[Federal Register Volume 61, Number 203 (Friday, October 18, 1996)]
[Rules and Regulations]
[Pages 54492-54504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26496]
[[Page 54491]]
_______________________________________________________________________
Part II
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Secretary
_______________________________________________________________________
24 CFR Part 5, et al.
Combined Income and Rent; Final Rule
Federal Register / Vol. 61, No. 203 / Friday, October 18, 1996 /
Rules and Regulations
[[Page 54492]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
24 CFR Parts 5, 200, 236, 813, 913, 950, and 960
[Docket No. FR-3324-F-04]
RIN 2501-AB61
Combined Income and Rent
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
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SUMMARY: On April 5, 1995 (60 FR 17388), HUD published an interim rule
amending its regulations governing public housing, Indian housing, and
assisted housing programs by adding nine exclusions to the definition
of annual income. The interim rule also added provisions that implement
a statutory change to the definition of adjusted income for the Indian
housing program, and made two technical corrections to the existing
regulations. This rule finalizes the policies and procedures set forth
in the April 5, 1995 interim rule and takes into consideration the
public comments received on the interim rule. Further, this rule
consolidates the nearly identical provisions of 24 CFR parts 813 and
913 into a new subpart F of part 5.
EFFECTIVE DATE: November 18, 1996.
FOR FURTHER INFORMATION CONTACT: For Public Housing, Section 8
Certificates, Vouchers and Moderate Rehabilitation: Linda Campbell,
Room 4206, telephone number (202) 708-0744; For Native American
Programs: Deborah Lalancette, Room B-133, telephone number (202) 755-
0088; For Housing: Barbara D. Hunter, Room 6182, telephone number (202)
708-3944; Department of Housing and Urban Development, 451 Seventh
Street SW, Washington, DC 20410. Hearing- or speech-impaired
individuals may access these telephone numbers by calling the Federal
Information Relay Service TTY at 1-800-877-8339. (Except for the
``800'' number, these telephone numbers are not toll-free.)
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act
The information collection requirements contained in Secs. 5.607
and 5.617 of this rule have been approved by the Office of Management
and Budget in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3501-3520), and assigned OMB control numbers 2502-0204 and 2577-
0083. An agency may not conduct or sponsor, and a person is not
required to respond to a collection of information unless the
collection displays a valid control number.
II. The April 5, 1995 Interim Rule
On April 5, 1995 (60 FR 17388), HUD published for public comment an
interim rule amending HUD's regulations governing public housing,
Indian housing, Section 8 housing, and other assisted housing programs
by adding nine exclusions to the definition of annual income.
Specifically, the interim rule excluded from annual income the
following: (1) Resident service stipends; (2) adoption assistance
payments in excess of $480 per adopted child; (3) student financial
assistance; (4) earned income of full-time students, except the family
head or spouse, in excess of $480 per student; (5) adult foster care
payments; (6) compensation from State or local job training programs
and training of resident management staff; (7) property tax rebates;
(8) homecare payments for developmentally disabled children or adult
family members; and (9) deferred periodic amounts of supplemental
security income and social security benefits received in a lump sum or
in periodic amounts.
With regard to the first eight exclusions to the definition of
income, the Secretary merely exercised the discretion conferred upon
him to define family income by section 3(b)(4) of the U.S. Housing Act
of 1937 (42 U.S.C. 1437 et seq.) (the 1937 Act), section 101(c)(2) of
the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s(c)(2)),
and section 236(m) of the National Housing Act (12 U.S.C. 1701 et
seq.). HUD believes these exclusions are essential for achieving its
goals of ensuring economic opportunity, empowering the poor and
expanding affordable housing.
The ninth exclusion to the definition of annual income was
statutorily mandated. Section 103(a)(1) of the Housing and Community
Development Act of 1992 (Pub. L. 102-550, approved October 28, 1993)
(1992 HCD Act) amended section 3(b)(4) of the 1937 Act to exclude from
annual income, ``any amounts which would be eligible for exclusion
under section 1613(a)(7) of the Social Security Act (42 U.S.C.
1382b(a)(7)).'' Section 1613(a)(7) of the Social Security Act covers
deferred periodic payments received in a lump sum or in prospective
monthly amounts from supplemental security income (SSI) and social
security benefits.
The April 5, 1995 interim rule also amended the definition of
adjusted income for Indian Housing programs by allowing a deduction for
both child care expenses and excessive travel expenses, as required by
section 103(a)(2) of the 1992 HCD Act. Finally, the interim rule made
two technical corrections to HUD's existing regulations at 24 CFR parts
236 and 913. The April 5, 1995 interim rule described in detail the
amendments to HUD's regulations.
