[Federal Register Volume 60, Number 13 (Friday, January 20, 1995)]
[Rules and Regulations]
[Pages 4344-4346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1414]



      

[[Page 4343]]

_______________________________________________________________________

Part VII





Department of Housing and Urban Development





_______________________________________________________________________



Office of the Secretary



_______________________________________________________________________



24 CFR Part 907



Homeownership Demonstration Program in Omaha, NE; Final Rule

  Federal Register / Vol. 60, No. 13 / Friday, January 20, 1995 / Rules 
and Regulations   
[[Page 4344]] 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Part 907

[Docket No. R-95-1704; FR-3573-F-02]
RIN 2577-AB38


Homeownership Demonstration Program in Omaha, NE

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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

SUMMARY: This final rule implements section 132 of the Housing and 
Community Development Act of 1992. Section 132 establishes a 
demonstration program to facilitate self-sufficiency and permits the 
homeownership sale of single family homes administered by the Housing 
Authority of the City of Omaha in the State of Nebraska. The purpose of 
the demonstration is to exhibit the effectiveness of promoting 
homeownership and providing support services.

EFFECTIVE DATE: January 20, 1995.

FOR FURTHER INFORMATION CONTACT: Gary Van Buskirk, Homeownership 
Division, Office of Public and Indian Housing, Department of Housing 
and Urban Development, 451 Seventh Street, SW., Room 4112, Washington, 
DC 20410. Telephone number, voice (202) 708-4233, TDD (202) 708-0850. 
(These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Background

    On January 24, 1994 (59 FR 3626), HUD published an interim rule 
implementing section 132 of the Housing and Community Development Act 
of 1992 (Pub. L. 102-550, approved Oct. 28, 1992) (section 132). 
Section 132 establishes a demonstration program to facilitate self-
sufficiency and to permit the homeownership sale of single family homes 
administered by the Housing Authority of the City of Omaha in the State 
of Nebraska. The purpose of the demonstration is to exhibit the 
effectiveness of promoting homeownership and providing support 
services.
    The interim rule was closely modeled on the interim rule for the 
Section 5(h) Homeownership Program, codified in 24 CFR part 906. The 
Housing Authority for the City of Omaha (Housing Authority), which is 
administering this demonstration program, is already administering a 
homeownership program approved pursuant to section 5(h) of the United 
States Housing Act of 1937, and it has indicated to HUD that it wishes 
to operate the two programs in a similar fashion. While this 
demonstration program and the Section 5(h) program are similar, the 
preamble to the interim rule described several differences (59 FR 
3626).
    HUD is publishing this final rule for effect immediately upon 
publication. Generally, in accordance with section 7(o) of the 
Department of Housing and Urban Development Act, HUD does not publish a 
rule or regulation for effect until after the expiration of the 30-day 
calendar period beginning on the day after the rule or regulation is 
published. However, because section 132(g) of the Housing and Community 
Development Act of 1992 provides that the final rule implementing the 
Homeownership Demonstration Program in Omaha, Nebraska ``shall take 
effect upon issuance,'' the section 7(o) provision does not apply to 
this final rule.

