[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: 94-16887]


[[Page Unknown]]

[Federal Register: July 18, 1994]


_______________________________________________________________________

Part IV





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 813, et al.




Section 8 Certificate and Voucher Programs Conforming Rule: Admissions; 
Final Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Parts 813, 882, 887, and 982

[Docket No. R-94-1628; FR-3727-F-01]
RIN 2577-AB47

 
Section 8 Certificate and Voucher Programs Conforming Rule: 
Admissions

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Final rule.

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SUMMARY: This rule amends requirements for admission of eligible 
families to receive tenant-based Section 8 rental assistance under the 
rental certificate program and the rental voucher program. The rule 
includes procedures for waiting list and non-waiting list admission, 
including federal and local preferences for admission from the Housing 
Agency waiting list. The rule makes these changes to implement a 
statutory change and to reorganize and clarify the admissions 
process.The statutory change implemented by this rule 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. The rule also 
consolidates and clarifies existing policies concerning the admissions 
process.

EFFECTIVE DATES: Except for Sec. 982.209(b), this rule is effective on 
October 18, 1994. Section 982.209(b) is effective January 18, 1995.

FOR FURTHER INFORMATION CONTACT: Madeline Hastings, Director, Rental 
Assistance Division, Room 4204. Telephone numbers (202) 708-2841 
(voice); (202) 708-0850 (TDD). (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The information collection requirements in this rule have been 
approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520), and have been 
assigned OMB Control Number 2577-0169.

Background

    On February 24, 1993, HUD published a comprehensive proposed rule 
to combine and conform the rules for tenant-based Section 8 rental 
assistance under the rental certificate program and the rental voucher 
program. [58 FR 11292]
    This final rule only covers unified admission procedures for the 
tenant-based program. Admission procedures are contained in Subpart E 
of a new tenant-based rule at 24 CFR Part 982. As soon as possible, HUD 
will issue a comprehensive final rule covering all aspects of the 
tenant-based programs. The final rule may include further revisions of 
program admission procedures.

Eligibility

When HA Can Admit Non Very Low-Income Families

    The proposed rule listed the categories of non very low-income 
families who may be selected for the tenant-based programs. Public 
comments state that the list is confusing, administratively cumbersome 
and unfair. Comments also claim HUD is improperly restricting admission 
of non very low-income families.
    Under the law, there are different income limits for admission to 
the certificate and voucher programs. In the certificate program, the 
law permits assistance for low-income families (income below 80 percent 
of area median). However, in the voucher program, the law generally 
limits participation to very low-income families (income below 50 
percent of area median). Families that are not very low-income can be 
admitted to the voucher program only in cases specified in the law--
families who reside in specified types of housing affected by various 
HUD programs or activities.
    A central goal of this rule is to unify regulatory requirements for 
the tenant-based certificate and voucher programs, except for 
differences that are required by the law. To this end, the rule largely 
sets the same eligibility requirements for the two tenant-based 
programs. For both programs, the rule allows admission of non very low-
income families within the statutory categories prescribed by law for 
the Section 8 voucher program (such as a family previously assisted in 
public housing), and also within the statutory lower income limit for 
admission to the Section 8 non-voucher programs. Thus families that 
meet the uniform eligibility requirements under this rule are within 
the statutory eligibility limits for both the Section 8 voucher and 
certificate programs.
    For the certificate program only, the rule permits admission of a 
low-income family that lives in a property sold by HUD or in a property 
sold at foreclosure of a HUD-held mortgage. This is the only difference 
between the uniform eligibility requirements for the tenant-based 
programs under this rule.
    In the certificate and voucher programs, the law establishes the 
outer boundaries of statutory eligibility. However, the law does not 
assure assistance for any eligible family. Unlike entitlement programs, 
in which assistance is provided to any eligible person, the 
availability of Section 8 certificate or voucher assistance is 
constrained by the amount of funding appropriated by the Congress, and 
by the funding available to the HA at which a family applies. Many may 
apply, but the HA can only assist the number of families that can be 
supported with available funding.
    In this context, the rule defines uniform eligibility criteria for 
admission of non very low-income families. The law does not require HUD 
to set eligibility limits at the boundaries of statutory program 
eligibility. Rather, the law specifically recognizes HUD's authority to 
limit admission of non very low-income families. [See 42 U.S.C. 1437n]
    HUD agrees with comments which note that the list of specific 
eligibility categories (for non very low-income admissions) is clumsy 
and confusing. However, since the voucher law does not permit 
assistance for other non very low-income families, use of the statutory 
voucher categories is the only way to define a uniform standard for 
admission of low-income families other than very low-income families. 
HUD may not totally prohibit admission of low-income families other 
than very low income families. [42 U.S.C. 1437n(c)] In addition, the 
eligibility definition in this rule focuses most available assistance 
on very low-income families, while permitting assistance for other low-
income families affected by specific HUD programs and activities.
    Under this rule, a Housing Agency (HA) can only admit non very low-
income families in the special categories defined in the rule. Before 
this rule, low-income families were, in theory, broadly eligible for 
admission to the certificate program. However, admission of such 
families was sharply restricted by HUD.
    By law, only 15 percent (5 percent before a 1990 amendment) of 
Section 8 and public housing units added nationally since federal 
fiscal year 1982 can be leased to non very low-income families. [U.S.H. 
Act, Sec. 16, 42 U.S.C. 1437n(b)(1)] The restrictions on leasing 
Section 8 units to non very low-income families are stated in a cross-
cutting regulation for the various Section 8 programs. [24 CFR 
Sec. 813.104 and Sec. 813.105] For the certificate program, the limit 
is applied by regulation to families admitted to the certificate 
program since July 1984. [Sec. 813.105(c)] In practice, almost all 
Section 8 tenant-based units are covered by the regulatory restriction. 
In general, the HA may not admit a non very low-income (but statutorily 
eligible) family unless HUD has given the HA approval to grant an 
``exception''.
    In implementing the limit on non very low-income admissions, 
exceptions were routinely permitted by HUD for the types of non very 
low-income admissions allowed under this rule. In practice, non very 
low-income occupancies have represented less than five percent of the 
Section 8 and public housing programs as a whole, or of the certificate 
program or voucher program separately. Even in the categories for which 
exceptions have been granted by HUD, most families are very low-income 
at admission to the certificate and voucher programs.
    For tenant-based assistance, this rule now lists the categories of 
non very low-income families that may be admitted to the program. For 
this reason, HUD has decided to delete the separate regulatory 
limitations (in Part 813) on non very low-income occupancy in the 
certificate programs, and to delete also the accompanying requirement 
to secure grant of a HUD ``exception'' permitting admission of non very 
low-income families. In essence, the exception cases are now built into 
the definition of income eligibility in the program rule. Since the 
number of non very low-income certificate and voucher admissions in 
these special categories is limited (in relation to the aggregate 
number of program admissions), experience indicates such admissions 
will continue to be well below 15 percent of certificate and voucher 
admissions, and will not jeopardize compliance with the global 15 
percent limitation for the Section 8 and public housing programs as a 
whole. Deletion of the certificate and voucher procedures for 
restricting and tracking non very low-income occupancy will simplify 
program administration by HAs and HUD, but will not substantially 
affect actual levels of occupancy in these programs.

Applicable Income Limit

    HUD establishes sets of income limits for each area of the country. 
The HA determines whether a family is income-eligible by comparing the 
family's annual income (gross income) and the HUD-established very low-
income limit or low-income limit for the appropriate income limit area. 
The final rule codifies how the HA determines the applicable income 
limit area for a family admitted to the tenant-based assistance 
programs.
    In the public housing program, and in the project-based Section 8 
assistance programs, family income eligibility at admission to the 
program is governed by the income limit for the area where the project 
is located, and the family is initially assisted. In the tenant-based 
programs, at initial issuance of a certificate or voucher to a family, 
the HA does not know where the family will initially rent with 
assistance under the program.
    At admission, a family may generally choose to rent a unit anywhere 
in the HA jurisdiction, and (if qualified for initial portability) may 
elect to rent a unit outside the HA jurisdiction under portability 
procedures. For some HAs, such as an HA with Statewide jurisdiction, 
the HA jurisdiction may include more than one income limit area. If the 
family moves to a different HA jurisdiction under portability, the 
receiving HA may be in a different income limit area (or areas) than 
the HA that admitted the family. The HA needs to know what income limit 
applies, both when the HA initially issues the family a certificate or 
voucher, and also when the HA initially executes a HAP contract for the 
family.
    The rule provides that in determining the applicable income limit 
for issuance of a certificate or voucher upon selection for the 
program, the HA uses the highest income limit (for the family unit 
size) of all the income limit areas in the HA jurisdiction. However, 
the family may only use the certificate or voucher to rent a unit in an 
area where the family is income eligible at admission to the program 
(that is, when the HA executes a HAP contract for the unit selected by 
the family). The applicable income limit for admission to the program 
is the income limit for the area where the family is initially 
assisted. [Sec. 982.201(b)(2)] For admission as a very low-income 
family, the family income must be within the very low-income limit for 
the area. For admission as a low-income family (which meets criteria 
for admission of a non very low-income family), the family income must 
be within the low-income limit for the area.

Continuously Assisted Family

    The rule provides that the HA may assist a low-income family that 
is continuously assisted under the 1937 Housing Act. 
[Sec. 982.201(b)(1)(ii)(A)] The rule lists the 1937 Housing Act 
programs. [``1937 Housing Act program'' defined at Sec. 982.3] The 1937 
Act programs include the public housing program and all of the Section 
8 project and tenant-based programs (as well as the old Section 23 
leased housing and Section 23 housing assistance payments programs).
    Public comments express concern about the process for determining 
if families are ``continuously assisted'' under the 1937 Housing Act. 
Families do not know if they have been continuously assisted under a 
1937 Act program. The HA would have to conduct investigations to 
determine if families qualify as continuously assisted. Comments ask 
for guidance on how to get this information.
    If a family is currently assisted in a 1937 Act program of the same 
HA at which it is applying for assistance under the certificate or 
voucher program, the HA should usually have no difficulty getting this 
information. If the family was receiving assistance under one of the 
1937 Housing Act programs from another HA or a private Section 8 owner, 
the family must generally provide the information to the HA. The HA may 
verify the information by inquiry to the HA or owner.
    The rule provides that an applicant is considered to be 
continuously assisted under the 1937 Housing Act if the family is 
already receiving assistance under any 1937 Housing Act program when 
the family is admitted to the certificate or voucher program. 
[Sec. 982.201(d)(1)] The Department recognizes that in a variety of 
circumstances there may be a brief interruption in the transition from 
another 1937 Act program to assistance under the 1937 Act tenant-based 
programs. For example, tenant-based assistance may be provided for 
continued assistance to residents of a Section 8 project after the HAP 
contract expires or is terminated for owner breach, and there may be a 
short delay in arranging for continued assistance for project-
residents.
    This rule allows the HA flexibility to deal with brief breaks that 
do not interrupt the essential continuity of 1937 Act assistance to the 
family. The rule provides, as proposed, that an HA must establish 
policies concerning whether and to what extent a brief interruption 
between assistance under a 1937 Act program and admission to the HA's 
tenant-based program will be considered to break continuity of 
assistance. [Sec. 982.201(d)(2)] Comments approve this approach.

Limit on Assistance for Aliens

    Comments suggest that proof of citizenship should be an eligibility 
requirement, and that foreign students should be ineligible for the 
program.
    Section 214 of the Housing and Community Development Act of 1980 
(42 U.S.C. 1436a) prohibits Section 8 assistance for persons other than 
United States citizens or eligible aliens. Section 214 will be 
implemented in a separate rule.

Definition of a Family

    In the Section 8 and public housing programs, the statutory term 
``family'' refers to a group or single person that can be assisted 
under the program. A 1992 law redefined the term ``family''. [42 U.S.C. 
1437a(b)(3), as amended by the Housing and Community Development Act of 
1992, section 621; 106 Stat. 3812] The February 24, 1993 proposed rule 
contained a new ``family'' definition based on the 1992 law. HUD did 
not propose to amend the general Section 8 definition of ``family'' and 
other related terms in 24 CFR 812.2. The statutory family definition 
was amended again, on April 11, 1994. [42 U.S.C. 1437a(b)(3)(B), 
amended by Section 301 of Public Law 103-233, 108 Stat. 342, 369]
    Public comments raise important questions about the new definition 
of the term ``family'' under the 1992 law and proposed rule. The 
Section 8 and public housing programs are covered by the same statutory 
``family'' definition in the U.S. Housing Act of 1937. Since there 
should be substantially uniform regulatory treatment of family 
eligibility in these programs, the Department is deferring 
implementation of any substantive changes because of the family 
redefinition under the 1992 law.
    The 1992 law provided that the term ``families'' ``means families 
with children''. [106 Stat. 3812] Many public comments echo HUD's 
concern in the proposed rule, that this new statutory definition might 
not permit admission of a multi-person family without children, such as 
a married couple without children or two adults. In 1994, the law was 
amended to provide that ``the term `families' includes families with 
children''.
    This final rule does not give a new family definition. However, the 
rule restates how the family concept is used in determining program 
eligibility. The rule states that a ``family'' may receive assistance 
under the certificate or voucher programs. [Sec. 982.201(a)] The 
``family'' may be either a single person or a group of persons. 
[Sec. 982.201(c)(1)] In accordance with the 1994 amendment, the rule is 
revised to provide that the group of persons constituting a family 
``includes a family with a child or children''. [Sec. 982.201(c)(2)] 
This provision allows admission of a family with children, but does not 
preclude the admission of a multi-person family without children.
    Over time, successive amendments of the U.S.H. Act ``family'' 
definition have widened the qualification of single individuals for 
assistance under the program. Originally, the term covered only aged, 
displaced or disabled single persons. Currently, any single person may 
qualify as a ``family''. Although the rule does not include a new 
family definition, the rule specifies that a single person family may 
be an elderly person, a disabled person, a displaced person or ``any 
other single person''. [Sec. 982.201(c)(4)(iv)]
    Through successive statutory amendments, the 1937 Housing Act 
specified when a single person qualifies as a family, but did not 
contain a comprehensive definition stating when a group of persons 
(other than an elderly family or disabled family) qualifies as a 
family. HUD does not impose a national definition of a multi-person 
family, but has substantially left this term to local definition by 
individual HAs for application to their programs.
    The rule confirms that ``family'' includes an elderly or disabled 
person or persons residing with a live-in aide who provides necessary 
supportive services. In accordance with historical practice and 
understanding, the rule provides that the HA determines if any other 
group of persons qualifies as a family. [Sec. 982.201(c)(3)]
    A 1993 rule removed restrictions on assistance for singles who are 
not elderly, disabled or displaced. [58 FR 39658, July 26, 1993] HAs 
now have broad authority to house other single persons, but must house 
the elderly, disabled or displaced ahead of other singles.

Near-elderly

    In accordance with the 1992 law, the family definition in the 
proposed rule contains several provisions on assistance to a ``near-
elderly'' person--defined as a person from 50 to 61 years old. The 
proposed rule provides that a statutory ``family'' (the entity eligible 
for program assistance) includes a family whose head or spouse is near-
elderly, and also provides that a single person family includes a near-
elderly person. Comments approve assistance for the near-elderly. The 
comments generally appear to assume that qualification as near-elderly 
makes a single person eligible for assistance, or confers priority over 
younger single persons. Such comment indicates confusion as to the 
impact of the near-elderly designation on program eligibility. Since 
any single person may now qualify as a statutory family, the near-
elderly designation is not necessary to confer single person program 
eligibility. Also, near elderly singles do not have a statutory 
priority for admission.
    This rule does not include the proposed near-elderly definition and 
provisions on family eligibility of a near-elderly person. Under the 
1992 law, the near-elderly characterization chiefly affects use of 
Section 8 project-based assistance in units or projects designated for 
the elderly. In the tenant-based programs, there are no projects or 
units designated for Section 8 elderly occupancy. Each family chooses a 
unit in the private market.

Temporary Absence of Foster Child

    Comments asked HUD to clarify a rule which states that the 
temporary absence of a child from the home due to placement in foster 
care may not be considered in determining what constitutes a family. A 
1990 law provides that: The temporary absence of a child from the home 
due to placement in foster child care shall not be considered in 
considering family composition and family size. [1990 NAHA, section 
574, amending 42 U.S.C. 1437a(b)(3); 104 Stat. 4238]
    In determining family composition, the temporarily absent child is 
considered to be part of the assisted household. For example, a single 
woman with two children who are currently and temporarily living in 
foster care homes, is considered as a family of three people, one adult 
and two children, instead of a single person family. The statutory 
provision is intended to promote family re-unification by permitting 
the family to rent a subsidized unit that will be big enough for the 
whole family when the absent child returns from foster care. To clarify 
this concept, the rule provides that: A child who is temporarily away 
from the home because of placement in foster care is considered a 
member of the family. [Sec. 982.201(c)(5)]
    The statutory and regulatory provisions only pertain to the foster 
child's ``temporary'' absence from the home, but are not intended to 
artificially enlarge the space available for other family members.

Remaining Family Member

    Comments ask HUD to clarify a proposed provision stating that the 
``remaining'' members of an assisted family qualify as a ``family''. 
Since the beginning of the Section 8 program, the law has provided that 
a ``family'' includes a ``remaining'' member of the tenant family. 
[Definition now at 42 U.S.C. 1437a(b)(3)(A)] Under the existing 
regulatory definition of a ``family'', the term ``family'' includes the 
``remaining member of a tenant family'' (at Sec. 812.2, not amended by 
this rule).
    If composition of an assisted family changes by death or departure 
of family members after initial admission to the program, the remaining 
members or individual member of the assisted family are a statutory 
``family''. The definition of a ``family'' as including a ``remaining'' 
family member merely confirms that the HA may continue assistance on 
behalf of a remaining family member after departure of other members of 
the original assisted family. The ``remaining'' family member concept 
does not affect original eligibility or admission to the program--
whether of a single individual or of a multi-person family.
    Since this rule only covers HA admission processes (Part 982, 
Subpart E), the rule deletes the proposed provision on remaining family 
members. The final stage of this rulemaking will clarify that remaining 
family members constitute a family.

