[Federal Register Volume 60, Number 41 (Thursday, March 2, 1995)]
[Rules and Regulations]
[Pages 11828-11834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4890]



      

[[Page 11827]]

_______________________________________________________________________

Part V





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Parts 243, 760 and 889



Low Income Housing: Elderly Persons Supportive Housing; Management and 
Operation Requirements; Final Rule

  Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules 
and Regulations   
[[Page 11828]] 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Parts 243, 760 and 889

[Docket No. R-95-1767; FR-3336-I-01]
RIN 2502-AF86


Supportive Housing for the Elderly; Management

AGENCY: Office of the Secretary, HUD.

ACTION: Interim rule.

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

SUMMARY: This interim rule establishes the requirements related to 
management and operation of the Supportive Housing for the Elderly 
Program. The purpose of the Supportive Housing for the Elderly Program 
is to enable elderly persons to live with dignity and independence by 
expanding the supply of supportive housing that is designed to 
accommodate the special needs of elderly persons and provides a range 
of services that are tailored to the needs of elderly persons occupying 
such housing. An interim rule similar to this interim rule is also 
being published in today's Federal Register for the Supportive Housing 
for Persons with Disabilities Program. This interim rule also adds both 
Supportive Housing programs to the list of projects covered by the pet 
ownership requirements. This interim rule also applies the wage and 
claim consent form requirements to both programs.

DATES: Effective Date: April 3, 1995.
    Sunset Provisions: Sections 243.3(c)(1), 760.3(b)(10) and (11), and 
889.600 through 889.655, shall expire and shall not be in effect after 
October 2, 1996, unless changes in this interim rule are published as a 
final rule, or the Department publishes a notice in the Federal 
Register to extend the effective date.
    Comments due date: May 1, 1995.

ADDRESSES: Interested persons are invited to submit comments regarding 
this interim rule to the Rules Docket Clerk, Office of the General 
Counsel, Room 10276, Department of Housing and Urban Development, 451 
Seventh Street, SW., Washington, DC 20410-0500. Communications should 
refer to the above docket number and title. A copy of each 
communication submitted will be available for public inspection during 
regular business hours (weekdays 7:30 a.m. to 5:30 p.m.) at the above 
address.

FOR FURTHER INFORMATION CONTACT: Margaret Milner, Acting Director, 
Office of Elderly and Assisted Housing, Department of Housing and Urban 
Development, 451 Seventh Street SW., Room 6130, Washington, DC 20410, 
telephone (202) 708-4542; (TDD) (202) 708-4594. (These are not toll-
free numbers.)

SUPPLEMENTARY INFORMATION:

I. Paperwork Burden

    The information collection requirements contained in this interim 
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 
assigned OMB control number 2502-0470.

II. Justification for Interim Rulemaking

    In general, the Department publishes a rule for public comment 
before issuing a rule for effect, in accordance with its own 
regulations on rulemaking, 24 CFR part 10. However, part 10 provides 
for exceptions from that general rule when the agency finds good cause 
to omit advance notice and public participation. The good cause 
requirement is satisfied when prior public procedure is 
``impracticable, unnecessary, or contrary to the public interest'' (24 
CFR 10.1). The Department finds that good cause exists to publish this 
interim rule for effect without first soliciting public comment, in 
that prior public procedure is unnecessary. These management rules vary 
only slightly from previous management requirements for the section 202 
(of the Housing Act of 1959) direct loan program. This interim rule 
furthers the legislative mandate of section 202 of the Housing Act of 
1959, as amended, and it involves only minor interpretations of that 
statute. The section 202 capital advance program currently is operating 
under a series of interim rules. The Department intends to publish a 
final rule that will incorporate public comments for all aspects of the 
section 202 capital advance program.
    The Department also finds that prior public procedure would be 
impracticable. The Department has awarded capital advances since 1991, 
and many of these projects are approaching the management phase or have 
become operational. Management requirements are needed immediately to 
assure transition from the development phase to the management phase.

III. Sunset of Interim Rule

    In accordance with the Department's policy on interim rules, the 
amendments made by this interim rule shall expire 18 months after the 
effective date of this interim rule, unless extended by notice 
published in the Federal Register, or adopted by a final rule published 
on or before the 18-month anniversary date of the effective date of 
this interim rule.

IV. Background

    The Supportive Housing for the Elderly Program is authorized by 
section 202 of the Housing Act of 1959, as amended by section 801 of 
the Cranston-Gonzalez National Affordable Housing Act (the NAHA Act) 
and the Housing and Community Development Act of 1992 (1992 Act). Under 
the program, which is implemented in 24 CFR part 889, assistance is 
provided to private nonprofit organizations and nonprofit consumer 
cooperatives to expand the supply of supportive housing for the 
elderly. Such assistance is provided as (1) capital advances and (2) 
project rental assistance contracts. Capital advances may be used to 
finance the construction or rehabilitation of a structure, or the 
acquisition of a structure from the Resolution Trust Corporation (RTC), 
to be used as supportive housing for the elderly. This assistance may 
also cover the cost of real property acquisition, site improvement, 
conversion, demolition, relocation, and other expenses that the 
Secretary determines are necessary to expand the supply of supportive 
housing for the elderly.
    On June 12, 1991, the Department published an interim rule (56 FR 
27104) implementing the amendments made by section 801 of the NAHA to 
establish the Supportive Housing for the Elderly Program. That interim 
rule, which enabled the program to be funded for FY-1991, described 
application procedures and program requirements, selection of 
applications and duration of fund reservation requirements. A second 
interim rule was published on August 12, 1992 (57 FR 36338) to provide 
the development-related requirements (closing of capital advances and 
requirements related to project rental assistance contracts) of the 
program. The program was the subject of further amendments of the 1992 
Act, which were implemented by a third interim rule published on May 5, 
1993 (58 FR 26836). All three interim rules are codified at 24 CFR part 
889.
    Selection preference rules (Secs. 889.611-889.615) for this program 
were published on July 18, 1994 at 59 FR 36616. Today's interim rule 
(subpart F, part 889) completes the establishment of the program by 
providing the requirements for management and operation of projects 
funded under the program. After the period of public comment is 
completed on this interim rule, the Department will develop a final 
rule based on all previous rules. [[Page 11829]] 

