions should assist 
in assuring that the preference is not claimed unjustifiably.
    Two commenters suggested that an abuser should be permitted to live 
in the unit if the abuser has successfully completed a rehabilitation 
program, and that standards should be provided in the rule to guide the 
HAs and owners in making such a determination. The Department has not 
added anything on this subject to the rule. HAs and owners should use 
their own best judgment on this issue.
    One commenter recommended that the definition of involuntarily 
displaced should be expanded to include a person in an institution who 
is ready for discharge but cannot be released because the person's 
current unit is inaccessible because of disability. This is one of the 
examples given in the statute of a local preference. It is certainly an 
appropriate category of persons to be given a preference under an HA's 
system of local preferences, and would be covered under involuntary 
displacement by mobility impairment, discussed above.
    Two changes have been made in the final rule's definition of 
involuntary displacement--not in response to public comment--but as 
part of the Administration's efforts to support law enforcement 
activities and protect families against hate crimes. A category of 
displacement has been added to cover displacement to avoid reprisals. 
This category is to cover situations where a family member was a 
witness to a crime and the family must be rehoused to avoid risk of 
violence as a result of the person's cooperation with law enforcement 
officials. The second category covers actual or constructive 
displacement caused by ``hate crimes''--actual or threatened physical 
violence or intimidation that is directed against a person or his or 
her property and that is based on the person's race, color, religion, 
sex, national origin, handicap, or familial status.
    Two other changes have been made to improve the organization of the 
discussion of displacement resulting from owner action and to include a 
provision enacted by Congress to cover displacement resulting from HUD 
disposition of a multifamily housing project under section 203 of the 
Housing and Community Development Amendments of 1978 [Multifamily 
Housing Property Disposition Reform Act of 1994, section 101(c), 108 
Stat. 357]. The change with respect to owner action places the non-
exclusive list of examples of owner action with the initial statement 
of that category of involuntary displacement. The addition of the 
element of HUD disposition of a project is added at the end of the 
categories of involuntary displacement.
4. Rent Burden
    There were only two types of comment on the rent burden category of 
federal preference. The first dealt with the 90-day period for 
demonstrating excessive rent burden. The second dealt with the 
exclusion from the definition of rent any utility costs covered by an 
energy assistance program.
    The provision that this preference applies only to applicants who 
experience excessive rent burden for at least 90 days was added to 
assure that applicants would not purposely place themselves in a rent 
burdened situation for a very short period merely to qualify for a 
preference. Eleven commenters favored this approach. Five commenters 
opposed it, indicating that it is unnecessary (because applicants wait 
so long to be admitted) and that it would be burdensome to enforce. 
Although in some areas waiting lists are so long that this 90-day 
provision is unnecessary, there are other areas where waiting lists may 
be short. Where it is unnecessary, it will not have any effect, but 
elsewhere it will help prevent sham preference applications.
    The Department of Health and Human Services submitted the comment 
criticizing the exclusion from rent the amount of costs covered by its 
Low Income Home Energy Assistance Program. It stated that the statute 
authorizing that program prohibits the benefits from being counted as 
income or resources under any federal or state law. HUD has had 
previous correspondence with the HHS on this matter (1989). Our 
position then remains unchanged. Since the amount paid by LIHEAP is not 
included in income of the family, the expense it covers is also not 
counted as a rental expense of the family.

G. Interaction of Section 8 and Public Housing

    It was suggested that this rule explicitly authorize merged waiting 
lists for the Section 8 Certificate/Voucher and public housing 
programs, and that an HA be required to notify the public before it 
actually merges them. The rule for the Section 8 Certificate/Voucher 
program does mention merger of waiting lists. The Department believes 
it is unnecessary to discuss this subject in this rule, as well.
    A few commenters indicated that they thought it would be difficult 
for an HA that maintains one waiting list for its public housing and 
Section 8 programs to comply with the provisions of this rule and the 
one governing the Section 8 Certificate/Voucher rule. The two rules 
have been developed in coordination with each other, and compliance 
with them should not be difficult. If an HA is looking for particular 
characteristics of an applicant when it is selecting a participant for 
one program, it can search its merged list for that characteristic.
    One commenter urged that differences between an HA's Section 8 
program preferences and its public housing program preferences should 
be required to be justified on the basis of statutory differences or 
other compelling reasons. Another commenter stated that the ability to 
adopt different local preferences for the two programs was good. The 
Department disagrees with the former suggestion because it would limit 
HA discretion unnecessarily. The Department believes that HAs should be 
provided flexibility in tailoring their local preferences to local 
needs, and, therefore, agrees with the latter suggestion. Since the HA 
must respond to the public in the development of local preferences, its 
system should not be arbitrary.
    Two commenters asked why a system of local preferences that has 
been approved by HUD (as it is in the Section 8 Certificate/Voucher 
program) must be submitted for approval by a Section 8 project owner. 
It is possible that a system of preferences that is applied to 
applicants selected for a program in which the participants are 
dispersed throughout the jurisdiction may have a very different, and 
discriminatory, impact when applied to a particular project.
    Two commenters objected to the requirement that if an owner wanted 
to use a system of preferences other than the federal preferences it is 
required to use the HA's. This is a statutory requirement. Therefore, 
the commenter who advocated that an owner should be able to submit its 
own system of preferences if the HA in the jurisdiction of the project 
had not adopted any must also be disappointed. The statute does not 
authorize such a practice.
    One organization criticized the provision allowing owners to 
establish their own ranking preferences. It stated that a uniform 
national system of ordering applicants with federal preference by date 
and time only would be fair and easy to monitor. The Department 
recognizes that private owners have invested in their projects and need 
to have some say over how they select tenants, while complying with the 
statutorily required preferences. This is a continuation of existing 
policy, which was not changed by Congress when it made other changes.
    One commenter advocated that owners should be able to select 
tenants by income categories in order to achieve a stable and desirable 
economic mix of residents. However, another commenter pointed out that 
the rule's provision prohibiting income-based admissions in the Section 
8 program must be retained, since such admissions are not authorized 
under the law.
    Commenters objected to permitting an owner to select the HA whose 
local preferences it will apply when there is more than one that has 
jurisdiction in the area where the housing is located. In the Section 8 
program, an HA may operate anywhere it may legally enter into 
contracts--which results in a theoretical multiplicity of HAs with 
jurisdiction over a particular project area. The final rule requires 
use of the local preferences of the HA for the jurisdiction (using the 
statutory language). However, it clarifies that when there is more than 
one HA with jurisdiction, the local preferences of the ``HA for the 
lowest level of government that has jurisdiction where the project is 
located'' are used.

III. Transition

    If an HA has not adopted local preferences following a public 
hearing in accordance with this rule by six months after August 17, 
1994, no local preferences will be in effect, and the federal 
preferences (including any ranking preferences) will be used for all 
admissions until such time as local preferences are duly adopted.

IV. Findings and Certifications

A. Impact on the Economy

    This rule does not constitute a ``major rule'' as that term is 
defined in Section 1(b) of Executive Order 12291, Regulatory Planning 
Process. Analysis of the rule indicates that it does not: (1) Have an 
annual effect on the economy of $100 million or more; (2) cause a major 
increase in costs or prices for consumers, individual industries, 
Federal, State or local government agencies or geographic regions; or 
(3) have a significant adverse effect on competition, employment, 
investment, productivity, innovation or on the ability of United 
States-based enterprises to compete with foreign-based enterprises in 
domestic or export markets.

B. Impact on the Environment

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50 that 
implement section 102(2)(C) of the National Environmental Policy Act of 
1969, 42 U.S.C. 4332. The Finding of No Significant Impact is available 
for public inspection and copying during regular business hours (7:30 
a.m. to 5:30 p.m.) in the Office of the Rules Docket Clerk, room 10276, 
451 Seventh Street, SW., Washington, DC 20410-0500.

C. Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this rule have impact on States or their political 
subdivisions only to the extent required by the statute being 
implemented. The rule specifies to what extent preferences for 
admission of particular categories of applicants that are established 
by the local housing agency, in accordance with a statutorily-
prescribed hearing procedure, may be used to admit participants. The 
only guidelines stated for the local agency's discretion are those 
required by the statute: the preferences are to respond to local 
housing needs and priorities. Since the rule merely carries out a 
statutory mandate and does not create any new significant requirements, 
it is not subject to review under the Executive Order.

D. Impact on the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this rule does not have 
potential for significant impact on family formation, maintenance, and 
general well-being, and, thus is not subject to review under the Order. 
The rule merely carries out the mandate of federal statute with respect 
to admission preferences. (To the extent that an HA adopts a local 
preference for admitting families whose children would otherwise be put 
in foster care, as is suggested by the statute, there would be a 
positive impact on families. However, neither the statute nor the rule 
requires adoption of such a preference.)

E. Impact on Small Entities

    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 
impact on a substantial number of small entities, because it does not 
place major burdens on housing authorities or housing owners.

F. Regulatory Agenda

    This rule was listed as sequence number 1552 under the Office of 
the Secretary in the Department's Semiannual Regulatory Agenda 
published on April 25, 1994 (59 FR 20424, 20440) in accordance with 
Executive Order 12866 and the Regulatory Flexibility Act.

G. Regulatory Review

    This rule was reviewed by the Office of Management and Budget under 
Executive Order 12866, Regulatory Planning and Review. Any changes made 
to the 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 Department's Rules Docket Clerk, room 10276, 451 Seventh St. SW., 
Washington, DC 20410.

H. Catalog

    The Catalog of Federal Domestic Assistance numbers for the programs 
affected by this rule are 14.157, 14.182, 14.850, and 14.856.

List of Subjects

24 CFR Part 880

    Grant programs--housing and community development, Rent subsidies, 
Reporting and record keeping requirements.

24 CFR Part 881

    Grant programs--housing and community development, Rent subsidies, 
Reporting and record keeping requirements.

24 CFR Part 882

    Grant programs--housing and community development, Homeless, Lead 
poisoning, Manufactured homes, Rent subsidies, Reporting and record 
keeping requirements.

24 CFR Part 883

    Grant programs--housing and community development, Rent subsidies, 
Reporting and record keeping requirements.

24 CFR Part 884

    Grant programs--housing and community development, Rent subsidies, 
Reporting and record keeping requirements, Rural areas.

24 CFR Part 885

    Aged, Handicapped, Loan programs--housing and community 
development, Low and moderate income housing, Reporting and record 
keeping requirements.

24 CFR Part 886

    Grant programs--housing and community development, Lead poisoning, 
Rent subsidies, Reporting and record keeping requirements.

24 CFR Part 889

    Aged, Grant programs--housing and community development, Loan 
programs--housing and community development, Low and moderate income 
housing, Rent subsidies, Reporting and record keeping requirements.

24 CFR Part 904

    Grant programs--housing and community development, Loan programs--
housing and community development, Public housing.

24 CFR Part 905

    Aged, Grant programs--Indians, Grant programs--housing and 
community development, Handicapped, Indians, Loan programs--housing and 
community development, Loan programs--Indians, Low and moderate income 
housing, Public housing, Reporting and record keeping requirements.

24 CFR Part 906

    Grant programs--housing and community development, Low and moderate 
income housing, Public housing, Reporting and record keeping 
requirements.

24 CFR Part 960

    Aged, Grant programs--housing and community development, 
Handicapped, Public housing.