Disability

    The family definition in the 1992 law includes a new definition of 
``person with disabilities'' (essentially combining defining elements 
of three separate disability definitions under prior law). [106 Stat. 
3812, amending 42 U.S.C. 1437a(b)(3)(E)] The law provides that ``person 
with disabilities'' may not exclude persons with the disease of 
acquired immunodeficiency syndrome (AIDS), or conditions resulting from 
the AIDS syndrome. The proposed rule would incorporate the new AIDS-
related elements in the definition of ``person with disabilities''.
    Comments ask HUD to clarify whether the disability definition 
includes a person who is HIV positive, but who does not exhibit 
symptoms or conditions associated with AIDS. Comments ask why persons 
with terminal illnesses other than AIDS are not included in the 
definition, and suggest that HUD expand the definition of the term 
disabled person to include persons in recovery programs for substance 
abuse or other conditions.
    As indicated above, substantive changes in the ``family'' 
definition under the 1992 law will be implemented by HUD in a separate 
rulemaking for the whole universe of covered Section 8 and public 
housing programs. This rule does not include special provisions on 
eligibility of individuals with AIDS and related conditions. To qualify 
for assistance as a disabled person, a single person must meet the 
general disability standards carried forward from the prior law (and 
consolidated under the term ``disabled person''). In addition, since 
the law and rule now permit assistance to any single person (not only 
the aged, disabled or displaced), disabled or non-disabled single 
persons are broadly eligible for Section 8 assistance.
    The definition of ``disabled person'' includes a person with a 
disability as defined in section 223 of the Social Security Act. 
[Definition of ``disabled person'' in Sec. 982.3; 42 U.S.C. 
1437a(b)(3)(E)(i)] Comments state that the HUD rule should use the 
disabled definition in the Americans with Disabilities Act instead of 
the definition of disabled under section 223 of the Social Security 
Act. Since the disability definition in the 1937 Housing Act explicitly 
incorporates the disability definition in the Social Security Act, HUD 
has not followed this recommendation.

Live-in Aide

    The rule defines the term ``live-in aide''. [Sec. 982.3] A live-in 
aide resides with the assisted family to care for a family member who 
is disabled or elderly. Section 8 family income does not include income 
of the live-in aide (either for determination of family eligibility at 
admission to the program, or for determination of the family share at 
admission and reexamination). If the Section 8 participant leaves the 
unit, the live-in aide is not considered a ``remaining'' family member 
or program participant, and does not receive any assistance for 
continued occupancy of the unit.
    The definition of live-in aide in this rule substantially tracks 
the definition in other cross-cutting Section 8 rules that apply to the 
certificate and voucher programs. [24 CFR Parts 812 and 813] The 1992 
law also authorizes the use of a live-in aide for a near-elderly 
person. This change will be implemented in the future rulemaking for 
programs affected by the 1992 family amendments.
    The final rule deletes a proposed change of the live-in aide 
definition (not included in the parallel language of other Section 8 
rules) to provide that a live-in aide may not be related by blood, 
marriage or operation of law to the persons receiving Section 8 
assistance for occupancy of the unit. Comments objected to this 
proposal, stating that HUD should encourage a family relative to act as 
a live-in aide.

Single Persons: Preference for Admission of Elderly or Disabled

    By law, a single person who is elderly (over 62), disabled or 
displaced must be admitted before other single person families. [42 
U.S.C. 1437a(b)(3)(A)] This singles preference is implemented in the 
existing HUD rule on admission of single persons in the Section 8 
programs. [Sec. 812.3, as amended at 58 Federal Register 39658-59, 7/
26/93]
    In HUD's existing rules, the statutory preference for a disabled or 
elderly single person is broadened to provide a preference for an 
``elderly family'' or displaced person over other single persons. 
[Sec. 812.3(e)] An ``elderly family'' includes both a single person 
family consisting of a person who is disabled or over 62, and a multi-
person family whose head or spouse is disabled or over 62. [Definition 
of ``elderly family'' in Sec. 812.2]
    The proposed rule merely states the bare statutory preference for 
an elderly, disabled or displaced single person over other single 
persons, without stating the preference for an ``elderly'' multi-person 
family. [Proposed Sec. 982.201(a)(2)(ii)] In this rule, the statement 
of the preference has been conformed to the existing rule that gives 
preference to any family with an elderly or disabled head or spouse, 
not limited to a preference for elderly or disabled single person 
families.
    The rule provides that: In selecting applicants, the HA must give 
preference to:
    (1) A family (with or without federal preference):
    (i) Whose single member is a displaced person or,
    (ii) Whose head or spouse or single member is an elderly person or 
a disabled person, over
    (2) A single person (with or without federal preference) who is not 
elderly, disabled or displaced. [Sec. 982.207(d)]
    Comments note that the proposed rule does not explain how the 
statutory singles preference (for single persons who are elderly, 
disabled or displaced) relates to the statutory federal preferences 
(for single or multi-person families that are displaced, rent-burdened 
or live in substandard housing). Comments recommend that the rule 
should specify that the preference for singles applies between 
applicants with the same federal preference status (i.e., applicants 
with or without a federal preference). As HUD understands this 
proposal, the singles preference would require the admission of a 
federal preference single who is elderly, disabled or displaced before 
a federal preference single who is not elderly, disabled or displaced.
    The statutes do not state the relation between the two types of 
statutory preference, nor prescribe which type of preference takes 
precedence. HUD has decided to provide that the federal statutory 
preference for elderly, disabled or displaced singles will take 
precedence over the so-called ``federal preferences''. Under this rule, 
the singles preference is not limited--as proposed by the comment--to 
applicants with the same federal preference status. The rule is revised 
to provide that the singles preference applies to a family ``with or 
without a federal preference'' over a single person with or without a 
federal preference. The rule requires admission of a single individual 
who is elderly, disabled or displaced, but does not qualify for federal 
preference, before a single individual who qualifies for federal 
preference, but is not elderly, disabled or displaced. 
[Sec. 982.207(d)]
    Comments state that HAs should not be required to accept 
applications from non-elderly applicants, when these applicants will 
never be reached on the waiting list because of the preference for 
elderly or disabled persons.
    The rule does not require the admission of ``other'' single 
persons, who are not entitled to the statutory singles preference. The 
rule also permits the HA to adopt a policy on opening or closing the 
waiting list to applications from such other singles. The HA may adopt 
local policy on who may apply for assistance when the waiting list is 
open. [Sec. 982.206(a)(3) and Sec. 982.206(b)(1)] If singles with 
statutory preference will absorb available program openings, the HA may 
elect to stop accepting new applications from other single persons.

Verifying Eligibility

    The proposed rule requires that an HA must verify family 
eligibility during the 90 day period before the family initially 
receives assistance under the program. Comments note that HAs will have 
difficulty in satisfying this requirement. The Department is also asked 
to clarify whether ``initially receiving assistance'' means the date a 
certificate or voucher is issued or the effective date of the HAP 
contract.
    After considering comments, HUD has decided to require that the HA 
obtain information verifying family eligibility no more than 60 days 
before the HA initially issues a certificate or voucher to an applicant 
family. [Sec. 982.201(e)] This timing of the verification process will 
eliminate scheduling problems that might be caused if the time for 
eligibility verification is linked to the commencement of assistance 
(effective date of the HAP contract).
    Comments state that the requirement to verify eligibility 90 days 
before commencement of assistance is inconsistent with handbook 
guidance providing that verifications are valid for 120 days from 
receipt by the HA. The 120 day validity period is and will remain 
applicable for annual reexaminations and interim redetermination of 
family income and composition after admission to the program. The 
program handbook will give additional guidance on how to administer the 
initial income eligibility verification deadline in this rule.
    The proposed rule provides that the HA must make a preliminary 
eligibility determination before placing a family's name on the waiting 
list. Comments criticize HUD for trying to micro-manage the admission 
process. An HA should have discretion whether to make an eligibility 
determination before a family is added to the waiting list. Family 
circumstances change. A family that is ineligible at the time of 
application may become eligible before its name is reached on the 
waiting list. Comments also ask HUD to clarify that the HA is not 
required to verify family eligibility before adding a family's name to 
the waiting list.
    An HA must determine and verify eligibility before a family is 
admitted. However, HUD agrees that HAs need flexibility to design an 
admission process and timing that fits the need of the local program. 
For most HAs, there are many qualified applicants and a long wait for 
entrance to the program. Families may move away or lose interest. 
Eligibility information must be current when the family is finally 
selected for admission to a program. The HA needs to balance 
administrative cost and problems against the need for an adequate pool 
of families for orderly admission to available program openings.
    Various program requirements apply to the HA ``waiting list'', 
including the federal preference scheme, and provisions governing the 
relation of the Section 8 waiting list to waiting lists for other 
assisted housing programs. The proposed rule provides that the HA must 
make a preliminary eligibility determination before a family is placed 
on the Section 8 waiting list. This provision was intended to specify 
that the universe to which ``waiting list'' requirements apply is the 
universe of families for which the HA has made a preliminary 
determination of eligibility (which need not be verified at that time). 
The proposed requirement was not intended to accelerate the HA's 
preliminary eligibility determination, or to require the HA to verify 
family eligibility before adding the family to the waiting list.
    In the rule, HUD does not require a preliminary eligibility 
determination before the HA puts the family on the waiting list.

Selecting Families

Family Size--Effect on Selection

    In the tenant-based programs, HAs currently apportion available 
program funding resources by unit size (1 bedroom, 2 bedroom * * *). 
The HA selects an applicant for the unit size opening for which the 
family qualifies under the HA occupancy standards. To match available 
program resources for each bedroom size with families who qualify for a 
particular bedroom size, waiting lists are organized by bedroom size.
    In the certificate program, an HA is currently required to use 
program resources in accordance with a HUD approved unit size 
distribution. The target unit distribution for the program is stated in 
the consolidated ACC for the program. Generally, HUD must approve 
substantial deviation from the distribution allowed under the ACC. In 
the voucher program, the HA has discretion to determine the bedroom 
distribution of the program units supported with available program 
resources.
    In both programs, families are selected by bedroom size for 
available program openings for the appropriate bedroom sizes. In this 
respect, the current selection procedure for the tenant-based programs 
is the same as the selection procedure by which HAs and owners fill 
vacant units in project-based assisted housing programs. For example, 
when there is a vacant two bedroom unit in an assisted project, the HA 
or owner selects a family that needs a two bedroom unit. In the 
project-based programs, selection is inherently constrained by the 
existing configuration of the subsidized unit, and the need to assure 
an appropriate match between the size of the project unit and the 
housing needs of the assisted family.
    In the tenant-based programs, however, there are no project units. 
The family chooses among units available for rent in the assisted 
housing market. Once admitted to the tenant-based program, a family 
that qualifies for any unit size can search for a suitable sized unit 
in the local rental market. The HA is limited by the total program 
funds available under the consolidated ACC. However, there is no 
inherent need to match the unit size needs of the family with any 
particular assisted unit, or with program funds apportioned to support 
rental of a particular size unit.
    In the tenant-based programs, the unit size for which the family 
qualifies determines the maximum subsidy for the family. For example, 
in the certificate program a four bedroom family must lease a unit that 
rents under the four bedroom fair market rent.
    Under the existing program procedures, the distribution of 
available program resources by unit size may result in different 
waiting periods for the different unit sizes. For example, at a 
particular HA the wait for a four bedroom certificate may be three 
years, while the wait for a two bedroom certificate is only one year. 
In general, the length of the time a family has to wait for assistance 
is determined by the amount of funding allocated by the HA for a given 
unit size, and the number of waiting list families who qualify for that 
unit size. In this system, federal and other locally determined 
preferences determine the order of admission among waiting list 
families who qualify for a given unit size.
    In this rulemaking, comments recommend that families should not be 
selected by unit size. Families should be chosen from the top of the 
waiting list without regard to unit size. HUD should not allocate 
funding by unit size.
    After careful consideration, HUD has decided to prohibit HA 
selection of families for tenant-based assistance on the basis of the 
unit size needed by the family. HAs are no longer permitted to select 
families to meet a pre-determined program unit size distribution. 
Instead, families must be selected by the HA without regard to family 
size, or to the unit size for which a family qualifies under the HA 
occupancy policy. When selected, a family receives the appropriate 
subsidy for the family size. The HA selects families of any size in 
order from the waiting list, up to the limit of available funding. The 
program unit size distribution is no longer the basis for selection, 
but the result of selection.
    To accomplish this important change in program selection 
procedures, the rule provides that ``the order of admission from the 
waiting list may not be based on family size, or on the family unit 
size for which the family qualifies under the HA occupancy policy.'' 
[Sec. 982.204(d)(1)]
    At the time when a family comes to the top of the waiting list, the 
HA may or may not immediately have enough funds to support the amount 
of subsidy required for the family. The new rule provides that if the 
HA does not have sufficient funds to subsidize the family unit size of 
the family at the top of the waiting list, the HA may not skip the top 
waiting list family in order to admit an applicant family with a 
smaller family unit size (that can be immediately supported with 
available funding). [Sec. 982.204(d)(2)]
    In eliminating selection by unit size, the rule also eliminates HA 
administrative problems in managing available assistance resources to 
meet a pre-determined unit distribution. Moreover, the rule has also 
eliminated the need and authority for the HA to establish priorities 
for families requiring different size units.
    At any given funding level, the HA can assist more families with a 
smaller subsidy, and fewer families with a larger subsidy. This 
proposition is equally true of the old system and of the system 
established under this rule. However, under the prior system, the 
choice of the pre-determined program unit distribution is also a choice 
of how many families will be assisted in the program. Under the new 
rule, the number of assisted families is the number of families 
supported by the available funding.
    HUD has developed a new form of consolidated annual contributions 
contract (ACC) for the certificate and voucher programs. The unified 
contract covers both tenant-based programs administered by an HA, and 
eliminates the HA's obligation to meet a pre-determined program unit 
size mix in administration of the certificate program under the old 
certificate program ACC form. HUD will also eliminate the current 
certificate handbook provision requiring HUD approval of unit size 
redistributions for more than 12 units.

Prohibited Admission Criteria

    In deciding whether to admit a family, the rule does not permit the 
HA to consider certain types of ``family characteristics'' listed in 
the rule. [Sec. 982.202(b)(4)]
Discrimination Against Family With Children
    The proposed rule provides that HA selection of families may not be 
based on ``whether the family includes children (family status)''. 
Comments state that presence or absence of children may be key to 
determining if a family is eligible for assistance. Contrary to the 
comment, program ``eligibility'' is not based on whether there are 
children in the family.
    Comments note that waiting lists are organized by unit size, and 
that the unit size for which a family qualifies is determined by the 
number and relationship of family members. As discussed above, this 
rule eliminates waiting list selection based on the size of the unit 
for which a family qualifies under the HA occupancy policy. 
[Sec. 982.204(d)]
    In response to comments, the rule is revised to clarify, as 
originally intended, that the HA is prohibited from using selection 
criteria which result in ``discrimination because a family includes 
children (familial status discrimination)''. [Sec. 982.202(b)(4)(i)(C)]
Employment or Education
    The proposed rule would have prohibited the HA from basing 
selection of participants on the ``employment history or education'' of 
family members.
    The final rule removes the proposed prohibition against selection 
based on employment history of family members. In addition, the rule 
now specifically permits the HA to give a preference among Federal 
preference holders for ``working families''. [Sec. 982.210(b)(3)(iv)] 
For admissions not subject to Federal preference, the HA may also give 
preference (``local preference'') to working families.
    In affording a preference for ``working families,'' the HA is 
subject to the statutory and regulatory prohibitions against 
discrimination because of age or disability. To provide protection 
against such discrimination, the rule provides that an applicant family 
must be given the benefit of a working family 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.
    Regulations for the tenant-based programs do not allow an HA to 
adopt a preference for admission of higher income waiting list families 
over families of lower income. [Sec. 982.202(b)(4)(ii)] For tenant-
based programs, this restriction is Departmental policy, but is not 
required by statute. In accordance with this policy, the rule provides 
that when an HA elects to adopt a ranking preference for Federal 
preference-qualified ``working families'', the HA admission preference 
``may not give greater preference to an applicant based on the amount 
of employment income.'' [Sec. 982.210(b)(3)(iv)]
    The final rule does not include the proposed prohibition of 
selection based on ``education'' of family members. An HA has 
discretion whether or not to adopt an admission policy with a 
preference for this purpose. For selection among federal preference 
holders, the rule explicitly provides that an HA admission policy may 
give ranking preference for graduates of, or active participants in 
educational and training programs that are designed to prepare 
individuals for the job market. [Sec. 982.210(b)(4)] (However, the law 
and regulation prohibit a special preference for applicant families 
that agree to participate in the HA's family self-sufficiency program.)
Suitability for Tenancy
    The rule restates the old rule requirement that the owner, not the 
HA, determines whether a family is suitable for tenancy. Admission to 
the program may not be based on a family's suitability for tenancy. 
[Sec. 982.202(b)(1)] Comments state that the HA determines suitability 
for tenancy when the HA denies assistance because of drug or violent 
crime by family members. Since 1990, program rules allow the HA to deny 
assistance if family members engage in drug crimes and crimes of 
violence. The rule has been revised to confirm that the HA may deny 
assistance to an applicant (under existing provisions of the program 
rule) because of drug-related criminal activity or violent criminal 
activity by family members. [Sec. 982.202(b)(1)]
Special Admission--Non Waiting List
    Sometimes HUD gives an HA program funding for families living in 
specified units, for example, funding for families displaced because of 
demolition or disposition of a public housing project. The final rule 
provides that: ``If HUD awards an HA program funding that is targeted 
for families living in specified units:
    (1) The HA must use the assistance for the families living in these 
units.
    (2) The HA may admit a family that is not on the HA waiting list, 
or without considering the family's waiting list position. The HA must 
maintain records showing that the family was admitted with HUD-targeted 
assistance.'' [Sec. 982.203(a)]
    The rule also lists examples of types of cases in which HUD may 
give the HA program funding for a family living in a specified unit. 
[Sec. 982.203(b)] In general, these are cases where HUD provides 
certificate or voucher funding for continued assistance to low income 
residents of projects in various HUD programs. The funding is granted 
to an HA by HUD to provide assistance for families who would be 
displaced from a project by the termination of assistance or some other 
event. The HA must use the funding for that purpose. The HA is not free 
to ``select'' other families.
    In the proposed rule, a non-waiting list admission is called a 
``special family selection''. In the final rule, HUD now uses the term 
``special admission'' to more accurately reflect the nature of these 
cases--which do not involve an authentic HA selection between eligible 
applicants. In the rule a ``special admission'' is defined as: 
``Admission of an applicant that is not on the HA waiting list, or 
without considering the applicant's waiting list position.'' 
[Sec. 982.3]
    The proposed rule would have allowed special admission of: (1) 
families forced to vacate housing because of rehabilitation under the 
former rental rehabilitation grant program; (2) families living in 
Section 8 Moderate Rehabilitation or Project-based Certificate Projects 
in units that are too big or too small; (3) families living in such 
projects when an assistance contract expires; (4) when HUD gives the HA 
funding for settlement of litigation. Under the terms of the final 
rule, special admission is limited to cases when HUD provides the HA 
funding for families living in specified units.
Special Admission: Overcrowded or Overhoused Family in Federally-
Assisted Project
    Under the proposed rule, the HA would be permitted to make a non-
waiting list admission of a family that lives in a project-based 
assisted unit that is too large or too small for the family (if there 
is no vacant unit of appropriate size in the project or program). This 
proposed provision would have applied to families living in project-
based units assisted under certain HA-administered programs: a public 
housing unit, a moderate rehabilitation unit, or a project-based 
certificate unit.
    Comments recommend that HUD should allow non-waiting list admission 
of a family living in an inappropriate-sized unit assisted under the 
Section 8 new construction or substantial rehabilitation programs. 
Comments also ask HUD to clarify that an HA has the option whether to 
use the authority for non-waiting list admission of families in units 
that are too big or too small.
    HUD has decided to eliminate altogether the proposed authority for 
special admission of families who occupy assisted units that are not 
suitable for the actual family size. Instead, the HA has latitude to 
grant preference for such families in the context of the HA's general 
scheme for federal preference and non-federal preference admissions, or 
to open the waiting list for such families. In administering the limit 
on non-federal preference admissions, the HA may choose to grant a 
local preference for these families.
Special Admission: Proposal for Expansion
    Comments ask HUD to permit additional categories of non-waiting 
list admission. Comments suggest that special admission should be 
allowed:

--For persons who are terminally ill.
--For moderate rehabilitation and project-based certificate program 
families whose health, welfare or safety is threatened, or families who 
have provided drug activity testimony.
--For families that need to move closer to medical or social services.