V. Summary of Interim Rule (Subpart F)

    Subpart F provides the responsibilities of the Owner, requirements 
of the replacement reserve, selection and admission requirements for 
tenants, obligations of tenants, provisions regarding overcrowded and 
underoccupied units, lease requirements, and requirements regarding 
termination of tenancy, modifications of leases, security deposits and 
vacancy payments.
    The subpart F requirements are similar to existing requirements for 
the section 202 Projects for Nonelderly Handicapped Families and 
Individuals receiving assistance under section 202(h) of the Housing 
Act of 1959. See 24 CFR 885.940-885.985.

Owner Responsibilities

    The responsibilities of an Owner under part 889 include marketing, 
management and maintenance, contracting for services, submission of 
financial and operating statements, project fund accounting and 
reporting. Marketing must be conducted in accordance with the HUD-
approved affirmative fair housing marketing plan and all Federal, State 
or local fair housing and equal opportunity requirements. The Owner is 
responsible for all management functions. These functions include 
selection and admission of tenants, required reexaminations of incomes 
for families occupying assisted units, collection of tenant payments, 
termination of tenancy and eviction, and all repair and maintenance 
functions (including ordinary and extraordinary maintenance and 
replacement of capital items). All functions must be performed in 
compliance with equal opportunity requirements. The Owner must also 
establish and maintain a replacement reserve to aid in funding 
extraordinary maintenance and repair and replacement of capital items.
    The Owner is required to adopt written tenant selection procedures 
which ensure nondiscrimination in the selection of tenants and that are 
(1) consistent with the purpose of improving housing opportunities for 
very low-income elderly persons; and (2) reasonably related to program 
eligibility and an applicant's ability to perform the obligations of 
the lease. The Owner must comply with all nondiscrimination 
authorities. The Secretary is to provide to an appropriate agency in 
each area (which may be the applicable State or Area Agency on Aging) 
information regarding the availability of housing assisted under this 
part. The Owner must accept applications for admission to the project 
in the form prescribed by HUD. Applicant families applying for assisted 
units must complete a certification of eligibility as part of the 
application for admission.
    The Owner is also responsible for determining whether applicants 
are eligible for admission and for the selection of families. To be 
eligible for admission, an applicant must be an elderly person (as 
defined in Sec. 889.105); must meet any project occupancy requirements 
approved by HUD under Sec. 889.305(a)(1); must meet the disclosure and 
verification requirements for Social Security Numbers, as provided by 
24 CFR part 750; must sign and submit consent forms for the obtaining 
of wage and claim information from State Wage Information Collection 
Agencies, as provided by 24 CFR part 760; and must be a very low-income 
family, as defined by Sec. 889.105. Under certain circumstances, HUD 
may permit the leasing of units to ineligible families under 
Sec. 889.515. If the Owner determines that the family is eligible and 
is otherwise acceptable and units are available, the Owner will assign 
the family a unit. The Owner will assign the family a unit of the 
appropriate size in accordance with HUD's general occupancy guidelines. 
If no suitable unit is available, the Owner will place the family on a 
waiting list for the project and notify the family when a suitable unit 
may become available. If the waiting list is so long that the applicant 
would not be likely to be admitted for the next 12 months, the Owner 
may advise the applicant that no additional applications for admission 
are being considered for that reason.
    If the Owner determines that an applicant is ineligible for 
admission or the Owner is not selecting the applicant for other 
reasons, the Owner will promptly notify the applicant in writing of the 
determination, the reasons for the determination, and that the 
applicant has a right to request a meeting to review the rejection, in 
accordance with HUD requirements.
    Records on applicants and approved eligible families, which provide 
racial, ethnic, gender and place of previous residency data required by 
HUD, must be retained for three years. The Owner must reexamine the 
income and composition of the family at least every 12 months. Upon 
verification of the information, the Owner must make appropriate 
adjustments in the total tenant payment in accordance with part 813, as 
modified by Sec. 889.105, and must determine whether the family's unit 
size is still appropriate. The Owner must adjust tenant payment and the 
project rental assistance payment and must carry out any unit transfer 
in accordance with HUD standards.

