[Federal Register Volume 61, Number 177 (Wednesday, September 11, 1996)]
[Rules and Regulations]
[Pages 48052-48061]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23166]



[[Page 48051]]


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Part III





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Parts 582 and 882



Section 8 Moderate Rehabilitation Single Room Occupancy Program for 
Homeless Individuals; Final Rule

  Federal Register / Vol. 61, No. 177 / Wednesday, September 11, 1996 / 
Rules and Regulations  

[[Page 48052]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 582 and 882

[Docket No. FR-3929-F-03]
RIN 2506-AB75


Office of the Assistant Secretary for Community Planning and 
Development; Section 8 Moderate Rehabilitation Single Room Occupancy 
Program for Homeless Individuals; Final Rule

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, HUD.

ACTION: Final rule.

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

SUMMARY: This rule represents the final rulemaking for three interim 
rules implementing the Section 8 Moderate Rehabilitation Single Room 
Occupancy Program for Homeless Individuals. The interim rules clarified 
program definitions and requirements, conformed the regulations with 
statutory and other changes, and simplified the application selection 
and tenant outreach processes by conforming them with the processes 
used in other HUD-administered competitive McKinney Act programs. This 
final rule adopts the interim rules as final and includes a discussion 
of the public comments received on the interim rules. This final rule 
also further streamlines the regulations by eliminating provisions that 
are redundant of statutes or are otherwise unnecessary, in accordance 
with the President's regulatory reform initiatives.

EFFECTIVE DATE: October 11, 1996.

FOR FURTHER INFORMATION CONTACT: Maggie H. Taylor, Director, Office of 
Special Needs Assistance Programs, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410; (202) 708-
4300 (this number is not toll-free). Hearing- or speech-impaired 
persons may access this number via TTY by calling the Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The purpose of the Section 8 Moderate Rehabilitation Single Room 
Occupancy (SRO) Program for Homeless Individuals is to provide rental 
assistance to homeless individuals in rehabilitated SRO housing. Under 
this program HUD awards assistance through a national competition that 
focuses on filling gaps identified in locally-developed continuum of 
care systems for assisting persons who are homeless. The program is 
authorized by title IV of the Stewart B. McKinney Homeless Assistance 
Act (42 U.S.C. 11301 et seq.) (the McKinney Act). HUD published its 
first final rule for the program in the Federal Register on November 7, 
1989 (54 FR 46832).
    Since that time, HUD has amended these regulations through three 
interim rules. Regulations that HUD publishes in interim rules become 
effective like final rules--30 days after publication in the Federal 
Register. Unlike final rules, however, interim rules invite the public 
to comment on their provisions.
    The purpose of today's final rule is to adopt as final the 
provisions of the SRO regulations that were the product of the three 
interim rules. The preamble of this final rule summarizes the public 
comments HUD received on each of the three interim rules and provides 
HUD's responses to the comments as appropriate. This final rule also 
improves the SRO regulations by clarifying and further streamlining the 
provisions, as described below.

II. March 15, 1993 Interim Rule

    HUD published an interim rule amending the SRO regulations on March 
15, 1993 (58 FR 13828). The March 15, 1993 interim rule adopted a 
standardized funding award process for competitively awarded assistance 
under the McKinney Act. This process consisted of two stages under 
which HUD would, after conditionally selecting applicants, require 
those applicants to submit additional technical information, such as 
project rent calculations (see Sec. 882.805 (c) and (d) of the interim 
rule).
    The March 15, 1993 interim rule also conformed the SRO program with 
other McKinney Act programs by removing the provisions requiring that 
units be leased to homeless individuals referred from a housing 
authority (HA) waiting list. Instead, the interim rule provided 
flexibility to HAs and owners by allowing them to engage in outreach 
efforts to bring homeless individuals into the program, and it provided 
that vacant units be rented directly to homeless individuals located 
through these outreach efforts (see Sec. 882.808).
    Additionally, the March 15, 1993 interim rule amended the SRO 
regulations to reflect a statutory amendment permitting an HA to 
contract with itself to receive SRO assistance for a project that it 
owns. The rule provided that HA-owners are subject to the same 
requirements that apply to other owners in the program, and that HUD 
must approve the base and contract rent calculations for these projects 
prior to execution of the agreement to enter into a housing assistance 
payments (HAP) contract and prior to the execution of the HAP contract 
(see Sec. 882.803(e)).
    The March 15, 1993 interim rule also amended Secs. 882.802 and 
882.805(f)(6) to reflect section 127 of the Department of Housing and 
Urban Development Reform Act of 1989 (Pub. L. 101-235; approved 
December 15, 1989), which raised the minimum amount of rehabilitation 
necessary to qualify a unit for assistance under the program to $3,000 
per unit, and which limited the size of projects to no more than 100 
assisted units.
    Lastly, the interim rule clarified the definition of ``Single Room 
Occupancy (SRO) housing'' in Sec. 882.802, the requirements for using 
SRO assistance in conjunction with the rehabilitation of efficiency 
units in the program, and HUD's right to require recipients of 
assistance to maintain any records and make any reports that HUD 
requires (see Sec. 882.808(p)).

Summary of Public Comments

    The deadline for submitting public comments on the March 15, 1993 
interim rule was May 14, 1993. By that date, HUD received comments from 
three organizations. After considering these comments, which are 
described below, HUD decided not to make any changes based on these 
comments in this final rule.
Two-Stage Application Process
    All three commenters supported the new two-stage application 
process (see Sec. 882.805(c) and (d) of the interim rule). As HUD 
stated in the preamble to the interim rule, under the new process, 
applicants submitting proposals that were not conditionally selected 
for funding would not have to incur the costs of addressing technical 
issues, such as securing financial commitments from other sources, only 
to have HUD reject their applications.
    HUD Response: The two-stage application process has been in effect 
for three years, and HUD believes the process has been successful in 
reducing the burden on applicants and in providing conditionally 
selected applicants with the opportunity to receive ongoing HUD 
assistance in meeting the technical submission requirements.
Conformance with Other McKinney Act Programs
    The commenters supported the provisions of the March 15, 1993 
interim rule that conformed the SRO program with the other McKinney Act