    HUD has not adopted the recommendation to expand the list of non-
waiting list categories (special admission). Each of the situations 
noted in the public comments may be a legitimate basis for preferential 
admission. Within the scheme of federal preference and non-federal 
preference admissions, the HA can employ admission techniques that 
expedite assistance for waiting list families with special and urgent 
needs described in the HA administrative plan. The HA may, for example, 
open a closed waiting list to such families. The HA may adopt 
``ranking'' preferences for selection among federal preference holders, 
or ``local'' preferences for a local preference admission. Use of the 
HA local preference quota is the appropriate vehicle for rationing 
available local assistance resources among eligible families who do not 
qualify for federal preference. Non-waiting list treatment does not 
solve or avoid the burden of local choice in allocation of program 
resources.
Special Admission: Funding for Specific Families; Terminology
    The rule provides that if HUD awards the HA funding that is 
targeted for families living in specified units, the HA must use the 
funding for the designated purpose. [Sec. 982.203(a)]
    Comments suggest that the limit on use of targeted funding should 
only restrict the HA's initial use of the funding. This recommendation 
is not adopted. The HA must use targeted funding in accordance with the 
conditions imposed when the funds are awarded to and accepted by an HA. 
Sometimes HUD funding may be earmarked for specific families, even 
after turnover. In most cases, special admission funding is only 
restricted on initial use for a particular family. On turnover, such 
funding becomes available for general use in the HA tenant-based 
program. HUD determines how long the HA is bound by the requirement to 
use special funding for the purpose awarded. If HUD does not require 
continued use of the funding for a special purpose, the funding is 
released from special use requirements.

Waiting List

Status of Applicant
    The rule provides that an applicant does not have any right or 
entitlement to be listed on the waiting list, to any particular 
position on the waiting list, or to admission to the programs. Further, 
the rule states that this provision does not affect or prejudice any 
applicant right, independent of the certificate and voucher 
regulations, to bring a judicial action challenging an HA violation of 
a constitutional or statutory requirement. [Sec. 982.202(c)]
    Comments ask HUD to delete this provision, asserting that qualified 
applicants have a right to be listed on and selected from a waiting 
list if funding is available. Other comments expressed concern that 
this rule could be construed to mean that an HA may be sued if HUD 
fails to take action to implement a statutory provision.
    The rule language at issue substantially restates provisions of the 
current rule. [See 49 FR 12215, 12224, March 29, 1984] The language 
makes clear that the rule is not intended to create any right or 
entitlement of individual applicants to apply for or participate in the 
programs.
Metropolitan Area Admission Procedures
    Comments recommend that HUD require the establishment of a 
metropolitan-wide waiting list and nonprofit clearinghouse to take and 
process tenant applications for all subsidized housing programs in a 
metropolitan area. Comments state that this type of process is needed 
to ensure equitable treatment of applicants, and to maximize fair 
housing opportunities.
    The proposal to restructure metropolitan area admission procedures 
would affect operation of all HUD public and assisted housing programs. 
In this rulemaking, HUD will not require adoption of metropolitan-wide 
waiting lists for all subsidized programs, or the use of non-profit 
clearinghouses for processing applications.
    HUD plans to develop and implement a metropolitanwide strategy for 
the delivery of HUD-assisted housing programs. Initially HUD expects to 
develop a model for implementation of a pilot program in up to three 
metropolitan areas.
Admission to Different Subsidized Housing Programs
    This rule gives a unified statement of provisions on the 
relationship between admission to the Section 8 tenant-based programs, 
and provisions on admission to other subsidized housing programs. These 
provisions cover:

--The relation between the Section 8 tenant-based certificate and 
voucher programs. [Sec. 982.205(a)]
--The relation between the Section 8 tenant-based programs and other 
assisted housing programs. [Sec. 982.205 (b) and (c)]
Single Waiting List for Tenant-Based Programs
    The rule provides that an HA which uses residency preferences for a 
county or municipality in the HA jurisdiction may use a separate 
waiting list for the county or municipality. [Sec. 982.205(a)(1)] 
However, an HA must use the same waiting list for admission to its 
tenant-based certificate and voucher programs. [Sec. 982.205(a)(2)] The 
HA may not have separate waiting lists for its certificate and voucher 
programs.
Refusing Tenant-Based Assistance
    An applicant may decline an offer of admission to the certificate 
or voucher program, preferring to wait for admission to the other 
tenant-based program. However, if an applicant refuses offers of 
admission to both of the tenant-based programs, the HA may remove the 
applicant from the waiting list for tenant-based assistance. 
[Sec. 982.205(c)(2)]
Relation to Other Subsidized Housing Programs
    The rule provides that a family may apply for, receive or refuse 
other housing assistance without losing the opportunity for listing on 
the Section 8 tenant-based waiting list. For this purpose, ``other 
housing assistance'' means a federal, State or local housing subsidy, 
as determined by HUD, including public or Indian housing. 
[Sec. 982.205(c)(1)] Of course, the family may not continue to receive 
two forms of housing subsidy after admission to the tenant-based 
program.
    The proposed rule provided that an HA must combine the waiting list 
for the tenant-based programs with the waiting list for project-based 
certificate assistance, and that the HA may merge its tenant-based 
waiting list with the waiting list for its public or Indian housing 
program, or Section 8 moderate rehabilitation program. Comments object 
to requiring a common waiting list for tenant-based subsidy and the 
project-based certificate program. Comments note that many families on 
a common waiting list would only accept the offer of a tenant-based 
subsidy, and that it is cumbersome for the HA to administer a waiting 
list covering tenant-based and project-based units.
    HUD concurs that the decision whether to combine the tenant-based 
and certificate project-based waiting lists should be left to local 
choice by individual HAs. The rule removes the proposed requirement to 
use the same waiting list for the tenant-based programs as for the HA's 
project-based certificate program.
    The rule provides that an HA may merge the waiting list for tenant-
based assistance with HA waiting lists for admission to other assisted 
housing programs--including project-based programs administered by the 
HA (such as the project-based certificate program or the public housing 
program). The decision whether to merge the program waiting lists rests 
in the discretion of the HA. If the HA elects to merge the program 
waiting lists, selection from the merged waiting list is subject to HUD 
regulations and requirements for each of the covered programs. 
[Sec. 982.205(b)(1)]
Management of the Waiting List
    An HA must give public notice that the waiting list is open. The HA 
may adopt criteria defining who can apply, but the limitations must be 
stated in the public notice. [Sec. 982.206] The final rule adds a new 
provision clarifying that the HA may not arbitrarily refuse 
applications when the waiting list is open. The rule now provides that 
if the waiting list is open, the HA must accept applications from 
families who meet the criteria in the HA notice unless there is a 
``good cause'' for not accepting the application, such as a denial of 
assistance for one of the grounds listed in the regulation. 
[Sec. 982.206(b)(2)]
    Comments ask HUD to provide guidance on how and when to ``purge'' 
or ``update'' the waiting list. They state that the rule should not 
allow the HA to drop families who fail to demonstrate continued 
interest in assistance under the program. Comments state that the HA 
should have a rational process for updating the waiting list. They 
state that HAs should be required to establish procedures to protect 
applicants from being arbitrarily dropped from the waiting list.
    HUD does not require an HA to purge its waiting list. Usually, an 
HA purges the waiting list when the list becomes unmanageable, or the 
HA is unable to contact families. HUD believes that the HA should 
retain discretion in management of the waiting list, in determining 
when names should be dropped from the list, or in using a new or 
updated list. HUD has not adopted recommendations to add new 
restrictions on HA procedures for determining the active waiting list.
    Individual applicant families do not have a right to be placed on 
the waiting list, or to a waiting list position. [Sec. 982.202(c)] The 
HA is charged with the task of distributing limited available 
assistance resources among eligible families. To this end, the HA is 
legitimately vested with broad discretion to develop reasonable local 
policies for managing the process for admission of eligible families. 
The HA policies may properly reflect local values and local choices.
    The HA must comply with HUD requirements, including requirements 
for eligibility and preference. Within these requirements, HAs have 
wide latitude to develop a fair, orderly and economical process for 
admission of families. Because the universe of eligible families is 
generally much larger than the number of available slots, an HA needs 
to achieve a balance between the need to maintain a pool of families 
for admission to the program as openings occur, and the burden and 
expense entailed to support a waiting list that is disproportionate to 
available program resources. So long as the size of the HA waiting list 
is sufficient to fill available openings, an increase in the waiting 
list does not increase the number of families assisted. Rather, 
enlargement of the list absorbs funds that could otherwise be used for 
assistance to families--for example, by providing additional search 
assistance to selected families.
    Under this rule, HAs may decide when and how to purge the waiting 
list. The exercise of this discretion does not affect any property or 
procedural rights of individual applicants. The rule provides that: 
``The HA administrative plan must state HA policy on when applicant 
names may be removed from the waiting list. For example, the policy may 
provide that the HA will remove names of applicants who do not respond 
to HA requests for information or updates, or who have refused offers 
of tenant-based assistance under both the certificate program and the 
voucher program.'' [Sec. 982.204(c)(1)]
    The rule emphasizes that the HA's system for purging the waiting 
list may not prejudice the rights of a disabled applicant. The HA may 
not strike the name of a disabled applicant whose failure to respond to 
HA requests was caused by the applicant's disability. The HA must 
provide a reasonable accommodation that allows the disabled applicant a 
fair opportunity for response to the HA. [Sec. 982.204(c)(2)]
    Comments ask HUD to require all HAs to accept completed 
applications by mail. The Department has not accepted this 
recommendation. HAs use many different methods of taking applications. 
The Department has no reason to impose a particular method for taking 
applications. HAs are encouraged to use various locally-determined 
methods of taking applications, including home visits to applicants who 
are unable to reach the HA office. However, HAs should be aware of 
their obligation to make the application process accessible to 
applicants with a full range of disabilities.

Preference in Admission

Residency Preference

    As in the past, the rule provides that an HA may adopt a residency 
preference for admission of families on the HA waiting list. 
[Sec. 982.208] ``Residency preference'' means an HA preference for 
admission of families that reside in a specified area, including a 
family with a member who works or has been hired to work in the area. 
``Residency preference area'' means the specified area where a family 
must reside to qualify for a residency preference. [Sec. 982.208(a)]
    The final rule also clarifies when an HA may establish a residency 
preference for a part of the HA jurisdiction. If HUD approves, an HA 
may adopt a residency preference that establishes a county or 
municipality as a residency preference area. However, an HA may not 
establish a residency preference for an area smaller than a county or 
municipality. [Sec. 982.208(c)] An HA may elect to use a separate 
waiting list for a county or municipality. [Sec. 982.205(a)(1)]
    In addition, the final rule provides that selection for admission 
to the program may not be based on where a family lives before 
admission to the program. As an exception to this prohibition, the rule 
provides that an HA may target assistance for families who live in 
public housing or other federally assisted housing. 
[Sec. 982.202(b)(2)]
    The rule provides that an HA may use a residency preference either 
(1) as a ``ranking preference''--to select among federal preference 
holders, or (2) as a ``local preference''--to select among families 
that do not hold a federal preference. [Sec. 982.208(f)] Applicants 
with family members who work or who have been hired to work in the 
residency preference area must be treated the same as families that 
reside in the residency preference area. [Sec. 982.208(d)] A residency 
preference may not be based on how long the family has lived in or 
worked in the HA jurisdiction or the residency preference area. 
[Sec. 982.208(e)] A residency preference must be approved by HUD. 
[Sec. 982.208(b)]
    Some public comments approve local residency preferences. Other 
comments object to such preferences.
    Comments claim that HA residency preferences are not authorized 
under the preference statute, arguing that such preferences do not 
further any other national housing objective. HUD does not agree with 
this comment. Nothing in the preference statute precludes use of 
residency preferences.
    In admission of families who qualify for the federal preference, 
federal law does not dictate the order of admission among preference 
holders. An HA may adopt a residency preference for admission of 
federal preference holders who are local residents before admission of 
federal preference holders who are not local residents.
    In a non-federal preference admission, the law allows broad scope 
for HA adoption of local preferences to meet ``local needs and 
priorities''. The local need and priority may accommodate the desire to 
serve local residents before families who do not reside in the 
community. The law provides that the purposes of a local preference 
``may include'' a preference adopted to achieve statutory objectives of 
national housing policy. The listing of preference purposes in the law 
is not an exclusive enumeration of the purposes for which the HA may 
adopt a local preference. In addition, the adoption of a local 
residency preference may be consistent with the objective of providing 
housing to local residents in accordance with the broad objectives of 
national housing policy. [Sec. 982.209(a)]
    Comments state that an HA should use a single waiting list for the 
whole HA jurisdiction. Other comments state that HUD should not permit 
an HA to establish a separate waiting list for an area smaller than a 
county. Comments recommend that a large-area HA should be allowed to 
maintain a separate waiting list or preference for residents of a 
``reasonable subdivision'' or region of the HA jurisdiction.
    In the tenant-based programs, an HA residency preference affects 
entry to the housing program, and availability of the HA's housing 
subsidy resources for applicant families. However, the use of a 
residency preference does not affect geographic mobility of families 
once admitted to the program. During the first year after admission, 
all families may move anywhere in the HA jurisdiction. After the first 
year in the program, families may move anywhere in the State or 
metropolitan area under statutory portability procedures. (For a family 
that lives in the HA's jurisdiction when the family applies for 
assistance, the right of portability applies as soon as the family is 
admitted to the program.)
    Comments state that local residency preferences must comply with 
civil rights requirements, and should be approved in advance by HUD 
Fair Housing and Equal Opportunity. Comments also state that HUD should 
not approve a residency preference that would have a ``racially 
exclusionary effect''. The comments also allege that HUD routinely 
approves HA residency preferences, and that HUD approval is not founded 
on an adequate fair housing analysis.
    HUD emphatically agrees that HA admission policies, including any 
residency or other preference, are subject to civil rights 
requirements. HA selection policies are included in the HA 
administrative plan and the HA equal opportunity plan.
    As in the past, any residency preferences must be submitted for 
review and approval by HUD. The Department will be undertaking a full 
notice and comment rulemaking on standards or procedures for approval 
of HA residency preferences.