III. Summary of Changes to the April 5, 1995 Interim Rule
The public comment period on the interim rule expired on June 5,
1995. A total of 12 comments were received. This final rule makes one
change in response to public comment. Specifically, it amends the
exclusion on compensation received from State or local job training
programs to cover only incremental increases in income. HUD also
determined that it was necessary to make several other revisions to the
April 5, 1995 interim rule. For example, this rule consolidates and
streamlines the nearly identical requirements of 24 CFR parts 813 and
913. This rule also revises the definitions of the terms ``dependent''
and ``child care expenses.''
The following section of the preamble describes the changes made by
this final rule to the April 5, 1995 interim rule. The change made in
response to public comment is discussed in section V of this preamble,
which presents a summary of the significant issues raised by the public
commenters on the April 5, 1995 interim rule, and HUD's responses to
these comments. Section VI of the preamble discusses recent statutory
requirements established by the Balanced Budget Downpayment Act, I
(Pub. L. 104-99, approved January 26, 1996). Finally, section VII
describes a correction made by this rule to the authority citations in
24 CFR part 5.
IV. Changes to the April 5, 1995 Interim Rule
A. Parts 215 and 236
In response to President Clinton's regulatory reform initiative,
HUD conducted a page-by-page review of its regulations to determine
which could be eliminated, consolidated, or otherwise improved. As a
result of this review, HUD, in a separate rulemaking, has removed 24
CFR part 215 and subpart A of 24 CFR part 236. (61 FR 14396, April 1,
1996.)
Part 215 codified HUD's Rent Supplement Payments Program. New rent
supplement contracts were no longer authorized under the program.
Accordingly, HUD has removed these obsolete provisions from title 24 of
the Code of Federal Regulations. All of the existing projects and rent
supplement contracts remain subject to the part 215
[[Page 54493]]
regulations through a savings clause contained in new Sec. 200.1301.
Part 236 pertains to Mortgage Insurance and Interest Reduction
Payments for Rental Projects. A moratorium on the issuance of
commitments to insure new mortgages under part 236 was imposed on
January 5, 1973. HUD has therefore removed subpart A of part 236 and
replaced it with a savings clause.
The April 5, 1995 interim rule amended 24 CFR part 215 and subpart
A of 24 CFR part 236 to add the nine new exclusions to annual income.
Due to HUD's regulatory reform efforts, this rule finalizes these
amendments by establishing new Secs. 200.1303 and 236.3. These new
sections make the annual income exclusions established by this final
rule applicable to those program participants still subject to the
requirements of 24 CFR part 215 and subpart A of 24 CFR part 236.
B. Consolidating Parts 813 and 913
1. Consolidation of Regulatory Requirements
The provisions of 24 CFR parts 813 and 913 are virtually identical.
These two parts establish the definitions of ``annual income'',
``adjusted income'', and ``total tenant payment'', along with other
related definitions and requirements for assistance under the 1937 Act.
Part 813 applies to assistance administered under Section 8 of the 1937
Act. The requirements of part 913 apply to HUD's public housing
programs. On February 9, 1996 (61 FR 5198), HUD, as part of its
continuing regulatory-reform efforts, published a final rule creating a
new 24 CFR part 5. HUD established part 5 to set forth those
requirements which are applicable to one or more program regulations.
On February 13, 1996 (61 FR 5662), HUD published a final rule
consolidating 24 CFR parts 812 and 912 in a new subpart D to part 5.
Parts 812 and 912 described nearly identical general requirements for
assistance under the 1937 Act. As was the case with parts 813 and 913,
these requirements were originally set forth in separate parts of title
24 designated for different forms of assistance under the 1937 Act.
This final rule takes the next logical step in HUD's regulatory
reinvention efforts by consolidating parts 813 and 913 in a new subpart
F to 24 CFR part 5. Consolidation of these provisions in part 5 will
eliminate redundancy in title 24 and assist in HUD's efforts to
streamline the content of its regulations.
As a result of the consolidation of parts 813 and 913, this final
rule makes a conforming amendment to 24 CFR part 960. Part 960 sets
forth HUD's requirements for the admission to, and occupancy of, public
housing. Section 960.208 repeats the utility reimbursement provisions
currently located in 24 CFR part 913. This final rule amends
Sec. 960.208 to cross-reference to the consolidated requirements of new
Sec. 5.615.