II. Comments on the January 24, 1994 Interim Rule

    HUD solicited public comments on the interim rule implementing the 
Homeownership Demonstration Program in Omaha, Nebraska. By the 
expiration of the public comment period on March 25, 1994, HUD had 
received two comments, one from the Housing Authority of the City of 
Omaha (Housing Authority), and one from the Public Housing Agency of 
Saint Paul, Minnesota (Saint Paul Housing Agency). The final rule 
contains four changes to the interim rule, as further described below, 
in response to public comments: (1) HUD has deleted Sec. 907.5(b); (2) 
HUD has deleted the requirement in Sec. 907.6(b) for fire and safety 
inspections; (3) HUD has added applicants for public housing as 
eligible homebuyers in Sec. 907.8(c); and (4) HUD has revised 
Sec. 907.8(d) to acknowledge that the Housing Authority may submit for 
HUD's approval an order of preference for participants. The following 
discussion summarizes the comments and provides HUD's responses to 
those comments.
    1. The Housing Authority objected to certain sections of the 
interim rule that were modeled on the Section 5(h) interim regulations 
(codified at 24 CFR part 906), asserting that the borrowed language in 
those sections is inapplicable to this demonstration program. One of 
these sections is Sec. 907.5(b), regarding negotiations with residents 
wishing to initiate a homeownership plan. The Housing Authority stated 
that section 132 would not exist if the Housing Authority did not 
already desire to implement a homeownership program.
    The other section is Sec. 907.8(d), in the last sentence regarding 
the order of preference for participants, which ends ``in accordance 
with HUD approved preferences.'' The Housing Authority stated that this 
sentence may be confusing, asserting that section 132 gives the Housing 
Authority the right to make its own order of preference, and suggesting 
that the sentence would more clearly read: ``* * * in accordance with 
preferences as established by the Housing Authority and approved by 
HUD.''
    HUD Response: HUD agrees with the Housing Authority that the first 
sentence of Sec. 907.5(b) is inapposite, given that the Housing 
Authority has initiated the homeownership program. The remaining two 
sentences of Sec. 907.5(b) encourage the Housing Authority to maximize 
resident participation in planning and implementing the homeownership 
program. While HUD continues to encourage maximum resident 
participation, it agrees that it does not need to include such advice 
in the rule and therefore has deleted Sec. 907.5(b).
    With regard to Sec. 907.8(d), HUD does not object to a process in 
which the Housing Authority develops and submits to HUD an order of 
preference for participants, and has changed the section of the rule 
accordingly.
    2. The Housing Authority objected to several other provisions of 
the interim rule, asserting that they are otherwise inappropriate for 
this demonstration program. The first such provision is Sec. 907.5(a), 
in the third sentence regarding consultation about vacant units with 
resident organizations or resident management corporations. The Housing 
Authority remarked that such consultation every time there is a vacancy 
would be repetitive, since the Housing Authority would already have 
consulted both residents and their organizations in developing the 
plan. The Housing Authority further noted that this provision is 
unnecessary, since the Housing Authority does not intend to sell vacant 
units.
    HUD Response: Section 907.5(a) does not require repetitive resident 
consultation whenever there is a vacancy. It requires that resident 
consultation take place during the process of developing the 
homeownership plan even if the plan encompasses vacant units. Once the 
plan is developed and approved by HUD, the rule does not require 
further consultation when a unit included in the homeownership program 
becomes vacant.
    The Housing Authority also objected to the first sentence in 
Sec. 907.8(c), [[Page 4345]] regarding homebuyer eligibility, as 
inappropriate for this demonstration program. The Housing Authority 
asserted that applicants for public housing, as well as residents, 
could be eligible to become homebuyers, and therefore that the sentence 
should be amended to allow such applicants to be eligible.
    HUD Response: HUD agrees that applicants for public housing can 
also be eligible homebuyers and has modified Sec. 907.8(c) accordingly.
    Another provision that the Housing Authority regarded as 
inappropriate to this demonstration program is Sec. 907.11, regarding 
maintenance reserves. The Housing Authority remarked that this 
requirement is unusual for the single family homes affected by this 
program, and that these reserves would not be necessary if the 
qualifying resident was required to have sufficient income.
    HUD Response: HUD's previous experiences in overseeing low-income 
homeownership has demonstrated that those administering such programs 
must provide adequately for foreseeable future maintenance needs. 
Failure to take such expenses into account can lead to defaults and 
foreclosures because homeowners could not withstand the financial 
impact of such expenses. The provision in the rule gives the Housing 
Authority two options for handling foreseeable maintenance costs. The 
Housing Authority can either establish maintenance reserves or it can 
demonstrate that homebuyer income will be sufficient over the long term 
to manage the expense.
    The Housing Authority also commented that several sections of the 
interim rule contain inappropriate references to cooperatives, 
condominiums, or entities as purchasers. These sections include 
Secs. 907.7(a), 907.7(b), 907.8(c)(2), and 907.20(h). The Housing 
Authority stated that section 132 confines this program to single 
family homes, such that families, not entities, will be the purchasers.
    HUD Response: The rule gives the Housing Authority flexibility to 
structure the terms of purchase in a number of different ways, 
including by means of a cooperative or a condominium. HUD understands 
that at this time the Housing Authority does not believe that it needs 
the flexibility. However, it is important to allow maximum flexibility 
in the future to accommodate possible changes in circumstances without 
resorting to a waiver or change in the regulation.
    The final aspect of the interim rule that the Housing Authority 
found inappropriate to this demonstration program is the reference in 
several sections to affirmative fair housing marketing strategies. 
These sections include Secs. 907.7(b), 907.8(d), and 907.20(n). The 