Federal Preference: General

    Under federal law, a housing authority with a Section 8 certificate 
or voucher program must give preference for selection of families that 
are:
    (1) Involuntarily displaced.
    (2) Homeless or living in substandard housing.
    (3) Paying more than 50 percent of income for rent.
    These are known as the ``federal preferences''.
    The law requires federal preference for at least 90 percent of the 
families who initially receive tenant-based assistance in a one-year 
period. For the other 10 percent of admissions, the HA is not required 
to award a federal preference.
    The new rule establishes the same federal preference requirements 
and non-federal preference admission limit for the tenant-based 
certificate and voucher programs. The rule provides that at least 90 
percent of total waiting list admissions to the Section 8 tenant-based 
programs in each successive one-year period must be families that 
qualify for federal preference (if federal preference holders are 
available on the waiting list). However, up to ten percent of such 
admissions during the year period may be families that do not qualify 
for federal preference. [Sec. 982.207(b)]
    This rule amends requirements for federal preference selection of 
assisted families in the Section 8 certificate and voucher tenant-based 
programs. The National Affordable Housing Act of 1990 (NAHA) enacted 
changes concerning HA preferences in selecting Section 8 program 
participants. [1990 NAHA, Section 545, Pub. L. 101-625, 104 Stat. 4218-
4220] Later legislation provides that the NAHA Section 8 preference 
changes must be implemented by April 26, 1993, through a notice and 
comment rulemaking. [Housing and Community Development Act of 1992, 
Section 104, Pub. L. 102-550, 106 Stat. 3684] This rule implements the 
NAHA preference changes for the certificate and voucher programs.
    Comments state that an HA needs clarification of federal preference 
requirements for consistent program administration. The rule is re-
written and re-organized for greater clarity in how to apply the 
statutory preferences. For the same reason, the rule also includes a 
number of new or revised definitions of preference terms.
    However, the rule has left largely unchanged the regulatory 
definitions of the three statutory preferences. With HUD field office 
approval, an HA can adopt local modifications of the standard 
preference definitions.
    The old rule stated procedures that could be used by an HA to 
verify the federal preference claimed by an applicant family. However, 
an HA was not required to use these procedures. Since the verification 
procedures are not mandatory, they need not be stated in the rule. The 
final rule deletes the description of optional verification procedures.
Limit on Non-Federal Preference Admissions
    Under the law, federal preference applies for 90 percent of the 
families who ``initially receive assistance in any 1-year period''. [42 
U.S.C. 1437f(d)(1)(A)(i) (certificates) and 1437f(o)(3)(B) (vouchers)] 
Public comments object to the 10 percent limit on non-federal 
preference admissions, and challenge the value of the statutory federal 
preference scheme. Comments state that assistance should be distributed 
first-come first-served. Comments state that the rule should increase 
the permitted percentage of non-federal preference admissions, so an HA 
can serve more families who do not qualify for federal preference--such 
as the working poor or families who need help to become economically 
self-sufficient; families at risk of becoming homeless; families in 
rural areas.
    Comments state that the federal preference requirements produce 
much paperwork for little benefit. Almost all families that are income 
eligible also qualify for federal preference. By contrast, other 
comments assert that only a fraction of waiting list families qualify 
for federal preference, and that 10 percent of admissions is not a 
sufficient allowance for non-preference admissions. Commenters doubt 
that the preference requirements are effective in achieving self-
sufficiency and equity. Others object to the difference in the 
percentage of non-preference admissions allowed by the law for public 
housing (50 percent), Section 8 project-based assistance (30 percent) 
and Section 8 tenant-based assistance (10 percent). Many comments are 
criticisms of the statutory preference requirements, rather than 
objections to HUD's implementation of the law.
    Comments indicate that the regulation should clarify how to apply 
the limit on non-federal preference admissions. Should the limit be 
tracked program-by-program? Does the count of families that initially 
``receive assistance'' include a family that receives a certificate or 
voucher from the HA, or only count if the HA has executed an assistance 
contract for the family? What is the time period for applying the local 
preference admission limit? Comments state that the rule should make 
clear that the requirement to admit a federal preference holder before 
a non-federal preference holder does not apply to a local preference 
admission within the 10 percent limit.
    The rule provides that: ```Local preference limit' means ten 
percent of total annual waiting list admissions to the an HA's tenant-
based certificate and voucher programs. In any year, the number of 
families given preference in admission to the HA tenant-based 
certificate program and voucher program over families with a federal 
preference may not exceed the local preference limit.'' 
[Sec. 982.207(b)(1)]
    Under the old certificate and voucher program rules, the 10 percent 
limit on non-federal preference admissions was applied separately for 
admissions to each program. In this rule, the limit applies to total 
waiting list admissions to the HA tenant-based certificate and voucher 
programs, rather than as a limit on admission to each separate tenant-
based program. The HA is not required to apply the 10 percent limit in 
each separate tenant-based program, so long as the HA does not breach 
the limit for admissions to both programs together.
    The statutory preference quota applies to a family that ``initially 
receives assistance'' in the certificate or voucher program. [42 U.S.C. 
1437f(d)(1)(A)(i) (certificates) and 1437f(o)(3)(B) (vouchers)] Under 
this rule, ``admission'' for tenant-based assistance is defined as the 
effective date of the first HAP contract executed by the HA for a 
family in a tenant-based program. [Sec. 982.3] The HAP contract is 
effective on the first day of the initial lease term. The term of a HAP 
contract for tenant-based assistance follows the term of the lease 
between the family and the owner. Calculation of the local preference 
limit, and of non-federal preference admissions charged against the 
limit, does not include cases where the HA has only issued a voucher or 
certificate to an applicant family, but the initial lease term has not 
commenced.
    Under this rule, the local preference limit on admission of 
families that do not qualify for federal preference only applies to 
admissions from the HA waiting list. The local preference limit does 
not apply to a ``special admission'' using funding awarded to the HA to 
provide assistance for specific families. For example, the federal 
preference requirement and local preference limit do not apply if HUD 
has given the HA funding for specific families in a specific project, 
such as a family living in a project sold by HUD. Non waiting list 
admissions are not included in the base of program admissions to which 
the federal preference percentage is applied. In addition, such 
admissions are not counted against the 10 percent limit on non federal 
preference admissions. [Sec. 982.207(b)(2)]
    The law mandates a ``preference'' in selection of families. The law 
therefore implies that federal preference applies when the HA is 
exercising a choice between a qualifying family and a non-qualifying 
family. In such an admission, the HA must ``prefer'' a qualifying 
family over a non qualifying family. Conversely, however, if a 
qualified family is not available for admission, the HA is not 
presented with a choice between a qualifying and a non-qualifying 
family, and is not required to give preference to a qualifying over a 
non qualifying family.
    Under the proposed rule, federal preference requirements would only 
apply to admissions where there is a choice between a federal 
preference holder and a non federal preference holder. Otherwise such 
an admission would not be included in the computation of families which 
initially receive assistance during the year (the base to which the 
statutory percentage applies), and selection of the family would not be 
counted against the 10 per cent limit on non federal preference 
selections.
    For ease of administration and understanding, the final rule 
changes the proposed procedure for calculating and applying the limit 
on non federal preference admissions. In this rule, all waiting list 
admissions (that is, all admissions other than a ``special admission'') 
are included in the base used to determine the 10 per cent local 
preference limit on non federal preference admissions. The base is not 
limited to admissions where there is a choice between a federal 
preference holder and a non-federal preference holder.
    However, if a federal preference holder is not available, the 
admission of a family that does not qualify for preference does not 
count against the federal preference limit. The final rule provides 
that the 10 percent local preference limit only applies to the 
admission of a non-qualifying family ``over families with a federal 
preference.'' [Sec. 982.207(b)(1)] If a federal preference holder is 
available for admission, the admission of a non-federal preference 
family is counted against the 10 per cent local preference limit. 
Conversely, if a federal preference holder is not available for 
admission, the admission of a non-federal preference holder is not 
counted against the HA's 10 percent local preference limit.
    The federal preference requirements and limit also do not apply 
when a family is received in an HA's tenant-based program under 
portability procedures. The rule clarifies that in applying local 
preference limit for a receiving HA, the beginning of assistance for 
the portability family is not counted against the receiving HA local 
preference limit. [Sec. 982.207(b)(3)] However, admission of the family 
is counted against the initial HA's local preference limit.
    The local preference limit applies to admissions ``in any 1-year 
period''. The rule does not prescribe the HA choice of an appropriate 
year period for applying the limit, such as the calendar year, the 
federal fiscal year or the HA fiscal year.
Types of Preference
    In the vocabulary of the proposed rule, HUD distinguished between 
``federal preferences'' and other ``local preferences''. As used in the 
proposed rule, the term ``local preferences'' would refer to HA 
admission preferences adopted by an HA to meet local needs and 
priorities, including preferences used to select between families that 
qualify for federal preference (admissions that count toward the 90 per 
cent of federal preference admissions), as well as preferences used to 
select between families that do not qualify for federal preference 
(selections counted against the 10 per cent limit on non federal 
preference admissions).
    In the text of the law for the Section 8 certificate program, the 
term ``local preferences'' refers to preferences used in selection of 
families who do not qualify for a federal preference (subject to the 10 
per cent limit). For such ``remaining assistance'' the HA must give 
preference under a system of ``local preferences'' established by the 
public housing agency in writing and after public hearing to respond to 
local housing needs and priorities. [42 U.S.C. 1437f(d)(1)(A)(ii)] The 
voucher statute refers to a ``system of preferences'' established by 
the HA for this purpose. [42 U.S.C. 1437f(o)(3)(B)]
    This final rule adopts the terminology used in the certificate 
statute. In the rule, the term ``local preference'' refers only to a 
preference used by the HA to select among waiting list families without 
regard to their federal preference status. [Sec. 982.3 and 
Sec. 982.207(a)(3)(iii)] The rule has also added a new term ``ranking 
preference'', designating a preference used by the HA to select among 
families that qualify for a federal preference. [Sec. 982.3 and 
Sec. 982.207(a)(3)(ii)] To summarize, the HA scheme for selection from 
the waiting list may comprise three types of preference: a federal 
preference directed by federal law for at least 90 percent of waiting 
list admissions, a ranking preference used to select among federal 
preference holders, and a local preference used to select among 
families that do not qualify for federal preference.
Drug Crime Eviction: Disqualification for Preference
    The rule implements legislation that denies federal or local 
preference for a person or family evicted from Section 8 or public 
housing in the last three years because of drug-related criminal 
activity. [1990 NAHA, Section 545, 104 Stat. 4218-4220] The proposed 
rule would only have denied a federal preference. The rule is broadened 
to provide that the evicted family may not be granted a federal 
preference, local preference or ranking preference. [Sec. 982.207(f)] 
An applicant family may not be granted a preference if any member of 
the family was evicted in the last three years from Section 8 housing 
(project-based or tenant-based) or from public or Indian housing 
because of drug-related criminal activity.
    Public comments largely approve denying an admission preference to 
persons who were evicted from assisted housing for drug-related 
criminal activity. However, comments note that implementation of this 
requirement involves the HA in screening for prior behavior of 
applicants. In the Section 8 tenant-based programs, the HA is generally 
prohibited from screening program applicants as prospective tenants.
    By law, the family may not be granted a federal or local preference 
if the family was evicted for drug-related criminal activity in the 
last three years. Comments urge HUD to set a ``statute of limitations'' 
on denial of preference for drug-related criminal activity, asserting 
that the rule should allow admission of person who have paid their debt 
to society.
    This rule follows the limitation prescribed in the law. Under the 
law and this rule, preference is denied only if the family member was 
evicted in the last three years, but is not denied for an eviction 
prior to that time. The limitation in the law is pegged to the time of 
eviction for drug-related criminal activity, rather than the time when 
the crime was committed. The statutory scheme should not be complicated 
by adding a secondary limitation based on when the person committed a 
crime for which the person was evicted in the last three years.
    Comments assert that families whose members engage in drug crime 
should be barred from the program, not merely denied an admission 
``preference''. The HA should not be required to place the family on 
the waiting list.
    The federal preference scheme governs the order of admission among 
families otherwise eligible and qualified for admission. However, the 
statute and regulation requiring denial of an admission ``preference'' 
because family members were evicted from assisted housing because of 
drug related criminal activity do not affect at all the independent 
authority of the HA to deny program admission for drug-related criminal 
activity, or for other bases allowed under the rule. The allowable 
grounds for denying assistance are explicitly listed in the program 
rules. (Currently at Sec. 882.210 for the certificate program and 
Sec. 887.403 for the voucher program. These provisions will be combined 
and conformed in the second stage of this unified rule.) Program 
regulations provide that the HA may deny assistance if a family member 
has engaged in drug-related or violent criminal activity. [For the 
certificate program, see Sec. 882.118(b)(4) and Sec. 882.210(b)(4)] If 
the HA has grounds for denial of assistance, the HA is not required to 
list the family on the waiting list, or to admit the family off the 
waiting list.
    Comments state that the HA should be permitted to deny a preference 
even if the family was not evicted for drug-related criminal activity. 
They recommend that the HA should be permitted to deny preference if 
the family was evicted for other reasons, or moved out before eviction, 
or if the family violated program requirements.
    If a family qualifies for a federal preference under the HA 
selection procedures (including the HA definition of the individual 
federal preferences), and was not evicted for drug-related criminal 
activities, the HA may not deny the federal preference. However, the HA 
may deny admission to the tenant-based programs for any of the grounds 
stated in the program regulations, such as failure to pay public 
housing rent, or fraud in a federal housing program. In addition, since 
preferences for selection among federal preference holders are not 
prescribed by federal law or program rules, the HA is free to adopt a 
system of ranking preferences to reflect local policies and concerns 
(so long as the preference system does not incorporate prohibited 
selection criteria).
    Comments ask the meaning of ``drug-related criminal activity''. 
Comments note that there should be objective standards for determining 
when a family member has engaged in such activity, such as arrest or 
conviction. The term drug-related criminal activity is defined in the 
law and rule. [42 U.S.C. 1437f(f)(5); Sec. 982.3] The definition covers 
both illegal dealing in drugs (manufacture, sale or distribution) and 
illegal use of drugs. The term embraces drug crimes that are illegal 
under State or federal law. The definition of a specific criminal drug 
crime is found in the State or federal criminal codes and caselaw that 
define the elements of a criminal act. In principle, the determination 
that a family member was evicted for drug-related criminal activity 
does not depend on an arrest or conviction, though the fact of an 
arrest or conviction may facilitate the HA determination whether the 
family member was evicted because of the crime.
    Comments point out the practical problems in determining whether 
family members were evicted from Section 8 or public housing for drug-
related criminal activity. Comments remark that it will be hard to 
implement the preference disqualification without a national tracking 
system. An HA does not know what happened in another program or 
jurisdiction.
    HUD agrees that it will not be easy to enforce the statutory denial 
of preference for families evicted for drug-related criminal activity. 
For families evicted by a Section 8 owner, there may be no records, or 
readily accessible records, of such eviction. For example, local court 
records may show only that the court issued a judgment or order of 
eviction, but without stating the grounds, and may not identify the 
names of residents other than the defendant tenant. The HA is most 
likely to know about prior drug eviction only if the family lived in 
the HA's own public housing and was evicted by the HA itself. HAs may 
be forced to rely largely on the representation or certification by the 
applicant family that no family members were evicted for drug crime 
from a Section 8 or public housing program in the three preceding 
years.
    By contrast, it may be easier for an HA to simply deny admission to 
the program because of drug-related or violent criminal activities by 
family members (rather than to deny a preference because of such 
activities, or because of an eviction for such activities). This HA 
determination does not require a finding that the family had also been 
evicted for the criminal activity.
    The law provides that the HA may grant a federal or local 
preference if the evicted ``tenant'' has completed an HA-approved 
rehabilitation program. In this context, HUD construes the word 
``tenant'' as referring to a person who engaged in drug-related 
criminal activity at a prior residence. The rule provides that the HA 
may grant a selection preference to a family with a member evicted in 
the last three years for drug-related criminal activity ``if the HA 
determines that the evicted person has successfully completed a 
rehabilitation program approved by the HA''. [Sec. 982.207(f)(1)]
    The law also provides that the HA may ``waive'' the preference 
prohibition under standards established by HUD. 42 U.S.C. 
1437f(d)(1)(A)(iii) and 42 U.S.C. 1437f(o)(3)(B). The standards must 
permit the HA to grant a waiver for an individual who ``clearly did not 
participate in and had no knowledge of'' the drug-related criminal 
activity, or when ``circumstances leading to eviction no longer 
exist''. The rule provides that the HA may waive the federal preference 
prohibition if the HA determines either that the evicted person 
``clearly did not participate in or know about the drug-related 
criminal activity'', or that the evicted person ``no longer 
participates in any drug-related criminal activity''. [Sec. 982.207(f) 
(2) and (3)]
    Comments note that it is hard for an HA to determine if a family 
member has ``successfully completed'' a rehabilitation program, or knew 
of drug-related criminal activity in a prior unit. Comments recommend 
that HUD define the meaning of successful completion. HUD agrees that 
it will be hard for HAs to render a sound judgment on these questions. 
However, these problems are inherent in the waiver law as enacted by 
the Congress. Ultimately, the decision on whether to grant relief from 
the preference prohibition rests in the judgment of the HA. The HA may 
require the family to present information or testimony that will 
satisfy the HA. HUD will not prescribe additional definitions or 
instructions. Each HA is free to work out the most practical ways of 
dealing with these questions.
Denying Admission to Preference Holder
    Comments ask if the HA can deny assistance to a family that was 
previously terminated from the Section 8 program, but applies for 
readmission and now qualifies for federal preference. The HA may deny 
admission to the tenant-based programs for the grounds listed in the 
program rules. (This rule on program admissions does not affect the 
current program rules on grounds for denial or termination of 
assistance in the certificate and voucher programs. This subject will 
be covered in the second phase of this rule.) As previously remarked, 
the federal preference scheme affects the order of admission of 
otherwise qualified families, but does not affect the determination of 
who may be qualified for admission. The allowable grounds for 
terminating assistance to a participant are also grounds for denial of 
assistance. If there are proper grounds for denial, the HA may refuse 
listing on the waiting list without regard to the family's federal 
preference status.
    Under the current program rule, behavior in a prior tenancy is not 
a ground for denial of assistance. Comments state that a family that 
causes damage or infestation to a prior residence should not qualify 
for federal preference. The proposed rule provided that a participant 
in the tenant-based programs is responsible for family-caused damage to 
an assisted unit, and for infestation caused by poor family 
housekeeping. [See Subpart L of the February 24, 1993 proposed rule. 58 
FR 11352 et seq.]
    Provisions on family obligations, and on grounds for denial of 
assistance will be included in the second phase of this rule. At this 
time, family-caused damage or infestation in a prior assisted or 
unassisted unit is not a ground for denial of assistance. Moreover, 
such behavior is not grounds for denying a statutory federal preference 
for which the family is otherwise qualified. In development of the 
rule, HUD will consider whether the HA should be authorized to deny 
admission for such behavior in prior assisted or unassisted occupancy, 
not just for such behavior as a participant in the Section 8 tenant-
based programs.
Denying Claim of Federal or Other Preference: Procedure
    Comments state that the rule should require the HA to provide the 
same procedural protections when the HA denies a claim of Federal 
preference as for a denial of assistance. The rule provides that the HA 
must give the applicant a brief statement of the reasons for a 
determination that the applicant does not qualify for federal 
preference, and must afford the applicant an opportunity to meet with 
an HA representative to review the HA determination. 
[Sec. 982.210(d)(1)] The same procedures are used under the existing 
rule. In addition, the final rule provides that the HA must give an 
applicant the same opportunity for review of the HA's decision denying 
a ranking preference (among Federal preference holders), or a local 
preference (among families that do not qualify for Federal preference).
    HUD believes the procedures provide adequate opportunity for a 
second look at an HA determination denying a federal, local or ranking 
preference. The HA must determine federal or other preference for the 
great mass of program applicants, in the routine processing of each 
individual application for admission. A decision granting a preference 
does not assure ultimate admission. Most HAs have long waiting lists. 
After listing, federal and other preference holders may wait years for 
admission to the program.
Federal Preference: Definitions
    Federal law requires a preference for displaced families, families 
living in substandard housing and families with an excessive rent 
burden. The preference rule defines each of these preferences. Comments 
recommend some revisions of these definitions. Comments state that an 
HA should have authority to grant exceptions to the standard preference 
definitions in the rule.
    For the most part, this rule does not substantially change the 
existing regulatory preference definitions. Under the rule, the HA has 
room to tailor the definition of each federal preference to local 
circumstances and local preference policy. If the HA wants to use a 
different or modified preference definition, the HA may submit an 
alternative definition for review and approval by the local HUD office. 
[Sec. 982.210(a)] In addition, the HA may adopt its own procedures to 
verify that an applicant qualifies for a federal preference. 
[Sec. 982.210(c)(3)(ii)] The HA does not have to get HUD approval 
before implementing its own verification procedures.
    Comments note that HAs need guidance in interpreting the rule. In a 
program handbook, HUD will furnish additional guidance on how to 
interpret and apply the rule.
Involuntary Displacement Preference
    Displacement by domestic violence. The definition of involuntary 
displacement gives federal preference to a family that is forced to 
move because of physical violence by a member of the household. 
[Sec. 982.211(b)(4)] This preference allows other household members to 
move away from a spouse or other person who has abused members of the 
family.
    The applicant must certify that the former abuser will not reside 
with the applicant family unless the HA has given advance written 
approval. If the abuser returns to the family, household members are 
again exposed to the threat of domestic violence. 
[Sec. 982.211(b)(4)(iii)(B)] The purpose of the certification is two-
fold: to minimize or sanction cases where there is a bogus claim for 
federal preference because of domestic violence, as well as cases where 
the abuser's return to the household defeats the purpose of the federal 
preference.
    Comments support the certification requirement, but recommend that 
the rule provide that violation of the certification is grounds for 
termination from the program. The recommendation is adopted. The rule 
provides that if a family is admitted on the basis of this preference 
(involuntary displacement because of domestic violence), the HA may 
deny or terminate assistance for breach of this certification. 
Composition of the assisted family must be approved by the HA. The HA 
must approve return of the former abuser to the assisted household. 
Thus the HA may also deny or terminate assistance where the family has 
not asked and obtained HA permission for occupancy by a former family 
member.
    In any individual case, the decision to deny or terminate 
assistance for this reason lies in the discretion of the HA. The HA 
``may'' terminate assistance, but is not required to exercise this 
authority. Even if the family was admitted with federal preference, so 
that the family can escape a threat of domestic violence, changes in 
family circumstance after admission may justify continued assistance 
for the family, for example, if the former abuser has received therapy 
or counselling that appears to minimize likelihood of recurrence.
    Displacement by owner action. The definition of involuntary 
displacement gives preference to applicants forced to vacate a dwelling 
unit by certain types of owner action, such as owner action that 
withdraws the unit from the rental market. [Sec. 982.211(b)(3)]
    Comments recommend that involuntary displacement should not cover a 
displacement because a landlord evicts the family, but should only 
cover displacement because of disaster, displacement by a government 
program, or displacement because of spousal abuse.
    No change is required. Under the rule, a family that is evicted by 
an owner for violation of the lease does not qualify for preference. To 
qualify for preference, the family must have ``met all previously 
imposed conditions of occupancy''. [Sec. 982.211(b)(3)(ii)(B)] In 
addition, with HUD approval, an HA may adopt an alternative definition 
that specifically excludes displacement because of owner eviction.
    Comments suggest that in a case where an adult ``child'' is forced 
out of the parent's unit, the child should not be treated as 
involuntarily displaced unless there was a prior rental agreement 
between the owner and child. This comment may reflect concern that in a 
family context an alleged involuntary displacement may not be genuine. 
However, HUD is not persuaded that this change should be included in 
the national definition of involuntary displacement. In any case, an 
individual HA may incorporate the suggested modification in the local 
definition.
    Displacement by government action. The definition of involuntary 
displacement in the rule gives preference to a family displaced by 
government action in connection with code enforcement, or with a public 
improvement or development program. [Sec. 982.211(b)(2)] Comments argue 
that displacement because of code enforcement results from private 
action, and should not be treated as displacement by government action. 
Comments claim that the regulatory definition rewards the building 
owner, as well as a family which ``elects'' to live in a building that 
violates the code.
    HUD does not agree that the grant of federal preference for a 
family that is forced to live in sub-code housing is an inappropriate 
``reward'' for a family that is forced to live in such circumstances. 
Moreover, the preference is not a reward for the owner of the housing. 
The family has the right to move to any available standard unit, not 
just to another unit of the same landlord. The issuance of a 
certificate or voucher helps the family move from substandard housing.
    Some HAs claim that families move into substandard housing in order 
to qualify for federal preference, and thereby speed up access to 
subsidized housing. It is likely that such cases occur only or 
principally for HAs that do not have long waiting lists of federal 
preference holders, and where federal preference qualification may lead 
to rapid entry to the programs. HAs that want to minimize possible 
abuse of the federal preferences for persons displaced by code 
enforcement, or for residents of substandard housing, may adopt ranking 
preferences based on duration of a family's residence in substandard 
housing. Alternatively, with HUD approval, the HAs could adopt modified 
preference definitions designed to deal with this problem.
    Displacement to avoid reprisals. The definition of involuntary 
displacement is amended to permit the HA to grant federal preference 
status if there is a danger of reprisal against a family member who 
provides information on criminal activities to a law enforcement 
agency. The HA may only grant a preference on this basis if the law 
enforcement agency has carried out a threat assessment, and recommends 
rehousing a family to avoid or minimize a risk of violence against 
family members. [Sec. 982.211(b)(5)]
    Displacement by hate crimes. The definition of involuntary 
displacement is amended to permit the HA to grant federal preference 
status for a family displaced by a ``hate crime''--defined as actual or 
threatened violence or intimidation against a person or the person's 
property because of race, color, religion, sex, national origin, 
handicap or familial status. [Sec. 982.211(b)(6)] An applicant 
qualifies for preference if a family member is a hate crime victim, and 
the family has been forced to vacate its housing, or fear has destroyed 
the family's peaceful enjoyment of its home. The HA must determine that 
the hate crime occurred recently or is of a continuing nature.
    Displacement: Need for accessible unit. The definition of 
involuntary displacement is amended to provide that an applicant is 
involuntarily displaced if:
    --A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    --The owner is not legally obligated to make changes to the unit 
that would make critical elements accessible to the disabled person as 
a reasonable accommodation. [Sec. 982.211(b)(7)]
    Displacement: HUD disposition of multifamily project. A recent law 
amends requirements governing HUD disposition of multifamily rental 
projects (that were previously insured or assisted under the National 
Housing Act or were subject to a loan under Section 202 of the Housing 
Act of 1959). [Pub. L. 103-233, 108 Stat. 342, April 11, 1994] This law 
amends the various federal preference statutes to specify that the 
preference for families that are involuntarily displaced applies to 
displacement ``because of 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) (``Clarification of Federal preferences''), 108 
Stat. ______, amending 42 U.S.C. 1437f(d)(1)(A)(i) (certificates) and 
1437f(o)(3)(B) (vouchers)]
    The rule is amended to reflect this statutory change. 
[Sec. 982.211(b)(8)] A family that is displaced because of the HUD 
disposition may be assisted either as a federal preference admission 
from the HA waiting list in accordance with the new law, or as a 
special admission (non-waiting list) with funding provided by HUD for 
this purpose [Sec. 982.203(b)(2)].
Substandard Housing
    Substandard housing--Definition. The statute and rule give 
admission preference to families that are homeless or live in 
substandard housing. The rule defines when a unit is considered 
substandard. [Sec. 982.212(a)]
    Public comments recommend several changes in the definition of 
substandard housing. In the existing preference rule, and in this final 
rule, substandard housing is described by the physical attributes of 
the unit. Conversely, substandardness is not defined by who occupies or 
will occupy the unit. Comments recommend that the HA should be allowed 
to treat as substandard--housing that is ``over-crowded'', or that is 
occupied by more than one family, or that does not meet HA occupancy 
standards (for the configuration of persons occupying the unit).
    HUD has not followed the recommendations. A definition based on 
unit occupancy patterns, as recommended by comment, would be more 
subject to manipulation. Families can claim over-occupancy to 
accelerate admission to the program. Over-crowding is harder to verify 
than the physical condition of the unit. With HUD approval, an 
individual HA can elect to adopt a local definition of substandard 
housing that covers housing that is over-crowded.
    Comments state that a disabled person who needs a home adapted for 
disabled occupancy should be treated as an occupant of substandard 
housing. However, a unit is not substandard merely because the unit is 
inappropriate for its disabled occupant. Instead, it is more 
appropriate to treat a disabled person who cannot continue to live in 
an unsuitable unit as a person who has been involuntarily displaced, 
and to afford a federal preference on this basis. In addition, for 
admissions not subject to federal preference (10 percent of annual 
waiting list admissions), an HA may adopt a local preference for 
admission of disabled persons.
Substandard Housing: Family in Public Housing
    If a family is living in public housing, and the family's apartment 
is in fact substandard, the family qualifies for federal preference. 
Comments agreed that a family should not be denied a federal preference 
simply because the unit where the family lives is public housing. In 
the certificate program, the law provides that a family may not be 
denied a preference ``solely because the family resides in public 
housing''. [42 U.S.C. 1437f(d)(1)(A)(i)]
    Comments note that a family living in substandard public housing 
may not be able to verify that the unit is substandard. However, if the 
family is living in public housing run by the same HA (to which the 
family is applying for Section 8), the HA is the family's present 
landlord. An HA can readily verify if its own public housing unit is 
substandard.
    Of course, an HA may be embarrassed by the claim that the family's 
public housing unit is substandard. However, the HA cannot properly 
refuse verification for this reason, or refuse to take actions to 
determine whether the unit is substandard.
Preference for Homeless
    1990 legislation confirms that the preference for families in 
substandard housing applies to families that are homeless or living in 
a shelter for the homeless. Pub. L. 101-625 (Cranston-Gonzalez National 
Affordable Housing Act), 11/28/90, section 545, 104 Stat. 4218-4219. 
Since HUD's rules already provide that homeless families qualify for 
the federal preference, no substantive change is required in this 
rulemaking. [Sec. 982.212(c)]
    The existing rule defines the term ``homeless family''. Comments 
state that each locality should be allowed to define homelessness. An 
HA may ask HUD approval to use local definitions of federal preference 
terms, including local definitions of ``substandard housing'' and 
``homeless family''. [Sec. 982.210(a)]
    Comments state that HA admission of a homeless family should be 
based on the family's current status, but should not be based on the 
cause of homelessness. HUD has not adopted this comment. In addition, 
in admission of homeless families, the HA may use ranking preferences 
based on the cause of homelessness.
Federal or Local Preference for Resident of Temporary or Transitional 
Housing
    A family may currently reside in a homeless shelter or another form 
of temporary housing. Under the HA preference system, the family may 
qualify for a federal or local preference.
    The proposed rule provides that the HA may adopt a local preference 
for families that move from ``transitional housing or a homeless 
shelter''. The 1990 preference law explicitly permits non-federal 
preference admission of families who ``reside in transitional housing . 
. .'' (that is assisted under the Mckinney Act). [42 U.S.C. 
1437f(d)(1)(A)(ii) (certificates) and 1437f(o)(3)(B) (vouchers)]
    Comments assert that a resident of transitional housing should be 
given a local preference. Other comments correctly point out that a 
family residing in a homeless shelter will generally qualify for 
federal preference, and state that the family should not be admitted 
under the authority for local preference.
    The rule does not list examples of the statutory local preference, 
including the HA option to grant a local preference for residents of 
transitional housing. The HA does not need to use its local preference 
admissions quota for families who qualify for federal preference. Under 
existing preference rules, a family that is living in transitional 
housing or a homeless shelter may qualify for federal preference.
    The old preference rule provides that the definition of a 
``homeless family'' includes a family living in a supervised 
``shelter'' that is designed to provide ``temporary living 
accommodations''. The old rule also specifies that such shelters 
``include'' certain types of housing, such as ``transitional housing 
for the mentally ill''. However, the listing of these shelter types is 
illustrative, not exclusive, and includes transitional housing for 
populations other than the mentally ill. The existing homeless family 
definition also allows the HA to give a preference for persons in a 
``temporary residence'' for persons to be institutionalized--a category 
also embraced in the broader preference for persons in temporary living 
accommodations.
    In this rulemaking, the preference for persons living in temporary 
accommodations is left substantially unchanged. However the list of 
shelter type examples is revised to explicitly cover ``transitional 
housing'' broadly, instead of referring to transitional housing ``for 
the mentally ill''. [Sec. 982.212(c)(2)(ii)(A)] This revision does not 
change the substantive import of the rule, and is merely intended to 
make clear that the preference is not restricted to residents of 
transitional housing for the mentally ill, but applies broadly to 
residents of temporary housing accommodations, including transitional 
housing.
    Comments suggest that when the HA offers a certificate or voucher 
to a family in transitional housing, the family should be allowed to 
wait for completion of transitional housing services without losing its 
place on the waiting list. HUD will not change the rule in response to 
this comment. The decision whether to hold a family's waiting list 
place should be left to the HA. However, the HA procedure may not 
discriminate against persons with disabilities.
Rent Burden
    Treatment of energy assistance payments. Federal law gives an 
admission preference to families that pay more than 50 percent of 
income for rent. For this purpose, the rule defines ``income'' and 
``rent''. [Sec. 982.213(b)]
    A family may draw benefits under a program that helps the family 
pay for energy costs (utilities). The rule provides that if energy 
assistance payments are not included in family income, the payments are 
also subtracted in calculating the family's rent burden. 
[Sec. 982.213(b)(3)] This provision is not changed from the prior rule. 
Comments ask why energy assistance payments are subtracted from rent.
    The purpose of the rent burden calculation is to determine how much 
of a family's available income is consumed for payment of the family's 
rent. Energy assistance payments cover a portion of family utility 
costs. Energy costs that are covered by energy assistance payments are 
not an additional rent burden for the family.
    The calculation of family income excludes payments under the HHS 
Energy Assistance Program. [58 FR 41287, 41288, August 3, 1993 
(paragraph (v) on list of federally mandated exclusions)] Since such 
payments are not included in income, inclusion in rent burden of costs 
covered by the HHS payments would distort calculation of the family 
rent burden (essentially by double-counting energy costs: first by 
deducting from income, and second by counting as rent burden against 
the balance of family income).
    Amount of rent. Comments ask if the HA can verify the amount paid 
as rent, instead of the amount due as rent. The statute is framed as a 
preference for families that ``are paying'' more than 50 percent of 
income for rent. Under the definition of ``rent'' in the existing rule, 
rent is the ``actual amount due'' under the family's lease.
    In implementing the statutory rent burden preference, HUD defines 
``rent'' as the amount a tenant is contractually bound to pay the owner 
as rent, not necessarily the amount that the tenant actually pays the 
owner against the monthly rent due under the lease. 
[Sec. 982.212(b)(2)(i)] A family's contractual obligation to pay rent 
is a better gauge of the family's rent burden, than the amount the 
family is able to scrape up for payment to the landlord. A family may 
be unable to pay the full rent, and may be under the shadow of eviction 
for non-payment. If the amount actually paid to the landlord is less 
than 50 percent of income, the family would not qualify for a 
preference based on the actual amount ``paid'' to the landlord. (The 
smaller the amount ``paid'' as rent, the more difficulty in qualifying 
for the rent burden preference.) In the present rule, as in the 
existing rule, the determination of rent burden is based on rent owed 
to the landlord.
    Rent burden in rural areas. Comments state that some families don't 
qualify for rent burden preference because rural areas have lower rent. 
The comments urge flexibility in determining rent burden for rural 
families.
    The percentage rent burden (50 percent) needed to qualify for 
preference is set by law. HUD does not have authority to allow use of a 
lower percentage in rural areas. If rural or non-rural families can 
rent units for less than the preference threshold, they do not qualify 
for the preference.