Family Responsibilities

    Families under the program are required to do the following: (1) 
Pay amounts due under the lease directly to the Owner; (2) supply such 
certification, release, information, or documentation as the Owner or 
HUD determines necessary, including information and documentation 
relating to the disclosure and verification of Social Security Numbers, 
as provided by 24 CFR part 750, and the signing and submission of 
consent forms for the obtaining of wage and claim information from 
State Wage Information Collection Agencies, as provided by 24 CFR part 
760; (3) allow the Owner to inspect the dwelling unit or residential 
space at reasonable times and after reasonable notice; (4) notify the 
Owner before vacating the dwelling unit; and (5) use the dwelling unit 
solely for residence by the family, and as the family's principal place 
of residence. The family may not assign the lease or transfer the unit, 
nor may it occupy, or receive assistance for the occupancy of a unit 
governed under this part while occupying, or receiving assistance for 
occupancy of, another unit assisted under any Federal housing 
assistance program, including any section 8 program.

Lease

    The term of the lease may not be less than one year. Unless the 
lease has been terminated by appropriate action, upon expiration of the 
lease term, the family and Owner may execute a new lease for a term not 
less than one year, or may take no action. If no action is taken, the 
lease will automatically be renewed for successive terms of one month. 
The Owner shall use the lease form prescribed by HUD. The Owner may not 
use any of the prohibited provisions specified by HUD. In addition to 
required provisions of the lease form, the Owner may include a 
provision in the lease permitting the Owner to enter the leased 
premises, at any time, without advance notice where there is reasonable 
cause to believe that an emergency exists or that health or safety of a 
family member is endangered. The provisions of part 247 apply to all 
decisions by an Owner to terminate the tenancy or modify the lease of a 
family residing in a unit.

Security Deposit

    At the time of the initial execution of the lease, the Owner will 
require each family occupying a unit to pay a [[Page 11830]] security 
deposit in an amount equal to one month's total tenant payment or $50, 
whichever is greater. The family is expected to pay the security 
deposit from its own resources and other available public or private 
resources. The Owner may collect the security deposit on an installment 
basis. The Owner must place the security deposits in a segregated 
interest-bearing account.

Utility Allowances

    The Owner must also submit an analysis of any utility allowances 
applicable. Such data as changes in utility rates and other facts 
affecting utility consumption should be provided as part of this 
analysis to permit appropriate adjustments in the utility allowances 
for assisted units. In addition, if utility rate changes would result 
in a cumulative increase of 10 percent or more in the most recently 
approved utility allowances, the Owner must advise HUD and request 
approval of new utility allowances. Whenever a utility allowance for an 
assisted unit is adjusted, the Owner will promptly notify affected 
families and make a corresponding adjustment of the tenant payment and 
the amount of the project rental assistance payment.

Vacancy Payments

    Vacancy payments under the Project Rental Assistance Contract 
(PRAC) will not be made unless certain conditions for receipt of these 
project rental assistance payments are fulfilled. For each unit that is 
not leased as of the effective date of the PRAC, the Owner is entitled 
to vacancy payments in the amount of 50 percent of the per unit 
operating cost for the first 60 days of vacancy, if the Owner: (1) 
Conducted marketing in accordance with Sec. 889.600(a) and otherwise 
complied with Sec. 889.600; (2) has taken and continues to take all 
feasible actions to fill the vacancy; and (3) has not rejected any 
eligible applicant except for good cause acceptable to HUD. If an 
eligible family vacates a unit, the Owner is entitled to vacancy 
payments in the amount of 50 percent of the approved per unit operating 
cost for the first 60 days of vacancy if the Owner: (1) Certifies that 
it did not cause the vacancy by violating the lease, the PRAC, or any 
applicable law; (2) notified HUD of the vacancy or prospective vacancy 
and the reasons for the vacancy upon learning of the vacancy or 
prospective vacancy; (3) has fulfilled and continues to fulfill the 
requirements specified in Sec. 889.600(a)(2) and (3) and 
Sec. 889.650(b)(2) and (3); and (4) for any vacancy resulting from the 
Owner's eviction of an eligible family, certifies that it has complied 
with Sec. 889.635. If the Owner collects payments for vacancies from 
other sources (tenant payments, security deposits, payments under 
Sec. 889.640(c), or governmental payments under other programs), the 
Owner shall not be entitled to collect vacancy payments to the extent 
these collections from other sources plus the vacancy payment exceed 
the approved per unit operating cost.

HUD Reviews

    HUD shall conduct periodic on-site management reviews of the 
Owner's compliance with the requirements of part 889.

VI. Amendments to 24 CFR Parts 243 and 760

    This interim rule also amends 24 CFR part 243 by including the 
Supportive Housing for the Elderly and Supportive Housing for Persons 
with Disabilities projects in the list of projects covered by the pet 
ownership requirements. The interim rule also amends part 760 and 
applies the wage and claim consent form requirements to the Supportive 
Housing for the Elderly and Supportive Housing for Persons with 
Disabilities Programs.

VII. Other Matters

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been 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. The Finding of No Significant Impact is 
available for public inspection and copying between 7:30 a.m. and 5:30 
p.m. weekdays at the Office of the Rules Docket Clerk, 451 Seventh 
Street, SW., Room 10276, Washington, DC 20410-0500.

Regulatory Flexibility Act

    Under 5 U.S.C. 605(b) (the Regulatory Flexibility Act), the 
undersigned hereby certifies that this interim rule does not have a 
significant economic impact on a substantial number of small entities. 
The interim rule would provide capital advances to private nonprofit 
organizations and nonprofit consumer cooperatives to expand the supply 
of supportive housing for the elderly. Although small entities will 
participate in the program, the interim rule would not have a 
significant impact on them.