[[Page 48053]]

programs. The commenters especially supported the interim rule's 
requirement that HAs or owners engage in outreach efforts to bring 
homeless individuals into the program, rather than using HA waiting 
lists (see Sec. 882.808). One commenter noted that the new outreach 
process would be a more efficient process for locating homeless 
individuals.
    HUD Response: As indicated in the preamble to the interim rule, 
private nonprofit organizations, HAs, and project owners had expressed 
to HUD that the HA waiting list was an impractical method of locating 
homeless individuals for participation in the program, given the 
transient nature of many of these individuals. HUD is pleased that 
commenters supported the increased flexibility that the rule provided 
to them.
Records and Reports
    The commenters supported the interim rule's requirement in 
Sec. 882.808(p) that each recipient of assistance under this program 
maintain any records and make any reports that HUD may require.
    HUD Response: HUD has used this authority to implement annual 
progress reporting requirements in the SRO program similar to those 
used in other HUD-administered McKinney Act programs. The goal of these 
reports is to provide recipients the opportunity to demonstrate the 
progress they are making in areas such as increasing the skills and 
income of program participants.
Private Nonprofit Organizations as Direct Applicants
    The preamble to the March 15, 1993 interim rule noted that section 
1405 of the Housing and Community Development Act of 1992 (42 U.S.C. 
11399) amended the SRO program, providing in part that private 
nonprofit organizations could apply directly for SRO assistance. 
Although the interim rule did not change the regulations to reflect 
this amendment, one commenter questioned whether HUD would scrutinize 
these nonprofit organizations as thoroughly as it scrutinizes housing 
authorities. This commenter also expressed concern that HUD was leading 
these organizations to believe they could apply for public housing 
administration or Section 8 program administration funds.
    HUD Response: HUD has used the ability of the applicant to develop 
and operate a project as a rating criterion for applications. Under 
this criterion, HUD subjects HAs and private nonprofit applicants to 
the same scrutiny. Additionally, the statutory provision allowing 
private nonprofit organizations to apply for assistance, and HUD's 
subsequent implementation of this provision (see the discussion of the 
February 14, 1996 interim rule, below), clearly only apply to the SRO 
program.
Definition of ``Single Room Occupancy (SRO) Housing''
    All of the commenters supported the March 15, 1993 interim rule's 
revision of the definition of ``Single room occupancy (SRO) housing'' 
in Sec. 882.802 to include units with or without food preparation or 
sanitary facilities. One commenter suggested that HUD expand the 
program to include units that could accommodate more than one person, 
since families are now a large proportion of the homeless population.
    HUD Response: According to section 441 of the McKinney Act, HUD may 
only provide assistance for SRO units occupied by single homeless 
individuals. The legislative history of section 441 of the McKinney 
Act, which HUD recounts in the first final rule for the SRO program 
published in the Federal Register on November 7, 1989 (54 FR 46828), 
clearly indicates that Congress intended that assistance under this 
program only be used for single homeless individuals, and not 
multiperson families.
    While there is no statutory authority to provide assistance to 
homeless families under the SRO program, these families can receive 
assistance under other McKinney Act programs, including the Supportive 
Housing program (24 CFR part 583) and the Shelter Plus Care program (24 
CFR part 582).
Efficiency Units
    The March 15, 1993 interim rule amended Sec. 882.805(g)(4) to 
clarify that SRO program assistance may be used for efficiency units, 
but the gross rent for these units will be no higher than for SRO 
units. One commenter recommended that HUD amend the paragraph even 
further to provide that contract rents should include service-related 
hard costs, such as those related to the creation of office and meeting 
space. The commenter also suggested HUD include in this paragraph a 
list of reasonable service-related hard costs that could be included in 
contract rents.
    HUD Response: HUD has described in detail the provisions on 
eligible and ineligible costs in the technical assistance book on the 
SRO program that HUD issues each year. HUD believes that repeating 
these detailed provisions in the regulations would unnecessarily 
complicate the regulations, and that such repetition would be 
inconsistent with the President's regulatory reform initiatives 
(described below in this preamble, under the heading ``Regulatory 
Reform'').
    On a substantive level, the technical assistance book indicates 
that rehabilitation of space that will be used to provide supportive 
services to program participants is an eligible program cost. The costs 
of providing the supportive services, however, is not an eligible cost.

III. May 10, 1994 Interim Rule

    HUD published an interim rule on May 10, 1994 (59 FR 24252) that 
amended the SRO program application and funding award provisions by 
removing some of the descriptive information and providing that this 
information will appear in the annual notices of funding availability 
(NOFAs). The interim rule also amended the regulations to clarify when 
Comprehensive Housing Affordability Strategy (CHAS) certifications must 
be made. The deadline for public comments on the May 10, 1994 interim 
rule was July 11, 1994. HUD has not received any comments on the rule. 
Today's rule will adopt as final these amendments to the SRO program 
regulations, as well as similar amendments to the Shelter Plus Care 
program in Sec. 582.200 that also were included in the May 10, 1994 
interim rule. (The May 10, 1994 interim rule also amended the 
Supportive Housing program in Sec. 583.200; this portion of the interim 
was adopted as final in a rule published on July 19, 1994 (59 FR 
36886)). However, while this rule adopts these amendments as final, it 
also streamlines the regulations as part of the President's regulatory 
reform initiatives. This streamlining is described below, in the 
``Regulatory Reform'' section of this preamble.

IV. February 14, 1996 Interim Rule

    HUD published a third interim rule amending the SRO regulations on 
February 14, 1996 (61 FR 5850). The February 14, 1996 interim rule 
eliminated most of the remaining provisions on the required use of HA 
waiting lists, in conformance with the March 15, 1993 interim rule, 
described above. The February 14, 1996 interim rule also clarified the 
role of HAs in helping to identify homeless individuals during the 
outreach process (Sec. 882.808(a)(1)).
    The February 14, 1996 interim rule also conformed the regulations 
with section 1405 of the Housing and Community Development Act of 1992,

[[Page 48054]]

which amended the Stewart B. McKinney Homeless Assistance Act. This 
statutory amendment included a requirement for the participation of 
homeless individuals in considering and making policies and decisions 
regarding rehabilitation of structures receiving assistance under the 
SRO program, and for the involvement of homeless individuals in the 
rehabilitation and operation of these structures. The interim rule 
included this requirement in Sec. 882.808(q).
    The statutory amendment also provided that private nonprofit 
organizations can apply directly for SRO assistance. Prior to this 
amendment, HAs were the only eligible applicants under the program. To 
implement this change, the interim rule added definitions of 
``Applicant'' and ``Private nonprofit organization'' in Sec. 882.802.
    The February 14, 1996 interim rule also conformed the program 
regulations with the environmental review procedures in 24 CFR part 58. 
The Multifamily Housing Property Disposition Reform Act of 1994 (Pub. 
L. 103-233; approved April 11, 1994) made these procedures applicable 
to the SRO program, and HUD published implementing regulations in the 
Federal Register on March 13, 1995 (60 FR 13518). Under part 58, HAs 
(including HAs that administer programs for nonprofit applicants) must 
obtain an agreement with the responsible entity designated under part 
58 for the performance of environmental reviews.
    Additionally, the interim rule revised the provision on project 
eligibility in Sec. 882.803(a)(2) to provide that housing is ineligible 
for assistance under this program if it is receiving Federal funding 
for rental assistance or operating costs under other HUD programs. 
Under this revised standard, there is no restriction on the use of 
other Federal funding for acquisition and rehabilitation costs. HUD has 
successfully used this clearer, less restrictive standard in its 
Shelter Plus Care program.
    The February 14, 1996 interim rule also eliminated an obsolete date 
reference in the provision for determining the maximum amount of 
rehabilitation allowable in the program (Sec. 882.805(g)(1)(ii)(A) of 
the interim rule) so that more recent data can be used.
    Finally, the interim rule corrected an error in a final rule on 
relocation and displacement requirements published in the Federal 
Register on June 6, 1994 (59 FR 29326). The June 6, 1994 rule, which 
conformed HUD's regulations with the requirements of the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970, and its implementing regulations in 49 CFR part 24, added 
Sec. 882.810 and intended to remove much of Sec. 882.803(d). However, 
the most recent codification of part 882 (April 1, 1995) included all 
of Sec. 882.803(d). Therefore, in order to correct the error, the 
February 14, 1996 interim rule removed much of Sec. 882.803(d).