Preference for Public Housing Residents

Summary of Law and Rule

    For the certificate program, a 1990 law provides that a family may 
not be denied federal preference or ``delayed or otherwise adversely 
affected'' in receiving tenant-based assistance ``solely because the 
family resides in public housing''. [42 U.S.C. 1437f(d)(1)(A)(i); 1990 
National Affordable Housing Act, Section 545, 104 Stat. 4218-4219] The 
amendment was introduced by Congressman Bartlett to preserve Section 8 
federal preference status of families on the Section 8 waiting list 
when admitted to public housing. [Transcript of May 21, 1990 markup by 
Housing Subcommittee of Housing Banking Committee] Another law provides 
that in selecting families for Section 8 certificate or voucher 
assistance a housing agency may not ``exclude or penalize'' a family 
solely because the family resides in a public housing project. [42 
U.S.C. 1437f(s)]
    For both tenant-based programs, the rule provides that if a public 
housing family was on the HA Section 8 tenant-based waiting list when 
admitted to the HA's public housing (since April 26, 1993), the HA 
federal preference determination must be based on the situation of the 
applicant at the time of admission to public housing (beginning of 
initial public housing lease). [Sec. 982.210(c)(4)(ii)]

Example

    At the time a family is admitted to an HA's public housing program, 
the family is on the HA's waiting list for Section 8 tenant-based 
assistance. The family also qualifies for federal preference as a 
homeless family. The family keeps its federal preference status 
(homeless) on the Section 8 waiting list.

Preference Retention: Purpose and Effect

    The new rule implements the law which provides that a family may 
not be denied federal preference or ``otherwise adversely affected'' in 
admission to the certificate program ``solely because'' the family 
resides in public housing. [42 U.S.C. 1437f(d)(1)(A)(i)] The law is a 
statutory exception to the broad federal preference requirement (that 
90 percent of certificate admissions must be families who currently 
qualify for federal preference). The statutory exception does not apply 
to the voucher program. However, under the voucher law, for good cause 
HUD may permit an HA to admit more than 10 percent non-federal 
preference holders before families who qualify for federal preference. 
[42 U.S.C. 1437f(o)(3)(B)] HUD finds that the need for uniformity in 
administration of the tenant-based programs is good cause to require 
that HAs give preference for voucher admission of public housing 
residents who would not otherwise currently qualify for federal 
preference.
    The new rule applies the same requirements for both Section 8 
tenant-based assistance programs. An applicant for an HA's Section 8 
program that is currently living in public housing of the same HA 
qualifies for Section 8 federal preference if the applicant was 
qualified for preference at the time the applicant was admitted to 
public housing. [Sec. 982.210(c)(4)(ii)] This provision only applies if 
the applicant:
    (1) Was admitted to public housing on or after April 26, 1993--the 
statutory deadline for implementation of preference requirements in the 
National Affordable Housing Act of 1990. [Pub. L. 102-550, Section 104, 
October 28, 1992, 106 Stat. 3684]
    (2) Was qualified for federal preference at the time of such 
admission.
    (3) Was on the HA's Section 8 tenant-based waiting list at the time 
of admission to the same HA's public housing.