2. Updated Introduction to the Definition of Annual Income
HUD's definition of ``annual income'' is currently set forth at
Secs. 813.106 and 913.106, and is consolidated by this rule at
Sec. 5.609. This final rule updates and clarifies the introductory
paragraph of this definition, which presents an overview of annual
income. For example, the revised introductory text now states that
annual income includes amounts ``monetary or not'' that go to ``or on
behalf of'' a family member and are received ``from a source outside
the family.'' These revisions do not signify a change in HUD's policy.
Rather, the changes reflect the interpretation of annual income under
which HUD and Public Housing Agencies (PHAs) are currently operating.
Since the original publication of parts 813 and 913, HUD's day-to-day
administration of these regulatory requirements has resulted in the
clarification and interpretation of the definition of annual income.
The changes made by this final rule merely update the definition to
incorporate these clarifications.
3. Elimination of Unnecessary Regulatory Provisions
This rule also removes redundant or obsolete regulatory provisions
from 24 CFR parts 813 and 913. For example, although parts 813 and 913
originally became effective on July 1, 1984, HUD chose to delay
implementation of the definitions of ``annual income'' and ``adjusted
income'' until October 1, 1984. Accordingly, Secs. 813.110 and 913.110
set forth extensive transition provisions concerning the initial
implementation of these definitions. These provisions have become
obsolete and are not included in new 24 CFR part 5, subpart F.
Paragraphs (b) and (c) of Sec. 913.107 set forth the total tenant
payment provisions for public housing families whose initial lease was
effective before August 1, 1982. These regulatory provisions require
the gradual phasing-in of the total tenant payment established in 24
CFR 913.107(a) for public housing families whose initial lease was
effective before August 1, 1982. There is a very small number of public
housing families to whom these phase-in provisions might still apply.
Accordingly, HUD has decided not to include these provisions in subpart
F of 24 CFR part 5. However, new Sec. 5.613 contains a savings clause
which states that the total tenant payment phase-in provisions will
continue to be applicable to public housing families whose initial
lease was effective before August 1, 1982.
This rule also removes provisions which merely repeat statutory
language and replaces them with a citation to the specific statutory
section. It is unnecessary to repeat statutory requirements in the CFR,
since these requirements are otherwise accessible and binding.
Furthermore, regulatory provisions which reiterate statutory language
must be updated each time Congress amends the statute. Accordingly,
this final rule replaces the total tenant payment provisions located at
paragraph (a) of Secs. 813.107 and 913.107, and now consolidated at
Sec. 5.613, with a cross-reference to the identical language in the
1937 Act.
This rule also eliminates unnecessary repetition by removing the
definitions of terms that are already defined in the 1937 Act or in
part 5 and replacing them with simple cross-references.
4. Nonapplicability to HUD's Indian Housing Regulations
New 24 CFR part 5, subpart F does not incorporate the similar
requirements for HUD's Indian housing programs. The Indian housing
provisions continue to be set forth in 24 CFR part 950.
C. Revised Definitions of the Terms ``Child Care Expenses'' and
``Dependent''
This final rule also revises the definitions of the terms
``dependent'' and ``child care expenses.'' These amendments are
necessary to clarify the exclusions to annual income established by the
April 5, 1995 interim rule.
Sections 813.102, 913.102, and 950.102 currently define the term
``adjusted income'' to mean annual income less certain specified
deductions. One of the permitted deductions is for ``child care
expenses'' necessary to enable a family member to be gainfully employed
or to further his or her education. The amount deducted, however, may
not exceed the amount of income received from the employment made
possible by the child care expense.
The April 5, 1995 interim rule amended the definition of annual
income to exclude earned income of full-time students, other than the
family head or spouse, in excess of $480. Under the current regulations
an employed full-time student would be
[[Page 54494]]
able to deduct the full amount of the earned income made possible by a
child care expense, despite the fact that most of these earnings are
already excluded from annual income. This final rule amends the
definition of ``child care expenses'' to limit the deduction to the
amount of employment income that is included in annual income.
The rule makes a second change to the definition of ``child care
expenses.'' As explained above, the only child care expenses which are
currently excluded from annual income are those which permit a family
member to be gainfully employed or to further his or her education.
This final rule expands the scope of the definition to include those
child care expenses which are necessary to permit a family member to
actively seek employment. The revised definition will empower low-
income families and broaden the economic opportunities which are
available to them. Specifically, this change will provide family
members with the additional flexibility they may require to obtain
gainful employment.
Family members are also permitted to deduct $480 for each
``dependent.'' The definition of ``dependent'' excludes foster
children. This is due to the fact that child foster care payments are
already excluded from annual income. If HUD were to treat foster
children as dependents, a family would be able to deduct the foster
child payments which are already excluded from annual income. The April
5, 1995 interim rule excluded adult foster care payments from the
definition of annual income. However, HUD inadvertently failed to amend
the definition of ``dependent'' to exclude foster adults. This final
rule corrects the oversight.