Executive Order 12606, the Family

    The General Counsel, as the Designated Official for Executive Order 
12606, the Family, has determined that the provisions of this interim 
rule will not have a significant impact on family formation, 
maintenance or well being.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order No. 12611--Federalism, has determined that the 
interim rule does not involve the preemption of State law by Federal 
statute or regulation and does not have federalism impacts.

Regulatory Agenda

    This interim rule was listed as sequence number 1807 in the 
Department's Semiannual Agenda of Regulations published on November 14, 
1994 (59 FR 57632, 57657) under Executive Order 12866 and the 
Regulatory Flexibility Act.

Catalog of Federal Domestic Assistance

    The program number is 14.157, Housing for the Elderly or 
Handicapped.

List of Subjects

24 CFR Part 243

    Aged, Grant programs--housing and community development, 
Individuals with disabilities, Loans programs--housing and community 
development, Low and moderate income housing, Mortgage insurance, Pets, 
Reporting and recordkeeping requirements.

24 CFR Part 760

    Grant programs--housing and community development, Income 
verification procedures, Indians, Intergovernmental relations, Loan 
programs--housing and community development, Penalties, Public housing, 
Rent subsidies, Reporting and recordkeeping requirements, Wages.

24 CFR Part 889

    Aged, Capital advance programs, Grant programs--housing and 
communtiy development, Loan programs--housing and community 
development, Low and moderate income housing, Rent subsidies, Reporting 
and recordkeeping requirements.
    Accordingly, for the reasons stated in the preamble, title 24 of 
the Code of Federal Regulations is amended to read as follows:

PART 243--PET OWNERSHIP IN HOUSING FOR THE ELDERLY OR HANDICAPPED

    1. The authority citation for part 243 continues to read as 
follows:

    Authority: 12 U.S.C. 1701r-1; 42 U.S.C. 3535(d).

    [[Page 11831]] 2. In Sec. 243.3, paragraph (c) introductory text 
and paragraph (c)(1) are revised to read as follows:


Sec. 243.3  Definitions.

* * * * *
    (c) Project for the elderly or persons with disabilities means a 
specific rental or cooperative multifamily property that, unless 
currently owned by HUD, is subject to a first mortgage, and:
    (1) That is assisted under section 202 of the Housing Act of 1959, 
and as amended (Housing for the Elderly or Disabled or Supportive 
Housing for the Elderly) or is assisted under section 811 of the 
National Affordable Housing Act (Supportive Housing for Persons with 
Disabilities);
* * * * *
    3. Section 243.4 is revised to read as follows:


Sec. 243.4  Effective date.

    This part shall be effective on March 2, 1987. However, project 
owners shall have until May 1, 1987 to implement the provisions of this 
part. Section 243.3(c)(1) shall expire and shall not be in effect after 
October 2, 1996, unless changes in this interim rule are published as a 
final rule, or the Department publishes a notice in the Federal 
Register to extend the effective date.

PART 760--PROCEDURES FOR OBTAINING WAGE AND CLAIM INFORMATION ABOUT 
APPLICANTS AND PARTICIPANTS IN HUD'S SECTION 8 AND PUBLIC HOUSING 
PROGRAMS FROM STATE WAGE INFORMATION COLLECTION AGENCIES (SWICAs)

    4. The authority citation for part 760 is revised to read as 
follows:

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437a, 1437d, 1437ee, 
1437f, 3535(d), and 3544.

    5. In Sec. 760.3, paragraph (b) is amended by redesignating 
paragraphs (b)(10) through (b)(13) as paragraphs (b)(12) through 
(b)(15), and by adding new paragraphs (b)(10) and (b)(11), to read as 
follows:


Sec. 760.3  Applicability.

* * * * *
    (b) * * *
    (10) Part 889, Supportive Housing for the Elderly.
    (11) Part 890, Supportive Housing for Persons with Disabilities.
* * * * *
    6. Section 760.40 is amended by adding paragraph (c) to read as 
follows:


Sec. 760.40  Effective date of rule.

* * * * *
    (c) Expiration date. Sections 760.3(b)(10) and (11) shall expire 
and shall not be in effect after October 2, 1996, unless changes in 
this interim rule are published as a final rule, or the Department 
publishes a notice in the Federal Register to extend the effective 
date.

PART 889--SUPPORTIVE HOUSING FOR THE ELDERLY

    7. The authority citation for part 889 continues to read as 
follows:

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

    8. Section 889.100 is amended by adding paragraph (d) to read as 
follows:


Sec. 889.100  Purpose and policy.

* * * * *
    (d) Expiration date. Sections 889.600 through 889.655 shall expire 
and shall not be in effect after October 2, 1996, unless changes in 
this interim rule are published as a final rule, or the Department 
publishes a notice in the Federal Register to extend the effective 
date.
    9. Subpart F is amended by adding Secs. 889.600, 889.605, 889.610, 
889.620, 889.625, 889.630, 889.635, 889.640, 889.645, and 889.650, to 
read as follows:

Subpart F--Project Management

Sec.
889.600  Responsibilities of owner.
889.605  Replacement reserve.
889.610  Selection and admission of tenants.
889.611  Selection preferences.
* * * * *
889.620  Obligations of the family.
889.625  Overcrowded and underoccupied units.
889.630  Lease requirements.
889.635  Termination of tenancy and modification of lease.
889.640  Security deposits.
889.645  Adjustment of utility allowances.
889.650  Conditions for receipt of vacancy payments for assisted 
units.
889.655  HUD review.