Preference Retention: Family Need

    Federal preferences direct housing assistance resources to families 
with urgent housing needs. Usually, public housing residents do not 
currently qualify for federal preference. For the most part, public 
housing residents are not displaced, do not pay over fifty percent of 
income for rent (most public housing families pay 30 percent of 
adjusted income), and do not live in substandard housing.
    Under the rule, federal preference for the public housing resident 
is based on the family's federal preference situation at the time when 
the family was admitted to public housing (if the family was on the 
HA's Section 8 waiting list when admitted to the HA's public housing 
program on or after April 26, 1993). Thus a family that was homeless 
when admitted to public housing, but is now living in secure and decent 
public housing, is treated the same as a homeless family on the street. 
Both families benefit from the federal preference for admission of 
families living in substandard housing.
    In some cases, a public housing family will qualify for federal 
preference because of the family's current situation. For example, a 
family may currently live in a public housing unit that is substandard. 
Thus a public housing family may receive federal preference for 
admission to the Section 8 tenant-based assistance programs either (1) 
because of the family's preference situation when admitted to public 
housing, or (2) because of the family's current federal preference 
status. The rule provides that the HA may not deny any admission 
preference for which the applicant is currently qualified (federal, 
local or ranking preference) because the applicant already resides in 
public or other assisted housing. [Sec. 982.205(c)(1)]
    HUD received many public comments on the proposed provision that 
allows a family to retain its federal preference status at the time of 
admission to public housing. Most comments strongly oppose this 
requirement. Comments state that scarce housing resources should be 
directed to families with the greatest need, not to families already 
residing in decent, safe and sanitary public housing. Some comments 
acknowledge that the regulation follows the intention of the law.
    Comments assert that the language of the law does not support grant 
of a preference based on the family's situation at a past time, before 
the family entered public housing. Comments claim that the required 
preference retention unfairly delays or denies assistance to other 
families. The family's need and preference should be based on the 
condition of the family's current housing.
    Comments state that the preference for public housing residents is 
unfair and harmful to:

--families that currently qualify for federal preference.
--families without federal preference.
--families living in other project-based assisted housing (non-public 
housing).
--families living in private housing.
--families not currently receiving any form of housing assistance.

    Other comments commend HUD's implementation of the requirement for 
retention of federal preference. The comments state that the preference 
is essential so a public housing family is not locked into public 
housing projects which are highly segregated or disproportionally 
minority.
    HUD notes that the grant of federal preference to public housing 
families that would not otherwise qualify for preference will 
necessarily operate to limit Section 8 openings for other families. 
Program selection is the competitive distribution of available 
openings. By requiring the retention of a family's original preference 
status, at the time of admission to public housing, the Section 8 rule 
carries out the specific purpose of the law--that a family may not be 
denied federal preference or ``otherwise adversely affected'' in 
admission to the Section 8 program because the family resides in public 
housing.

Preference Retention: Administration

    Comments state that preference retention increases the HA 
administrative burden. To implement this requirement, the HA must track 
and verify the family's original preference status. By allowing HA 
public housing families to move to the HA Section 8 program, the rule 
will create public housing vacancy, turnover and financial burden.
    Comments object that the preference retention rule treats public 
housing as transitional housing. The rule implies that public housing 
is bad housing, from which families are allowed to escape by operation 
of an artificial preference. Operation of the preference undercuts 
initiatives for improvement of public housing.
    HUD agrees that the preference retention will cause public housing 
turnover and associated HA administrative costs. However, the rule 
faithfully implements the purpose of the law as expressed in committee 
markup. The law is designed to facilitate a family's move from public 
housing to Section 8. HUD is seeking repeal of the law. However, at 
this time, there is no way to avoid the costs and administrative burden 
of carrying out the law.
    An HA must determine and verify the family's federal preference 
status at admission to the HA's public housing program. At the 
subsequent admission to Section 8, the HA can rely on information 
obtained for the prior determination and verification.
    Comments state that the preferential admission of public housing 
families should not apply to more than five percent of annual 
admissions to the HA Section 8 program. This recommendation is not 
adopted. Under the law, HUD is not authorized to set a limit on the 
percentage of Section 8 housing admissions for which the HA is 
prohibited from denying a federal preference because a family resides 
in public housing.

Preference Retention: For Families on Section 8 Waiting List

    Under the proposed rule, the retention of federal preference would 
apply if a family was on the Section 8 waiting list when admitted to 
public housing on or after September 1, 1991. Under this final rule, 
the retention of federal preference will apply to a family on the 
Section 8 waiting list when admitted to public housing on or after 
April 26, 1993. This date is the statutory deadline for rulemaking to 
implement the 1990 preference law (six months from enactment of the 
Housing and Community Development Act of 1992). [Pub. Law 102-550, 
October 28, 1992, Section 104, 106 Stat. 3684]
    Comments object that the retention of federal preference only 
applies if a family is (1) on the Section 8 waiting list (2) at the 
time of admission of public housing (3) after a specified date. The 
comments state that preference retention should also apply to families 
which apply for Section 8 after admission to public housing.
    Comments state that the preference retention should cover families 
admitted to public housing at any time in the past, or admitted since 
passage of the Cranston-Gonzalez National Affordable Housing Act (NAHA) 
on November 28, 1990 (prohibits denial of preference because a family 
resides in public housing). Comments state that the rule favors new 
public housing residents over older residents.
    The Housing and Community Development Act of 1992 provides that the 
preference amendments under the Cranston-Gonzalez Act must be 
implemented through notice and comment rulemaking by expiration of the 
180-day period beginning on the date of enactment of the 1992 law 
(October 28, 1992). The 180-day period expired on April 26, 1993. 
Although the Department did not complete the rulemaking by this 
deadline, the final rule provides that the retention of federal 
preference status applies to Section 8 waiting list families admitted 
to public housing on or after that date. Such families would have 
qualified for preference if the rule had been issued by the deadline 
date.
    HUD has not adopted recommendations to go beyond the requirements 
of the law--by covering families that were admitted to public housing 
before April 26, 1993, or who applied for Section 8 after admission to 
public housing.

Public Housing Family: Denial of Preference

    The rule provides that the fact that a family lives in public or 
other assisted housing may not be used as a ground for denying a 
federal, local or ranking preference for which the applicant is 
currently qualified. [Sec. 982.205(c)(1)] If the family's public 
housing unit is substandard, the family qualifies for federal 
preference, the same as a resident of private substandard housing. 
Comments generally approve allowing a federal preference for a public 
housing resident who currently qualifies for federal preference.
    Comments assert that the rule favors public housing residents over 
applicants in private housing, and is therefore unfair. The rule does 
not direct favored treatment for public housing residents (other than 
by implementing the law that allows a public housing family to keep the 
same preference status as at admission to public housing). Conversely, 
however, the rule does not prohibit the adoption of a ranking or local 
preference for residents of public housing. The rule provides that the 
HA may target assistance for families who live in public or other 
federally assisted housing. [Sec. 982.202(b)(2)]

Family Receiving HOME Tenant-Based Assistance

    In the HOME Program, HUD allocates funds to State and local 
governments for support of affordable housing. [24 CFR part 92] A 
participating jurisdiction may choose to use HOME funds to provide 
tenant-based rental assistance for low-income families during a period 
of up to 24 months. Since the period of HOME rental assistance is 
limited, Section 8 tenant-based assistance may be used to provide 
continued rental assistance for a family after termination of the HOME 
subsidy.
    A family may meet Section 8 federal preference criteria at the time 
the family begins tenant-based assistance under the HOME Program. 
Usually, the family does not qualify for preference while receiving the 
HOME subsidy. To facilitate the transition from short-term tenant-based 
assistance under the HOME Program, the HOME statute provides that 
recipients of HOME tenant based rental assistance qualify for Section 8 
tenant selection preferences to the same extent as when they initially 
received the HOME rental assistance. [42 U.S.C. 12742(a)(3)(D)] As in 
the case of the public housing preference retention provisions 
discussed above, the HOME statute permits the family to retain its 
prior federal preference situation.
    This rule provides that if a Section 8 applicant is currently 
receiving tenant-based assistance under the HOME program, the HA 
determines whether the applicant qualifies for Section 8 federal 
preference based on the situation of the applicant at the time the 
applicant began to receive tenant-based assistance under the HOME 
program. [Sec. 982.210(c)(4)(i)] The family must show that it qualifies 
for preference on this basis.

Local Preference

    For non-federal preference admissions, the law provides that the HA 
may use a system of local preferences ``to respond to local housing 
needs and priorities''. In the vocabulary of this rule, the term 
``local preference'' means a preference used by the HA to select among 
applicant families that do not qualify for federal preference. 
[Sec. 982.3, Sec. 982.207(a)(3)(iii)] Each year, ten per cent of 
admissions can be families that do not qualify for federal preference.
    The HA is not required to use or exhaust the 10 percent quota of 
admissions not subject to federal preference. The HA may elect to admit 
federal preference holders without drawing on the limit for local 
preference admission.

Preference Hearing

    The law provides that local preferences must be established in 
writing and after public hearing. [42 U.S.C. 1437f(d)(1)(A)(ii) and 
1437f(o)(3)(B); amended by 1990 NAHA, Section 545 (104 Stat. 4219), and 
1992 Housing Act, Section 144 (106 Stat. 3714)] The law does not 
contain any parallel public hearing requirement for HA policies 
implementing the federal preference, or for HA preferences in selecting 
among federal preference holders (called ``ranking preferences'' in 
this rule). In the proposed rule, HUD proposed to require public 
hearing both for adoption of preferences used to select among federal 
preference holders, and also for adoption of preferences used to select 
among families not qualifying for the federal preference.
    Comment: Some comments approve the requirement to conduct a public 
hearing on HA selection preferences, asserting that the hearing process 
will provide valuable input. Other comments oppose the hearing 
requirement. Comments claim that the hearing will be an administrative 
burden, or that the hearing will attract attention of special interest 
groups. HAs are able to establish other local policies without hearing. 
HUD review of the HA preference policy is a sufficient check on the HA 
policy.
    Comments request that HUD relieve HAs of the hearing requirement in 
communities where there is a ``CHAS'' (Community Housing Affordability 
Strategy) that determines local needs and priorities. Comments suggest 
that HUD allow an HA to use a published local notice, instead of a 
public meeting or hearing. Comments ask whether, if the HA serves a 
large area, a hearing in one part of the area is sufficient.
    Response: The solicitation of public comments may elicit helpful 
ideas or information, but necessarily entails some burden for the HA. 
In the final rule, a hearing is only required for adoption of 
preferences used in a non-federal preference admission, as required by 
the law. This rule provides that local preferences may be adopted after 
public hearing to respond to local housing needs and priorities. 
[Sec. 982.209] The HA is not required to adopt a hearing process for 
adoption of ranking preferences for selection among federal preference 
holders (representing 90 percent or more of HA admissions).
    At this time, HUD will not attempt to dictate a set hearing 
procedure. The essence of the hearing requirement is that there should 
be a reasonable process for soliciting representative comment by 
interested publics, and for the comment to be ``heard'' (i.e., 
considered) by the HA. A variety of processes can be devised to satisfy 
the hearing requirement, and the process used need not be elaborate or 
expensive. The HA may consider appropriate ways of giving public 
notice--whether by publication in the local press, posting in HA 
offices and projects, notice to legal services offices or other service 
organizations, or notice to applicants. The rule does not require that 
the hearing must necessarily be cast as a ``meeting'' between HA 
representatives and the public, so long as the HA has a procedure for 
gathering and considering public comment. If the HA elects to frame the 
hearing process as an open public meeting, the rule does not prescribe 
any number of meetings or the number of hearing venues within the HA 
jurisdiction.
    Comments object to requiring public hearings for local preferences 
already contained in the HUD-approved administrative plan, or ask if 
hearing will only be required for new proposed preferences. Comments 
state that hearing should only be required for a change in existing 
local preferences.
    Under this rule, the local preference hearing requirements will be 
effective six months after publication of the rule (see ``effective 
date'' provision of rule). The hearing requirements apply to local 
preference admissions after expiration of the six month period. (The 
hearing requirements are stated in Sec. 982.209(b).) After that point, 
the HA may not continue to use existing local preferences until the HA 
has conducted the public hearing required by law and this rule.
    Hearings are only required for HA selection preferences that are 
used for admission of families that do not qualify for federal 
preference. In admitting families that qualify for federal preference, 
HAs can continue to apply the scheme of federal and ranking preferences 
in the HA's administrative plan.
    In a separate rulemaking, HUD proposed revisions of federal 
preference requirements for the public housing program (and for other 
assisted housing programs). [58 FR 44968 (August 25, 1993)] HA 
representatives asked whether an HA can hold a single hearing to 
consider at the same time local preferences to be used both in the HA's 
public housing program, and in its certificate and voucher programs. 
Nothing prevents an HA from conducting a single hearing for this 
purpose.

Purpose of Local Preference

    For local preference admissions, the law leaves broad authority for 
an HA to develop a local preference system to meet local housing needs 
and priorities. The local needs and priorities ``may include'' certain 
possible purposes listed in the law, or ``other objectives'' of 
national housing policy. The law does not contain any comprehensive or 
exclusive enumeration of allowable local ``needs and priorities''. The 
law merely states that the ``specific purposes'' and ``other 
objectives'' are included among the local needs and priorities that may 
be served by adoption of a local preference.
    In the proposed rule, HUD listed some examples of the purposes for 
which the HA may establish a system of local preferences, including 
preferences designed to achieve ``other objectives of national housing 
policy''.
    Comments approve allowing HA discretion to adopt local selection 
preferences. Comments state that HUD should offer examples of the 
national housing policy objectives for which the HA may adopt a local 
preference. Comments stress that the HA should not be limited by the 
``examples'' listed in the rule.
    This final rule provides that the HA may establish a system of 
local preferences ``to respond to local housing needs and priorities''. 
[Sec. 982.209(a)] The law states that the local preference system may 
be designed to achieve ``objectives of national housing policy affirmed 
by the Congress''.
    The local needs and priorities may include the objective to remedy 
unsafe and unsanitary housing conditions, and to improve housing 
opportunities for residents of the United States, particularly 
disadvantaged minorities, on a nondiscriminatory basis, or may promote 
other objectives of national housing policy affirmed by the Congress. 
For example, see the statements of national housing policy in the 
United States Housing Act of 1937 (which contains Section 8) [42 U.S.C. 
1437]; and in the Cranston-Gonzalez National Affordable Housing Act of 
1990 [Pub. L. 101-625, November 28, 1990, Section 102(3), 42 U.S.C. 
12702(3).
    An HA has broad discretion to adopt local preferences in accordance 
with local circumstances and local judgment. The final rule does not 
give examples of local preference purposes. The HUD program handbook 
will give examples of possible local preferences, and advice on how to 
set up a local preference system.
    Other comments state that the HA preferences must not violate fair 
housing requirements, and should be subject to HUD review and approval. 
The HA policies for selection of program participants, including local 
preferences and ranking preferences, must be contained in the HA's 
administrative plan or equal opportunity plan. The selection policy 
must meet fair housing requirements. Residency preferences must be 
approved by HUD.

Particular Preferences

    Comments recommend that the HA should have discretion to grant 
preference for an elderly person who lives in an assisted project, but 
who needs to move closer to family members or medical facilities. An HA 
may adopt a ranking or local preference for this purpose.
    Comments recommend that HUD require the HA to grant a preference 
for a disabled veteran who is eligible for discharge from a hospital or 
nursing home. Under the rule, the HA may choose to adopt a ranking or a 
local preference for a disabled veteran who needs a rental subsidy to 
lease accessible standard housing. However, the rule does not force the 
HA to adopt such a preference.
    The law provides that an HA may grant a local preference for the 
purpose of assisting ``youth'' after discharge from foster care. The 
proposed rule recited this optional local preference. Comments ask if 
the ``youth'' would have to live with an adult. The adoption of such a 
preference does not require any change in the criteria for admission of 
families to the HA program. If the HA chooses to adopt such a local 
youth preference, the HA may limit the preference to cases where a 
minor will live with a parent or guardian or other person capable of 
establishing and managing a household. The HA has the authority and 
responsibility to define the operation of its local preference.
    Comments recommend that the rule allow a preference for the ``near-
elderly'' (a person from 50 to 61 years of age). The HA has wide 
latitude to fashion its systems of ranking and local preference, and 
could adopt a ranking or local preference for admission of the near 
elderly.
    Comments recommend that the rule allow HA's with a large 
jurisdiction to award preference to a family that wants to live in a 
certain ``region'' of the HA jurisdiction. This suggestion is not 
adopted. The rule continues traditional program policy that admission 
may not be based on where the family will live with assistance under 
the program. [Sec. 982.202(b)(3)] The tenant-based programs are 
designed to maximize the ability of poor families to choose where they 
want to live, and also to maximize opportunities for economic 
advancement by free choice of housing. An assisted family may move 
anywhere in the HA jurisdiction, or anywhere outside the HA 
jurisdiction under portability procedures.
    The HA preference system may limit the number of families that may 
qualify for any ranking or local preference. [Sec. 982.207(a)(3)(iv)]

Selection by Random Choice or Time of Application

    The proposed rule provides that date and time of application govern 
selection among families with the same preference status. Comments 
asked if the HA may select by ``lottery'' instead of date and time of 
application.
    The proposed rule was not intended to prohibit selection by 
techniques of random choice among families on the waiting list. HUD 
agrees that use of a variety of random choice procedures may be a fair 
and workable way to distribute program openings among a large number of 
applicants. The rule clarifies, as originally intended, that use of 
date and time of application is not the only permitted technique for 
sorting among applicants in a given preference category. The final rule 
specifically sanctions use of random choice procedures for selection 
among applicants with the same preference status.
    The rule provides that the HA must use one of two techniques to 
select among applicants with the same preference status (federal, 
ranking or local preference): (1) Date and time of application, or (2) 
A drawing or other random choice technique. [Sec. 982.207(e)(1)] In all 
cases, the selection process must be consistent with the preferences 
required by federal law and regulation (both the federal preference 
requirements, and the preference for elderly, disabled or displaced 
over other singles). [Sec. 982.207(e)(2)] Whatever the process for 
selection of applicants, the HA must use procedures which provide a 
clear audit trail, that permits verification that each applicant has 
been selected in accordance with the method specified in the 
administrative plan. [Sec. 982.207(e)(3)]

Findings and Certifications

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.

Impact on the Environment

    A Finding of No Significant Impact with respect to the environment 
was made in connection with the proposed rule 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.

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.

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 carries out the mandate of federal statute with respect to 
admission preferences.

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.

Regulatory Agenda

    This rule was listed as sequence number 1691 under the Office of 
the Assistant Secretary for Public and Indian Housing in the 
Department's Semiannual Regulatory Agenda published on April 25, 1994 
(59 FR 20424, 20471) in accordance with Executive Order 12866 and the 
Regulatory Flexibility Act.

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.

List of Subjects

24 CFR Part 813

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements, Utilities.