    Accordingly, chapters VIII and IX of title 24 of the Code of 
Federal Regulations are amended as follows:

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

    1. The authority citation for part 880 continues to read as 
follows:

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


Sec. 880.603  [Amended]

    2. Section 880.603 is amended by removing from the introductory 
text of paragraph (b) the phrase ``a Federal selection preference in 
accordance with Sec. 880.613'', and by adding in its place the phrase 
``selection preferences in accordance with Secs. 880.613 through 
880.617''; by removing paragraph (b)(1); and by redesignating 
paragraphs (b) (2), (3), and (4) as paragraphs (b) (1), (2), and (3).
    3. Section 880.613 is revised and new Secs. 880.614 through 880.617 
are added to read as follows:


Sec. 880.613  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 880.614(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the owner for use in selecting among applicants that qualify for 
federal preference. See Sec. 880.614(b).
    (3) ``Local preferences'' are preferences that may be established 
by the housing agency administering the Section 8 Certificate and 
Voucher program in the area, for use in selecting among applicants 
without regard to their federal preference status.
    (b) System. The owner must establish a system for selection of 
applicants from the waiting list that includes the following:
    (1) How the federal preferences will be used;
    (2) How any ranking preferences will be used;
    (3) How any local preferences will be used; and
    (4) How any residency preference will be used.
    (c) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The owner may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the owner must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27 and 
100.202(c)(3)). Also, in selection of a family for a unit in a mixed 
population project, the owner will give preference to elderly families 
and disabled families (see subpart D of this part).
    (ii) Singles preference. See part 812 of this chapter.
    (2) Local preference admissions.
    (i) If the owner wants to use preferences to select among 
applicants without regard to their federal preference status, the owner 
must use the local preference system adopted for use in the Section 8 
Certificate and Rental Voucher programs (see Sec. 982.209 of this 
title) by the housing agency for the jurisdiction. If there is more 
than one HA for the jurisdiction, the owner shall use the local 
preference system of the HA for the lowest level of government that has 
jurisdiction where the project is located.
    (ii) Before the owner implements the HA's local preferences, the 
owner must receive approval from the HUD Field Office. HUD shall review 
these preferences to assure that they are applicable with respect to 
any tenant eligibility limitations for the subject housing and that 
they are consistent with HUD requirements pertaining to 
nondiscrimination and the Affirmative Fair Housing Marketing 
objectives. If HUD determines that the local preferences are in 
violation of those requirements, the owner will not be permitted to 
admit applicants on the basis of any local preferences.
    (iii) ``Local preference limit'' means thirty percent of total 
annual admissions to the project. In any year, the number of families 
given preference in admission pursuant to a local preference over 
families with a federal preference may not exceed the local preference 
limit.
    (d) Informing applicants about admission preferences.
    (1) The owner must inform all applicants about available 
preferences and must give applicants an opportunity to show that they 
qualify for available preferences (federal preference, ranking 
preference, or local preference).
    (2) If the owner determines that the notification to all applicants 
on a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the owner may provide 
this notification to fewer than all applicants on the list at any given 
time. The owner must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the owner's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the owner's framework for 
applying the preferences under paragraph (b) of this section and the 
federal preferences claimed by those already on the waiting list, any 
applicant who has not been so notified would receive assistance before 
those who have received notification.
    (e) Residency preferences. (1) Restrictions. Local residency 
requirements are prohibited. With respect to any residency preference, 
applicants who are working or who have been notified that they are 
hired to work in the jurisdiction shall be treated as residents of the 
jurisdiction. A residency preference may not be based on how long the 
applicant has resided in or worked in the jurisdiction.
    (2) HUD review. [Reserved]
    (f) Nondiscrimination. (1) Any selection preferences that are used 
by an owner must be established and administered in accordance with the 
following authorities:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the 
implementing regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
the implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (2) Such preferences also must be consistent with HUD's affirmative 
fair housing objectives and (where applicable) the owner's HUD-approved 
affirmative fair housing marketing plan.
    (g) Income-based admission. The owner may not select a family for 
admission in an order different from the order on the waiting list for 
the purpose of selecting a relatively higher income family for 
admission.
    (h) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the owner determines that an applicant does not qualify for 
a federal preference, ranking preference, or a local preference claimed 
by the applicant, the owner must promptly give the applicant written 
notice of the determination. The notice must contain a brief statement 
of the reasons for the determination, and state that the applicant has 
the right to meet with a representative of the owner to review the 
determination. The meeting may be conducted by any person or persons 
designated by the owner, who may be an officer or employee of the 
owner, including the person who made or reviewed the determination or a 
subordinate employee. The procedures specified in this paragraph (d)(1) 
must be carried out in accordance with HUD's requirements.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against on the basis 
of race, color, religion, sex, national origin, age, disability or 
familial status.
    (Approved by the Office of Management and Budget under OMB 
control number 2502-0372) 
Sec. 880.614  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The owner's system of administering the federal preferences 
may provide for use of ranking preference for selecting among 
applicants who qualify for federal preference.
    (1) The owner could give preference to working families--so long as 
the prohibition of Sec. 880.613(g) against selection based on income 
and the nondiscrimination provisions that protect against 
discrimination on the basis of age or disability are not violated. (If 
an owner adopts such a preference, it may not give greater weight to an 
applicant based on the amount of employment income, and an applicant 
household shall be given the benefit of the preference if the head and 
spouse, or sole member, are age 62 or older or are receiving social 
security disability, supplemental security income disability benefits, 
or any other payments based on an individual's inability to work.) An 
owner could give preference to graduates of, as well as active 
participants in, educational and training programs that are designed to 
prepare individuals for the job market. The owner also could use the 
housing agency's ``local preferences'' for the Section 8 Certificate 
and Voucher programs to rank federal preference holders.
    (2) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference. (1) Basis of federal 
preference.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the owner that 
the family qualifies for federal preference. The owner must accept this 
certification, unless the owner verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the owner must require the applicant to provide information 
needed by the owner to verify that the applicant qualifies for a 
federal preference because of the applicant's current status. The 
applicant's current status must be determined without regard to whether 
there has been a change in the applicant's qualification for a federal 
preference between the time of application and selection for admission, 
including a change from one federal preference category to another.
    (ii) The owner must use the verification procedures in 
Sec. 880.615(c) (involuntary displacement); Sec. 880.616(c) 
(substandard housing); and Sec. 880.617(b) (rent burden).
    (iii) Once the owner has verified an applicant's qualification for 
a federal preference, the owner need not require the applicant to 
provide information needed by the owner to verify such qualification 
again unless:
    (A) The owner determines reverification is desirable because a long 
time has passed since verification, or
    (B) The owner has reasonable grounds to believe that the applicant 
no longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.
    (d) Approval of special conditions satisfying preference 
definitions. HUD may specify additional conditions under which the 
federal preferences, as defined in paragraph (a) of this section, can 
be satisfied. In such cases, appropriate certification of qualification 
must be provided. (See HUD Handbook 4350.3, which is available at HUD 
field offices.)

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 880.615  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (2)(i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The owner must determine, in accordance with HUD's 
administrative instructions, that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant family unless the owner has 
given advance written approval. If the family is admitted, the owner 
may deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The owner may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The owner must determine, in accordance with HUD's 
administrative instructions, that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit.
    An applicant is involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Develoment Amendments of 1978.
    (c) Involuntary displacement preference: Verification. Verification 
of an applicant's involuntary displacement is established by the 
following documentation:
    (1) Displacement by disaster. Certification, in a form prescribed 
by the Secretary, from a unit or agency of government that an applicant 
has been or will be displaced as a result of a disaster that results in 
the uninhabitability of an applicant's unit.
    (2) Displacement by government action. Certification, in a form 
prescribed by the Secretary, from a unit or agency of government that 
an applicant has been or will be displaced by activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by owner action. Certification, in a form 
prescribed by the Secretary, from an owner or owner's agent that an 
applicant had to or will have to vacate a unit by a date certain 
because of owner action.
    (4) Displacement because of domestic violence. Certification, in a 
form prescribed by the Secretary, of displacement because of domestic 
violence from the local police department, social services agency, or 
court of competent jurisdiction, or a clergyman, physician, or public 
or private facility that provides shelter or counseling to the victims 
of domestic violence.
    (5) Displacement to avoid reprisals. A threat assessment by a law 
enforcement agency.
    (6) Displacement by hate crime. Certification by a law enforcement 
agency or other reliable information.
    (7) Displacement by inaccessibility of unit. Certification by a 
health care professional that a family member has a mobility or other 
impairment that makes critical elements of the current unit 
inaccessible and statement by the owner that it is unable to make 
necessary changes to the unit to make it accessible.
    (8) Displacement by HUD disposition of multifamily project. 
Certification by HUD with respect to the disposition.


Sec. 880.616  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.
    (c) Substandard housing preference: verification.
    (1) Verification that an applicant is living in substandard housing 
consists of certification, in a form prescribed by the Secretary, from 
a unit or agency of government or from an applicant's present landlord 
that the applicant's unit is ``substandard housing'' (as described in 
this section).
    (2) In the case of a ``homeless family'' (as described in this 
section), verification consists of certification, in a form prescribed 
by the Secretary, of this status from a public or private facility that 
provides shelter for such individuals, or from the local police 
department or social services agency.


Sec. 880.617  Federal preference: rent burden.

    (a) Rent burden preference: how determined.
    (1) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (2) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (i) ``Family income'' means Monthly Income, as defined in 24 CFR 
813.102.
    (ii) ``Rent'' means:
    (A) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (B) For utilities purchased directly by tenants from utility 
providers:
    (1) The utility allowance for family-purchased utilities and 
services that is used in the HA tenant-based program, or
    (2) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (iii) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (3) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (i) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (ii) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (A) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (B) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (C) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.
    (b) Rent burden preference: verification of income and rent. The 
owner must verify that an applicant is paying more than 50 percent of 
family income for rent, as follows:
    (1) How to verify income. The owner must verify a family's income 
by using the standards and procedures that it uses to verify family 
income under 24 CFR part 813.
    (2) How to verify rent. The owner must verify the amount due to the 
family's landlord (or cooperative) under the lease or occupancy 
agreement:
    (i) By requiring the family to furnish copies of its most recent 
rental (or cooperative charges) receipts (which may include canceled 
checks or money order receipts) or a copy of the family's current lease 
or occupancy agreement, or
    (ii) By contacting the landlord (or cooperative) or its agent 
directly.
    (3) Utilities. To verify the actual amount that a family paid for 
utilities and other housing services, the owner must require the family 
to provide copies of the appropriate bills or receipts, or must obtain 
the information directly from the utility or service supplier.

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

    4. The authority citation for part 881 continues to read as 
follows:

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


Sec. 881.603  [Amended]

    5. Section 881.603 is amended by removing from the introductory 
text of paragraph (b) the phrase, ``a Federal selection preference in 
accordance with Sec. 881.613'', and by adding in its place the phrase, 
``selection preferences in accordance with Secs. 881.613 through 
881.617''.
    6. Section 881.613 is revised and new Secs. 881.614 through 881.617 
are added, to read as follows:


Sec. 881.613  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 881.614(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the owner to use in selecting among applicants that qualify for 
federal preferences. See Sec. 881.614(b).
    (3) ``Local preferences'' are preferences that may be established 
by the housing agency administering the Section 8 Certificate and 
Voucher program in the area, for use in selecting among applicants 
without regard to their federal preference status.
    (b) System. The owner must establish a system for selection of 
applicants from the waiting list that includes the following:
    (1) How the federal preferences will be used;
    (2) How any ranking preferences will be used;
    (3) How any local preferences will be used; and
    (4) How any residency preference will be used.
    (c) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The owner may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the owner must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27 and 
100.202(c)(3)). Also, in selection of a family for a unit in a mixed 
population project, the owner will give preference to elderly families 
and disabled families (see subpart D of this part).
    (ii) Singles preference. See part 812 of this chapter.
    (2) Local preference admissions.
    (i) If the owner wants to use preferences to select among 
applicants without regard to their federal preference status, the owner 
must use the local preference system adopted for use in the Section 8 
Certificate and Rental Voucher programs (see Sec. 982.209 of this 
title) by the housing agency for the jurisdiction. If there is more 
than one HA for the jurisdiction, the owner shall use the local 
preference system of the HA for the lowest level of government that has 
jurisdiction where the project is located.
    (ii) Before the owner implements the HA's local preferences, the 
owner must receive approval from the HUD Field Office. HUD shall review 
these preferences to assure that they are applicable with respect to 
any tenant eligibility limitations for the subject housing and that 
they are consistent with HUD requirements pertaining to 
nondiscrimination and the Affirmative Fair Housing Marketing 
objectives. If HUD determines that the local preferences are in 
violation of those requirements, the owner will not be permitted to 
admit applicants on the basis of any local preferences.
    (iii) ``Local preference limit'' means thirty percent of total 
annual admissions to the project. In any year, the number of families 
given preference in admission pursuant to a local preference over 
families with a federal preference may not exceed the local preference 
limit.
    (d) Informing applicants about admission preferences.
    (1) The owner must inform all applicants about available 
preferences and must give applicants an opportunity to show that they 
qualify for available preferences (federal preference, ranking 
preference, or local preference).
    (2) If the owner determines that the notification to all applicants 
on a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the owner may provide 
this notification to fewer than all applicants on the list at any given 
time. The owner, must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the owner's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the owner's framework for 
applying the preferences under paragraph (b) of this section and the 
federal preferences claimed by those already on the waiting list, any 
applicant who has not been so notified would receive assistance before 
those who have received notification.
    (e) Residency preferences. (1) Restrictions. Local residency 
requirements are prohibited. With respect to any residency preference, 
applicants who are working or who have been notified that they are 
hired to work in the jurisdiction shall be treated as residents of the 
jurisdiction. A residency preference may not be based on how long the 
applicant has resided in or worked in the jurisdiction.
    (2) HUD review. [Reserved]
    (f) Nondiscrimination. (1) Any selection preferences that are used 
by an owner must be established and administered in accordance with the 
following authorities:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the 
implementing regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
the implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (2) Such preferences also must be consistent with HUD's affirmative 
fair housing objectives and (where applicable) the owner's HUD-approved 
affirmative fair housing marketing plan.
    (g) Income-based admission. The owner may not select a family for 
admission in an order different from the order on the waiting list for 
the purpose of selecting a relatively higher income family for 
admission.
    (h) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the owner determines that an applicant does not qualify for 
a federal preference, ranking preference, or a local preference claimed 
by the applicant, the owner must promptly give the applicant written 
notice of the determination. The notice must contain a brief statement 
of the reasons for the determination, and state that the applicant has 
the right to meet with a representative of the owner to review the 
determination. The meeting may be conducted by any person or persons 
designated by the owner, who may be an officer or employee of the 
owner, including the person who made or reviewed the determination or a 
subordinate employee. The procedures specified in this paragraph (h)(1) 
must be carried out in accordance with HUD's requirements.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against on the basis 
of race, color, religion, sex, national origin, age, disability or 
familial status.