Subpart F--Project Management


Sec. 889.600  Responsibilities of owner.

    (a) Marketing. (1) The Owner must commence and continue diligent 
marketing activities not later than 90 days before the anticipated date 
of availability of the first unit. Market activities shall include the 
provision of notices of the availability of housing under the program 
to operators of temporary housing for the homeless in the same housing 
market.
    (2) Marketing must be done in accordance with the HUD-approved 
affirmative fair housing marketing plan and all Federal, State or local 
fair housing and equal opportunity requirements. The purpose of the 
plan and requirements is to achieve a condition in which eligible 
families of similar income levels in the same housing market have a 
like range of housing choices available to them regardless of 
discriminatory considerations such as their race, color, creed, 
religion, familial status, disability, sex or national origin.
    (3) At the time of PRAC execution, the Owner must submit to HUD a 
list of leased and unleased assisted units, with a justification for 
the unleased units, in order to qualify for vacancy payments for the 
unleased units.
    (b) Management and maintenance. The Owner is responsible for all 
management functions. These functions include selection and admission 
of tenants, required reexaminations of incomes for families occupying 
assisted units, collection of tenant payments, termination of tenancy 
and eviction, and all repair and maintenance functions (including 
ordinary and extraordinary maintenance and replacement of capital 
items). All functions must be performed in compliance with equal 
opportunity requirements.
    (c) Contracting for services. (1) With HUD approval, the Owner may 
contract with a private or public entity for performance of the 
services or duties required in paragraphs (a) and (b) of this section. 
However, such an arrangement does not relieve the Owner of 
responsibility for these services and duties. All such contracts are 
subject to the restrictions governing prohibited contractual 
relationship described in Sec. 889.105 (definition of Owner). (These 
prohibitions do not extend to management contracts entered into by the 
Owner with the Sponsor or its non-profit affiliate.)
    (2) Consistent with the objectives of Executive Orders 11625, 12432 
and 12138, the Owner will promote awareness and participation of 
minority and women-owned business enterprises in contracting and 
procurement activities.
    (d) Submission of financial and operating statements. The Owner 
must submit to HUD:
    (1) Within 60 days after the end of each fiscal year of project 
operations, financial statements for the project audited by an 
independent public accountant and in the form required by HUD; and
    (2) Other statements regarding project operation, financial 
conditions and occupancy as HUD may require to administer the PRAC and 
to monitor project operations. [[Page 11832]] 
    (e) Use of project funds. The Owner shall maintain a separate 
project fund account in a depository or depositories which are members 
of the Federal Deposit Insurance Corporation or National Credit Union 
Share Insurance Fund and shall deposit all tenant payments, charges, 
income, and revenues arising from project operation or ownership to 
this account. All project funds are to be deposited in Federally-
insured accounts. All balances shall be fully insured at all times, to 
the maximum extent possible. Project funds must be used for the 
operation of the project (including required insurance coverage), and 
to make required deposits to the replacement reserve under 
Sec. 889.605, in accordance with HUD-approved budget. Any remaining 
project funds in the project funds account (including earned interest) 
following the expiration of the fiscal year shall be deposited in a 
Federally-insured residual receipts account within 60 days following 
the end of the fiscal year. Withdrawals from this account may be made 
only for project purposes and with the approval of HUD. If there are 
funds remaining in the residual receipts account when the mortgage is 
satisfied, such funds shall be returned to HUD.
    (f) Reports. The Owner shall submit such reports as HUD may 
prescribe to demonstrate compliance with applicable civil rights and 
equal opportunity requirements. See Sec. 889.610(a). (Approved by the 
Office of Management and Budget under control number 2502-0470).


Sec. 889.605  Replacement reserve.

    (a) Establishment of reserve. The Owner shall establish and 
maintain a replacement reserve to aid in funding extraordinary 
maintenance and repair and replacement of capital items.
    (b) Deposits to reserve. The Owner shall make monthly deposits to 
the replacement reserve in an amount determined by HUD.
    (c) Level of reserve. The reserve must be built up to and 
maintained at a level determined by HUD to be sufficient to meet 
projected requirements. Should the reserve reach that level, the amount 
of the deposit to the reserve may be reduced with the approval of HUD.
    (d) Administration of reserve. Replacement reserve funds must be 
deposited with HUD, or in a Federally-insured depository in an 
interest-bearing account(s) whose balances are fully insured at all 
times. All earnings including interest on the reserve must be added to 
the reserve. Funds may be drawn from the reserve and used only in 
accordance with HUD guidelines and with the approval of, or as directed 
by, HUD.


Sec. 889.610  Selection and admission of tenants.