24 CFR Part 882

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

24 CFR Part 887

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

24 CFR Part 982

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

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

PART 813--DEFINITION OF INCOME, INCOME LIMITS, RENT AND 
REEXAMINATION OF FAMILY INCOME FOR THE SECTION 8 HOUSING ASSISTANCE 
PAYMENTS PROGRAMS AND RELATED PROGRAMS

    1. The authority citation for part 813 is revised to read as 
follows:

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


Sec. 813.104  [Amended]

    2. In Sec. 813.104, paragraph (b)(2) is removed, and paragraph 
(b)(3) is redesignated as paragraph (b)(2).


Sec. 813.105  [Amended]

    3. Section 813.105 is amended as follows:
    a. In the first sentence of paragraph (a) introductory text, the 
words ``five percent'' are removed and the words ``fifteen percent'' 
are added in their place.
    b. Paragraph (c) is removed and reserved.
    c. Paragraphs (e)(2) and (e)(4) are removed, and paragraph (e)(3) 
is redesignated as paragraph (e)(2).

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

    4. The authority citation for part 882 is revised to read as 
follows:

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

    5. In Sec. 882.103, the introductory text of Sec. 882.103 is 
removed, and paragraph (b) is revised to read as follows:


Sec. 882.103  ``Finders-keepers'' policy.

* * * * *
    (b) The PHA may not, either in the provision of assistance to any 
Family in finding a unit or by any other action, directly or indirectly 
reduce any Family's opportunity to choose among the available units in 
the housing market.
* * * * *
    6. In Sec. 882.116, paragraph (c) is revised to read as follows:


Sec. 882.116  Responsibilities of the PHA.

* * * * *
    (c) Receipt and review of applications for participation; selection 
of applicants; verification of family income and other factors relating 
to eligibility and amount of assistance; and maintenance of a waiting 
list;
* * * * *


Sec. 882.207  [Removed and reserved]

    7. Section 882.207 is removed and reserved.
    8. In Sec. 882.209, paragraph (a) is revised to read as follows:


Sec. 882.209  Selection and participation.

    (a) Selection for participation. For provisions on selection of 
participants for the Section 8 certificate and voucher programs, see 
Part 982, Subpart E of this title.
* * * * *


Sec. 882.216  [Amended]

    9. In Sec. 882.216, paragraph (a)(4) is removed.


Sec. 882.219  [Removed and reserved]

    10. Section 882.219 is removed and reserved.
    11. In Sec. 882.335, paragraph (a)(2)(i) is revised to read as 
follows:


Sec. 882.335  Special requirements for related lease shared housing.

    (a) * * *
    (2) * * *
    (i) The PHA must require an applicant Family that is issued a 
Certificate on the basis of its willingness to share a unit with a 
particular Family to use the Certificate for occupancy of a unit with 
that Family under a Contract for Related Lease Shared Housing. However, 
if the Family later wants to move to another dwelling unit with 
continued participation in the PHA's program, the Family may select a 
dwelling unit in any area where the PHA is not legally barred from 
entering into Contracts.
* * * * *
    12. In Sec. 882.701, paragraph (c) is revised to read as follows:


Sec. 882.701  Purpose and applicability.

* * * * *
    (c) Except as otherwise expressly modified or excluded by this 
subpart G, project-based assistance under this subpart G is subject to 
all provisions of subparts A and B of part 882, and of part 982 of this 
title.
* * * * *
    13. In Sec. 882.753, paragraph (a) is revised to read as follows:


Sec. 882.753  Family participation.

* * * * *
    (a) Participation. For purposes of this subpart G, a Family becomes 
a participant on the effective date of the first lease with the owner 
(first date of initial lease term).
* * * * *

PART 887--HOUSING VOUCHERS

    14. The authority citation for part 887 is revised to read as 
follows:

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


Sec. 887.5  [Amended]

    15. Section 887.5 is amended by removing paragraph (c).
    16. In Sec. 887.59, paragraphs (c) (1) and (d) are revised to read 
as follows:


Sec. 887.59  Equal opportunity housing plan.

* * * * *
    (c) * * *
    (1) Outreach and public notice to eligible families;
* * * * *
    (d) The plan must include any special rules for use of HUD-targeted 
housing vouchers.
* * * * *


Sec. 887.105  [Amended]

    17. Section 887.105 is amended as follows:
    a. By removing from paragraph (b)(1) the phrase ``(see 
Sec. 887.107)''.
    b. By removing from paragraph (b)(2) the phrase ``in accordance 
with Sec. 887.157''.


Sec. 887.107  [Removed and reserved]

    18. Section 887.107 is removed and reserved.
    19. In Part 887, the title of Subpart D is revised to read as 
follows:

``Subpart D--Issuing Housing Vouchers''

    20. In Subpart D of Part 887, Sec. 887.151 is revised to read as 
follows:


Sec. 887.151  Selection for participation.

    For provisions on selection of participants for the Section 8 
certificate and voucher programs, see Part 982, Subpart E of this 
title.


Secs. 887.152--887.157  [Removed and reserved]

    21. In Subpart D of Part 887, Secs. 887.153, 887.155, and 887.157 
are removed and reserved.
    22. In Sec. 887.565, paragraph (c) is revised to read as follows:


Sec. 887.565  Portability: responsibilities of the receiving PHA.

* * * * *
    (c) The receiving PHA must recertify the family's income initially 
and at least annually thereafter for purposes of determining the 
housing assistance payments.
* * * * *
    23-24. Part 982, consisting of Secs. 982.1 through 982.213, is 
added to chapter IX to read as follows:

PART 982--SECTION 8 TENANT-BASED ASSISTANCE: UNIFIED RULE FOR 
TENANT-BASED ASSISTANCE UNDER THE SECTION 8 RENTAL CERTIFICATE 
PROGRAM AND THE SECTION 8 RENTAL VOUCHER PROGRAM

Subpart A--General Information

Sec.
982.1  General program description.
982.2  Applicability.
982.3  Definitions.

Subparts B-D--[Reserved]

Subpart E--Admission to Tenant-Based Program

982.201  Eligibility.
982.202  How applicants are selected: General requirements.
982.203  Special admission (non-waiting list): Assistance targeted 
by HUD.
982.204  Waiting list: Administration of waiting list.
982.205  Waiting list: Different programs.
982.206  Waiting list: Opening and closing; public notice.
982.207  Waiting list: Use of preferences.
982.208  Waiting list: Residency preference.
982.209  Waiting list: How applicant qualifies for local preference.
982.210  Waiting list: How applicant qualifies for federal 
preference.
982.211  Federal preference: Involuntary displacement.
982.212  Federal preference: Substandard housing.
982.213  Federal preference: Rent burden.

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

Subpart A--General Information


Sec. 982.1  General program description.

    In the HUD rental voucher program and the HUD rental certificate 
program, a rent subsidy is paid to help eligible families afford rent 
for decent, safe, and sanitary housing. Both programs are administered 
by State, local governmental or tribal bodies called housing agencies 
(HAs). HUD provides funds to an HA for rent subsidy on behalf of 
eligible families. HUD also provides funds for HA administration of the 
programs.


Sec. 982.2  Applicability.

    Part 982 is a unified statement of requirements for admission to 
the tenant-based housing assistance programs under Section 8 of the 
United States Housing Act of 1937 (42 U.S.C. 1437f). The tenant-based 
programs are the Section 8 tenant-based rental certificate program and 
the Section 8 rental voucher program.


Sec. 982.3  Definitions.

    Admission. The effective date of the first HAP contract for a 
family (first day of initial lease term) in a tenant-based program. 
This is the point when the family becomes a participant in the program.
    Annual income. Defined in 24 CFR 813.106.
    Applicant (or applicant family). A family that has applied for 
admission to a program, but is not yet a participant in the program.
    Certificate. A document issued by an HA to a family selected for 
admission to the rental certificate program. The certificate describes 
the program, and the procedures for HA approval of a unit selected by 
the family. The certificate also describes the obligations of the 
family under the program.
    Certificate or voucher holder. A family holding a voucher or 
certificate with unexpired search time.
    Certificate program. Rental certificate program.
    Continuously assisted. An applicant is continuously assisted under 
the 1937 Housing Act if the family is already receiving assistance 
under any 1937 Housing Act program when the family is admitted to the 
certificate or voucher program.
    Disabled person. A person who is any of the following:
    (1) A person who has a disability as defined in section 223 of the 
Social Security Act. (42 U.S.C. 423)
    (2) A person who has a physical, mental, or emotional impairment 
that:
    (i) Is expected to be of long-continued and indefinite duration;
    (ii) Substantially impedes his or her ability to live 
independently; and
    (iii) Is of such a nature that ability to live independently could 
be improved by more suitable housing conditions.
    (3) A person who has a developmental disability as defined in 
section 102(7) of the Developmental Disabilities Assistance and Bill of 
Rights Act (42 U.S.C. 6001(7)).
    Displaced person. A person displaced by governmental action, or a 
person whose dwelling has been extensively damaged or destroyed as a 
result of a disaster declared or otherwise formally recognized under 
federal disaster relief laws.
    Drug-related criminal activity. The illegal manufacture, sale, 
distribution, use, or possession with intent to manufacture, sell, 
distribute or use, of a controlled substance (as defined in section 102 
of the Controlled Substances Act (21 U.S.C. 802)).
    Elderly person. A person who is at least 62 years of age.
    EO plan. Equal opportunity housing plan. The EO plan establishes HA 
policies for implementing civil rights requirements.
    Fair Market Rent. FMR. Defined in 24 CFR 882.102.
    Family. Defined in 24 CFR 812.2. Family composition is discussed at 
Sec. 982.201(c) of this chapter.
    Family unit size. The appropriate number of bedrooms for a family. 
Family unit size is determined by the HA under the HA occupancy 
standards.
    Federal preference. A preference under federal law for admission of 
applicant families that are any of the following:
    (1) Involuntarily displaced.
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless).
    (3) Paying more than 50 percent of family income for rent.
    Federal preference holder. An applicant that qualifies for a 
federal preference.
    FMR. Fair market rent.
    HA. Housing Agency.
    HAP contract. Housing assistance payments contract.
    Housing agency (HA). A State, county, municipality or other 
governmental entity or public body authorized to administer the 
program. The term ``HA'' includes an Indian housing authority (IHA). 
(``PHA'' and ``HA'' mean the same thing.)
    HUD. The U.S. Department of Housing and Urban Development.
    Indian housing authority (IHA). A housing agency established 
either:
    (1) By exercise of the power of self-government of an Indian Tribe, 
independent of State law; or
    (2) By operation of State law providing specifically for housing 
authorities for Indians.
    Live-in aide. A person who resides with an elderly person or 
disabled person and who:
    (1) Is determined to be essential to the care and well-being of the 
person.
    (2) Is not obligated for the support of the person.
    (3) Would not be living in the unit except to provide necessary 
supportive services.
    Local preference. A preference used by the HA to select among 
applicant families without regard to their federal preference status.
    Local preference limit. Ten percent of total annual waiting list 
admissions to the HA's tenant-based certificate and voucher programs. 
The local preference limit is used to select among applicants without 
regard to their federal preference status.
    Low-income family. A family whose annual income does not exceed 80 
percent of the median income for the area, as determined by HUD, with 
adjustments for smaller and larger families. For admission to the 
certificate program, HUD may establish income limits higher or lower 
than 80 percent of the median income for the area on the basis of its 
finding that such variations are necessary because of the prevailing 
levels of construction costs or unusually high or low family incomes.
    1937 Housing Act. The United States Housing Act of 1937 (42 U.S.C. 
1437 et seq.). The HUD tenant-based programs are authorized by Section 
8 of the 1937 Housing Act (42 U.S.C. 1437f).
    1937 Housing Act program. Any of the following programs:
    (1) The public housing program or Indian housing program.
    (2) Any program assisted under Section 8 of the 1937 Act (42 U.S.C. 
1437f) (including assistance under a Section 8 tenant-based or project-
based program).
    (i) The Section 23 leased housing program.
    (ii) The Section 23 housing assistance payments program. (``Section 
23'' means Section 23 of the United States Housing Act of 1937 prior to 
enactment of the Housing and Community Development Act of 1974.)
    Occupancy standards. Standards established by an HA to determine 
the appropriate number of bedrooms for families of different sizes and 
compositions. See definition of ``family unit size''.
    Participant. A family that has been admitted to the HA's 
certificate program or voucher program. The family becomes a 
participant on the effective date of the first HAP contract executed by 
the HA for the family (first day of initial lease term).
    PHA. Public housing agency. See definition of ``HA''. (``PHA'' and 
``HA'' mean the same thing.)
    Program. The tenant-based certificate program or voucher program.
    Public housing agency (PHA). A State, county, municipality or other 
governmental entity or public body authorized to administer the 
programs. The term ``PHA'' includes an Indian housing authority (IHA). 
(``PHA'' and ``HA'' mean the same thing. In this rule, a ``PHA'' is 
referred to as a ``housing agency'' (HA)).
    Ranking preference. A preference used by the HA to select among 
applicant families that qualify for federal preference.
    Rental certificate. Certificate.
    Rental certificate program. Certificate program.
    Rental voucher. Voucher.
    Rental voucher program. Voucher program.
    Residency preference. An HA preference for admission of families 
that reside anywhere in a specified area, including families with a 
member who works or has been hired to work in the area (``residency 
preference area'').
    Residency preference area. The specified area where families must 
reside to qualify for a residency preference.
    Special admission. Admission of an applicant that is not on the HA 
waiting list, or without considering the applicant's waiting list 
position.
    Unit. Dwelling unit.
    United States Housing Act of 1937 (1937 Housing Act). The basic law 
that authorizes the public and Indian housing programs, and the Section 
8 programs. (42 U.S.C. 1437 et seq.)
    Very low-income family. A family whose annual income does not 
exceed 50 percent of the median income for the area, as determined by 
HUD, with adjustments for smaller and larger families. HUD may 
establish very low-income limits higher or lower than 50 percent of the 
median income for the area on the basis of its finding that such 
variations are necessary because of unusually high or low family 
incomes.
    Voucher (rental voucher). A document issued by an HA to a family 
selected for participation in the rental voucher program. The voucher 
describes the program, and the procedures for HA approval of a unit 
selected by the family. The voucher also states the obligations of the 
family under the program.
    Voucher program. Rental voucher program.
    Waiting list admission. An admission from the HA waiting list.

Subparts B-D--[Reserved]

Subpart E--Admission to Tenant-Based Program


Sec. 982.201  Eligibility.

    (a) When applicant is eligible: general. The HA may only admit an 
eligible family to a program. To be eligible, the applicant must be a 
``family'', and must be income-eligible.
    (b) Income.
    (1) To be income eligible, the family must be either:
    (i) A ``very low-income'' family; or
    (ii) A ``low-income'' family in any of the following categories:
    (A) A low-income family that is ``continuously assisted'' under the 
1937 Housing Act.
    (B) A low-income family physically displaced by rental 
rehabilitation activity under 24 CFR part 511.
    (C) A low-income non-purchasing family residing in a HOPE 1 (HOPE 
for Public and Indian Housing Homeownership) or HOPE 2 (HOPE for 
Homeownership of Multifamily Units) project.
    (D) A low-income non-purchasing family residing in a project 
subject to a homeownership program under 24 CFR 248.173.
    (E) A low-income family displaced as a result of the prepayment of 
a mortgage or voluntary termination of a mortgage insurance contract 
under 24 CFR 248.165.
    (F) For the certificate program only, a low-income family residing 
in a HUD-owned multifamily rental housing project when HUD sells, 
forecloses or demolishes the project.
    (2) The HA determines whether the family is income-eligible by 
comparing the family's annual income (gross income) with the HUD-
established very low-income limit or low-income limit for the area. The 
applicable income limit for issuance of a certificate or voucher when a 
family is selected for the program is the highest income limit (for the 
family unit size) for areas in the HA jurisdiction. The applicable 
income limit for admission to the program is the income limit for the 
area where the family is initially assisted in the program. The family 
may only use the certificate or voucher to rent a unit in an area where 
the family is income eligible at admission to the program.
    (c) Family composition. (1) A ``family'' may be a single person or 
a group of persons.
    (2) A ``family'' includes a family with a child or children.
    (3) A group of persons consisting of two or more elderly persons or 
disabled persons living together, or one or more elderly or disabled 
persons living with one or more live-in aides is a family. The HA 
determines if any other group of persons qualifies as a ``family''.
    (4) A single person family may be:
    (i) An elderly person.
    (ii) A displaced person.
    (iii) A disabled person.
    (iv) Any other single person.
    (5) A child who is temporarily away from the home because of 
placement in foster care is considered a member of the family.
    (d) Continuously assisted. (1) An applicant is continuously 
assisted under the 1937 Housing Act if the family is already receiving 
assistance under any 1937 Housing Act program when the family is 
admitted to the certificate or voucher program.
    (2) The HA must establish policies concerning whether and to what 
extent a brief interruption between assistance under one of these 
programs and admission to the certificate or voucher program will be 
considered to break continuity of assistance under the 1937 Housing 
Act.
    (e) When HA verifies that applicant is eligible. The HA must 
receive information verifying that an applicant is eligible within the 
period of 60 days before the HA issues a certificate or voucher to the 
applicant.
    (f) Decision to deny assistance.
    (1) Notice to applicant. The HA must give an applicant prompt 
written notice of a decision denying admission to the program 
(including a decision that the applicant is not eligible, or denying 
assistance for other reasons). The notice must give a brief statement 
of the reasons for the decision. The notice must also state that the 
applicant may request an informal review of the decision, and state how 
to arrange for the informal review.
    (2) Grounds for decision. For a discussion of the grounds for 
denying assistance because of action or inaction by the applicant, see 
Sec. 882.210 (certificate program) of this title and Sec. 887.403 
(voucher program) of this title.


Sec. 982.202  How applicants are selected: General requirements.