V. Discussion of Public Comments on the April 5, 1995 Interim Rule
A. General Comments on the Interim Rule
1. Rule Will Reduce Revenue
Comment. Two commenters were concerned about the drop in rent-
generated revenue Public Housing Agencies (PHAs) and Indian Housing
Authorities (IHAs) (collectively referred to as HAs) would experience
as a result of the April 5, 1995 interim rule. The commenters believed
that the overall effect of the rule would be to reduce HA revenue.
HUD Response. HUD recognizes that in the short-term, these
exclusions will reduce the revenues an HA receives from rent. HUD
believes that any short-term loss in rental income will be offset by
the long-term benefits of retaining higher income families in
occupancy. These exclusions are designed to benefit working families
and families in transition from welfare to work. Many of the exclusions
are temporary in nature, and others exclude only a portion of the
family's income, with the remainder being considered in determining
rent.
2. Administration of the Rule Presents Difficulties
Comment. One commenter believed the April 5, 1995 interim rule
created administrative difficulties by not specifying that HAs
implement the rule in the course of their normal annual review cycles.
The commenter recommended that HUD permit HAs to make any required
rental adjustments in the course of the first regular reexamination
after the final rule's effective date.
The commenter also urged that the effective date of the final rule
be set at the first day of the month. The April 5, 1995 interim rule
had an effective date of May 5, 1995. The commenter believed that
establishing the effective date at the first of the month would
eliminate the computational problems resulting from the need to prorate
a rent change for a partial month.
HUD Response. HUD has decided not to adopt the commenter's
suggestions. Like the interim rule, this final rule requires that HAs
amend their policies to incorporate all the required changes, and that
HAs must then make whatever retroactive adjustments are necessary for
families that have applied, been admitted, or been reexamined since the
rule's effective date. Historically, HUD has implemented all changes to
the definition of income in such a manner, so that the maximum benefit
of the changes are realized.
However, HAs have the discretion to apply the exclusions to rent
paid as of June 1, 1995 when determining retroactive payments. Since
the April 5, 1995 interim rule was effective May 5, 1995, it is
reasonable for HAs to make adjustments to rent as of June 1, 1995.
3. Formula Should Be Used To Determine Income Exclusion
Comment. One of the commenters believed that the April 5, 1995
interim rule should be revised to include an income exclusion formula.
The commenter believed that such a formula could allow an initial fifty
percent (50%) exclusion for income affiliated with each exclusionary
item, but have each of the remaining sources of income tied to weighted
percentages. The commenter suggested that the percentages be
established according to the value of the subsidy in its importance
toward elevating the tenant or resident from dependence to total
independence. The initial 50% exclusion when added to the other income
sources could equal a 110% exclusion.
HUD Response. The suggested method is not in keeping with HUD's
goals of both assisting families and providing HAs with less
regulation. Additionally, such a formula would be administratively
burdensome.
4. Rule Should Take Short-Term Employment Into Account
Comment. One of the commenters believed the April 5, 1995 interim
rule unfairly penalized tenants taking advantage of short-term
employment opportunities, such as those provided in occasional
construction related jobs. The commenter pointed out that these
opportunities did not fall under either the interim rule's definition
of resident service stipends or employee training programs. The
commenter recommended that the interim rule be amended to provide
direction to HAs on how to treat income from these types of programs.
HUD Response. One of the goals of this final rule is to foster
full-time, long-term employment by supporting a number of efforts,
primarily training and education. Short-term employment only continues
the dispiriting welfare-work-welfare cycle HUD has observed for many
residents. HUD hopes that this rule will assist HAs in adding a
training component to their existing efforts to create employment
opportunities for residents. In many cases, only through additional
training and education will long-term employment become a viable
option.
5. Rule Should Not Apply to Section 8 Housing
Comment. One commenter believed that the income exclusions
established by the April 5, 1995 interim rule should not apply to
Section 8 housing. The commenter pointed out that public housing is not
profit driven and the operating income is determined by tenant rent and
performance funding subsidy. The commenter stated that Section 8
housing is profit driven and not dependent on tenant income. According
to the commenter, this difference justifies denying the income
exclusions to Section 8 housing residents.
HUD Response. The objective of this rule is to assist low income
families. Accordingly, as the rule is directed to families and not
programs, it would be inappropriate to limit benefits based on the
program in which a family is assisted.
[[Page 54495]]
B. Comments on Specific Income Exclusions
1. Resident Service Stipend
Comment. The April 5, 1995 interim rule provided for the exclusion
of resident service stipends from annual income. However, the rule
limited the exclusion to stipends that did not exceed $200 per month.