    (a) Written tenant selection procedures. The Owner shall adopt 
written tenant selection procedures which ensure nondiscrimination in 
the selection of tenants and that are consistent with the purpose of 
improving housing opportunities for very low-income elderly persons; 
and reasonably related to program eligibility and an applicant's 
ability to perform the obligations of the lease. The Owner must comply 
with the following nondiscrimination authorities: section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794) and the implementing 
regulations at 24 CFR Part 8; the Fair Housing Act (42 U.S.C. 3600-
3619) and the implementing regulations at 24 CFR Part 100, 108, 109, 
and 110; Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR Part 1; section 3 of the Housing 
and Urban Development Act of 1968 (12 U.S.C. 1701u) and the 
implementing regulations at 24 CFR Part 135; the Age Discrimination Act 
of 1975 (42 U.S.C. 6101-6107) and the implementing regulations at 24 
CFR part 146; Executive Order 11246 (as amended), 3 CFR, 1964-1965 
Comp., p. 339 and the implementing regulations at 41 CFR Chapter 60; 
the regulations implementing Executive Order 11063 (Equal Opportunity 
in Housing), 3 CFR, 1959-1963 Comp., p. 652, at 24 CFR part 107; the 
Americans with Disabilities Act (42 U.S.C. 12101 et seq.) to the extent 
applicable; and other applicable Federal, State and local laws 
prohibiting discrimination and promoting equal opportunity. While local 
residency requirements are prohibited, local residency preferences may 
be applied in selecting tenants only to the extent that they are not 
inconsistent with affirmative fair housing marketing objectives and the 
Owner's HUD-approved affirmative fair housing marketing plan. 
Preferences may not be based on the length of time the applicant has 
resided in the jurisdiction. With respect to any residency preference, 
persons expected to reside in the community as a result of current or 
planned employment will be treated as residents. Owners shall promptly 
notify in writing any rejected applicant of the grounds for any 
rejection. Additionally, owners shall maintain a written, chronological 
waiting list showing the name, race, gender, ethnicity and date of each 
person applying for the program.
    (b) Information on availability of assisted housing. The Secretary 
shall provide to an appropriate agency in each area (which may be the 
applicable State or Area Agency on Aging) information regarding the 
availability of housing assisted under this part.
    (c) Application for admission. The Owner must accept applications 
for admission to the project in the form prescribed by HUD and is 
obligated to confirm all information provided by the applicant families 
on the application. Applicant families must be requested to complete a 
release of information consent for verification of information. 
Applicant families applying for assisted units must complete a 
certification of eligibility as part of the application for admission. 
Applicant families must meet the disclosure and verification 
requirements for Social Security Numbers, as provided by 24 CFR part 
750. Applicant families must sign and submit consent forms for the 
obtaining of wage and claim information from State Wage Information 
Collection Agencies, as provided by 24 CFR part 760. Both the Owner and 
the applicant family must complete and sign the application for 
admission. On request, the Owner must furnish copies of all 
applications for admission to HUD.
    (d) Determination of eligibility and selection of tenants. The 
Owner is responsible for determining whether applicants are eligible 
for admission and for the selection of families. To be eligible for 
admission, an applicant must be an elderly person (as defined in 
Sec. 889.105); must meet the disclosure and verification requirements 
for Social Security Numbers, as provided by 24 CFR part 750; must sign 
and submit consent forms for the obtaining of wage and claim 
information from State Wage Information Collection Agencies, as 
provided by 24 CFR part 760; and must be a very low-income family, as 
defined by Sec. 889.105. Under certain circumstances, HUD may permit 
the leasing of units to ineligible families under Sec. 889.515.
    (e) Unit assignment. If the Owner determines that the family is 
eligible and is otherwise acceptable and units are available, the Owner 
will assign the family a unit. The Owner will assign the family a unit 
of the appropriate size in accordance with HUD's general occupancy 
guidelines. If no suitable unit is available, the Owner will place the 
family on a waiting list for the project and notify the family when a 
suitable unit may become available. If the waiting list is so long that 
the applicant would not be likely to be admitted for the next 12 
months, the Owner may advise the applicant that no 
[[Page 11833]] additional applications for admission are being 
considered for that reason.
    (f) Ineligibility determination. If the Owner determines that an 
applicant is ineligible for admission or the Owner is not selecting the 
applicant for other reasons, the Owner will promptly notify the 
applicant in writing of the determination, the reasons for the 
determination, and the applicant's right to request a meeting to review 
the rejection, in accordance with HUD requirements. The review, if 
requested, may not be conducted by a member of the Owner's staff who 
made the initial decision to reject the applicant. The applicant may 
also exercise other rights (e.g., rights granted under Federal, State, 
or local civil rights laws) if the applicant believes he or she is 
being discriminated against on a prohibited basis.
    (g) Records. Records on applicants and approved eligible families, 
which provide racial, ethnic, gender and place of previous residency 
data required by HUD, must be retained for three years. See 
Sec. 889.610(a).
    (h) Reexamination of family income and composition. (1) Regular 
reexaminations. The Owner must reexamine the income and composition of 
the family at least every 12 months. Upon verification of the 
information, the Owner must make appropriate adjustments in the total 
tenant payment in accordance with part 813, as modified by 
Sec. 889.105, and must determine whether the family's unit size is 
still appropriate. The Owner must adjust tenant payment and the project 
rental assistance payment, and must carry out any unit transfer in 
accordance with HUD standards. At the time of reexamination under 
paragraph (h)(1) of this section, the Owner must require the family to 
meet the disclosure and verification requirements for Social Security 
Numbers, as provided by 24 CFR part 750. For requirements regarding the 
signing and submitting of consent forms by families for obtaining of 
wage and claim information from State Wage Information Collection 
Agencies, see 24 CFR part 760.
    (2) Interim reexaminations. The family must comply with the 
provisions in its lease regarding interim reporting of changes in 
income. If the Owner receives information concerning a change in the 
family's income or other circumstances between regularly scheduled 
reexaminations, the Owner must consult with the family and make any 
adjustments determined to be appropriate. See 24 CFR 750.10(d)(2)(i) 
for the requirements for the disclosure and verification of Social 
Security Number at interim reexaminations involving new family members. 
For requirements regarding the signing and submitting of consent forms 
by families for the obtaining of wage and claim information from State 
Wage Information Collection Agencies, see 24 CFR part 760. Any change 
in the family's income or other circumstances that result in an 
adjustment in the total tenant payment, tenant payment, and project 
rental assistance payment must be verified.
    (3) Continuation of project rental assistance payment. (i) A family 
shall remain eligible for project rental assistance payment until the 
total tenant payment equals or exceeds the gross rent. The termination 
of subsidy eligibility will not affect the family's other rights under 
its lease. Project rental assistance payment may be resumed if, as a 
result of changes in income, rent or other relevant circumstances 
during the term of the PRAC, the family meets the income eligibility 
requirements of part 813 of this chapter (as modified in Sec. 889.105) 
and project rental assistance is available for the unit under the terms 
of the PRAC. The family will not be required to establish its 
eligibility for admission to the project under the remaining 
requirements of paragraph (d) of this section.
    (ii) A family's eligibility for project rental assistance payment 
may be terminated in accordance with HUD requirements for such reasons 
as failure to submit requested verification information, including 
information related to disclosure and verification of Social Security 
Numbers (as provided by 24 CFR part 750) or failure to sign and submit 
consent forms for the obtaining of wage and claim information from 
State Wage Information Collection Agencies (as provided by 24 CFR part 
760).
* * * * *