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 881.614  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The owner's system of administering the federal preferences 
may provide for use of ranking preference for selecting among 
applicants who qualify for federal preference.
    (1) The owner could give preference to working families--so long as 
the prohibition of Sec. 881.613(g) against selection based on income 
and the nondiscrimination provisions that protect against 
discrimination on the basis of age or disability are not violated. (If 
an owner adopts such a preference, it may not give greater weight to an 
applicant based on the amount of employment income, and an applicant 
household shall be given the benefit of the preference if the head and 
spouse, or sole member is age 62 or older or is receiving social 
security disability, supplemental security income disability benefits, 
or any other payments based on an individual's inability to work.) An 
owner could give preference to graduates of, as well as active 
participants in, educational and training programs that are designed to 
prepare individuals for the job market. The owner also could use the 
housing agency's ``local preferences'' for the Section 8 Certificate 
and Voucher programs to rank federal preference holders.
    (2) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference. (1) Basis of federal 
preference.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the owner that 
the family qualifies for federal preference. The owner must accept this 
certification, unless the owner verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the owner must require the applicant to provide information 
needed by the owner to verify that the applicant qualifies for a 
federal preference because of the applicant's current status. The 
applicant's current status must be determined without regard to whether 
there has been a change in the applicant's qualification for a federal 
preference between the time of application and selection for admission, 
including a change from one federal preference category to another.
    (ii) The owner must use the verification procedures in 
Sec. 881.615(c) (involuntary displacement); Sec. 881.616(c) 
(substandard housing); and Sec. 881.617(b) (rent burden).
    (iii) Once the owner has verified an applicant's qualification for 
a federal preference, the owner need not require the applicant to 
provide information needed by the owner to verify such qualification 
again unless:
    (A) The owner determines reverification is desirable because a long 
time has passed since verification, or
    (B) The owner has reasonable grounds to believe that the applicant 
no longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.
    (d) Approval of special conditions satisfying preference 
definitions. HUD may specify additional conditions under which the 
federal preferences, as defined in paragraph (a) of this section, can 
be satisfied. In such cases, appropriate certification of qualification 
must be provided. (See HUD Handbook 4350.3, which is available at HUD 
field offices.)

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 881.615  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (2)(i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant's family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The owner must determine, in accordance with HUD's 
administrative instructions, that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant's family unless the owner 
has given advance written approval. If the family is admitted, the 
owner may deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The owner may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The owner must determine, in accordance with HUD's 
administrative instructions, that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Development Amendments of 1978.
    (c) Involuntary displacement preference: Verification. Verification 
of an applicant's involuntary displacement is established by the 
following documentation:
    (1) Displacement by disaster. Certification, in a form prescribed 
by the Secretary, from a unit or agency of government that an applicant 
has been or will be displaced as a result of a disaster that results in 
the uninhabitability of an applicant's unit.
    (2) Displacement by government action. Certification, in a form 
prescribed by the Secretary, from a unit or agency of government that 
an applicant has been or will be displaced by activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by owner action. Certification, in a form 
prescribed by the Secretary, from an owner or owner's agent that an 
applicant had to or will have to vacate a unit by a date certain 
because of owner action.
    (4) Displacement because of domestic violence. Certification, in a 
form prescribed by the Secretary, of displacement because of domestic 
violence from the local police department, social services agency, or 
court of competent jurisdiction, or a clergyman, physician, or public 
or private facility that provides shelter or counseling to the victims 
of domestic violence.
    (5) Displacement to avoid reprisals. A threat assessment by a law 
enforcement agency.
    (6) Displacement by hate crime. Certification by a law enforcement 
agency or other reliable information.
    (7) Displacement by inaccessibility of unit. Certification by a 
health care professional that a family member has a mobility or other 
impairment that makes critical elements of the current unit 
inaccessible and statement by the owner that it is unable to make 
necessary changes to the unit to make it accessible.
    (8) Displacement by HUD disposition of multifamily project. 
Certification by HUD with respect to the disposition.


Sec. 881.616  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized: or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.
    (c) Substandard housing preference: verification.
    (1) Verification that an applicant is living in substandard housing 
consists of certification, in a form prescribed by the Secretary, from 
a unit or agency of government or from an applicant's present landlord 
that the applicant's unit is ``substandard housing'' (as described in 
this section).
    (2) In the case of a ``homeless family'' (as described in this 
section), verification consists of certification, in a form prescribed 
by the Secretary, of this status from a public or private facility that 
provides shelter for such individuals, or from the local police 
department or social services agency.


Sec. 881.617  Federal preference: rent burden.

    (a) Rent burden preference: how determined.
    (1) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (2) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (i) ``Family income'' means Monthly Income, as defined in 24 CFR 
813.102.
    (ii) ``Rent'' means:
    (A) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (B) For utilities purchased directly by tenants from utility 
providers:
    (1) The utility allowance for family-purchased utilities and 
services that is used in the HA tenant-based program, or
    (2) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (iii) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (3) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (i) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (ii) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (A) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (B) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (C) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.
    (b) Rent burden preference: verification of income and rent. The 
owner must verify that an applicant is paying more than 50 percent of 
family income for rent, as follows:
    (1) How to verify income. The owner must verify a family's income 
by using the standards and procedures that it uses to verify family 
income under 24 CFR part 813.
    (2) How to verify rent. The owner must verify the amount due to the 
family's landlord (or cooperative) under the lease or occupancy 
agreement:
    (i) By requiring the family to furnish copies of its most recent 
rental (or cooperative charges) receipts (which may include canceled 
checks or money order receipts) or a copy of the family's current lease 
or occupancy agreement, or
    (ii) By contacting the landlord (or cooperative) or its agent 
directly.
    (3) Utilities. To verify the actual amount that a family paid for 
utilities and other housing services, the owner must require the family 
to provide copies of the appropriate bills or receipts, or must obtain 
the information directly from the utility or service supplier.

PART 882--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--EXISTING 
HOUSING

    6. The authority citation for part 882 continues to read as 
follows:

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

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

    7. Section 882.517 is revised and new Secs. 882.518 through 882.521 
are added, to read as follows:


Sec. 882.517  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 882.518(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the HA to use in selecting among applicants that qualify for federal 
preferences. See Sec. 882.518(b).
    (3) ``Local preferences'' are preferences used to select among 
applicants without regard to their federal preference status.
    (b) System. The HA's admission policy, in accordance with its 
regulations, must include the following:
    (1) How the federal preferences will be used, including any changes 
in the definitions of the federal preferences or changes in the 
verification procedures from those specified in Secs. 882.518 through 
882.521;
    (2) How any ranking preferences will be used;
    (3) How any local preferences will be used; and
    (4) How any residency preference will be used.
    (c) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The HA may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the HA must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27 and 
100.202(c)(3)). Also, in selection of a family for a unit in a mixed 
population project, the owner will give preference to elderly families 
and disabled families.
    (ii) Singles preference. See part 812 of this chapter.
    (2) Local preference admissions.
    (i) If the HA wants to use preferences to select among applicants 
without regard to their federal preference status, it may use its local 
preference system (see Sec. 982.209 of this title).
    (ii) ``Local preference limit'' means thirty percent of total 
annual admissions to an HA's project-based Section 8 Moderate 
Rehabilitation programs. In any year, the number of families given 
preference in admission pursuant to a local preference over families 
with a federal preference may not exceed the local preference limit.
    (3) Prohibition of preference if applicant was evicted for drug-
related criminal activity. The HA may not give a preference to an 
applicant (federal preference, local preference or ranking preference) 
if any member of the family is a person who was evicted during the past 
three years because of drug-related criminal activity from housing 
assisted under a 1937 Housing Act program. However, the HA may give an 
admission preference in any of the following cases:
    (i) If the HA determines that the evicted person has successfully 
completed a rehabilitation program approved by the HA;
    (ii) If the HA determines that the evicted person clearly did not 
participate in or know about the drug-related criminal activity; or
    (iii) If the HA determines that the evicted person no longer 
participates in any drug-related criminal activity.
    (d) Informing applicants about admission preferences.
    (1) The HA must inform all applicants about available preferences 
and must give applicants an opportunity to show that they qualify for 
available preferences (federal preference, ranking preference, or local 
preference).
    (2) If the HA determines that the notification to all applicants on 
a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the HA may provide 
this notification to fewer than all applicants on the list at any given 
time. The HA, must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the HA's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the HA's framework for 
applying the preferences under paragraph (b) of this section and the 
federal preferences claimed by those already on the waiting list, any 
applicant who has not been so notified would receive assistance before 
those who have received notification.
    (e) Residency preferences--(1) Restrictions. Local residency 
requirements are prohibited. With respect to any residency preference, 
applicants who are working or who have been notified that they are 
hired to work in the jurisdiction shall be treated as residents of the 
jurisdiction. A residency preference may not be based on how long the 
applicant has resided in or worked in the jurisdiction.
    (2) HUD review. [Reserved]
    (f) Nondiscrimination. (1) Any selection preferences that are used 
by an HA must be established and administered in accordance with the 
following authorities:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the 
implementing regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
the implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (2) Such preferences also must be consistent with HUD's affirmative 
fair housing objectives and (where applicable) the HA's HUD-approved 
equal opportunity plan.
    (g) Income-based admission. The HA may not select a family for 
admission in an order different from the order on the waiting list for 
the purpose of selecting a relatively higher income family for 
admission.
    (h) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the HA determines that an applicant does not qualify for a 
federal preference, ranking preference, or local preference claimed by 
the applicant, the HA must promptly give the applicant written notice 
of the determination. The notice must contain a brief statement of the 
reasons for the determination, and state that the applicant has the 
right to meet with a representative of the HA to review the 
determination. The meeting may be conducted by any person or persons 
designated by the HA, who may be an officer or employee of the HA, 
including the person who made or reviewed the determination or a 
subordinate employee.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against on the basis 
of race, color, religion, sex, national origin, age, disability or 
familial status.

(Approved by the Office of Management and Budget under OMB control 
number 2577-0169)


Sec. 882.518  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The HA's admission policy may provide for use of ranking 
preference to select among applicants who qualify for federal 
preference.
    (1) The HA could give preference to working families--so long as 
the prohibition of Sec. 882.517(g) against selection based on income 
and the nondiscrimination provisions that protect against 
discrimination on the basis of age or disability are not violated. (If 
an HA adopts such a preference, it may not give greater weight to an 
applicant based on the amount of employment income, and an applicant 
household shall be given the benefit of the preference if the head and 
spouse, or sole member is age 62 or older or is receiving social 
security disability, supplemental security income disability benefits, 
or any other payments based on an individual's inability to work.) An 
HA could give preference to graduates of, as well as active 
participants in, educational and training programs that are designed to 
prepare individuals for the job market. The HA also could use its 
``local preferences'' to rank federal preference holders.
    (2) The HA may limit the number of applicants who may qualify for 
any ranking preference.
    (3) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference--(1) Basis of federal 
preference. The HA must use the following definitions of the federal 
preferences unless it has received HUD approval of alternative 
definitions.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the HA.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the HA that the 
family qualifies for federal preference. The HA must accept this 
certification, unless the HA verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the HA must require the applicant to provide information 
needed by the HA to verify that the applicant qualifies for a federal 
preference because of the applicant's current status. The applicant's 
current status must be determined without regard to whether there has 
been a change in the applicant's qualification for a federal preference 
between the time of application and selection for admission, including 
a change from one federal preference category to another.
    (ii) Once the HA has verified an applicant's qualification for a 
federal preference, the HA need not require the applicant to provide 
information needed by the HA to verify such qualification again unless:
    (A) The HA determines reverification is desirable because a long 
time has passed since verification, or
    (B) The HA has reasonable grounds to believe that the applicant no 
longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.

(Approved by the Office of Management and Budget under OMB control 
number 2577-0169)


Sec. 882.519  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the HA.
    (2)(i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The PHA must determine that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant family unless the PHA has 
given advance written approval. If the family is admitted, the PHA may 
deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The PHA may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The PHA must determine that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Develoment Amendments of 1978.


Sec. 882.520  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.


Sec. 882.521  Federal preference: rent burden.

    (a) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (b) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (1) ``Family income'' means Monthly Income, as defined in 24 CFR 
813.102.
    (2) ``Rent'' means:
    (i) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (ii) For utilities purchased directly by tenants from utility 
providers:
    (A) The utility allowance for family-purchased utilities and 
services that is used in the HA tenant-based program, or
    (B) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (3) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (c) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (1) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (2) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (i) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (ii) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (iii) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.

PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE 
HOUSING AGENCIES

    8. The authority citation for part 883 continues to read as 
follows:

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

    9. Section 883.714 is revised and new Secs. 883.715 through 883.718 
are added, to read as follows:


Sec. 883.714  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 883.715(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the owner to use in selecting among applicants that qualify for 
federal preferences. See Sec. 883.715(b).
    (3) ``Local preferences'' are preferences that may be established 
by the housing agency administering the Section 8 Certificate and 
Voucher program in the area, for use in selecting among applicants 
without regard to their federal preference status.
    (b) System. The owner must establish a system for selection of 
applicants from the waiting list that includes the following:
    (1) How the federal preferences will be used;
    (2) How any ranking preferences will be used;
    (3) How any local preferences will be used; and
    (4) How any residency preference will be used.
    (c) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The owner may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the owner must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27 and 
100.202(c)(3)). Also, in selection of a family for a unit in a mixed 
population project, the owner will give preference to elderly families 
and disabled families.
    (ii) Singles preference. See part 812 of this chapter.
    (2) Local preference admissions.
    (i) If an owner wants to use preferences to select among applicants 
without regard to their federal preference status, the owner must use 
the local preference system adopted for use in the Section 8 
Certificate and Rental Voucher programs (see Sec. 982.209 of this 
title) by the housing agency for the jurisdiction. If there is more 
than one HA for the jurisdiction, the owner shall use the local 
preference system of the HA for the lowest level of government that has 
jurisdiction where the project is located.
    (ii) Before the owner implements the HA's local preferences, the 
owner must receive approval from the HUD Field Office. HUD shall review 
these preferences to assure that they are applicable with respect to 
any tenant eligibility limitations for the subject housing and that 
they are consistent with HUD requirements pertaining to 
nondiscrimination and the Affirmative Fair Housing Marketing 
objectives. If HUD determines that the local preferences are in 
violation of those requirements, the owner will not be permitted to 
admit applicants on the basis of any local preferences.
    (iii) ``Local preference limit'' means thirty percent of total 
annual admissions to the project. In any year, the number of families 
given a preference in admission pursuant to a local preference over 
families with a federal preference may not exceed the local preference 
limit.
    (d) Informing applicants about admission preferences.
    (1) The owner must inform all applicants about available 
preferences and must give applicants an opportunity to show that they 
qualify for available preferences (federal preference, ranking 
preference, or local preference).
    (2) If the owner determines that the notification to all applicants 
on a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the owner may provide 
this notification to fewer than all applicants on the list at any given 
time. The owner, must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the owner's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the owner's framework for 
applying the preferences under paragraph (b) of this section and the 
federal preferences claimed by those already on the waiting list, any 
applicant who has not been so notified would receive assistance before 
those who have received notification.
    (e) Residency preferences--(1) Restrictions. Local residency 
requirements are prohibited. With respect to any residency preference, 
applicants who are working or who have been notified that they are 
hired to work in the jurisdiction shall be treated as residents of the 
jurisdiction. A residency preference may not be based on how long the 
applicant has resided in or worked in the jurisdiction.
    (2) HUD review. [Reserved]
    (f) Nondiscrimination. (1) Any selection preferences that are used 
by an owner must be established and administered in accordance with the 
following authorities:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-19) and the implementing 
regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-07) and the 
implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (2) Such preferences also must be consistent with HUD's affirmative 
fair housing objectives and (where applicable) the owner's HUD-approved 
affirmative fair housing marketing plan.
    (g) Income-based admission. The owner may not select a family for 
admission in an order different from the order on the waiting list for 
the purpose of selecting a relatively higher income family for 
admission.
    (h) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the owner determines that an applicant does not qualify for 
a federal preference, ranking preference, or local preference claimed 
by the applicant, the owner must promptly give the applicant written 
notice of the determination. The notice must contain a brief statement 
of the reasons for the determination, and state that the applicant has 
the right to meet with a representative of the owner to review the 
determination. The meeting may be conducted by any person or persons 
designated by the owner, who may be an officer or employee of the 
owner, including the person who made or reviewed the determination or a 
subordinate employee. The procedures specified in this paragraph (h)(1) 
must be carried out in accordance with HUD's requirements.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against on the basis 
of race, color, religion, sex, national origin, age, disability or 
familial status.

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 883.715  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The owner's system of administering the federal preferences 
may provide for use of ranking preference for selecting among 
applicants who qualify for federal preference.
    (1) The owner could give preference to working families--so long as 
the prohibition of Sec. 883.714(g) against selection based on income 
and the nondiscrimination provisions that protect against 
discrimination on the basis of age or disability are not violated. (If 
the owner adopts such a preference, it may not give greater weight to 
an applicant based on the amount of employment income, and an applicant 
household shall be given the benefit of the preference if the head and 
spouse, or sole member is age 62 or older or is receiving social 
security disability, supplemental security income disability benefits, 
or any other payments based on an individual's inability to work.) An 
owner could give preference to graduates of, as well as active 
participants in, educational and training programs that are designed to 
prepare individuals for the job market. The owner also could use the 
housing agency's ``local preferences'' for the Section 8 Certificate 
and Voucher programs to rank federal preference holders.
    (2) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference--(1) Basis of federal 
preference.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the owner that 
the family qualifies for federal preference. The owner must accept this 
certification, unless the owner verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the owner must require the applicant to provide information 
needed by the owner to verify that the applicant qualifies for a 
federal preference because of the applicant's current status. The 
applicant's current status must be determined without regard to whether 
there has been a change in the applicant's qualification for a federal 
preference between the time of application and selection for admission, 
including a change from one federal preference category to another.
    (ii) The owner must use the verification procedures in 
Sec. 883.716(c) (involuntary displacement); Sec. 883.717(c) 
(substandard housing); and Sec. 883.718(b) (rent burden).
    (iii) Once the owner has verified an applicant's qualification for 
a federal preference, the owner need not require the applicant to 
provide information needed by the owner to verify such qualification 
again unless:
    (A) The owner determines reverification is desirable because a long 
time has passed since verification, or
    (B) The owner has reasonable grounds to believe that the applicant 
no longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.
    (d) Approval of special conditions satisfying preference 
definitions. HUD may specify additional conditions under which the 
federal preferences, as defined in paragraph (a) of this section, can 
be satisfied. In such cases, appropriate certification of qualification 
must be provided. (See HUD Handbook 4350.3, which is available at HUD 
field offices.)

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 883.716  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (2)(i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The owner must determine, in accordance with HUD's 
administrative instructions, that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant family unless the owner has 
given advance written approval. If the family is admitted, the owner 
may deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The owner may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The owner must determine, in accordance with HUD's 
administrative instructions, that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Develoment Amendments of 1978.
    (c) Involuntary displacement preference: Verification. Verification 
of an applicant's involuntary displacement is established by the 
following documentation:
    (1) Displacement by disaster. Certification, in a form prescribed 
by the Secretary, from a unit or agency of government that an applicant 
has been or will be displaced as a result of a disaster that results in 
the uninhabitability of an applicant's unit.
    (2) Displacement by government action. Certification, in a form 
prescribed by the Secretary, from a unit or agency of government that 
an applicant has been or will be displaced by activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by owner action. Certification, in a form 
prescribed by the Secretary, from an owner or owner's agent that an 
applicant had to or will have to vacate a unit by a date certain 
because of owner action.
    (4) Displacement because of domestic violence. Certification, in a 
form prescribed by the Secretary, of displacement because of domestic 
violence from the local police department, social services agency, or 
court of competent jurisdiction, or a clergyman, physician, or public 
or private facility that provides shelter or counseling to the victims 
of domestic violence.
    (5) Displacement to avoid reprisals. A threat assessment by a law 
enforcement agency.
    (6) Displacement by hate crime. Certification by a law enforcement 
agency or other reliable information.
    (7) Displacement by inaccessibility of unit. Certification by a 
health care professional that a family member has a mobility or other 
impairment that makes critical elements of the current unit 
inaccessible and statement by the owner that it is unable to make 
necessary changes to the unit to make it accessible.
    (8) Displacement by HUD disposition of multifamily project. 
Certification by HUD with respect to the disposition.


Sec. 883.717  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized: or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.
    (c) Substandard housing preference: verification.
    (1) Verification that an applicant is living in substandard housing 
consists of certification, in a form prescribed by the Secretary, from 
a unit or agency of government or from an applicant's present landlord 
that the applicant's unit is ``substandard housing'' (as described in 
this section).
    (2) In the case of a ``homeless family'' (as described in this 
section), verification consists of certification, in a form prescribed 
by the Secretary, of this status from a public or private facility that 
provides shelter for such individuals, or from the local police 
department or social services agency.


Sec. 883.718  Federal preference: rent burden.

    (a) Rent burden preference: how determined.
    (1) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (2) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (i) ``Family income'' means Monthly Income, as defined in 24 CFR 
813.102.
    (ii) ``Rent'' means:
    (A) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (B) For utilities purchased directly by tenants from utility 
providers:
    (1) The utility allowance for family-purchased utilities and 
services that is used in the HA tenant-based program, or
    (2) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (iii) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (3) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (i) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (ii) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (A) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (B) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (C) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.
    (b) Rent burden preference: verification of income and rent. The 
owner must verify that an applicant is paying more than 50 percent of 
family income for rent, as follows:
    (1) How to verify income. The owner must verify a family's income 
by using the standards and procedures that it uses to verify family 
income under 24 CFR part 813.
    (2) How to verify rent. The owner must verify the amount due to the 
family's landlord (or cooperative) under the lease or occupancy 
agreement:
    (i) By requiring the family to furnish copies of its most recent 
rental (or cooperative charges) receipts (which may include canceled 
checks or money order receipts) or a copy of the family's current lease 
or occupancy agreement, or
    (ii) By contacting the landlord (or cooperative) or its agent 
directly.
    (3) Utilities. To verify the actual amount that a family paid for 
utilities and other housing services, the owner must require the family 
to provide copies of the appropriate bills or receipts, or must obtain 
the information directly from the utility or service supplier.

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

    10. The authority citation for part 884 continues to read as 
follows:

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

    11. Section 884.226 is revised and new Secs. 884.227 through 
884.230 are added, to read as follows:


Sec. 884.226  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 884.227(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the owner to use in selecting among applicants that qualify for 
federal preferences. See Sec. 884.227(b).
    (3) ``Local preferences'' are preferences that may be established 
by the housing agency administering the Section 8 Certificate and 
Voucher program in the area, for use in selecting among applicants 
without regard to their federal preference status.
    (b) System. The owner must establish a system for selection of 
applicants from the waiting list that includes the following:
    (1) How the federal preferences will be used;
    (2) How any ranking preferences will be used;
    (3) How any local preferences will be used; and
    (4) How any residency preference will be used.
    (c) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The owner may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the owner must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27 and 
100.202(c)(3)). Also, in selection of a family for a unit in a mixed 
population project, the owner will give preference to elderly families 
and disabled families.
    (ii) Singles preference. See part 812 of this chapter.
    (2) Local preference admissions.
    (i) If an owner wants to use preferences to select among applicants 
without regard to their federal preference status, the owner must use 
the local preference system adopted for use in the Section 8 
Certificate and Rental Voucher programs (see Sec. 982.209 of this 
title) by the housing agency for the jurisdiction. If there is more 
than one HA for the jurisdiction, the owner shall use the local 
preference system of the HA for the lowest level of government that has 
jurisdiction where the project is located.
    (ii) Before the owner implements the HA's local preferences, the 
owner must receive approval from the HUD Field Office. HUD shall review 
these preferences to assure that they are applicable with respect to 
any tenant eligibility limitations for the subject housing and that 
they are consistent with HUD requirements pertaining to 
nondiscrimination and the Affirmative Fair Housing Marketing 
objectives. If HUD determines that the local preferences are in 
violation of those requirements, the owner will not be permitted to 
admit applicants on the basis of any local preferences.
    (iii) ``Local preference limit'' means thirty percent of total 
annual admissions to the project. In any year, the number of families 
given preference in admission pursuant to a local preference over 
families with a federal preference may not exceed the local preference 
limit.
    (d) Informing applicants about admission preferences.
    (1) The owner must inform all applicants about available 
preferences and must give applicants an opportunity to show that they 
qualify for available preferences (federal preference, ranking 
preference, or local preference).
    (2) If the owner determines that the notification to all applicants 
on a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the owner may provide 
this notification to fewer than all applicants on the list at any given 
time. The owner, must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the owner's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the owner's framework for 
applying the preferences under paragraph (b) of this section and the 
federal preferences claimed by those already on the waiting list, any 
applicant who has not been so notified would receive assistance before 
those who have received notification.
    (e) Residency preferences. (1) Restrictions. Local residency 
requirements are prohibited. With respect to any residency preference, 
applicants who are working or who have been notified that they are 
hired to work in the jurisdiction shall be treated as residents of the 
jurisdiction. A residency preference may not be based on how long the 
applicant has resided in or worked in the jurisdiction.
    (2) HUD review. [Reserved]
    (f) Nondiscrimination. (1) Any selection preferences that are used 
by an owner must be established and administered in accordance with the 
following authorities:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the 
implementing regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
the implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (2) Such preferences also must be consistent with HUD's affirmative 
fair housing objectives and (where applicable) the owner's HUD-approved 
affirmative fair housing marketing plan.
    (g) Income-based admission. The owner may not select a family for 
admission in an order different from the order on the waiting list for 
the purpose of selecting a relatively higher income family for 
admission.
    (h) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the owner determines that an applicant does not qualify for 
a federal preference, ranking preference, or local preference claimed 
by the applicant, the owner must promptly give the applicant written 
notice of the determination. The notice must contain a brief statement 
of the reasons for the determination, and state that the applicant has 
the right to meet with a representative of the owner to review the 
determination. The meeting may be conducted by any person or persons 
designated by the owner, who may be an officer or employee of the 
owner, including the person who made or reviewed the determination or a 
subordinate employee. The procedures specified in this paragraph (h)(1) 
must be carried out in accordance with HUD's requirements.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against on the basis 
of race, color, religion, sex, national origin, age, disability or 
familial status.