Summary of Public Comments

    The deadline for submitting public comments on the February 14, 
1996 interim rule was April 15, 1996. By that date, HUD received 
comments from two organizations. After considering these comments, 
which are described below, HUD has decided not to make any changes to 
the interim rule.
Start-Up Costs
    A commenter that administers this program for units owned by a 
nonprofit organization remarked that start-up costs can be an obstacle, 
primarily because filling all the units is difficult when the 
individuals to be served by the program are transient. The commenter 
stated that until a project reaches 100 percent occupancy, the owners 
have to rely on the maximum allowable rents for the occupied units, 
plus 80 percent of the contract rent for vacant units. The commenter 
maintained that this is insufficient to cover start-up costs, and that 
HUD should provide another way for nonprofit organizations to survive 
early cash flow problems.
    HUD Response: Under Sec. 882.808(f), if a unit that has been 
rehabilitated in accordance with HUD requirements is not leased within 
15 days of the effective date of the HAP contract, owners may receive 
housing assistance payments in the amount of 80 percent of the contract 
rent for the unit for a vacancy period not exceeding 60 days from the 
effective date of the HAP contract. Maintaining this 60-day provision 
is reasonable. The SRO program is designed to serve homeless 
individuals, many of whom are living on the streets and in shelters. 
These individuals need the permanent housing the SRO program provides 
as quickly as possible. The current regulations provide assistance to 
owners who need a reasonable period of time to lease the SRO units, 
while simultaneously creating an incentive to lease the units at the 
earliest possible date.
Elimination of Waiting Lists
    Another commenter remarked on the February 14, 1996 interim rule's 
removal of most of the remaining provisions for waiting lists, 
requiring instead that HAs or owners engage in outreach efforts. This 
commenter requested additional guidance for situations in which the 
outreach efforts fail to produce eligible individuals. This commenter 
also worries that discarding waiting lists could have a disparate 
impact on the young, the aged, or the disabled.
    HUD Response: The SRO regulations (Sec. 882.808(a)(2)) require that 
if the outreach procedures the HA or owner intends to use are unlikely 
to reach persons of any particular age, physical or mental handicap, 
race, color, religion, sex, or national origin, the HA or owner must 
establish additional procedures that will ensure such persons are made 
aware of the availability of the program. Additionally, 
Sec. 882.808(a)(1) requires owners to notify HAs when they conduct the 
outreach effort, so that the HA may provide referrals of homeless 
individuals (including referrals from any waiting list maintained by 
the HA). These provisions ensure that all individuals, including those 
individuals listed by the commenter, are treated equally in the 
program. Lastly, additional guidance on the tenant outreach process is 
contained in the SRO technical assistance book.
    This final rule also removes one last reference to the procedures 
for establishing waiting lists, which was included in the contents of 
the Administrative Plan (Sec. 882.805(b)(1)(ii)).
Participation of Homeless Individuals
    Although the February 14, 1996 interim rule required that private 
nonprofit applicants include at least one homeless individual or 
formerly homeless individual in their decisions regarding the 
rehabilitation of the SRO housing, one commenter remarked that the rule 
still reflects an underrepresentation of homeless individuals in the 
decisionmaking process, especially since HAs are exempt from even this 
minimal requirement. The commenter expressed concern about HAs or other 
entities that focus on the interests of suburbia or business, rather 
than those of homeless individuals.
    This commenter applauded the involvement of homeless individuals in 
the rehabilitation efforts and in providing services to the occupants, 
and requested HUD to encourage any such employment initiative by HAs, 
especially within the SRO facility.
    HUD Response: Section 1405 of the Housing and Community Development 
Act of 1992 provides that each approved applicant that is not an HA 
must provide for the participation of not less than one homeless 
individual or

[[Page 48055]]

formerly homeless individual on its board of directors or other 
equivalent policymaking entity to the extent that such entity considers 
and makes policies and decisions regarding the rehabilitation of any 
SRO housing. Thus, the statute specifically exempts HAs from this 
requirement.
    HUD shares the commenter's view that homeless individuals should be 
involved in the SRO decisionmaking process. Thus, the 1996 Continuum of 
Care application (which covers assistance under the SRO, Shelter Plus 
Care, and Supportive Housing programs) requires that applicants 
describe how they will involve homeless participants in project 
decisionmaking and operations. Additionally, the application requires 
that an applicant describe the involvement of homeless and formerly 
homeless individuals in the development of a jurisdiction's continuum 
of care strategy (see Fiscal Year 1996 Continuum of Care NOFA, 
published on March 15, 1996 (61 FR 10866)).
Private Nonprofit Organizations as Eligible Applicants
    One commenter applauded the eligibility of private nonprofit 
organizations as applicants under the SRO program. The commenter 
explained that nonprofit organizations may be better equipped in some 
areas to serve the homeless population, because they are community-
based and may have stronger neighborhood support.
    HUD Response: HUD agrees that providing for private nonprofit 
applicants in the SRO program enhances the critical role these 
organizations play in developing a continuum of care strategy for 
assisting homeless individuals and in implementing that strategy.