Furthermore, the interim rule permitted only one resident service
stipend per family member.
One commenter wrote that the interim rule's resident service
stipend provisions created contradictory incentives for families. The
commenter believed the provision was over-inclusive because it
encouraged a single family to accumulate as many deductible ``stipend''
positions as family members. On the other hand, the commenter believed
the provision was under-inclusive because it penalized individual
residents who provided part-time services for which appropriate
compensation might have exceeded $200 per month. The commenter
suggested that the interim rule be amended to permit the first $200 of
any resident service stipend to qualify for the exclusion. The
commenter also felt the one stipend per family member limitation was
``unnecessarily restrictive'' and ``administratively burdensome.''
A second commenter believed the resident service stipend exclusion
was vague. The commenter wrote that the interim rule neglected to
address exactly how the resident service stipend would be documented.
The commenter wondered whether a contract would be required for the
resident service and whether board members would qualify for payment of
services.
HUD Response. The intent of the resident service stipend exclusion
is to exclude the stipends received by residents for performing a
service, on a part-time basis, that enhances the quality of life in a
housing development. Such services include, but are not limited to:
fire patrol, hall monitoring, lawn maintenance, resident initiatives
coordination, etc.
The parameters of the exclusion (i.e., the $200 limitation, the one
exclusion per family member restriction, and permitting the exclusion
for as many family members that are eligible) were developed to ensure
that the exclusion is utilized by residents who are truly performing a
service for the development, and not actually working for the
development without the benefits of legitimate employment (compensation
based on wage rates, benefits, tax contributions, etc.). The $200 limit
was established because, based on existing minimum wage rates and
standard definitions of full-time and part-time employment, if a
development is paying a stipend in excess of $200 a month it may need
to determine whether a wage-employment arrangement would be more
appropriate than a stipend-for-service one. Further, HUD wishes to
encourage all residents to contribute positively to their community,
even if the residents are members of one family.
In response to the commenter who believed the resident stipend
exclusion was vague, HUD notes that it is the responsibility of the
individual HAs to establish such matters as whether a contract is
required for resident services and whether board members qualify for
payment for such services.
The resident stipend exclusion has successfully been in effect
since its inclusion in a final rule published by HUD on August 24, 1994
(59 FR 43622). The April 5, 1995 interim rule only made a technical
correction to the resident stipend income exclusion, expanding the
scope to include all residents and not just resident leaders. Further,
HUD wishes to note that neither the April 5, 1995 interim rule nor this
final rule modify the existing exclusion of income earned by children
(including foster children) under 18 years of age.
2. Adoption Assistance
Comment. The April 5, 1995 interim rule excluded payments received
for the care of adopted children to the extent that the payments
exceeded $480 per adopted child. One commenter believed this provision
discouraged adoption. Specifically, the commenter pointed out that the
April 5, 1995 interim rule, when read in conjunction with HUD's
definition of ``adjusted income'' at 24 CFR 813.102 and 913.102,
treated the family with adopted children and the otherwise identical
family with foster children as having the same ``adjusted income'' and,
therefore, required both to pay the same rent. However, the commenter
also noted that for the purpose of determining whether the family
qualified for eligibility as a ``low income'' or ``very low income''
family under Secs. 813.105 or 913.105, or whether the family qualified
for a rent-hardship preference under Secs. 960.215 or 982.213, the
first $480 of adoption subsidy payments would have been included in
annual income whereas the first $480 of foster-care payments would have
been excluded from annual income.
The commenter recommended that the April 5, 1995 interim rule be
amended to exclude the full amount of adoption subsidy payments. The
commenter also suggested that HUD modify the definition of
``dependent'' to exclude ``children for whom the family receives an
adoption subsidy payment'', as well as foster children.
Another commenter feared that the adoption assistance exclusion
lent itself to abuse by unscrupulous persons who might adopt multiple
children as a means of obtaining extra income. This commenter believed
the exclusion should be limited to one adopted child per family.
The second commenter also believed that the adoption assistance
exclusion was vague concerning necessary documentation. The commenter
suggested that the interim rule be amended to list the documents
required for verification of the adoption assistance payments.
HUD Response. Adopted children already receive a $480 dependent
deduction when adjusted income is calculated for purposes of
determining rent. If the remaining $480 of earned income is excluded
from annual income, the net effect, per adopted child, would no longer
be $0, but rather would become $(480). Further, HUD does not believe
that, in most instances, $480 will change whether or not a family is
eligible under the existing income limits. Also, HUD has little
discretion to change the definition of dependent, as the definition of
adjusted income is statutory.