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 884.227  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The owner's system of administering the federal preferences 
may provide for use of ranking preference for selecting among 
applicants who qualify for federal preference.
    (1) The owner could give preference to working families--so long as 
the prohibition of Sec. 884.228(g) against selection based on income 
and the nondiscrimination provisions that protect against 
discrimination on the basis of age or disability are not violated. (If 
the owner adopts such a preference, it may not give greater weight to 
an applicant based on the amount of employment income, and an applicant 
household shall be given the benefit of the preference if the head and 
spouse, or sole member is age 62 or older or is receiving social 
security disability, supplemental security income disability benefits, 
or any other payments based on an individual's inability to work.) An 
owner could give preference to graduates of, as well as active 
participants in, educational and training programs that are designed to 
prepare individuals for the job market. The owner also could use the 
housing agency's ``local preferences'' for the Section 8 Certificate 
and Voucher programs to rank federal preference holders.
    (2) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference. (1) Basis of federal 
preference.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the owner that 
the family qualifies for federal preference. The owner must accept this 
certification, unless the owner verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the owner must require the applicant to provide information 
needed by the owner to verify that the applicant qualifies for a 
federal preference because of the applicant's current status. The 
applicant's current status must be determined without regard to whether 
there has been a change in the applicant's qualification for a federal 
preference between the time of application and selection for admission, 
including a change from one federal preference category to another.
    (ii) The owner must use the verification procedures in 
Sec. 884.228(c) (involuntary displacement); Sec. 884.229(c) 
(substandard housing); and Sec. 884.230(b) (rent burden).
    (iii) Once the owner has verified an applicant's qualification for 
a federal preference, the owner need not require the applicant to 
provide information needed by the owner to verify such qualification 
again unless:
    (A) The owner determines reverification is desirable because a long 
time has passed since verification, or
    (B) The owner has reasonable grounds to believe that the applicant 
no longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.
    (d) Approval of special conditions satisfying preference 
definitions. HUD may specify additional conditions under which the 
federal preferences, as defined in paragraph (a) of this section, can 
be satisfied. In such cases, appropriate certification of qualification 
must be provided. (See HUD Handbook 4350.3, which is available at HUD 
field offices.)

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 884.228  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (2)(i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The owner must determine, in accordance with HUD's 
administrative instructions, that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant family unless the owner has 
given advance written approval. If the family is admitted, the owner 
may deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The owner may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The owner must determine, in accordance with HUD's 
administrative instructions, that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Develoment Amendments of 1978.
    (c) Involuntary displacement preference: Verification. Verification 
of an applicant's involuntary displacement is established by the 
following documentation:
    (1) Displacement by disaster. Certification, in a form prescribed 
by the Secretary, from a unit or agency of government that an applicant 
has been or will be displaced as a result of a disaster that results in 
the uninhabitability of an applicant's unit.
    (2) Displacement by government action. Certification, in a form 
prescribed by the Secretary, from a unit or agency of government that 
an applicant has been or will be displaced by activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by owner action. Certification, in a form 
prescribed by the Secretary, from an owner or owner's agent that an 
applicant had to or will have to vacate a unit by a date certain 
because of owner action.
    (4) Displacement because of domestic violence. Certification, in a 
form prescribed by the Secretary, of displacement because of domestic 
violence from the local police department, social services agency, or 
court of competent jurisdiction, or a clergyman, physician, or public 
or private facility that provides shelter or counseling to the victims 
of domestic violence.
    (5) Displacement to avoid reprisals. A threat assessment by a law 
enforcement agency.
    (6) Displacement by hate crime. Certification by a law enforcement 
agency or other reliable information.
    (7) Displacement by inaccessibility of unit. Certification by a 
health care professional that a family member has a mobility or other 
impairment that makes critical elements of the current unit 
inaccessible and statement by the owner that it is unable to make 
necessary changes to the unit to make it accessible.
    (8) Displacement by HUD disposition of multifamily project. 
Certification by HUD with respect to the disposition.


Sec. 884.229  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized: or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.
    (c) Substandard housing preference: verification.
    (1) Verification that an applicant is living in substandard housing 
consists of certification, in a form prescribed by the Secretary, from 
a unit or agency of government or from an applicant's present landlord 
that the applicant's unit is ``substandard housing'' (as described in 
this section).
    (2) In the case of a ``homeless family'' (as described in this 
section), verification consists of certification, in a form prescribed 
by the Secretary, of this status from a public or private facility that 
provides shelter for such individuals, or from the local police 
department or social services agency.


Sec. 884.230  Federal preference: rent burden.

    (a) Rent burden preference: how determined.
    (1) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (2) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (i) ``Family income'' means Monthly Income, as defined in 24 CFR 
813.102.
    (ii) ``Rent'' means:
    (A) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (B) For utilities purchased directly by tenants from utility 
providers:
    (1) The utility allowance for family-purchased utilities and 
services that is used in the HA tenant-based program, or
    (2) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (iii) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (3) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (i) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (ii) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (A) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (B) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (C) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.
    (b) Rent burden preference: verification of income and rent. The 
owner must verify that an applicant is paying more than 50 percent of 
family income for rent, as follows:
    (1) How to verify income. The owner must verify a family's income 
by using the standards and procedures that it uses to verify family 
income under 24 CFR part 813.
    (2) How to verify rent. The owner must verify the amount due to the 
family's landlord (or cooperative) under the lease or occupancy 
agreement:
    (i) By requiring the family to furnish copies of its most recent 
rental (or cooperative charges) receipts (which may include canceled 
checks or money order receipts) or a copy of the family's current lease 
or occupancy agreement, or
    (ii) By contacting the landlord (or cooperative) or its agent 
directly.
    (3) Utilities. To verify the actual amount that a family paid for 
utilities and other housing services, the owner must require the family 
to provide copies of the appropriate bills or receipts, or must obtain 
the information directly from the utility or service supplier.

PART 885--LOANS FOR HOUSING FOR THE ELDERLY OR HANDICAPPED

    12. The authority citation for part 885 continues to read as 
follows:

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f and 3535(d).

    13. Section 885.427 is revised to read as follows:


Sec. 885.427  Selection preferences.

    The provisions of Secs. 880.613-880.617 of this chapter are 
applicable to projects assisted under subpart B of this part.

PART 886--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--SPECIAL 
ALLOCATIONS

    14. The authority citation for part 886 continues to read as 
follows:

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

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

    15. Section 886.133 is redesignated as Sec. 886.138; Sec. 886.132 
is revised; and new Secs. 886.133 through 886.136 are added, to read as 
follows:


Sec. 886.132  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 886.133(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the owner to use in selecting among applicants that qualify for 
federal preferences. See Sec. 886.133(b).
    (3) ``Local preferences'' are preferences that may be established 
by the housing agency administering the Section 8 Certificate and 
Voucher program in the area, for use in selecting among applicants 
without regard to their federal preference status.
    (b) System. The owner must establish a system for selection of 
applicants from the waiting list that includes the following:
    (1) How the federal preferences will be used;
    (2) How any ranking preferences will be used;
    (3) How any local preferences will be used; and
    (4) How any residency preference will be used.
    (c) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The owner may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the owner must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27 and 
100.202(c)(3)). Also, in selection of a family for a unit in a mixed 
population project, the owner will give preference to elderly families 
and disabled families.
    (ii) Singles preference. See part 812 of this chapter.
    (2) Local preference admissions.
    (i) If an owner wants to use preferences to select among applicants 
without regard to their federal preference status, the owner must use 
the local preference system adopted for use in the Section 8 
Certificate and Rental Voucher programs (see Sec. 982.209 of this 
title) by the housing agency for the jurisdiction. If there is more 
than one HA for the jurisdiction, the owner shall use the local 
preference system of the HA for the lowest level of government that has 
jurisdiction where the project is located.
    (ii) Before the owner implements the HA's local preferences, the 
owner must receive approval from the HUD Field Office. HUD shall review 
these preferences to assure that they are applicable with respect to 
any tenant eligibility limitations for the subject housing and that 
they are consistent with HUD requirements pertaining to 
nondiscrimination and the Affirmative Fair Housing Marketing 
objectives. If HUD determines that the local preferences are in 
violation of those requirements, the owner will not be permitted to 
admit applicants on the basis of any local preferences.
    (iii) ``Local preference limit'' means thirty percent of total 
annual admissions to the project. In any year, the number of families 
given preference in admission pursuant to a local preference over 
families with a federal preference may not exceed the local preference 
limit.
    (3) Prohibition of preference if applicant was evicted for drug-
related criminal activity. The owner may not give a preference to an 
applicant (federal preference, local preference or ranking preference) 
if any member of the family is a person who was evicted during the past 
three years because of drug-related criminal activity from housing 
assisted under a 1937 Housing Act program. However, the owner may give 
an admission preference in any of the following cases:
    (i) If the owner determines that the evicted person has 
successfully completed a rehabilitation program approved by the owner;
    (ii) If the owner determines that the evicted person clearly did 
not participate in or know about the drug-related criminal activity; or
    (iii) If the owner determines that the evicted person no longer 
participates in any drug-related criminal activity.
    (d) Informing applicants about admission preferences.
    (1) The owner must inform all applicants about available 
preferences and must give applicants an opportunity to show that they 
qualify for available preferences (federal preference, ranking 
preference, or local preference).
    (2) If the owner determines that the notification to all applicants 
on a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the owner may provide 
this notification to fewer than all applicants on the list at any given 
time. The owner, must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the owner's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the owner's framework for 
applying the preferences under paragraph (b) of this section and the 
federal preferences claimed by those already on the waiting list, any 
applicant who has not been so notified would receive assistance before 
those who have received notification.
    (e) Residency preferences. (1) Restrictions. Local residency 
requirements are prohibited. With respect to any residency preference, 
applicants who are working or who have been notified that they are 
hired to work in the jurisdiction shall be treated as residents of the 
jurisdiction. A residency preference may not be based on how long the 
applicant has resided in or worked in the jurisdiction.
    (2) HUD review. [Reserved]
    (f) Nondiscrimination. (1) Any selection preferences that are used 
by an owner must be established and administered in accordance with the 
following authorities:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the 
implementing regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
the implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (2) Such preferences also must be consistent with HUD's affirmative 
fair housing objectives and (where applicable) the owner's HUD-approved 
affirmative fair housing marketing plan.
    (g) Income-based admission. The owner may not select a family for 
admission in an order different from the order on the waiting list for 
the purpose of selecting a relatively higher income family for 
admission.
    (h) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the owner determines that an applicant does not qualify for 
a federal preference, ranking preference, or local preference claimed 
by the applicant, the owner must promptly give the applicant written 
notice of the determination. The notice must contain a brief statement 
of the reasons for the determination, and state that the applicant has 
the right to meet with a representative of the owner to review the 
determination. The meeting may be conducted by any person or persons 
designated by the owner, who may be an officer or employee of the 
owner, including the person who made or reviewed the determination or a 
subordinate employee. The procedures specified in this paragraph (h)(1) 
must be carried out in accordance with HUD's requirements.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against on the basis 
of race, color, religion, sex, national origin, age, disability or 
familial status.