    (a) Waiting list and other admission. The HA may admit an applicant 
for participation in the program either:
    (1) As a special admission (see Sec. 982.203).
    (2) As a waiting list admission (see Sec. 982.204 through 
Sec. 982.210).
    (b) Prohibited admission criteria.
    (1) Family suitability for tenancy. The owner selects the tenant. 
The owner decides whether the family is suitable for tenancy. The HA 
decision whether to admit an applicant to the program may not be based 
on an applicant's suitability for tenancy. The HA may deny assistance 
to an applicant because of drug-related criminal activity or violent 
criminal activity by family members. (See Sec. 882.210(b) (certificate 
program) of this title and Sec. 887.403(b) (voucher program) of this 
title.)
    (2) Where family lives. Admission to the program may not be based 
on where the family lives before admission to the program. However, the 
HA may target assistance for families who live in public housing or 
other federally assisted housing.
    (3) Where family will live. Admission to the program may not be 
based on where the family will live with assistance under the program.
    (4) Family characteristics.
    (i) Admission to the program may not be based on:
    (A) Discrimination because members of the family are unwed parents, 
recipients of public assistance, or children born out of wedlock;
    (B) Discrimination because a family includes children (familial 
status discrimination);
    (C) Discrimination because of age, race, color, religion, sex, or 
national origin;
    (D) Discrimination because of disability; or
    (E) Whether a family decides to participate in a family self-
sufficiency program.
    (ii) The HA may not adopt a preference for admission of higher 
income families over families of lower income.
    (c) Applicant status. An applicant does not have any right or 
entitlement to be listed on the HA waiting list, to any particular 
position on the waiting list, or to admission to the programs. The 
preceding sentence does not affect or prejudice any right, independent 
of this rule, to bring a judicial action challenging an HA violation of 
a constitutional or statutory requirement.
    (d) Admission policy. The HA must admit applicants for 
participation in accordance with HUD regulations and other 
requirements, and with policies stated in the HA administrative plan 
and EO plan. The HA admission policy must state the system of admission 
preferences that the HA uses to select applicants from the waiting 
list, including any federal preference, ranking preference, local 
preference and residency preference.


Sec. 982.203  Special admission (non-waiting list): Assistance targeted 
by HUD.

    (a) If HUD awards an HA program funding that is targeted for 
families living in specified units:
    (1) The HA must use the assistance for the families living in these 
units.
    (2) The HA may admit a family that is not on the HA waiting list, 
or without considering the family's waiting list position. The HA must 
maintain records showing that the family was admitted with HUD-targeted 
assistance.
    (b) The following are examples of types of program funding that may 
be targeted for a family living in a specified unit:
    (1) A family displaced because of demolition or disposition of a 
public or Indian housing project;
    (2) A family residing in a multifamily rental housing project when 
HUD sells, forecloses or demolishes the project;
    (3) For housing covered by the Low Income Housing Preservation and 
Resident Homeownership Act of 1990 (41 U.S.C. 4101 et seq.):
    (i) A non-purchasing family residing in a project subject to a 
homeownership program (under 24 CFR 248.173); or
    (ii) A family displaced because of mortgage prepayment or voluntary 
termination of a mortgage insurance contract (as provided in 24 CFR 
248.165);
    (4) A family residing in a project covered by a project-based 
Section 8 HAP contract at or near the end of the HAP contract term; and
    (5) A non-purchasing family residing in a HOPE 1 or HOPE 2 project.


Sec. 982.204  Waiting list: Administration of waiting list.

    (a) Admission from waiting list. Except for special admissions, 
participants must be selected from the HA waiting list. The HA must 
select participants from the waiting list in accordance with admission 
policies in the HA administrative plan and EO plan.
    (b) Organization of waiting list. The HA must maintain information 
that permits the HA to select participants from the waiting list in 
accordance with the HA admission policies. The waiting list must 
contain the following information for each applicant listed:
    (1) Applicant name;
    (2) Family unit size (number of bedrooms for which family qualifies 
under HA occupancy standards);
    (3) Date and time of application;
    (4) Qualification for federal preference;
    (5) Qualification for any ranking preference or local preference; 
and
    (6) Racial or ethnic designation of the head of household.
    (c) Removing applicant names from the waiting list.
    (1) The HA administrative plan must state HA policy on when 
applicant names may be removed from the waiting list. For example, the 
policy may provide that the HA will remove names of applicants who do 
not respond to HA requests for information or updates, or who have 
refused offers of tenant-based assistance under both the certificate 
program and the voucher program.
    (2) The system for removing applicant names from the waiting list 
may not violate the rights of a disabled person under HUD regulations 
and requirements. For example, if an applicant's failure to respond to 
HA requests for information or updates was caused by the applicant's 
disability, the HA must provide reasonable accommodation to give the 
applicant an opportunity to respond.
    (d) Family size. (1) The order of admission from the waiting list 
may not be based on family size, or on the family unit size for which 
the family qualifies under the HA occupancy policy.
    (2) If the HA does not have sufficient funds to subsidize the 
family unit size of the family at the top of the waiting list, the HA 
may not skip the top family to admit an applicant with a smaller family 
unit size. Instead, the family at the top of the waiting list will be 
admitted when sufficient funds are available.
    (e) Funding for specified category of waiting list families. When 
HUD awards an HA program funding for a specified category of families 
on the waiting list, the HA must select applicant families in the 
specified category.

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


Sec. 982.205  Waiting list: Different programs.

    (a) Tenant-based programs: Number of waiting lists.
    (1) An HA may use a single waiting list for admission to its 
tenant-based certificate and voucher programs, or may use separate 
waiting lists for a county or municipality.
    (2) An HA must use the same waiting list for admission to its 
tenant-based certificate and voucher programs.
    (b) Merger and cross-listing.
    (1) Merged waiting list. An HA may merge the waiting list for 
tenant-based assistance with the HA waiting list for admission to 
another assisted housing program, including a federal or local program. 
In admission from the merged waiting list, admission for each federal 
program is subject to federal regulations and requirements for the 
particular program.
    (2) Non-merged waiting list: Cross-listing. If the HA decides not 
to merge the waiting list for tenant-based assistance with the waiting 
list for the HA's public or Indian housing program, project-based 
certificate program or moderate rehabilitation program:
    (i) If the HA's waiting list for tenant-based assistance is open 
when an applicant is placed on the waiting list for the HA's public or 
Indian housing program, project-based certificate program or moderate 
rehabilitation program, the HA must offer to place the applicant on its 
waiting list for tenant-based assistance.
    (ii) If the HA's waiting list for its public or Indian housing 
program, project-based certificate program or moderate rehabilitation 
program is open when an applicant is placed on the waiting list for its 
tenant-based program, and if the other program includes units suitable 
for the applicant, the HA must offer to place the applicant on its 
waiting list for the other program.
    (c) Other housing assistance: Effect of application for, receipt or 
refusal.
    (1)(i) The HA may not take any of the following actions because an 
applicant has applied for, received or refused other housing 
assistance:
    (A) Refuse to list the applicant on the HA waiting list for tenant-
based assistance;
    (B) Deny any admission preference for which the applicant is 
currently qualified; or
    (C) Remove the applicant from the waiting list.
    (ii) For this purpose, ``other housing assistance'' means a 
federal, State or local housing subsidy, as determined by HUD, 
including public or Indian housing. However, the HA may remove such 
applicants from the waiting list in accordance with Sec. 982.204(c).
    (2) If an applicant refuses offers of tenant-based assistance under 
both the certificate program and the voucher program, the HA may remove 
the applicant from the waiting list for tenant-based assistance.
    (3) See Sec. 982.210(c)(4) for provisions concerning retention of 
federal preference by an applicant that either:
    (i) Receives assistance under the HOME program, or
    (ii) Resides in the HA's public or Indian housing.


Sec. 982.206  Waiting list: Opening and closing; public notice.

    (a) Public notice. (1) When the HA opens a waiting list, the HA 
must give public notice that families may apply for tenant-based 
assistance. The public notice must state where and when to apply.
    (2) The HA must give the public notice by publication in a local 
newspaper of general circulation, and also by minority media and other 
suitable means described in the EO plan. The notice must comply with 
the HUD-approved EO plan and with HUD fair housing requirements.
    (3) The public notice must state any limitations on who may apply 
for available slots in the program.
    (b) Criteria defining what families may apply.
    (1) The HA may adopt criteria defining what families may apply for 
assistance under a public notice.

Example A

    The HA decides that applications will only be accepted from 
families that qualify for federal preference, or from homeless federal 
preference families.

Example B

    In admission to the program, the HA must give preference to elderly 
families, displaced families and displaced persons over other single 
persons (24 CFR 812.3). The HA decides that applications from other 
single persons will not be accepted.
    (2) If the waiting list is open, the HA must accept applications 
from families for whom the list is open unless there is good cause for 
not accepting the application (such as a denial of assistance because 
of action or inaction by members of the family) for the grounds stated 
in Sec. 882.210 (certificate program) of this title and Sec. 887.403 
(voucher program) of this title).
    (c) Closing waiting list. (1) If the HA determines that the 
existing waiting list contains an adequate pool for use of available 
program funding, the HA may stop accepting new applications, or may 
accept only applications meeting criteria adopted by the HA.
    (2) Even if the HA is not otherwise accepting additional 
applications, the HA must accept applications from applicants who claim 
a federal preference unless the HA determines that the waiting list 
already contains an adequate pool of applicants who are likely to 
qualify for a federal preference.


Sec. 982.207  Waiting list: Use of preferences.

    (a) Types of preferences. (1) There are three types of admission 
preferences:
    (i) ``Federal preferences.''
    (ii) ``Ranking preferences.''
    (iii) ``Local preferences''.
    (2) Federal preference. (i) ``Federal preferences'' are required by 
federal law. Under federal law, the HA must give preference for 
admission of applicants that are:
    (A) Involuntarily displaced;
    (B) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (C) Paying more than 50 percent of family income for rent.
    (ii) The federal preference requirements determine how many 
selected applicants must be families with a federal preference, and how 
many selected applicants may be families without a federal preference.
    (3) Other preferences. (i) In addition to the federal preferences, 
the HA may establish ``ranking preferences'' or ``local preferences'' 
to meet local needs and priorities.
    (ii) ``Ranking preferences'' are used in selecting among applicants 
that qualify for federal preference.
    (iii) ``Local preferences'' are used in selecting among applicants 
without regard to their federal preference status.
    (iv) The HA preference system may limit the number of applicants 
that may qualify for any ranking preference or local preference.
    (b) Limit on local preference admission. (1) ``Local preference 
limit'' means ten percent of total annual waiting list admissions to an 
HA's tenant-based certificate and voucher programs. In any year, the 
number of families given preference in admission to the HA tenant-based 
certificate program and voucher program pursuant to a local preference 
over families with a federal preference may not exceed the local 
preference limit.
    (2) The local preference limit only applies to admission of an 
applicant from the HA waiting list. A special admission is not counted 
against the local preference limit.
    (3) The local preference limit does not apply when an applicant is 
received in an HA program under portability procedures. The admission 
of a portability family by a receiving HA does not count against the 
receiving HA local preference limit. The admission of such a family 
(not qualified for federal preference) counts against the local 
preference limit of the initial HA.
    (c) Use of preferences in admission. (1) In selecting applicants, 
the HA determines if an applicant qualifies for a federal preference, 
ranking preference or local preference.
    (2) Ranking preference governs selection among applicants that 
qualify for a federal preference.
    (3) Local preference governs selection among applicants that do not 
qualify for a federal preference.
    (d) Singles preference: Admission of elderly, disabled or displaced 
over other singles. In selecting applicants, the HA must give 
preference to:
    (1) A family (with or without federal preference):
    (i) Whose single member is a displaced person; or,
    (ii) Whose head or spouse or single member is an elderly person or 
a disabled person, over
    (2) A single person (with or without federal preference) who is not 
elderly, disabled or displaced.
    (e) Methods for selection. (1) The HA must use the following to 
select among applicants on the waiting list with the same preference 
status:
    (i) Date and time of application, or
    (ii) A drawing or other random choice technique.
    (2) The method for selecting applicants from preference categories 
must be consistent with requirements governing federal preference, and 
the singles preference (described in paragraph (d) of this section).
    (3) The method for selecting applicants from preference categories 
must leave a clear audit trail that can be used to verify that each 
applicant has been selected in accordance with the method specified in 
the administrative plan.
    (f) Prohibition of preference if applicant was evicted for drug-
related criminal activity. The HA may not give a preference to an 
applicant (federal preference, ranking preference or local 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:
    (1) If the HA determines that the evicted person has successfully 
completed a rehabilitation program approved by the HA.
    (2) If the HA determines that the evicted person clearly did not 
participate in or know about the drug-related criminal activity.
    (3) If the HA determines that the evicted person no longer 
participates in any drug-related criminal activity.
    (g) Fair Housing requirements. (1) Any admission preferences that 
are used by an HA must be established and administered in accordance 
with the following authorities, and HUD implementing regulations:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d);
    (ii) The Fair Housing Act (42 U.S.C. 3601-3619);
    (iii) Executive Order 11063 on Equal Opportunity in Housing (27 FR 
11527 (3 CFR, 1959-1963 Comp., p. 652);
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794);
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107); and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213).
    (2) Preferences must be consistent with HUD's affirmative fair 
housing objectives. The HA may not discriminate against families or 
family members on the basis of race, color, religion, sex, national 
origin, age, familial status or disability.
    (h) Informing applicants about admission preferences. The HA must 
inform applicants about available preferences. The HA must give 
applicants an opportunity to show that they qualify for available 
preferences (federal preference, ranking preference or local 
preference).


Sec. 982.208  Waiting list: Residency preference.

    (a) ``Residency preference'' is a preference for admission of 
families that reside anywhere in a specified area, including families 
with a member who works or has been hired to work in the area. The area 
where families must reside to qualify for the preference is called a 
``residency preference area''.
    (b) Any residency preference must be approved by HUD.
    (c) If approved by HUD, the HA may adopt a residency preference 
that establishes a county or municipality as a residency preference 
area. An HA may not adopt a residency preference for an area smaller 
than a county or municipality.
    (d) A residency preference must apply to families with a member who 
works or has been hired to work anywhere in a residency preference 
area. In applying the residency preference, such families must be 
treated like families that reside in the residency preference area.
    (e) A residency preference may not be based on how long the 
applicant has resided in or worked in the HA jurisdiction or residency 
preference area.
    (f) The HA may use a HUD-approved residency preference as a ranking 
or local preference.


Sec. 982.209  Waiting list: How applicant qualifies for local 
preference.

    (a) Local preference: Use and purpose. ``Local preferences'' are 
used to select among applicants that do not qualify for a federal 
preference. The HA may adopt a system of local preferences to respond 
to local housing needs and priorities.
    (b) Procedure. Local preferences may only be adopted or amended 
after the HA has conducted a public hearing. The HA may only use local 
preferences in selection for admission if the HA has conducted the 
required public hearing.


Sec. 982.210  Waiting list: How applicant qualifies for federal 
preference.

    (a) Applicable definitions. Unless HUD has reviewed and approved 
alternative definitions, the HA must use the definitions of the 
following terms in this part:
    (1) ``Standard, permanent replacement housing''.
    (2) ``Involuntary displacement''.
    (3) ``Substandard housing''.
    (4) ``Homeless family''.
    (5) ``Family income''.
    (6) ``Rent''.
    (b) Ranking preferences: Selection among federal preference 
holders. (1) The HA admission policy may provide for use of ranking 
preferences to select among applicants that qualify for federal 
preference.
    (2) The HA may limit the number of applicants who may qualify for 
any ranking preference.
    (3) The HA ranking preferences may determine the relative weight of 
the federal preferences through means such as:
    (i) Aggregating the federal preferences (such as, two federal 
preferences outweigh one and three outweigh two).
    (ii) Ranking the federal preferences. For example, the HA admission 
policy may provide that an applicant who lives in substandard housing 
has preference over an applicant who qualifies for a rent burden 
preference (paying more than 50 percent of income for rent).
    (iii) Ranking the definitional elements of a federal preference. 
For example, the HA admission policy may provide that an applicant 
living in substandard housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government has preference 
over an applicant whose housing is substandard only because the housing 
does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family.
    (iv) The HA admission policy may give ranking preference for 
working families. However, the preference may not violate the 
prohibitions against discrimination on the basis of age or disability. 
An applicant must be given the benefit of the preference for working 
families 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. If an HA adopts a ranking preference for working 
families, the admission policy may not give greater preference to an 
applicant based on the amount of employment income.
    (4) The HA admission policy may give ranking preference for 
graduates of, or active participants in, educational and training 
programs that are designed to prepare individuals for the job market.
    (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 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 an applicant is admitted on the basis of a federal 
preference, the applicant must 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 
certification and selection for admission, including a change from one 
federal preference category to another.
    (ii) The HA may adopt its own verification procedures.
    (iii) 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) Retention of preference. (i) If a Section 8 applicant is 
currently receiving tenant-based assistance under the HOME program (24 
CFR part 92), the HA determines whether the applicant qualifies for 
Section 8 federal preference based on the situation of the applicant at 
the time the applicant began to receive tenant-based assistance under 
the HOME program.
    (ii) If an applicant seeking admission to an HA's tenant-based 
program currently resides in public or Indian housing of the same HA, 
and was on the HA's tenant-based program waiting list when admitted to 
the HA's public or Indian housing on or after April 26, 1993, the HA 
determines whether the applicant qualifies for Section 8 federal 
preference based on the situation of the applicant at the time the 
applicant was admitted to the HA's public or Indian housing program 
(beginning of initial public housing lease).
    (d) Notice and opportunity for a meeting where federal 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 an HA representative 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.


Sec. 982.211  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.
    (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) For an applicant to qualify as involuntarily displaced 
because of domestic violence:
    (A) The HA 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 HA has 
given advance written approval. If the family is admitted, the HA 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, the 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 HA 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 HA 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 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. 982.212  Federal preference: Substandard housing.

    (a) When a unit is substandard. A unit is substandard if the unit:
    (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 or 
government.
    (b) Dilapidated unit. A housing unit is dilapidated if:
    (1) 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
    (2) 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 lack of 
repair or from serious damage to the structure.
    (c) Homeless family. (1) An applicant that is a homeless family is 
considered to be living in substandard housing.
    (2) A ``homeless family'' includes any person or family that:
    (i) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (ii) Has a primary nighttime residence that is:
    (A) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (B) An institution that provides a temporary residence for persons 
intended to be institutionalized; or
    (C) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (3) A ``homeless family'' does not include any person imprisoned or 
otherwise detained pursuant to an Act of the Congress or a State law.
    (d) 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 
the unit does not contain sanitary or food preparation facilities.


Sec. 982.213  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.
    (4) For an applicant who owns a manufactured home, but who rents 
the space upon which it is located, rent includes the monthly payment 
to amortize the purchase price of the home, calculated in accordance 
with HUD's requirements.
    (5) For members of a cooperative, rent means the charges under the 
occupancy agreement between the members and the cooperative.
    (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 (42 U.S.C. 1437 et seq.);
    (ii) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965 (12 U.S.C. 1701s); or
    (iii) Rental assistance payments under section 236(f)(2) of the 
National Housing Act (12 U.S.C. 1715z-1).

    Dated: June 24, 1994.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 94-16887 Filed 7-13-94; 8:45 am]
BILLING CODE 4210-33-P