V. Regulatory Reform

    In response to Executive Order 12866 and President Clinton's 
memorandum of March 4, 1995 to all Federal departments and agencies on 
the subject of regulatory reinvention, HUD has reviewed all its 
regulations to determine whether certain regulations can be eliminated, 
streamlined, or consolidated with other regulations. While the interim 
rules described above were successful in eliminating many obsolete 
provisions, and in updating and significantly streamlining certain 
requirements, HUD determined that the SRO regulations can be further 
streamlined.
    This final rule, in addition to adopting the previous interim rules 
as final, further streamlines and clarifies the SRO regulations as 
follows:
    (a) It streamlines the definition of ``Homeless individual'' in 
Sec. 882.802. This definition simply repeated the language contained in 
section 103 of the McKinney Act. This rule also revises the definition 
of ``Statement of family responsibility'', by changing the term 
``family'' to ``individual.'' Since HUD can only serve eligible 
individuals under this program, using the term ``individual'' will help 
eliminate confusion.
    (b) It removes the definition of ``Supportive services,'' which 
largely consisted of a listing of items that may be considered 
supportive services. HUD can more appropriately provide such guidance 
in the SRO technical assistance book.
    (c) It eliminates Sec. 882.803(b)(5). This provision is repetitive 
of the definition of ``Single room occupancy (SRO) housing'' in 
Sec. 882.802--a unit for occupancy by one person, which need not but 
may contain food preparation or sanitary facilities, or both.
    (d) It revises and updates Sec. 882.804 regarding other Federal 
requirements. Part of this section repeats information already provided 
in 24 CFR part 5. This rule will provide a cross-reference to part 5, 
and it will also refer to the Americans with Disabilities Act, 
compliance with which is required under the SRO program.
    (e) It removes information from Sec. 882.805 regarding the 
application requirements and criteria for rating applications, which 
HUD will more appropriately provide in the annual NOFA.
    (f) It removes the obsolete reference in Sec. 882.805(b) to the 
requirement of submitting an Equal Opportunity Housing Plan. In July 
1995, HUD merged the contents of this plan into the Administrative 
Plan, which is also listed in Sec. 882.805(b). Therefore, while HAs 
must still submit the contents of an Equal Opportunity Housing Plan as 
part of the Administrative Plan, it is inaccurate for the regulations 
to list it as a separate requirement.
    (g) It consolidates the lengthy description of displacement and 
relocation requirements in Sec. 882.810. These requirements are nearly 
identical to those in Sec. 882.406. Since it is unnecessary to 
duplicate these requirements within the same part of the Code of 
Federal Regulations, this rule amends Sec. 882.406 so that it also 
applies to the SRO program. This rule then removes the provisions of 
Sec. 882.810 and replaces them with a reference to Sec. 882.406. In 
this streamlining of Secs. 882.406 and 882.810, HUD is not making any 
substantive changes to the requirements, but is merely eliminating 
unnecessary provisions.
    As part of HUD's regulatory reform efforts, HUD consolidated some 
of the requirements in Sec. 882.102 (which contains definitions for the 
Section 8 Certificate and Moderate Rehabilitation programs) and the 
provisions in 24 CFR part 812 (which contained the definition of 
``Family'' and the restrictions on assistance to noncitizens) into 24 
CFR part 5. Part 5 now contains most of HUD's general program 
requirements. HUD also consolidated the requirements in 24 CFR part 12 
regarding accountability in the provision of HUD assistance into 24 CFR 
part 4. This final rule updates the references to all these 
requirements in the SRO regulations.

VI. Other Matters

Environmental Impact

    This rule does not in itself have an environmental impact. This 
rule merely adopts effective interim regulations as final and amends 
existing regulations by streamlining provisions; it does not alter the 
environmental effect of the regulations being amended. At the time of 
development of regulations in part 882, subpart H, and for each of the 
three interim rules discussed above, Findings of No Significant Impact 
with respect to the environment were made in accordance with HUD 
regulations in 24 CFR part 50 and section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332). The findings remain 
applicable to this rule, and are available for public inspection 
between 7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules 
Docket Clerk, Office of General Counsel, Room 10276, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC.

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, and 
general well-being. This rule merely adopts effective interim 
regulations as final and eliminates unnecessary provisions, and does 
not change the substance of the program's regulations. Therefore, this 
rule is not subject to review under the order.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has

[[Page 48056]]

determined that the policies 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. This rule is limited to adopting effective interim 
regulations as final and eliminating unnecessary provisions. Therefore, 
the rule is not subject to review under the order.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that it does not have a significant economic 
impact on a substantial number of small entities. Specifically, the 
rule is limited to adopting effective interim regulations as final and 
eliminating unnecessary provisions.

List of Subjects

24 CFR Part 582

    Homeless, Rent subsidies, Reporting and recordkeeping requirements, 
Supportive housing programs--housing and community development, 
Supportive services.

24 CFR Part 882

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

    Accordingly, for the reasons stated in the preamble, the interim 
rule amending 24 CFR part 882, which was published at 58 FR 13828 on 
March 15, 1993; the interim rule amending 24 CFR parts 582 and 882, 
which was published at 59 FR 24252 on May 10, 1994; and the interim 
rule amending 24 CFR part 882, which was published at 61 FR 5850 on 
February 14, 1996; are adopted as final rules, with the following 
changes:

PART 882--SECTION 8 CERTIFICATE AND MODERATE REHABILITATION 
PROGRAMS

    1. The authority citation for 24 CFR part 882 continues to read as 
follows:

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

    2. Section 882.406 is revised to read as follows:


Sec. 882.406  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. (1) Consistent with the other goals 
and objectives of this part, owners must assure that they have taken 
all reasonable steps to minimize the displacement of persons 
(households, businesses, nonprofit organizations, and farms) as a 
result of a project assisted under this part. To the extent feasible, 
residential tenants must be provided a reasonable opportunity to lease 
and occupy a suitable, decent, safe, sanitary, and affordable dwelling 
unit in the project upon its completion.
    (2) Whenever a building/complex is rehabilitated, and some but not 
all of the rehabilitated units will be assisted upon completion of the 
rehabilitation, the relocation requirements described in this section 
apply to the occupants of each rehabilitated unit, whether or not 
Section 8 assistance will be provided for the unit.
    (b) Temporary relocation. The following policies cover residential 
tenants who will not be required to move permanently but who must 
relocate temporarily for the project. Such tenants must be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses 
incurred in connection with the temporary relocation;
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe, and sanitary 
dwelling to be made available for the temporary period;
    (iii) The terms and conditions under which the tenant may lease and 
occupy a suitable, decent, safe, and sanitary dwelling in the project 
upon completion; and
    (iv) The assistance required under paragraph (b)(1) of this 
section.
    (c) Relocation assistance for displaced persons. A ``displaced 
person'' (defined in paragraph (g) of this section) must be provided 
relocation assistance at the levels described in, and in accordance 
with the requirements of, the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 
4601-4655) and implementing regulations in 49 CFR part 24. A displaced 
person must be advised of his or her rights under the Fair Housing Act 
(42 U.S.C. 3601-19) and, if the comparable replacement dwelling used to 
establish the amount of the replacement housing payment to be provided 
to a minority is located in an area of minority concentration, such 
person also must be given, if possible, referrals to comparable and 
suitable, decent, safe, and sanitary replacement dwellings not located 
in such areas.
    (d) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B.
    (e) Appeals. A person who disagrees with the HA's determination 
concerning whether the person qualifies as a displaced person, or the 
amount of relocation assistance for which the person is eligible, may 
file a written appeal of that determination with the HA. A person who 
is dissatisfied with the HA's determination on his or her appeal may 
submit a written request for review of that determination to the HUD 
field office.
    (f) Responsibility of HA. (1) The HA must certify (i.e., provide 
assurance of compliance as required by 49 CFR part 24) that it will 
comply with the URA, the regulations in 49 CFR part 24, and the 
requirements of this section, and must ensure such compliance 
notwithstanding any third party's contractual obligation to the HA to 
comply with these provisions.
    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. Such costs may be paid for with local public funds or funds 
available from other sources. The cost of HA advisory services for 
temporary relocation of tenants to be assisted under the program also 
may be paid from preliminary administrative funds.
    (3) The HA must maintain records in sufficient detail to 
demonstrate compliance with the provisions of this section. The HA must 
maintain data on the racial, ethnic, gender, and disability status of 
displaced persons.
    (g) Definition of displaced person. (1) For purposes of this 
section, the term displaced person means a person (household, business, 
nonprofit organization, or farm) that moves from real property, or 
moves personal property from real property, permanently, as a direct 
result of acquisition, rehabilitation, or demolition for a project 
assisted under this part. The term displaced person includes, but may 
not be limited to:
    (i) A person who moves permanently from the real property after 
receiving notice requiring such move, if the move occurs on or after 
the date the owner submits to the HA the owner proposal that is later 
approved;
    (ii) A person, including a person who moves from the property 
before the date the owner submits the proposal to the HA, if the HA or 
HUD determines that the displacement resulted directly from 
acquisition, rehabilitation, or demolition for the assisted project; or
    (iii) A tenant-occupant of a dwelling unit who moves from the 
building/