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 886.133  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The owner's system of administering the federal preferences 
may provide for use of ranking preference for selecting among 
applicants who qualify for federal preference.
    (1) The owner could give preference to working families--so long as 
the prohibition of Sec. 886.132(g) against selection based on income 
and the nondiscrimination provisions that protect against 
discrimination on the basis of age or disability are not violated. (If 
the owner adopts such a preference, it may not give greater weight to 
an applicant based on the amount of employment income, and an applicant 
household shall be given the benefit of the preference if the head and 
spouse, or sole member is age 62 or older or is receiving social 
security disability, supplemental security income disability benefits, 
or any other payments based on an individual's inability to work.) An 
owner could give preference to graduates of, as well as active 
participants in, educational and training programs that are designed to 
prepare individuals for the job market. The owner also could use the 
housing agency's ``local preferences'' for the Section 8 Certificate 
and Voucher programs to rank federal preference holders.
    (2) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference. (1) Basis of federal 
preference.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the owner that 
the family qualifies for federal preference. The owner must accept this 
certification, unless the owner verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the owner must require the applicant to provide information 
needed by the owner to verify that the applicant qualifies for a 
federal preference because of the applicant's current status. The 
applicant's current status must be determined without regard to whether 
there has been a change in the applicant's qualification for a federal 
preference between the time of application and selection for admission, 
including a change from one federal preference category to another.
    (ii) The owner must use the verification procedures in 
Sec. 886.134(c) (involuntary displacement); Sec. 886.135(c) 
(substandard housing); and Sec. 886.136(b) (rent burden).
    (iii) Once the owner has verified an applicant's qualification for 
a federal preference, the owner need not require the applicant to 
provide information needed by the owner to verify such qualification 
again unless:
    (A) The owner determines reverification is desirable because a long 
time has passed since verification, or
    (B) The owner has reasonable grounds to believe that the applicant 
no longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.
    (d) Approval of special conditions satisfying preference 
definitions. HUD may specify additional conditions under which the 
federal preferences, as defined in paragraph (a) of this section, can 
be satisfied. In such cases, appropriate certification of qualification 
must be provided. (See HUD Handbook 4350.3, which is available at HUD 
field offices.)
    (Approved by the Office of Management and Budget under OMB 
control number 2502-0372) 
Sec. 886.134  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (2)(i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The owner must determine, in accordance with HUD's 
administrative instructions, that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant family unless the owner has 
given advance written approval. If the family is admitted, the owner 
may deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The owner may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The owner must determine, in accordance with HUD's 
administrative instructions, that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Develoment Amendments of 1978.
    (c) Involuntary displacement preference: Verification. Verification 
of an applicant's involuntary displacement is established by the 
following documentation:
    (1) Displacement by disaster. Certification, in a form prescribed 
by the Secretary, from a unit or agency of government that an applicant 
has been or will be displaced as a result of a disaster that results in 
the uninhabitability of an applicant's unit.
    (2) Displacement by government action. Certification, in a form 
prescribed by the Secretary, from a unit or agency of government that 
an applicant has been or will be displaced by activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by owner action. Certification, in a form 
prescribed by the Secretary, from an owner or owner's agent that an 
applicant had to or will have to vacate a unit by a date certain 
because of owner action.
    (4) Displacement because of domestic violence. Certification, in a 
form prescribed by the Secretary, of displacement because of domestic 
violence from the local police department, social services agency, or 
court of competent jurisdiction, or a clergyman, physician, or public 
or private facility that provides shelter or counseling to the victims 
of domestic violence.
    (5) Displacement to avoid reprisals. A threat assessment by a law 
enforcement agency.
    (6) Displacement by hate crime. Certification by a law enforcement 
agency or other reliable information.
    (7) Displacement by inaccessibility of unit. Certification by a 
health care professional that a family member has a mobility or other 
impairment that makes critical elements of the current unit 
inaccessible and statement by the owner that it is unable to make 
necessary changes to the unit to make it accessible.
    (8) Displacement by HUD disposition of multifamily project. 
Certification by HUD with respect to the disposition.


Sec. 886.135  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.
    (c) Substandard housing preference: verification.
    (1) Verification that an applicant is living in substandard housing 
consists of certification, in a form prescribed by the Secretary, from 
a unit or agency of government or from an applicant's present landlord 
that the applicant's unit is ``substandard housing'' (as described in 
this section).
    (2) In the case of a ``homeless family'' (as described in this 
section), verification consists of certification, in a form prescribed 
by the Secretary, of this status from a public or private facility that 
provides shelter for such individuals, or from the local police 
department or social services agency.


Sec. 886.136  Federal preference: rent burden.

    (a) Rent burden preference: how determined.
    (1) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (2) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (i) ``Family income'' means Monthly Income, as defined in 24 CFR 
813.102.
    (ii) ``Rent'' means:
    (A) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (B) For utilities purchased directly by tenants from utility 
providers:
    (1) The utility allowance for family-purchased utilities and 
services that is used in the HA tenant-based program, or
    (2) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (iii) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (3) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (i) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (ii) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (A) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (B) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (C) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.
    (b) Rent burden preference: verification of income and rent. The 
owner must verify that an applicant is paying more than 50 percent of 
family income for rent, as follows:
    (1) How to verify income. The owner must verify a family's income 
by using the standards and procedures that it uses to verify family 
income under 24 CFR part 813.
    (2) How to verify rent. The owner must verify the amount due to the 
family's landlord (or cooperative) under the lease or occupancy 
agreement:
    (i) By requiring the family to furnish copies of its most recent 
rental (or cooperative charges) receipts (which may include canceled 
checks or money order receipts) or a copy of the family's current lease 
or occupancy agreement, or
    (ii) By contacting the landlord (or cooperative) or its agent 
directly.
    (3) Utilities. To verify the actual amount that a family paid for 
utilities and other housing services, the owner must require the family 
to provide copies of the appropriate bills or receipts, or must obtain 
the information directly from the utility or service supplier.

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

    16. Section 886.337 is revised to read as follows:


Sec. 886.337  Selection preferences.

    Sections 886.132 through 886.136 govern the use of preferences in 
the selection of tenants under this subpart.

PART 889--SUPPORTIVE HOUSING FOR THE ELDERLY

    17. The authority citation for part 889 is revised to read as 
follows:

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 3535(d).

    18. Sections 889.611-889.615 are added to subpart F, to read as 
follows:


Sec. 889.611  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 889.612(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the owner to use in selecting among applicants that qualify for 
federal preferences. See Sec. 889.612(b).
    (3) ``Local preferences'' are preferences that may be established 
by the housing agency administering the Section 8 Certificate and 
Voucher program in the area, for use in selecting among applicants 
without regard to their federal preference status.
    (b) System. The owner must establish a system for selection of 
applicants from the waiting list that includes the following:
    (1) How the federal preferences will be used;
    (2) How any ranking preferences will be used;
    (3) How any local preferences will be used; and
    (4) How any residency preference will be used.
    (c) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The owner may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the owner must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27 and 
100.202(c)(3)). Also, in selection of a family for a unit in a mixed 
population project, the owner will give preference to elderly families 
and disabled families.
    (ii) Singles preference. See part 812 of this chapter.
    (2) Local preference admissions.
    (i) If the owner wants to use preferences to select among 
applicants without regard to their federal preference status, the owner 
must use the local preference system adopted for use in the Section 8 
Certificate and Rental Voucher programs (see Sec. 982.209) by the 
housing agency for the jurisdiction. If there is more than one HA for 
the jurisdiction, the owner shall use the local preference system of 
the HA for the lowest level of government that has jurisdiction where 
the project is located.
    (ii) Before the owner implements the HA's local preferences, the 
owner must receive approval from the HUD Field Office. HUD shall review 
these preferences to assure that they are applicable with respect to 
any tenant eligibility limitations for the subject housing and that 
they are consistent with HUD requirements pertaining to 
nondiscrimination and the Affirmative Fair Housing Marketing 
objectives. If HUD determines that the local preferences are in 
violation of those requirements, the owner will not be permitted to 
admit applicants on the basis of any local preferences.
    (iii) ``Local preference limit'' means thirty percent of total 
annual admissions to the project. In any year, the number of families 
given preference in admission pursuant to a local preference over 
families with a federal preference may not exceed the local preference 
limit.
    (d) Informing applicants about admission preferences.
    (1) The owner must inform all applicants about available 
preferences and must give applicants an opportunity to show that they 
qualify for available preferences (federal preference, ranking 
preference, or local preference).
    (2) If the owner determines that the notification to all applicants 
on a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the owner may provide 
this notification to fewer than all applicants on the list at any given 
time. The owner, must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the owner's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the owner's framework for 
applying the preferences under paragraph (b) of this section and the 
federal preferences claimed by those already on the waiting list, any 
applicant who has not been so notified would receive assistance before 
those who have received notification.
    (e) Residency preferences. (1) Restrictions. Local residency 
requirements are prohibited. With respect to any residency preference, 
applicants who are working or who have been notified that they are 
hired to work in the jurisdiction shall be treated as residents of the 
jurisdiction. A residency preference may not be based on how long the 
applicant has resided in or worked in the jurisdiction.
    (2) HUD review. [Reserved]
    (f) Nondiscrimination. (1) Any selection preferences that are used 
by an owner must be established and administered in accordance with the 
following authorities:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the 
implementing regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
the implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (2) Such preferences also must be consistent with HUD's affirmative 
fair housing objectives and (where applicable) the owner's HUD-approved 
affirmative fair housing marketing plan.
    (g) Income-based admission. The owner may not select a family for 
admission in an order different from the order on the waiting list for 
the purpose of selecting a relatively higher income family for 
admission.
    (h) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the owner determines that an applicant does not qualify for 
a federal preference, ranking preference, or local preference claimed 
by the applicant, the owner must promptly give the applicant written 
notice of the determination. The notice must contain a brief statement 
of the reasons for the determination, and state that the applicant has 
the right to meet with a representative of the owner to review the 
determination. The meeting may be conducted by any person or persons 
designated by the owner, who may be an officer or employee of the 
owner, including the person who made or reviewed the determination or a 
subordinate employee. The procedures specified in this paragraph (h)(1) 
must be carried out in accordance with HUD's requirements.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against on the basis 
of race, color, religion, sex, national origin, age, disability or 
familial status.

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 889.612  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The owner's system of administering the federal preferences 
may provide for use of ranking preference for selecting among 
applicants who qualify for federal preference.
    (1) The owner could give preference to working families--so long as 
the prohibition of Sec. 889.611(g) against selection based on income 
and the nondiscrimination provisions that protect against 
discrimination on the basis of age or disability are not violated. (If 
the owner adopts such a preference, it may not give greater weight to 
an applicant based on the amount of employment income, and an applicant 
household shall be given the benefit of the preference if the head and 
spouse, or sole member is age 62 or older or is receiving social 
security disability, supplemental security income disability benefits, 
or any other payments based on an individual's inability to work.) An 
owner could give preference to graduates of, as well as active 
participants in, educational and training programs that are designed to 
prepare individuals for the job market. The owner also could use the 
housing agency's ``local preferences'' for the Section 8 Certificate 
and Voucher programs to rank federal preference holders.
    (2) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference. (1) Basis of federal 
preference.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the owner that 
the family qualifies for federal preference. The owner must accept this 
certification, unless the owner verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the owner must require the applicant to provide information 
needed by the owner to verify that the applicant qualifies for a 
federal preference because of the applicant's current status. The 
applicant's current status must be determined without regard to whether 
there has been a change in the applicant's qualification for a federal 
preference between the time of application and selection for admission, 
including a change from one federal preference category to another.
    (ii) The owner must use the verification procedures in 
Sec. 889.613(c) (involuntary displacement); Sec. 889.614(c) 
(substandard housing); and Sec. 889.615(b) (rent burden).
    (iii) Once the owner has verified an applicant's qualification for 
a federal preference, the owner need not require the applicant to 
provide information needed by the owner to verify such qualification 
again unless:
    (A) The owner determines reverification is desirable because a long 
time has passed since verification, or
    (B) The owner has reasonable grounds to believe that the applicant 
no longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.
    (d) Approval of special conditions satisfying preference 
definitions. HUD may specify additional conditions under which the 
federal preferences, as defined in paragraph (a) of this section, can 
be satisfied. In such cases, appropriate certification of qualification 
must be provided. (See HUD Handbook 4350.3, which is available at HUD 
field offices.)

(Approved by the Office of Management and Budget under OMB control 
number 2502-0372)


Sec. 889.613  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the owner.
    (2)(i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The owner must determine, in accordance with HUD's 
administrative instructions, that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant family unless the owner has 
given advance written approval. If the family is admitted, the owner 
may deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The owner may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The owner must determine, in accordance with HUD's 
administrative instructions, that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Develoment Amendments of 1978.
    (c) Involuntary displacement preference: Verification. Verification 
of an applicant's involuntary displacement is established by the 
following documentation:
    (1) Displacement by disaster. Certification, in a form prescribed 
by the Secretary, from a unit or agency of government that an applicant 
has been or will be displaced as a result of a disaster that results in 
the uninhabitability of an applicant's unit.
    (2) Displacement by government action. Certification, in a form 
prescribed by the Secretary, from a unit or agency of government that 
an applicant has been or will be displaced by activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by owner action. Certification, in a form 
prescribed by the Secretary, from an owner or owner's agent that an 
applicant had to or will have to vacate a unit by a date certain 
because of owner action.
    (4) Displacement because of domestic violence. Certification, in a 
form prescribed by the Secretary, of displacement because of domestic 
violence from the local police department, social services agency, or 
court of competent jurisdiction, or a clergyman, physician, or public 
or private facility that provides shelter or counseling to the victims 
of domestic violence.
    (5) Displacement to avoid reprisals. A threat assessment by a law 
enforcement agency.
    (6) Displacement by hate crime. Certification by a law enforcement 
agency or other reliable information.
    (7) Displacement by inaccessibility of unit. Certification by a 
health care professional that a family member has a mobility or other 
impairment that makes critical elements of the current unit 
inaccessible and statement by the owner that it is unable to make 
necessary changes to the unit to make it accessible.
    (8) Displacement by HUD disposition of multifamily project. 
Certification by HUD with respect to the disposition.


Sec. 889.614  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized: or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.
    (c) Substandard housing preference: verification.
    (1) Verification that an applicant is living in substandard housing 
consists of certification, in a form prescribed by the Secretary, from 
a unit or agency of government or from an applicant's present landlord 
that the applicant's unit is ``substandard housing'' (as described in 
this section).
    (2) In the case of a ``homeless family'' (as described in this 
section), verification consists of certification, in a form prescribed 
by the Secretary, of this status from a public or private facility that 
provides shelter for such individuals, or from the local police 
department or social services agency.


Sec. 889.615  Federal preference: rent burden.