In response to the second commenter, it is the responsibility of
the family social service agency to ensure that the family adopting the
child is able to care for the child appropriately, and is not merely
adopting the child for some monetary gain. Limiting the exclusion to
one adopted child per family could potentially cause problems,
especially where families are adopting children who are siblings who
need to remain together.
Finally, adoption assistance payments are well documented and
therefore easily verified. In situations where residents do not provide
the HA with the necessary documentation needed for verification, it is
the responsibility of the HA to take appropriate action until such
information is provided.
3. Full-Time Student Earned Income
Comment. The April 5, 1995 interim rule established an exclusion
for income earned by full-time students similar to the exclusion for
adoption assistance payments. Specifically, the interim rule excluded
earnings in excess of $480 for each full-time student 18 years of age
or older, excluding the head of household and spouse. The same
commenter who
[[Page 54496]]
believed adoption assistance should be completely excluded from income
wrote to advocate the total exclusion of full-time student earned
income. This commenter made the recommendation for the same reasons
that it urged exclusion of adoption assistance.
Another commenter believed that the full-time student earned income
exclusion should be limited by establishing an age eligibility
requirement. The commenter feared that an open-ended exclusion easily
lent itself to abuse by persons seeking additional income. The
commenter pointed out that many health insurance policies contain such
a requirement by limiting coverage to students 25 years of age or
younger.
Another commenter believed that in order to ``eliminate needless
consternation and controversy'' the April 5, 1995 interim rule should
be amended to define ``full time student.''
HUD Response. In response to the commenter who recommended total
exclusion of full-time student earned income, HUD reiterates its
response above to the suggestion that adoption assistance payments be
completely excluded. Like adopted children, full-time students, who are
not the family head or spouse, already receive a $480 dependent
deduction for rent determination purposes. HUD has also not adopted the
other two comments. HUD will not unnecessarily limit the benefit of
this exclusion by imposing an age restriction. Further, the definition
of ``full-time student'' can be found in new 24 CFR 5.603.
4. Adult Foster Care Payments
Comment. One commenter urged that the exclusion of adult foster
care payments should be limited to a small number of adults per
household. According to the commenter, this would prevent the
warehousing of large numbers of adults in rooming houses with minimal
service to foster care cases and maximum profits to providers.
HUD Response. HUD has not adopted the comment. The issue raised by
the commenter is more of an occupancy and space standards issue than
one concerning the definition of annual income. Any limitation on the
number of foster adults is at the discretion of the HA. The HA has
certain controls over who is, and is not, permitted to live in a unit.
5. State or Local Job Training Program Compensation
Comment. One of the commenters was concerned about the reduction in
revenue resulting from the exclusion of compensation from State or
local job training programs. The commenter noted that a tenant's
entitlement subsidies could be discontinued due to the income received
from the on-the-job training or apprenticeship program. In such cases,
these tenant rents could drop to $0. The commenter recommended that the
April 5, 1995 interim rule be amended to state that rents will be
frozen at the amount charged at the time of entry into the training
program.
Another commenter wrote that the exclusion should be modified in
order to prevent abuse by tenants seeking to unscrupulously accumulate
income. Specifically, the commenter suggested that the exclusion be
amended to contain either a limitation on the number of training
programs in which a family is permitted to participate and still
qualify for an exclusion, or a time limitation beyond which the
exclusion would no longer apply.
HUD Response. HUD has adopted the suggestion made by the first
commenter. The exclusion on compensation from State and local job
training programs has been amended to exclude only incremental
increases in income resulting from the training program. In most cases
this will have the effect of freezing the rent at the amount charged at
the start of the job training program. In addition to addressing the
concerns raised by the commenter, this revision will assure that this
income exclusion is not more generous than that established by section
515(b) of the NAHA. The provisions of this final rule which implement
section 515(b) limit the exclusion to incremental increases in earnings
and benefits.
HUD has also made several clarifying changes to the exclusion on
income received as a result of a State or local job training program.
First, this final rule clarifies that the exclusion applies to all
State and local job training programs, including training programs that
are not affiliated with a local government. Further, this rule
clarifies that the exclusion only covers income received during the
period of the job training program.
HUD has not adopted the recommendations made by the second
commenter. HUD believes that the limitations suggested by this
commenter would be over-regulation that would defeat the exclusion's
intent of assisting families in transition from welfare to work.
HUD wishes to note that the job-training program exclusion applies
only to its public housing and section 8 programs. This exclusion has
successfully been in effect since September 23, 1994. The April 5, 1995
interim rule only made technical corrections to this exclusion.