[[Page 48057]]

complex permanently after the execution of the Agreement between the 
owner and the HA (or, for projects assisted under subpart H of this 
part, after the ``initiation of negotiations'' (see paragraph (h) of 
this section)), if the move occurs before the tenant is provided a 
written notice offering him or her the opportunity to lease and occupy 
a suitable, decent, safe, and sanitary dwelling in the same building/
complex, under reasonable terms and conditions, upon its completion. 
Such reasonable terms and conditions must include a monthly rent and 
estimated average monthly utility costs that do not exceed the greater 
of:
    (A) The tenant's monthly rent before the execution of the agreement 
and estimated average monthly utility costs; or
    (B) Thirty percent of gross household income.
    (C) For projects assisted under subpart H of this part, the amount 
cannot exceed the greater of the tenant's monthly rent before the 
``initiation of negotiations'' and estimated average monthly utility 
costs; or (if the tenant is low-income) the total tenant payment, as 
determined under 24 CFR 813.107, or (if the tenant is not low-income) 
30 percent of gross household income; or
    (iv) A tenant-occupant of a dwelling, who is required to relocate 
temporarily, but does not return to the building/complex, if either:
    (A) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation; 
or
    (B) Other conditions of the temporary relocation are not 
reasonable; or
    (v) A tenant-occupant of a dwelling who moves from the building/
complex permanently after he or she has been required to move to 
another dwelling unit in the building/complex, if either:
    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) Other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a displaced person (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation 
of the terms and conditions of the lease or occupancy agreement, 
violation of applicable Federal, State, or local law, or other good 
cause, and the HA determines that the eviction was not undertaken for 
the purpose of evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the submission of the 
preliminary proposal (or application, if there is no preliminary 
proposal), and before signing a lease and commencing occupancy, 
received written notice of the project and its possible impact on the 
person (e.g., the person may be displaced, temporarily relocated, or 
suffer a rent increase) and the fact that the person would not qualify 
as a displaced person (or for any assistance provided under this 
section) as a result of the project;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (3) The HA may request, at any time, HUD's determination of whether 
a displacement is or would be covered by this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing 
assistance to be provided to a residential tenant displaced as a direct 
result of private-owner rehabilitation or demolition of the real 
property, the term initiation of negotiations means the execution of 
the Agreement between the owner and the HA.

(Approved by Office of Management and Budget under OMB control 
number 2506-0121).

    3. Subpart H is revised to read as follows:
Subpart H--Section 8 Moderate Rehabilitation Single Room Occupancy 
Program for Homeless Individuals
Sec.
882.801  Purpose.
882.802  Definitions.
882.803  Project eligibility and other requirements.
882.804  Other Federal requirements.
882.805  HA application process, ACC execution, and pre-
rehabilitation activities.
882.806  Agreement to enter into housing assistance payments.
882.807  Housing assistance payments contract.
882.808  Management.
882.809  Waivers.
882.810  Displacement, relocation, and acquisition.

Subpart H--Section 8 Moderate Rehabilitation Single Room Occupancy 
Program for Homeless Individuals


Sec. 882.801  Purpose.

    The purpose of the Section 8 Moderate Rehabilitation Program for 
Single Room Occupancy (SRO) Dwellings for Homeless Individuals is to 
provide rental assistance for homeless individuals in rehabilitated SRO 
housing. The Section 8 assistance is in the form of rental assistance 
payments. These payments equal the rent for the unit, including 
utilities, minus the portion of the rent payable by the tenant under 
the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.).


Sec. 882.802   Definitions.

    In addition to the definitions set forth in 24 CFR part 5 and 
Sec. 882.102 (except for the definition of ``Single Room Occupancy 
(SRO) Housing'' therein) the following will apply:
    Agreement to enter into housing assistance payments contract 
(Agreement). A written agreement between the owner and the HA that, 
upon satisfactory completion of the rehabilitation in accordance with 
requirements specified in the Agreement, the HA will enter into a 
housing assistance payments contract with the owner.
    Applicant. A public housing agency or Indian housing authority 
(collectively referred to as HAs), or a private nonprofit organization 
that applies for assistance under this program. HUD will require 
private nonprofit applicants to subcontract with public housing 
agencies to administer their rental assistance.
    Eligible individual (individual). An individual who, taking into 
account the supportive services available to the individual, is capable 
of independent living and is authorized for admission to assisted 
housing under subparts D and E of 24 CFR part 5, and 24 CFR part 813.
    Homeless individual. An individual as described in section 103 of 
the McKinney Act (42 U.S.C. 11302).
    McKinney Act. The Stewart B. McKinney Homeless Assistance Act (42 
U.S.C. 11301 et seq.).
    Moderate rehabilitation. Rehabilitation involving a minimum 
expenditure of $3,000 for a unit, including its prorated share of work 
to be accomplished on common areas or systems, to upgrade to decent, 
safe, and sanitary condition to comply with the Housing Quality 
Standards or other standards approved by HUD, from a condition below 
those standards (improvements being of a modest nature and other than 
routine maintenance).
    Private nonprofit organization. An organization, no part of the net 
earnings of which inures to the benefit of any member, founder, 
contributor, or individual. The organization must:
    (1) Have a voluntary board;

[[Page 48058]]

    (2) Have a functioning accounting system that is operated in 
accordance with generally accepted accounting principles, or designate 
an entity that will maintain a functioning accounting system for the 
organization in accordance with generally accepted accounting 
principles; and
    (3) Practice nondiscrimination in the provision of assistance.
    Single room occupancy (SRO) housing. A unit for occupancy by one 
person, which need not but may contain food preparation, sanitary 
facilities, or both.
    Statement of individual responsibility. An agreement, in the form 
prescribed by HUD, between the HA and an individual to be assisted 
under the program, stating the obligations and responsibilities of the 
two parties.