    (a) Rent burden preference: how determined.
    (1) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (2) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (i) ``Family income'' means Monthly Income, as defined in 24 CFR 
813.102.
    (ii) ``Rent'' means:
    (A) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (B) For utilities purchased directly by tenants from utility 
providers:
    (1) The utility allowance for family-purchased utilities and 
services that is used in the HA tenant-based program, or
    (2) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (iii) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (3) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (i) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (ii) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (A) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (B) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (C) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.
    (b) Rent burden preference: verification of income and rent. The 
owner must verify that an applicant is paying more than 50 percent of 
family income for rent, as follows:
    (1) How to verify income. The owner must verify a family's income 
by using the standards and procedures that it uses to verify family 
income under 24 CFR part 813.
    (2) How to verify rent. The owner must verify the amount due to the 
family's landlord (or cooperative) under the lease or occupancy 
agreement:
    (i) By requiring the family to furnish copies of its most recent 
rental (or cooperative charges) receipts (which may include canceled 
checks or money order receipts) or a copy of the family's current lease 
or occupancy agreement, or
    (ii) By contacting the landlord (or cooperative) or its agent 
directly.
    (3) Utilities. To verify the actual amount that a family paid for 
utilities and other housing services, the owner must require the family 
to provide copies of the appropriate bills or receipts, or must obtain 
the information directly from the utility or service supplier.

PART 904--LOW RENT HOUSING HOMEOWNERSHIP OPPORTUNITIES

    19. The authority citation for part 904 is revised to read as 
follows:

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

    20. Section 904.122 is revised, to read as follows:


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 Secs. 960.211 through 960.215. 
Notwithstanding those preferences, the LHA can limit homeownership 
admission to eligible homeownership candidates.

PART 905--INDIAN HOUSING PROGRAMS

    21. The authority citation for part 905 is revised to read as 
follows;

    Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437aa-1437ee and 
3535(d).

    22. Section 905.301 is amended by removing from paragraphs (e)(1) 
and (e)(4) the phrase, ``the Federal preferences contained in 
Sec. 905.305'' and adding in its place the phrase, ``the federal 
preferences, ranking preferences, and local preferences in accordance 
with Secs. 905.303 through 905.307''; by removing from paragraph (e)(2) 
the word ``Fig.''; by removing from paragraph (e)(4) the phrase ``10 
percent'' and adding in its place the phrase ``30 percent''; by 
removing from paragraph (e)(4) the phrase, ``, as set out in 
Sec. 905.305(b)(2)(ii)''; and by revising paragraph (a), to read as 
follows:


Sec. 905.301  Admission policies.

    (a) Admission policies. (1) The IHA shall establish and adopt 
written policies for admission of participants. The policies shall 
cover all programs operated by the housing authority and, as 
applicable, will address the programs individually to meet their 
specific requirements (i.e., Rental, MH, or Turnkey III). A copy of the 
policies shall be posted prominently in the IHA's office for 
examination by prospective participants and shall be submitted to the 
HUD field office promptly after adoption by the IHA. (See Sec. 905.416 
with respect to Mutual Help admission policies.)
    (2) These policies shall be designed:
    (i) To attain, to the maximum extent feasible, residency that 
includes families with a broad range of incomes and that avoids 
concentrations of the most economically deprived families with serious 
social problems;
    (ii) To preclude admission of applicants whose habits and practices 
reasonably may be expected to have a detrimental effect on the 
residents or the project environment;
    (iii) To give a preference in selection of tenants and homebuyers 
to applicants who qualify for a federal preference, ranking preference, 
or local preference, in accordance with Secs. 905.303 through 905.307; 
and
    (iv) To establish objective and reasonable policies for selection 
by the IHA among otherwise eligible applicants.
    (3) The IHA admission policies shall include the following:
    (i) Requirements for applications and waiting lists;
    (ii) Description of the policies for selection of applicants from 
the waiting list that includes the following:
    (A) How the ``federal preferences'' (described in Sec. 905.303) 
will be used;
    (B) How any ``ranking preferences'' (described in Sec. 905.303) 
will be used;
    (C) How any ``local preferences'' (described in Sec. 905.303) will 
be used; and
    (D) How any residency preference will be used;
    (iii) Policies for verification and documentation of information 
relevant to acceptance or rejection of an applicant;
    (iv) Policies for resident transfer between units, projects, and 
programs. For example, an IHA could adopt a criterion for voluntary 
transfer that the resident had met all obligations under the current 
program, including payment of charges to the IHA and completion of 
maintenance requirements;
    (v) Policies for compliance with 24 CFR part 750, which requires 
applicants and participants to disclose and verify social security 
numbers at the time eligibility is determined and at later income 
reexaminations; and
    (vi) Policies for compliance with 24 CFR part 760, which requires 
applicants and participants to sign and submit consent forms for the 
obtaining of wage and claims information from State wage and 
information collections agencies.
    (4) These selection policies shall:
    (i) Be duly adopted; and
    (ii) Be publicized by posting copies thereof in each office where 
applications are received and by furnishing copies to applicants or 
residents upon request, free or at their expense, at the discretion of 
the IHA.
    (5) Such policies shall be submitted to the HUD field office upon 
request from that office.
    (6) ``Residency preference'' means a preference for admission of 
families living in the jurisdiction of the IHA. Residency provisions 
are subject to the following:
    (i) Residency requirements are not permitted;
    (ii) A residency preference may not be based on how long the 
applicant has resided in the jurisdiction; and
    (iii) Applicants who are working or who have been notified that 
they are hired to work in the jurisdiction shall be treated as 
residents of the jurisdiction.
* * * * *
    23. New Secs. 905.303 905.304, 905.306, and 905.307 are added and 
Sec. 905.305 is revised, to read as follows:


Sec. 905.303  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 905.304(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the IHA to use in selecting among applicants that qualify for 
federal preferences. See Sec. 905.304(b).
    (3) ``Local preferences'' are preferences that may be established 
by the IHA for use in selecting among applicants without regard to 
their federal preference status.
    (b) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The IHA may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the IHA must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27). Also, in 
selection of a family for a unit in a mixed population project, the 
owner will give preference to elderly families and disabled families.
    (ii) Singles preference. See Sec. 905.102.
    (2) Local preference admissions.
    (i) If the IHA wants to use preferences to select among applicants 
without regard to their federal preference status, it may adopt a 
preference system for this purpose. These ``local preferences'' may 
only be adopted after the IHA has conducted a public hearing to 
establish preferences that respond to local housing needs and 
priorities. The IHA may only use local preferences in selection for 
admission if the IHA has conducted the required public hearing.
    (ii) ``Local preference limit'' means thirty percent of total 
annual admissions to the program. In any year, the number of families 
given preference in admission pursuant to a local preference over 
families with a federal preference may not exceed the local preference 
limit.
    (3) Prohibition of preference if applicant was evicted for drug-
related criminal activity. The IHA may not give a preference to an 
applicant (federal preference, local preference or ranking preference) 
if any member of the family is a person who was evicted during the past 
three years because of drug-related criminal activity from housing 
assisted under a 1937 Housing Act program. However, the IHA may give an 
admission preference in any of the following cases:
    (i) If the IHA determines that the evicted person has successfully 
completed a rehabilitation program approved by the IHA;
    (ii) If the IHA determines that the evicted person clearly did not 
participate in or know about the drug-related criminal activity; or
    (iii) If the IHA determines that the evicted person no longer 
participates in any drug-related criminal activity.
    (c) Informing applicants about admission preferences.
    (1) The IHA must inform all applicants about available preferences 
and must give applicants an opportunity to show that they qualify for 
available preferences (federal preference, ranking preference, or local 
preference).
    (2) If the IHA determines that the notification to all applicants 
on a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the IHA may provide 
this notification to fewer than all applicants on the list at any given 
time. The IHA, must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the IHA's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the IHA's framework for 
applying the preferences and the federal preferences claimed by those 
already on the waiting list, any applicant who has not been so notified 
would receive assistance before those who have received notification.
    (d) Nondiscrimination.
    (1) Any selection preference used by an IHA must be established and 
administered in a manner that is consistent with HUD's affirmative fair 
housing objectives.
    (2) The Indian Civil Rights Act may apply to operations of the IHA.
    (3) In addition, the following nondiscrimination requirements may 
apply:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the 
implementing regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
the implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (e) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the IHA determines that an applicant does not qualify for a 
federal preference, ranking preference, or local preference claimed by 
the applicant, the IHA must promptly give the applicant written notice 
of the determination. The notice must contain a brief statement of the 
reasons for the determination, and state that the applicant has the 
right to meet with a representative of the IHA to review the 
determination. The meeting may be conducted by any person or persons 
designated by the IHA, who may be an officer or employee of the IHA, 
including the person who made or reviewed the determination or a 
subordinate employee.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against in violation 
of requirements stated in paragraph (d) of this section.

(Approved by the Office of Management and Budget under OMB control 
number 2577-0105)


Sec. 905.304  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The IHA's admission policy may provide for use of ranking 
preference for selecting among applicants who qualify for federal 
preference.
    (1) The IHA could give preference to working families. (If an IHA 
adopts such a preference, an applicant household shall be given the 
benefit of the preference if the head and spouse, or sole member is age 
62 or older or is receiving social security disability, supplemental 
security income disability benefits, or any other payments based on an 
individual's inability to work.) A IHA also could give preference to 
graduates of, as well as active participants in, educational and 
training programs that are designed to prepare individuals for the job 
market. An IHA also could use its ``local preferences'' for the Section 
8 Certificate and Voucher programs to rank federal preference holders.
    (2) The IHA may limit the number of applicants who may qualify for 
any ranking preference.
    (3) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference. (1) Basis of federal 
preference. The IHA must use the following definitions of the federal 
preferences (as elaborated upon in Secs. 905.305, 905.306, and 905.307) 
unless it has received HUD approval of alternative definitions.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the IHA.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the IHA that 
the family qualifies for federal preference. The IHA must accept this 
certification, unless the IHA verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the IHA must require the applicant to provide information 
needed by the IHA to verify that the applicant qualifies for a federal 
preference because of the applicant's current status. The applicant's 
current status must be determined without regard to whether there has 
been a change in the applicant's qualification for a federal preference 
between the time of application and selection for admission, including 
a change from one federal preference category to another.
    (ii) Once the IHA has verified an applicant's qualification for a 
federal preference, the IHA need not require the applicant to provide 
information needed by the IHA to verify such qualification again 
unless:
    (A) The IHA determines reverification is desirable because a long 
time has passed since verification, or
    (B) The IHA has reasonable grounds to believe that the applicant no 
longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.


Sec. 905.305  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the IHA.
    (2)(i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The IHA must determine that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant family unless the IHA has 
given advance written approval. If the family is admitted, the IHA may 
deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The IHA may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The IHA must determine that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Develoment Amendments of 1978.


Sec. 905.306  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State or 
tribal law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.


Sec. 905.307  Federal preference: rent burden.

    (a) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (b) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (1) ``Family income'' means Monthly Income, as defined in 
Sec. 905.102.
    (2) ``Rent'' means:
    (i) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (ii) For utilities purchased directly by tenants from utility 
providers:
    (A) The utility allowance for family-purchased utilities and 
services that is used in the IHA's programs, or
    (B) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (3) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (c) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (1) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (2) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (i) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (ii) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (iii) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.
    24. Section 905.416 is amended by removing from paragraph (d) the 
phrase, ``Federal preference in accordance with Sec. 905.305'', and 
adding in its place the phrase, ``federal preferences, ranking 
preferences, and local preferences, in accordance with Secs. 905.303 
through 905.307''; by removing the last sentence from paragraph (f); 
and by revising paragraph (a)(3), to read as follows:


Sec. 905.416  Selection of MH homebuyers.

    (a) * * *
    (3) Different standards for MH program. (i) The IHA's admission 
policies for MH projects should be different from those for its rental 
or Turnkey III projects. The policies for the MH program should provide 
standards for determining a homebuyer's:
    (A) Ability to provide maintenance for the unit; and
    (B) Potential for maintaining at least the current income level.
    (ii) The policies for the Mutual Help program must include 
procedures for determining the successor to a unit upon the death of a 
homebuyer (in the event that the homebuyer has not designated a 
successor or the successor fails to qualify).
* * * * *
    25. In Sec. 905.1008, the introductory text and the first sentence 
of paragraph (a) is revised to read as follows:


Sec. 905.1008  Purchaser eligibility and selection.

    Standards and procedures for eligibility and selection of the 
initial purchasers of individual dwellings shall be consistent with the 
following provisions:
    (a) Subject to the preference provisions of Secs. 905.303 through 
905.307 and any additional eligibility and preference standards that 
are required or permitted under this section, a homeownership plan may 
provide for the eligibility of residents of public housing owned or 
leased by the seller IHA, and residents of other housing who are 
receiving housing assistance under Section 8 of the Act, under an ACC 
administered by the seller IHA; provided that the resident has been in 
lawful occupancy for a minimum period specified in the plan (not less 
than 30 days prior to conveyance of title to the dwelling to be 
purchased). * * *
* * * * *

PART 906--SECTION 5(h) HOMEOWNERSHIP PROGRAM

    26. The authority citation for part 906 is revised to read as 
follows:

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

    27. In Sec. 906.8, the introductory text and the first sentence of 
paragraph (a) are revised to read as follows:


Sec. 906.8  Purchaser eligibility and selection.