Sec. 889.620  Obligations of the family.

    (a) Requirements. The family shall:
    (1) Pay amounts due under the lease directly to the Owner;
    (2) Supply such certification, release of information, consent, 
completed forms or documentation as the Owner or HUD determines 
necessary, including information and documentation relating to the 
disclosure and verification of Social Security Numbers, as provided by 
24 CFR part 750, and the signing and submission of consent forms for 
the obtaining of wage and claim information from State Wage Information 
Collection Agencies, as provided by 24 CFR part 760;
    (3) Allow the Owner to inspect the dwelling unit or residential 
space at reasonable times and after reasonable notice;
    (4) Notify the Owner before vacating the dwelling unit; and
    (5) Use the dwelling unit solely for residence by the family and as 
the family's principal place of residence.
    (b) Prohibitions. The family shall not:
    (1) Assign the lease or transfer the unit; or
    (2) Occupy, or receive assistance for the occupancy of, a unit 
governed under this part while occupying, or receiving assistance for 
occupancy of, another unit assisted under any Federal housing 
assistance program, including any section 8 program.

(Approved by the Office of Management and Budget under control 
number 2502-0470)


Sec. 889.625  Overcrowded and underoccupied units.

    If the Owner determines that because of change in family size, a 
unit is smaller than appropriate for the eligible family to which it is 
leased, or that the unit is larger than appropriate, project rental 
assistance payment with respect to the unit will not be reduced or 
terminated until the eligible family has been relocated to an 
appropriate alternate unit. If possible, the Owner will, as promptly as 
possible, offer the family an appropriate alternate unit. The Owner may 
receive vacancy payments for the vacated unit if the Owner complies 
with the requirements of Sec. 889.650.


Sec. 889.630  Lease requirements.

    (a) Term of lease. The term of the lease may not be less than one 
year. Unless the lease has been terminated by appropriate action, upon 
expiration of the lease term, the family and Owner may execute a new 
lease for a term not less than one year or may take no action. If no 
action is taken, the lease will automatically be renewed for successive 
terms of one month.
    (b) Termination by the family. All leases may contain a provision 
that permits the family to terminate the lease upon 30 days advance 
notice. A lease for a term that exceeds one year must contain such 
provision.
    (c) Form. The Owner shall use the lease form prescribed by HUD. In 
addition to required provisions of the lease form, the Owner may 
include a provision in the lease permitting the Owner to enter the 
leased premises, at any time, without advance notice where there is 
reasonable cause to believe that an emergency exists or that health or 
safety of a family member is endangered. [[Page 11834]] 


Sec. 889.635  Termination of tenancy and modification of lease.

    The provisions of part 247 of this title apply to all decisions by 
an Owner to terminate the tenancy or modify the lease of a family 
residing in a unit.


Sec. 889.640  Security deposits.