Sec. 882.803  Project eligibility and other requirements.

    (a) Eligible and ineligible properties. (1) Except as otherwise 
provided in paragraph (a) of this section, housing suitable for 
moderate rehabilitation is eligible for inclusion under this program. 
Existing structures of various types may be appropriate for this 
program, including single family houses and multifamily structures.
    (2) Housing is not eligible for assistance under this program if it 
is receiving Federal funding for rental assistance or operating costs 
under other HUD programs.
    (3) Nursing homes and related facilities such as intermediate care 
or board and care homes; units within the grounds of penal, 
reformatory, medical, mental, and similar public or private 
institutions; and facilities providing continual psychiatric, medical, 
or nursing services are not eligible for assistance under this program.
    (4) No Section 8 assistance may be provided with respect to any 
unit occupied by an owner.
    (5) Housing located in the Coastal Barrier Resources System 
designated under the Coastal Barriers Resources Act is not eligible.
    (6) Single-sex facilities are allowable under this program, 
provided that the HA determines that because of the physical 
limitations or configuration of the facility, considerations of 
personal privacy require that the facility (or parts of the facility) 
be available only to members of a single sex.
    (b) Housing quality standards. Section 882.404 (including its 
incorporation by reference of Sec. 882.109) applies to this program, 
except as follows:
    (1) The housing quality standards in Secs. 882.109(i) and 
882.404(c) concerning lead-based paint do not apply to this program, 
since these SRO units will not house children.
    (2) In addition to the performance requirements contained in 
Sec. 882.109(p) concerning SRO units, a sprinkler system that protects 
all major spaces, hard wired smoke detectors, and such other fire and 
safety improvements as State or local law may require must be installed 
in each building. The term ``major spaces'' means hallways, large 
common areas, and other areas specified in local fire, building, or 
safety codes.
    (3) Section 882.109(q), concerning shared housing, does not apply 
to this program.
    (4) Section 882.404(b), concerning site and neighborhood standards, 
does not apply to this program, except that Sec. 882.404(b) (1) and (2) 
applies. In addition, the site must be accessible to social, 
recreational, educational, commercial, and health facilities, and other 
appropriate municipal facilities and services.
    (c) Financing. Section 882.405 applies to this program.
    (d) Relocation. Section 882.406 applies to a project assisted under 
this program.
    (e) HA-owned housing. (1) A unit that is owned by the HA that 
administers the assistance under the ACC (including a unit owned by an 
entity substantially controlled by the HA) may only be assisted if:
    (i) The unit is not ineligible under Sec. 882.803(a); and
    (ii) HUD approves the base and contract rent calculations prior to 
execution of the Agreement and prior to execution of the HAP contract.
    (2) The HA as owner is subject to the same program requirements 
that apply to other owners in the program.


Sec. 882.804  Other Federal requirements.

    (a) Participation in this program requires compliance with the 
Federal requirements set forth in 24 CFR 5.105, and with the Americans 
with Disabilities Act (42 U.S.C. 12101 et seq.).
    (b) For agreements covering nine or more assisted units, the 
following requirements for labor standards apply:
    (1) Not less than the wages prevailing in the locality, as 
determined by the Secretary of Labor under the Davis-Bacon Act (40 
U.S.C. 276a through 276a-5), must be paid to all laborers and mechanics 
employed in the development of the project, other than volunteers under 
the conditions set out in 24 CFR part 70;
    (2) The employment of laborers and mechanics is subject to the 
provisions of the Contract Work Hours and Safety Standards Act (40 
U.S.C. 327-333); and
    (3) HAs, owners, contractors, and subcontractors must comply with 
all related rules, regulations, and requirements.
    (c) The environmental review requirements of 24 CFR part 58, 
implementing the National Environmental Policy Act and related 
environmental laws and authorities, apply to this program.


Sec. 882.805  HA application process, ACC execution, and pre-
rehabilitation activities.

    (a) Review. When funds are made available for assistance, HUD will 
publish a notice of funding availability (NOFA) in the Federal Register 
in accordance with the requirements of 24 CFR part 4. HUD will review 
and screen applications in accordance with the guidelines, rating 
criteria, and procedures published in the NOFA.
    (b) ACC Execution. (1) Before execution of the annual contributions 
contract (ACC), the HA must submit to the appropriate HUD field office 
the following:
    (i) Estimates of Required Annual Contributions, Forms HUD-52672 and 
HUD-52673;
    (ii) Administrative Plan, which should include:
    (A) Procedures for tenant outreach;
    (B) A policy governing temporary relocation; and
    (C) A mechanism to monitor the provision of supportive services.
    (iii) Proposed Schedule of Allowances for Tenant-Furnished 
Utilities and Other Services, Form HUD-52667, with a justification of 
the amounts proposed;
    (iv) If applicable, proposed variations to the acceptability 
criteria of the Housing Quality Standards (see Sec. 882.803(b)); and
    (v) The fire and building code applicable to each structure.
    (2) After HUD has approved the HA's application, the review and 
comment requirements of 24 CFR part 791 have been complied with, and 
the HA has submitted (and HUD has approved) the items required by 
paragraph (b)(1) of this section, HUD and the HA must execute the ACC 
in the form prescribed by HUD. The initial term of the ACC must be 11 
years. This term allows one year to rehabilitate the units and place 
them under a 10-year HAP contract. The ACC must give HUD the option to 
renew the ACC for an additional 10 years.
    (3) Section 882.403(a) (Maximum Total ACC Commitments) applies to 
this program.
    (4) Section 882.403(b) (Project account) applies to this program.
    (c) Project development. Before execution of the Agreement, the HA 
must:

[[Page 48059]]