    Standards and procedures for eligibility and selection of the 
initial purchasers of individual dwellings shall be consistent with the 
following provisions:
    (a) Subject to the preference provisions of Secs. 960.211-960.215 
(except for the restriction against use of a ranking preference that 
would cause selection of a relatively higher income family and any 
additional eligibility and preference standards that are required or 
permitted under this section), a homeownership plan may provide for the 
eligibility of residents of public housing owned or leased by the 
seller IHA, and residents of other housing who are receiving housing 
assistance under Section 8 of the Act, under an ACC administered by the 
seller IHA; provided that the resident has been in lawful occupancy for 
a minimum period specified in the plan (not less than 30 days prior to 
conveyance of title to the dwelling to be purchased). * * *
* * * * *

PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING

    28. The authority citation for part 960 is revised to read as 
follows:

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

    29. Section 960.203 is revised to read as follows:


Sec. 960.203  Nondiscrimination requirements.

    (a) The tenant selection criteria and requirements used by a PHA 
must be established and implemented in accordance with the following 
authorities:
    (1) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (2) The Fair Housing Act (42 U.S.C. 3601-3619) and the implementing 
regulations at 24 CFR parts 100, 108, 109, and 110;
    (3) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (4) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (5) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
the implementing regulations at 24 CFR part 146; and
    (6) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (b) Any tenant selection policies also must be consistent with 
HUD's affirmative fair housing objectives.
    30. Section 960.204 is revised to read as follows:


Sec. 960.204  Tenant selection policies.

    (a) Selection policies. (1) The PHA shall establish and adopt 
written policies for admission of tenants.
    (2) These policies shall be designed:
    (i) To attain, to the maximum extent feasible, a tenant body in 
each project that is composed of families with a broad range of incomes 
and to avoid concentrations of the most economically deprived families 
with serious social problems;
    (ii) To preclude admission of applicants whose habits and practices 
reasonably may be expected to have a detrimental effect on the 
residents or the project environment;
    (iii) To give a preference in selection of tenants to applicants 
who qualify for a federal preference, ranking preference, or local 
preference, in accordance with Secs. 960.211 through 960.215; and
    (iv) To establish objective and reasonable policies for selection 
by the PHA among otherwise eligible applicants.
    (3) The PHA tenant selection policies shall include the following:
    (i) Requirements for applications and waiting lists (see 24 CFR 
1.4);
    (ii) Description of the policies for selection of applicants from 
the waiting list that includes the following:
    (A) How the ``federal preferences'' (described in Sec. 960.211) 
will be used;
    (B) How any ``ranking preferences'' (described in Sec. 960.211) 
will be used;
    (C) How any ``local preferences'' (described in Sec. 960.211) will 
be used; and
    (D) How any residency preference will be used;
    (iii) Policies for verification and documentation of information 
relevant to acceptance or rejection of an applicant; and
    (iv) Policies for participant transfer between units, projects, and 
programs. For example, a PHA could adopt a criterion for voluntary 
transfer that the tenant had met all obligations under the current 
program, including payment of charges to the PHA.
    (b) These selection policies shall:
    (1) Be duly adopted; and
    (2) Be publicized by posting copies thereof in each office where 
applications are received and by furnishing copies to applicants or 
tenants upon request, free or at their expense, at the discretion of 
the PHA.
    (c) Such policies shall be submitted to the HUD field office upon 
request from that office.
    (d) ``Residency preference'' means a preference for admission of 
families living in the jurisdiction of the PHA. Residency provisions 
are subject to the following:
    (1) Residency requirements are not permitted;
    (2) A residency preference may not be based on how long the 
applicant has resided in the jurisdiction; and
    (3) Applicants who are working or who have been notified that they 
are hired to work in the jurisdiction shall be treated as residents of 
the jurisdiction.
    32. In Sec. 960.205, paragraphs (a) and (c) is revised to read as 
follows:


Sec. 960.205  Standards for PHA tenant selection criteria.

    (a) The tenant selection criteria to be established and information 
to be considered shall be reasonably related to individual attributes 
and behavior of an applicant and shall not be related to those which 
may be imputed to a particular group or category of persons of which an 
applicant may be a member. The PHA may use preferences based on the 
employment status of family members.
* * * * *
    (c) The criteria to be established shall be reasonably related to 
attaining, to the maximum extent feasible, a tenant body in each 
project that is composed of families with a broad range of incomes. 
PHAs shall develop criteria, by local preference (see Sec. 960.211) or 
otherwise, which will be reasonably calculated to attain the basic 
objective. (But see Sec. 960.211(d).) The criteria developed shall be 
sufficiently flexible to assure administrative feasibility. A dwelling 
unit should not be allowed to remain vacant for the purpose of awaiting 
application by a family falling within the appropriate range.
* * * * *


Sec. 960.206  [Amended]

    33. In Sec. 960.206, the last sentence of paragraph (a) is amended 
by removing the term, ``under Sec. 960.211,'' and adding in its place 
the phrase, ``a ranking preference, or a local preference, under 
Secs. 960.211 through 960.215,''.


Sec. 960.207  [Amended]

    34. In Sec. 960.207, paragraph (a) is amended by removing the last 
sentence, and by adding, before the period in the first sentence, the 
phrase, ``(see Sec. 960.211)''; and paragraph (b) is amended by 
removing the second sentence, and paragraphs (b)(1) and (b)(2).
    35. Section 960.211 is revised and new Secs. 960.212 through 
960.215 are added, to read as follows:


Sec. 960.211  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
federal law and required to be used in the selection process. See 
Sec. 960.212(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the PHA for use in selecting among applicants that qualify for 
federal preferences. See Sec. 960.212(b).
    (3) ``Local preferences'' are preferences that may be established 
by the PHA for use in selecting among applicants without regard to 
their federal preference status.
    (b) Use of preference in selection process.
    (1) Factors other than preference.
    (i) Characteristics of the unit. The PHA may match other 
characteristics of the applicant's family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the PHA must give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27 and 
100.202(c)(3)). Also, in selection of a family for a unit in a mixed 
population project, the owner will give preference to elderly families 
and disabled families, as provided by subpart D.
    (ii) Singles preference. See part 912 of this chapter.
    (2) Local preference admissions.
    (i) If the PHA wants to use preferences to select among applicants 
without regard to their federal preference status, it may adopt a 
preference system for this purpose. These ``local preferences'' may 
only be adopted after the PHA has conducted a public hearing to 
establish preferences that respond to local housing needs and 
priorities. The PHA may only use local preferences in selection for 
admission if the PHA has conducted the required public hearing.
    (ii) ``Local preference limit'' means fifty percent of total annual 
admissions to the program. In any year, the number of families given 
preference in admission pursuant to a local preference over families 
with a federal preference may not exceed the local preference limit.
    (3) Prohibition of preference if applicant was evicted for drug-
related criminal activity. The PHA may not give a preference (federal 
preference, local preference or ranking preference) to an applicant if 
any member of the family is a person who was evicted during the past 
three years because of drug-related criminal activity from housing 
assisted under a 1937 Housing Act program. However, the PHA may give an 
admission preference in any of the following cases:
    (i) If the PHA determines that the evicted person has successfully 
completed a rehabilitation program approved by the PHA;
    (ii) If the PHA determines that the evicted person clearly did not 
participate in or know about the drug-related criminal activity; or
    (iii) If the PHA determines that the evicted person no longer 
participates in any drug-related criminal activity.
    (c) Informing applicants about admission preferences.
    (1) The PHA must inform all applicants about available preferences 
and must give applicants an opportunity to show that they qualify for 
available preferences (federal preference, ranking preference, or local 
preference).
    (2) If the PHA determines that the notification to all applicants 
on a waiting list required by paragraph (c)(1) of this section is 
impracticable because of the length of the list, the PHA may provide 
this notification to fewer than all applicants on the list at any given 
time. The PHA must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the owner's 
determination of the number of applicants on the waiting list who 
already claim a federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a federal preference; and
    (ii) It is unlikely that, on the basis of the PHA's framework for 
applying the preferences and the federal preferences claimed by those 
already on the waiting list, any applicant who has not been so notified 
would receive assistance before those who have received notification.
    (d) Income-based admission. The PHA may only give preference to 
select a relatively higher income family for admission if the 
preference is pursuant to a ``local preference'' admission. (For other 
income-related restrictions on selection, see 24 CFR 913.105.)
    (e) Notice and opportunity for a meeting where preference is 
denied.
    (1) If the PHA determines that an applicant does not qualify for a 
federal preference, ranking preference, or local preference claimed by 
the applicant, the PHA must promptly give the applicant written notice 
of the determination. The notice must contain a brief statement of the 
reasons for the determination, and state that the applicant has the 
right to meet with a representative of the PHA to review the 
determination. The meeting may be conducted by any person or persons 
designated by the PHA, who may be an officer or employee of the PHA, 
including the person who made or reviewed the determination or a 
subordinate employee.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against on the basis 
of race, color, religion, sex, national origin, age, disability or 
familial status.

(Approved by the Office of Management and Budget under OMB control 
number 2577-0105)


Sec. 960.212  Federal preferences: general.

    (a) Definition. A federal preference is a preference under federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among federal preference 
holders. The PHA's admission policy may provide for use of ranking 
preference for selecting among applicants who qualify for federal 
preference.
    (1) The PHA may give ranking preference to working families--so 
long as the preference does not result in violation of the restriction 
of Sec. 960.211(d) concerning income based admissions or the 
nondiscrimination provisions that protect against discrimination on the 
basis of age or disability. (If a PHA adopts such a preference, it may 
not give greater weight to an applicant based on the amount of 
employment income, and an applicant household shall be given the 
benefit of the preference if the head and spouse, or sole member, are 
age 62 or older or are receiving social security disability, 
supplemental security income disability benefits, or any other payments 
based on an individual's inability to work.) The PHA also could give 
preference to graduates of, as well as active participants in, 
educational and training programs that are designed to prepare 
individuals for the job market.
    (2) The PHA may limit the number of applicants who may qualify for 
any ranking preference.
    (3) The system may give different weight to the federal 
preferences, through such means as:
    (i) Aggregating the federal preferences (e.g., provide that two 
federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a federal preference holder who fits 
a particular category of a single federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a federal preference. (1) Basis of federal 
preference. The PHA must use the following definitions of the federal 
preferences (as elaborated upon in Secs. 960.213, 960.214, and 
960.215), unless it has received HUD approval of alternative 
definitions.
    (i) Displacement. An applicant qualifies for federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the PHA.
    (ii) Substandard housing. An applicant qualifies for a federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a federal preference by certifying to the PHA that 
the family qualifies for federal preference. The PHA must accept this 
certification, unless the PHA verifies that the applicant is not 
qualified for federal preference.
    (3) Verification of preference.
    (i) Before admitting an applicant on the basis of a federal 
preference, the PHA must require the applicant to provide information 
needed by the PHA to verify that the applicant qualifies for a federal 
preference because of the applicant's current status. The applicant's 
current status must be determined without regard to whether there has 
been a change in the applicant's qualification for a federal preference 
between the time of application and selection for admission, including 
a change from one federal preference category to another.
    (ii) Once the PHA has verified an applicant's qualification for a 
federal preference, the PHA need not require the applicant to provide 
information needed by the PHA to verify such qualification again 
unless:
    (A) The PHA determines reverification is desirable because a long 
time has passed since verification, or
    (B) The PHA has reasonable grounds to believe that the applicant no 
longer qualifies for a federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit must be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence must be evaluated.

(Approved by the Office of Management and Budget under OMB control 
number 2577-0105)


Sec. 960.213  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference.
    (1) An applicant qualifies for a federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the PHA.
    (2) (i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of under-occupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence.
    (i) An applicant is involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence, or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The PHA must determine that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant must certify that the person who engaged in such 
violence will not reside with the applicant family unless the PHA has 
given advance written approval. If the family is admitted, the PHA may 
deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals.
    (i) An applicant family is involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The PHA may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes.
    (i) An applicant is involuntarily displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The PHA must determine that the hate crime involved occurred 
recently or is of a continuing nature.
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Development Amendments of 1978.


Sec. 960.214  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions.
    (1) Dilapidated unit. A housing unit is dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect or repair or 
from serious damage to the structure.
    (2) Homeless family.
    (i) An applicant that is a ``homeless family'' is considered to be 
living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized: or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.


Sec. 960.215  Federal preference: rent burden.

    (a) ``Rent burden preference'' means the federal preference for 
admission of applicants that pay more than 50 percent of family income 
for rent.
    (b) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (1) ``Family income'' means Monthly Income, as defined in 24 CFR 
913.102.
    (2) ``Rent'' means:
    (i) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (ii) For utilities purchased directly by tenants from utility 
providers:
    (A) The utility allowance for family-purchased utilities and 
services that is used in the PHA tenant-based program, or
    (B) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (3) Amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (c) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (1) The applicant has been paying more than 50 percent of income 
for rent for less than 90 days.
    (2) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated 
because of the applicant's refusal to comply with applicable program 
policies and procedures on the occupancy of underoccupied and 
overcrowded units:
    (i) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (ii) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (iii) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.

    Dated: June 3, 1994.
Henry G. Cisneros,
Secretary.
[FR Doc. 94-16886 Filed 7-13-94; 8:45 am]
BILLING CODE 4210-32-P