Housing Authority stated that it intends to sell only to residents, and 
that marketing strategies should therefore only be required if it ever 
intends to sell units to other than its residents.
    HUD Response: Implementing this demonstration program in accordance 
with fair housing objectives is of the utmost importance. The final 
rule has retained almost verbatim the civil rights related program 
requirements contained in the interim rule. Additionally, in response 
to the Housing Authority's comment above, the final rule includes as 
eligible homebuyers both current residents and applicants for public 
housing. Since HUD has changed the rule in this manner, the Housing 
Authority must comply with Secs. 907.7(b), 907.8(d), and 907.20(n) of 
the rule. The affirmative fair housing marketing strategy is thus an 
integral part of this program, especially in view of the fact that the 
potential market for this program is 602 units or 20 percent of the 
total units administered by the Housing Authority.
    3. The Housing Authority also objected to two sections of the 
interim rule containing language that it asserted is unnecessary to the 
rule. First, it objected to the parenthetical sentence in Sec. 907.2, 
regarding the 20 percent ceiling. It asserted that this parenthetical 
is unnecessary and may lead to confusion, especially with regard to 
additional units developed by the Housing Authority. The Housing 
Authority explained that the manner in which it may have acquired any 
particular single family home and when it acquired that home is 
irrelevant. Second, it objected to the parenthetical example in the 
second sentence of Sec. 907.8(c), describing sources of funds that a 
cooperative homeownership plan may include, claiming it is unnecessary.
    HUD Response: The parenthetical language must remain to describe 
properly the statutory requirement that the demonstration program may 
be applied to not more that 20 percent of the total number of public 
housing units administered by the Housing Authority. The total number 
of public housing units administered by the Housing Authority can be 
expected to change over time as units are sold and as other units are 
added to the Housing Authority's inventory. If the 20 percent 
requirement were permitted to be reapplied to whatever the current 
number of units is at a given time, the Housing Authority would 
conceivably be able to continue selling units until it reached a level 
at which 20 percent would no longer equal a whole unit. For example, if 
it began with 100 units and sold 20 percent (20 units), 80 units would 
remain. It could then reapply the 20 percent standard and sell 20 
percent of 80 units (16 units), and then have 64 units remaining. The 
process would then go on until only 4 units were left and applying 20 
percent would leave less than a whole unit. Clearly this was not the 
way that Congress contemplated the 20 percent provision to be applied. 
Therefore, the 20 percent should be applied once (as of the enactment 
date of the law, October 28, 1992) to establish a base figure. HUD 
calculated that 20 percent of the total units at the time of enactment 
was 602 units. The Housing Authority should also be able to add 20 
percent of any newly acquired units that are not replacement units to 
the base figure as well. Newly acquired units that are replacement for 
units that left the Housing Authority's inventory should not be 
counted, since the units they are replacing were already taken into 
consideration in establishing the base figure of 602 units.
    4. The Housing Authority objected to two provisions of the interim 
rule as burdensome or wasteful. First, the Housing Authority suggested 
that the requirement in the third sentence of Sec. 907.6(b) for fire 
and safety inspections by local officials would be duplicative, since 
the Housing Authority will have already inspected the property several 
times. This requirement would be difficult, if not impossible, to 
fulfill, remarked the Housing Authority, since the City of Omaha does 
not normally conduct such inspections of existing single family homes.
    HUD Response: HUD did not intend to create a burden in terms of 
inspections beyond that customarily imposed by the locality. HUD has 
therefore deleted this requirement.
    Second, the Housing Authority commented that the environmental 
review required in Sec. 907.18(d) would be an unwarranted expense to 
the taxpayer, since HUD will have already reviewed all the single 
family homes in the program.
    HUD Response: The regulations in 24 CFR part 50 establish HUD's 
responsibilities in complying with several environmental requirements, 
including the National Environmental Policy Act (NEPA). In approving 
the homeownership plan, HUD must consult these regulations to determine 
which if any of these requirements apply. While HUD intends to perform 
its obligations in a rational and cost-effective manner, it cannot 
categorically [[Page 4346]] dispense with its environmental 
responsibilities.
    5. The Public Housing Agency of Saint Paul, Minnesota (Saint Paul 
Housing Agency) suggested that instead of approving a separate 
homeownership demonstration program, HUD should develop various 
alternative programs to be approved and administered under the Section 
5(h) regulations. According to the Saint Paul Housing Agency, one such 
alternative could be this Omaha Demonstration Program, with its mandate 
to affirmatively further fair housing objectives. A second such 
alternative could be the program that the Saint Paul Housing Agency has 
developed, which provides for homeownership through a lease/purchase 
contract with financial assistance. A third such alternative could be a 
program geared toward a metropolitan area and its special needs for 
affordable housing solutions. The Saint Paul Housing Authority remarked 
that by providing different variations of homeownership programs, HUD 
would allow housing agencies discretion to implement a program to meet 
local needs while staying within the Section 5(h) guidelines.
    HUD Response: HUD agrees that the Section 5(h) program should 
accommodate many different models and has striven to preserve such 
flexibility in the recently published final Section 5(h) rule. HUD did 
not initiate the Omaha demonstration program. The primary innovation 
permitted by the Omaha demonstration that could not be accommodated by 
the existing Section 5(h) program is the wide discretion granted to the 
Omaha Housing Authority to select who is eligible to participate in the 
program. In most other respects, the Omaha Demonstration Program 
closely parallels the Section 5(h) program.