    (1)(i) Inspect the structure to determine the specific work items 
that need to be accomplished to bring the units to be assisted up to 
the Housing Quality Standards (see Sec. 882.803(b)) or other standards 
approved by HUD;
    (ii) Conduct a feasibility analysis, and determine whether cost-
effective energy conserving improvements can be added;
    (iii) Ensure that the owner prepares the work write-ups and cost 
estimates required by Sec. 882.504(f); and
    (iv) Determine initial base rents and contract rents;
    (2) Assure that the owner has selected a contractor in accordance 
with Sec. 882.504(g);
    (3) After the financing and a contractor are obtained, determine 
whether the costs can be covered by initial contract rents, computed in 
accordance with paragraph (d) of this section; and, if a structure 
contains more than 50 units to be assisted, submit the base rent and 
contract rent calculations to the appropriate HUD field office for 
review and approval in sufficient time for execution of the Agreement 
in a timely manner;
    (4) Obtain firm commitments to provide necessary supportive 
services;
    (5) Obtain firm commitments for other resources to be provided;
    (6) Determine that the $3,000 minimum amount of work requirement 
and other requirements in Sec. 882.504(c)(2) and (3) are met;
    (7) Determine eligibility of current tenants, and select the units 
to be assisted, in accordance with Sec. 882.504(e);
    (8) Comply with the financing requirements in Sec. 882.504(i);
    (9) Assure compliance with all other applicable requirements of 
this subpart; and
    (10) In the event that the HA determines that any structure 
proposed in its application is infeasible, or the HA proposes to select 
a different structure for any other reason, the HA must submit 
information for the proposed alternative structure to HUD for review 
and approval. HUD will rate the proposed structure in accordance with 
procedures in the applicable notice of funding availability. The HA may 
not proceed with processing for the proposed structure or execute an 
Agreement until HUD notifies the HA that HUD has approved the proposed 
alternative structure and that all requirements have been met.
    (d) Initial contract rents. Section 882.408 (Initial contract 
rents), including the establishment of fair market rents for SRO units 
at 75 percent of the O-bedroom Moderate Rehabilitation Fair Market 
Rent, applies to this program, except as follows:
    (1)(i) In determining the monthly cost of a rehabilitation loan, in 
accordance with Sec. 882.408(c)(2), a loan term of a least 10 years 
(instead of 15 years) may be used. The exception in 
Sec. 882.408(c)(2)(iii) for using the actual loan term if the total 
amount of the rehabilitation is less than $15,000 continues to apply. 
In addition, the cost of the rehabilitation that may be included for 
the purpose of calculating the amount of the initial contract rent for 
any unit must not exceed the lower of:
    (A) The projected cost of rehabilitation; or
    (B) The per unit cost limitation that is established by Federal 
Register notice, plus the cost of the fire and safety improvements 
required by Sec. 882.803(b)(2). HUD may, however, increase the 
limitation in paragraph (d)(1)(i)(B) of this section by an amount HUD 
determines is reasonable and necessary to accommodate special local 
conditions, including high construction costs or stringent fire or 
building codes. HUD will publish future cost limitation changes in the 
Federal Register in the Notice of Funding Availability issued each 
year.
    (ii) If the Federal Housing Administration (FHA) believes that high 
construction costs warrant an increase in the per unit cost limitation 
in paragraph (d)(1)(i)(B) of this section, the HA must demonstrate to 
HUD's satisfaction that a higher average per unit amount is necessary 
to conduct this program, and that every appropriate step has been taken 
to contain the amount of the rehabilitation within the published per 
unit cost limitation established at that time, plus the cost of the 
required fire and safety improvements. These higher amounts will be 
determined as follows:
    (A) HUD may approve a higher per unit amount up to, but not to 
exceed, an amount computed by multiplying the HUD-approved High Cost 
Percentage for Base Cities (used for computing FHA high cost area 
adjustments) for the area, by the current published cost limitation 
plus the cost of the required fire and safety improvements.
    (B) HUD may, on a structure-by-structure basis, increase the level 
approved in paragraph (d)(1)(i) of this section to up to an amount 
computed by multiplying 2.4 by the current published cost limitation 
plus the cost of the required fire and safety improvements.
    (2) In approving changes to initial contract rents during 
rehabilitation in accordance with Sec. 882.408(d), the revised initial 
contract rents may not reflect an average per unit rehabilitation cost 
that exceeds the limitation specified in paragraph (d)(1) of this 
section.
    (3) If the structure contains four or fewer SRO units, the Fair 
Market Rent for that size structure (the Fair Market Rent for a 1-, 2-, 
3-, or 4-bedroom unit, as applicable) must be used to determine the 
Fair Market Rent limitation instead of using the separate Fair Market 
Rent for each SRO unit. To determine the Fair Market Rent limitation 
for each SRO unit, the Fair Market Rent for the structure must be 
apportioned equally to each SRO unit.
    (4) Contract rents must not include the costs of providing 
supportive services, transportation, furniture, or other nonhousing 
costs, as determined by HUD. SRO program assistance may be used for 
efficiency units selected for rehabilitation under this program, but 
the gross rent (contract rent plus any Utility Allowance) for these 
units will be no higher than for SRO units (i.e., 75 percent of the 0-
bedroom Moderate Rehabilitation Fair Market Rent).

(Approved by the Office of Management and Budget under control 
number 2506-0131)


Sec. 882.806  Agreement to enter into housing assistance payments.

    (a) Rehabilitation period. (1) Agreement. Before the owner begins 
any rehabilitation, the HA must enter into an Agreement with the owner 
in the form prescribed by HUD.
    (2) Timely performance of work. Section 882.506(a) applies to this 
program. In addition, the Agreement must provide that the work must be 
completed and the contract executed within 12 months of execution of 
the ACC. HUD may reduce the number of units or the amount of the annual 
contribution commitment if, in HUD's determination, the HA fails to 
demonstrate a good faith effort to adhere to this schedule or if other 
reasons justify reducing the number of units.
    (3) Inspections. Section 882.506(b) applies to this program.
    (4) Changes. Section 882.506(c)(1) applies to this program. 
Contract rents may not be increased except in accordance with 
Secs. 882.408(d) and 882.805(d)(2).
    (b) Completion of rehabilitation. (1) Notification of completion. 
Section 882.507(a) applies to this program.
    (2) Evidence of completion. Section 882.507(b) applies to this 
program, except that Sec. 882.507(b)(2)(iv), concerning lead-based 
paint requirements, does not apply.
    (3) Actual cost and rehabilitation loan certifications. Section 
882.507(c) applies

[[Page 48060]]

to this program, except that contract rents must be established in 
accordance with Sec. 882.805(d).
    (4) Review and inspections. Section 882.507(d) applies to this 
program.
    (5) Acceptance. Section 882.507(e) applies to this program.

(Approved by the Office of Management and Budget under control 
number 2502-0367)


Sec. 882.807  Housing assistance payments contract.

    (a) Time of execution of contract. Section 882.508(a) applies to 
this program.
    (b) Term of contract. The contract for any unit rehabilitated in 
accordance with this program must be for a term of 10 years. The 
contract must give the HA the option to renew the contract for an 
additional 10 years.
    (c) Changes in contract rents from agreement. The contract rents 
may be higher or lower than those specified in the Agreement, in 
accordance with Sec. 882.805(d).
    (d) Unleased units. Section 882.508(c) applies to this program.
    (e) Contract rents at end of rehabilitation loan term. For a 
contract in which the initial contract rent was based upon a loan term 
shorter than 10 years, the contract must provide for reduction of the 
contract rent effective with the rent for the month following the end 
of the term of the rehabilitation loan. The amount of the reduction 
will be the monthly cost of amortization of the rehabilitation loan. 
This reduction should result in a new contract rent equal to the base 
rent plus all subsequent adjustments.