6. Employment Training Under Section 515(b) of the NAHA
Comment. One commenter questioned the logic of the exclusion set
forth by the interim rule at 24 CFR 913.106(c)(13) (now 24 CFR
5.609(c)(13)) and paragraph (2)(xiii) of the definition of ``Annual
Income'' in Sec. 950.102. This exclusion implements section 515(b) of
the National Affordable Housing Act of 1990 (NAHA). Section 515(b)
excludes from annual income the earnings and benefits resulting from
programs providing employment training in accordance with the Family
Support Act of 1988, section 22 of the 1937 Act, or any comparable
Federal, State, or local law. Section 515(b) excludes training income
for the period of the program, plus a running 18 month period starting
at the point the family member begins his or her first job after
completing the program. The commenter wrote that by extending the
exclusion period beyond the twelve months customarily utilized for rent
determination, the interim rule overly complicated the administration
of the exclusion.
HUD Response. HUD has not adopted the recommendations made by this
commenter. As described above, the 18 month exclusion period is
prescribed by statute and HUD has no authority to adjust the length of
the exclusion. HUD wishes to clarify several matters relating to this
exclusion. First, the exclusion is separate from the State and local
job training program exclusion described previously in this preamble.
Secondly, the provisions of this final rule which implement section
515(b) of the NAHA apply only to HUD's public housing and Indian
housing programs. Further, the exclusion applies only to those job
training programs which meet the criteria set forth in those
implementing regulatory provisions. Finally, the exclusion only covers
incremental increases in income resulting from participation in the job
training program.
7. Property Tax Rebates
Comment. One of the commenters wrote that the property tax rebate
exclusion was in need of clarification. The commenter noted that the
preamble to the April 5, 1995 interim rule referred to an exclusion of
rent ``credits.'' (60 FR 17388, 17389). However, the commenter also
pointed out that the regulatory language made no mention of rent
credits, but referred to amounts received by the family in the form of
``refunds or rebates.'' Since rent credits are not the
[[Page 54497]]
same as property tax rebates, the commenter believed greater definition
was needed in order for the exclusion to be applied correctly.
Two commenters believed the tax rebate exclusion was overly broad,
and permitted tenants to benefit from improperly received rebates. The
commenters wrote that in certain States, public housing residents are
not eligible for tax rebates, because the HAs do not pay taxes.
Therefore, the commenters recommended that the April 5, 1995 interim
rule be amended to include improperly received rebates in income.
HUD Response. HUD wishes to clarify that the property tax rebate
exclusion applies to tax refunds or rebates. The exclusion does not
apply to rent credits. As the commenter noted, the regulatory text of
the April 5, 1995 interim rule utilized the term ``refunds or
rebates.'' This final rule adopts the term without change.
HUD decided to implement the tax rebate exclusion in order to
support State initiatives designed to benefit low income families. If,
based on State regulations, individuals are not eligible for such a
benefit, or are receiving the benefit in error, it is the
responsibility of the State agency administering the program to make
the necessary adjustments.
8. Homecare Payments for the Disabled
Comment. One of the commenters believed the income exclusion for
home care payments was lacking in clarity. The commenter suggested that
the April 5, 1995 interim rule be amended to define the terms
``developmentally disabled children'' and ``adult family members.''
HUD Response. There is no need for HUD to define these terms, as
they are defined by the State program providing the payments. If the
family is receiving such a payment from the State because a family
member meets the criteria of the definition, the HA should consider the
family eligible for the exclusion.
9. Deferred Periodic Amounts of Supplemental Security Income and Social
Security Benefits
Comment. One of the commenters questioned why the April 5, 1995
interim rule did not also exclude deferred periodic amounts received in
a lump sum from sources other than Supplemental Security Income and
Social Security Benefits. The commenter believed this unnecessarily
complicated implementation of the rule.
HUD Response. This exclusion implements section 103(a)(1) of the
1992 HCD Act, which amended section 3(b)(4) of the 1937 Act to exclude
from annual income ``any amounts which would be eligible for exclusion
under section 1613(a)(7) of the Social Security Act.'' The amounts
referred to are deferred periodic amounts from supplemental security
income and social security benefits. Deferred periodic amounts received
in a lump sum or in prospective monthly amounts from Supplemental
Security Income and Social Security Benefits are excluded, because that
is what the law provides. Deferred periodic amounts received in a lump
sum or prospective monthly amounts from other sources are counted as
income because they are not covered by a statutory exclusion.