III. Other Matters

National Environmental Policy Act

    At the time of the development of the interim rule, a Finding of No 
Significant Impact with respect to the environment was made in 
accordance with HUD regulations at 24 CFR part 50, implementing section 
102(2)(C) of the National Environmental Policy Act of 1969, 42 U.S.C. 
4332. That Finding remains applicable to this final rule, and is 
available for public inspection and copying between 7:30 a.m. and 5:30 
p.m. weekdays at the Office of Rules Docket Clerk, 451 Seventh Street 
SW., Room 10276, Washington, DC 20410-0500.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication, and by 
approving it certified that this rule does not have a significant 
economic impact on a substantial number of small entities. This rule is 
limited in scope to Omaha, Nebraska.

Executive Order 12606, 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, or 
general well-being, except to the extent that the program authorized by 
the rule increases homeownership opportunities for low-income families 
in Omaha, Nebraska. Any such impact is beneficial and merits no further 
review under the Order.

Executive Order 12611, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12611, Federalism, has determined that the policies 
contained in this rule will not have substantial direct effects on 
States or their political subdivisions, or the relationship between the 
Federal Government and the States, or on the distribution of power and 
responsibilities among the various levels of government. As a result, 
this rule is not subject to review under the order.

Semi-Annual Agenda of Regulations

    This rule was listed as sequence number 1895 in HUD's Semiannual 
Agenda of Regulations published on November 14, 1994 (59 FR 57632, 
57673) under Executive Order 12886 and the Regulatory Flexibility Act.

List of Subjects in 24 CFR Part 907

    Low and moderate income housing, Public housing, Reporting and 
recordkeeping requirements.

    Accordingly, the interim rule, which amended title 24 of the Code 
of Federal Regulations by adding a new part 907 to chapter IX, and 
which was published in the Federal Register on January 24, 1994 (59 FR 
3626), is adopted as a final rule with the following changes:

PART 907--HOMEOWNERSHIP DEMONSTRATION PROGRAM

    1. The authority citation for part 907 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d); sec. 132, Pub. L. 102-550, 106 
Stat. 3712-3713.


Sec. 907.1  [Amended]

    2. Section 907.1 is amended by removing the paragraph designation 
and the paragraph heading for paragraph (a), and by removing paragraph 
(b).


Sec. 907.5  [Amended]

    3. Section 907.5 is amended by removing the paragraph designation 
and the paragraph heading for paragraph (a), and by removing paragraph 
(b).


Sec. 907.6  [Amended]

    4. In Sec. 907.6, paragraph (b) is amended by removing from the 
middle of sentence three that begins with ``The Housing Authority prior 
 * * *'', the phrase ``and that the property has passed recent fire and 
other applicable safety inspections conducted by appropriate local 
officials''.
    5. Section 907.8 is amended by revising the first sentence in the 
introductory text of paragraph (c), and by revising paragraph (d), to 
read as follows:


Sec. 907.8  Purchaser eligibility and selection.

* * * * *
    (c) Homebuyer eligibility. Eligibility shall be limited to 
residents and applicants for public housing, who are capable of 
assuming the financial obligations of homeownership under minimum 
income standards for affordability, taking into account the 
unavailability of public housing operating subsidies and modernization 
funds after conveyance of the property by the Housing Authority. * * *
* * * * *
    (d) Procedures/Affirmative Fair Housing Marketing Strategy. The 
Housing Authority must establish written equitable procedures for 
identifying and selecting eligible families to participate in the 
homeownership program. The Housing Authority must have an affirmative 
fair housing marketing strategy that applies whenever homeownership 
opportunities are made available to other than current residents of the 
property. Selections made from the Housing Authority's waiting list for 
the homeownership program must be in a nondiscriminatory manner in 
accordance with preferences as submitted by the Housing Authority and 
approved by HUD.
* * * * *
    Dated: January 12, 1995.
Henry G. Cisneros,
Secretary.
[FR Doc. 95-1414 Filed 1-19-95; 8:45 am]
BILLING CODE 4210-32-P