(Approved by the Office of Management and Budget under control 
number 2502-0367)


Sec. 882.808  Management.

    (a) Outreach to homeless individuals and appropriate organizations. 
(1) The HA or the owner must undertake outreach efforts to homeless 
individuals so that they may be brought into the program. The outreach 
effort should include notification to emergency shelter providers and 
other organizations that could provide referrals of homeless 
individuals. If the owner conducts the outreach effort, the owner must 
notify the HA so that it may provide referrals of homeless individuals.
    (2) Additional outreach concerns. If the procedures that the HA or 
owner intends to use to publicize the availability of this program are 
unlikely to reach persons of any particular race, color, religion, sex, 
age, national origin, or mental or physical disability who may qualify 
for admission to the program, the HA or owner must establish additional 
procedures that will ensure that such persons are made aware of the 
availability of the program. The HA or owner must also adopt and 
implement procedures to ensure that interested persons can obtain 
information concerning the existence and location of services and 
facilities that are accessible to persons with disabilities.
    (3) First priority for homeless individuals. Homeless individuals 
must have the first priority for occupancy of housing rehabilitated 
under this program.
    (b) Individual participation. (1) Initial determination of 
individual eligibility. Section 882.514(a) applies to this program.
    (2) Owner selection of individuals. The owner must rent all vacant 
units under contract to homeless individuals located through HA or 
owner outreach efforts and determined by the HA to be eligible. The 
owner is responsible for tenant selection and may refuse any 
individual, provided the owner does not unlawfully discriminate. If the 
owner rejects an individual, and the individual believes that the 
owner's rejection was the result of unlawful discrimination, the 
individual may request the assistance of the HA in resolving the issue 
and may also file a complaint with HUD's Office of Fair Housing and 
Equal Opportunity in accordance with 24 CFR 103.25. If the individual 
requests the assistance of the HA, and if the HA cannot resolve the 
complaint promptly, the HA should advise the individual that he or she 
may file a complaint with HUD, and provide the individual with the 
address of the nearest HUD Office of Fair Housing and Equal 
Opportunity.
    (3) Briefing of individuals. Section 882.514(d) applies to this 
program, except that Sec. 882.514(d)(1)(vi) does not apply.
    (4) Continued participation of individual when contract is 
terminated. Section 882.514(e) applies to this program, except that the 
HA may issue a Housing Voucher instead of a Certificate.
    (5) Individuals determined by the HA to be ineligible. Section 
882.514(f) applies to this program. In addition, individuals are not 
precluded from exercising other rights if they believe they have been 
discriminated against on the basis of age.
    (c) Lease. (1) Contents of lease. Section 882.504(j) applies to 
this program. In addition, the lease must limit occupancy to one 
eligible individual.
    (2) Term of lease. Section 882.403(d) applies to this program.
    (d) Security and utility deposits. Section 882.112 applies to this 
program.
    (e) Rent adjustments. Section 882.410 applies to this program.
    (f) Payments for vacancies. Section 882.411 applies to this 
program.
    (g) Subcontracting of owner services. Section 882.412 applies to 
this program.
    (h) Responsibility of the individual. Section 882.413 applies to 
this program.
    (i) Reexamination of individual income. (1) Regular reexaminations. 
The HA must reexamine the income of all individuals at least once every 
12 months. After consultation with the individual and upon verification 
of the information, the HA must make appropriate adjustments in the 
Total Tenant Payment in accordance with 24 CFR part 813, and verify 
that only one individual is occupying the unit. The HA must adjust 
Tenant Rent and the Housing Assistance Payment to reflect any change in 
Total Tenant Payment. At each regular reexamination, the HA must follow 
the requirements of 24 CFR part 5, subpart E concerning verification of 
immigration status of any new family member.
    (2) Interim reexaminations. The individual must supply such 
certification, release, information, or documentation as the HA or HUD 
determines to be necessary, including submissions required for interim 
reexaminations of individual income and determinations as to whether 
only one person is occupying the unit. In addition, the second and 
third sentences of Sec. 882.515(b) apply. At any interim reexamination 
when there is a new family member, the HA must follow the requirements 
of 24 CFR part 5, subpart E concerning obtaining and processing 
evidence of citizenship or eligible immigration status of the new 
family member.
    (3) Continuation of Housing Assistance Payments. Section 882.515(c) 
applies to this program.
    (j) Overcrowded units. If the HA determines that anyone other than, 
or in addition to, the eligible individual is occupying an SRO unit 
assisted under this program, the HA must take all necessary action, as 
soon as reasonably feasible, to ensure that the unit is occupied by 
only one eligible individual.
    (k) Adjustment of utility allowance. Section 882.510 applies to 
this program.
    (l) Termination of tenancy. Section 882.511 applies to this 
program. For provisions requiring termination of assistance when the HA 
determines that a family member is not a U.S. citizen or does not have 
eligible immigration status, see 24 CFR part 5, subpart E for 
provisions concerning certain assistance

[[Page 48061]]

for mixed families (families whose members include those with eligible 
immigration status, and those without eligible immigration status) in 
lieu of termination of assistance, or for provisions concerning 
deferral of termination of assistance.
    (m) Reduction of number of units covered by contract. Section 
882.512 applies to this program.
    (n) Maintenance, operation, and inspections. Section 882.516 
applies to this program.
    (o) HUD review of contract compliance. Section 882.217 applies to 
this program.
    (p) Records and reports. Each recipient of assistance under this 
subpart must keep any records and make any reports that HUD may require 
within the timeframe required.
    (q) Participation of homeless individuals. (1) Each approved 
applicant receiving assistance under this program, except HAs, must 
provide for the participation of not less than one homeless individual 
or formerly homeless individual on the board of directors or other 
equivalent policymaking entity of such applicant, to the extent that 
the entity considers and makes policies and decisions regarding the 
rehabilitation of any housing with assistance under this subpart. This 
requirement is waived if the applicant is unable to meet this 
requirement and presents a plan that HUD approves to consult with 
homeless or formerly homeless individuals in considering and making 
such policies and decisions.
    (2) To the maximum extent practicable, each approved applicant must 
involve homeless individuals and families, through employment, 
volunteer services, or otherwise, in rehabilitating and operating 
facilities assisted under this subpart, and in providing services for 
occupants of such facilities.

(Approved by the Office of Management and Budget under control 
number 2506-0131)


Sec. 882.809  Waivers.

    Section 5.405(b) of this title does not apply to this program.


Sec. 882.810  Displacement, relocation, and acquisition.

    Section 882.406 applies to this program.

    Dated: September 3, 1996.
Andrew M. Cuomo,
Assistant Secretary for Community Planning and Development.
[FR Doc. 96-23166 Filed 9-10-96; 8:45 am]
BILLING CODE 4210-29-P