    (a) Collection of security deposit. At the time of the initial 
execution of the lease, the Owner will require each family occupying a 
unit to pay a security deposit in an amount equal to one month's total 
tenant payment or $50, whichever is greater. The family is expected to 
pay the security deposit from its own resources and other available 
public or private resources. The Owner may collect the security deposit 
on an installment basis.
    (b) Security deposit provisions applicable to units. (1) 
Administration of security deposit. The Owner must place the security 
deposits in a segregated interest-bearing account. The amount of the 
segregated, interest-bearing account maintained by the Owner must at 
all times equal the total amount collected from the families then in 
occupancy plus any accrued interest and less allowable administrative 
cost adjustments. The Owner must comply with any applicable State and 
local laws concerning interest payments on security deposits.
    (2) Family notification requirement. In order to be considered for 
the refund of the security deposit, a family must provide the Owner 
with a forwarding address or arrange to pick up the refund.
    (3) Use of security deposit. The Owner, subject to State and local 
law and the requirements of paragraph (b)(3) of this section, may use 
the family's security deposit balance as reimbursement for any unpaid 
family contribution or other amount which the family owes under the 
lease. Within 30 days (or shorter time if required by State or local 
law) after receiving notification under paragraph (b)(2) of this 
section the Owner must:
    (i) Refund to a family which does not owe any amount under the 
lease the full amount of the family's security deposit balance;
    (ii) Provide to a family owing amounts under the lease a list 
itemizing each amount, along with a statement of the family's rights 
under State and local law. If the amount which the Owner claims is owed 
by the family is less than the amount of the family's security deposit 
balance, the Owner must refund the excess balance to the family. If the 
Owner fails to provide the list, the family will be entitled to the 
refund of the full amount of the family's security deposit balance.
    (4) Disagreements. If a disagreement arises concerning 
reimbursement of the security deposit, the family will have the right 
to present objections to the Owner in an informal meeting. The Owner 
must keep a record of any disagreements and meetings in a tenant file 
for inspection by HUD. The procedures of paragraph (b)(4) of this 
section do not preclude the family from exercising its rights under 
State or local law.
    (5) Decedent's interest in security deposit. Upon the death of a 
member of a family, the decedent's interest, if any, in the security 
deposit will be governed by State or local law.
    (c) Reimbursement by HUD for assisted units. If the family's 
security deposit balance is insufficient to reimburse the Owner for any 
amount which the family owes under the lease for a unit and the Owner 
has provided the family with the list required by paragraph (b)(3)(ii) 
of this section, the Owner may claim reimbursement from HUD for an 
amount not to exceed the lesser of:
    (1) The amount owed the Owner; or
    (2) One month's per unit operating cost, minus the amount of the 
family's security deposit balance. Any reimbursement under this section 
will be applied first toward any unpaid tenant payment due under the 
lease. No reimbursement may be claimed for unpaid tenant payment for 
the period after termination of the tenancy. The Owner may be eligible 
for vacancy payments following a vacancy in accordance with the 
requirements of Sec. 889.650.


Sec. 889.645  Adjustment of utility allowances.

    The Owner must submit an analysis of any utility allowances 
applicable. Such data as changes in utility rates and other facts 
affecting utility consumption should be provided as part of this 
analysis to permit appropriate adjustments in the utility allowances 
for assisted units. In addition, when utility rate changes would result 
in a cumulative increase of 10 percent or more in the most recently 
approved utility allowances, the Owner must advise HUD and request 
approval of new utility allowances. Whenever a utility allowance for an 
assisted unit is adjusted, the Owner will promptly notify affected 
families and make a corresponding adjustment of the tenant payment and 
the amount of the project rental assistance payment.

(Approved by the Office of Management and Budget under control 
number 2502-0470)


Sec. 889.650  Conditions for receipt of vacancy payments for assisted 
units.

    (a) General. Vacancy payments under the PRAC will not be made 
unless the conditions for receipt of these project rental assistance 
payments set forth in this section are fulfilled.
    (b) Vacancies during rent-up. For each unit that is not leased as 
of the effective date of the PRAC, the Owner is entitled to vacancy 
payments in the amount of 50 percent of the per unit operating cost for 
the first 60 days of vacancy, if the Owner:
    (1) Conducted marketing in accordance with Sec. 889.600(a) and 
otherwise complied with Sec. 889.600;
    (2) Has taken and continues to take all feasible actions to fill 
the vacancy; and
    (3) Has not rejected any eligible applicant except for good cause 
acceptable to HUD.
    (c) Vacancies after rent-up. If an eligible family vacates a unit, 
the Owner is entitled to vacancy payments in the amount of 50 percent 
of the approved per unit operating cost for the first 60 days of 
vacancy if the Owner:
    (1) Certifies that it did not cause the vacancy by violating the 
lease, the PRAC, or any applicable law;
    (2) Notified HUD of the vacancy or prospective vacancy and the 
reasons for the vacancy upon learning of the vacancy or prospective 
vacancy;
    (3) Has fulfilled and continues to fulfill the requirements 
specified in Sec. 889.600(a)(2) and (3) and Sec. 889.650(b)(2) and (3); 
and
    (4) For any vacancy resulting from the Owner's eviction of an 
eligible family, certifies that it has complied with Sec. 889.635.
    (d) Prohibition of double compensation for vacancies. If the Owner 
collects payments for vacancies from other sources (tenant payments, 
security deposits, payments under Sec. 889.640(c), or governmental 
payments under other programs), the Owner shall not be entitled to 
collect vacancy payments to the extent these collections from other 
sources plus the vacancy payment exceed the approved per unit operating 
cost.


Sec. 889.655  HUD review.

    HUD shall conduct periodic on-site management inspections and 
reviews of the Owner's compliance with the requirements of this part.
Henry G. Cisneros,
Secretary.
[FR Doc. 95-4890 Filed 3-1-95; 8:45 am]
BILLING CODE 4210-32-P