VI. The Balanced Budget Downpayment Act, I
The Balanced Budget Downpayment Act, I (Pub. L. 104-99, approved
January 26, 1996), also known as the Continuing Resolution (CR),
contained three provisions which impact this final rule. Section 402(a)
of the CR provided that HAs must establish minimum rents,
``[n]otwithstanding sections 3(a) and (8)(o)(2)'' of the 1937
Act.1 The second provision, section 402(b) of the CR, amended
section 3(a)(2) of the 1937 Act to permit HAs to adopt ceiling rents.
Section 402(c) of the CR amended section 3(b)(5) of the 1937 Act to
permit HAs, at their expense, to establish additional deductions from
annual income in deriving adjusted income.
---------------------------------------------------------------------------
\1\ This minimum rent provision was later amended by section 230
of the Omnibus Consolidated Rescissions and Appropriations Act of
1996 (OCRA) (Pub. L. 104-134, approved April 26, 1996). Section 230
of OCRA provided that the Secretary of HUD may waive the minimum
rent requirement established by section 402 of the CR in order ``to
provide a transition period for affected families.''
---------------------------------------------------------------------------
Section 402(f) of the CR makes all three of the provisions
described above effective only for Fiscal Year (FY) 1996. With respect
to the first two provisions, HUD has decided not to amend its
regulations to incorporate these statutory changes. HUD has implemented
these changes made by the CR through other, non-regulatory means.
On August 30, 1996 (61 FR 46344), HUD published for public comment
an interim rule implementing section 402(c) of the CR. The August 30,
1996 interim rule amended 24 CFR parts 913 and 950 to permit HAs to
establish exclusions to earned income as a means of attracting more
tenants with earned income. Although section 402(c) of the CR expired
at the end of FY 1996 (September 30, 1996), a change made by the
Secretary in the definition of income permitting an exclusion for
earned income can have longer lasting effect. The Secretary exercised
this authority in publishing the August 30, 1996 interim rule. New
subpart F to 24 CFR part 5 incorporates the interim amendment to part
913 at Sec. 5.609(d).
In the interest of obtaining the fullest participation possible in
determining the factors that should be considered in an HA's
determination to adopt an optional earned income exclusion, HUD
welcomes public comment on the amendments made by the interim rule. The
public comment deadline is October 29, 1996. The August 30, 1996
interim rule contains a detailed discussion of the interim amendments
and provides the address where comments should be submitted.
VII. Updating the Authority Citations for 24 CFR Part 5
HUD established 24 CFR part 5 to set forth cross-cutting
definitions and program requirements. Since publication of the February
9, 1996 final rule establishing subpart A of 24 CFR part 5, HUD has
issued additional rulemakings establishing new subparts to part 5. This
final rule, for example, creates a new subpart F. The establishment of
these additional subparts has caused the original authority citation
set forth in 24 CFR part 5 to become outdated. This final rule updates
and corrects the authority citations in 24 CFR part 5.
VIII. Findings and Certifications
Executive Order 12866, Regulatory Planning and Review. This final
rule was reviewed by the Office of Management and Budget (OMB) under
Executive Order 12866, Regulatory Planning and Review. Any changes made
to the final rule as a result of that review are clearly identified in
the docket file, which is available for public inspection in the office
of the Department's Rules Docket Clerk, Room 10276, 451 Seventh Street
SW, Washington D.C.
This final rule was appropriate for review under E.O. 12866 because
it is a significant regulatory action of HUD but not an ``economically
significant'' regulatory action under Executive Order 12866. This final
rule will not have an annual effect on the economy of $100 million or
more, nor will it adversely affect in a material way the economy, a
sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or tribal
governments or communities. A cost estimate prepared by HUD at the
interim rule stage concluded that the cost of the amendments would not
exceed $10 million. A copy of the cost
[[Page 54498]]
estimate is available for public inspection in the office of the
Department's Rules Docket Clerk at the above address.
Unfunded Mandates Reform Act. The Secretary has reviewed this final
rule before publication and by approving it certifies, in accordance
with the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532), that
this rule does not impose a Federal mandate that will result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector, of $100 million or more in any one year.
Environmental Impact. A Finding of No Significant Impact with
respect to the environment was made at the interim rule stage in
accordance with HUD regulations at 24 CFR part 50, which implement
section 102(2)(C) of the National Environmental Policy Act of 1969.
This Finding of No Significant Impact remains applicable to this final
rule and is available for public inspection between 7:30 a.m. and 5:30
p.m. weekdays in the Office of General Counsel, the Rules Docket Clerk,
Room 10276, 451 Seventh Street, SW, Washington, D.C. 20410.
Executive Order 12612, Federalism. The General Counsel has
determined, as the Designated Official for HUD under section 6(a) of
Executive Order 12612, Federalism, that the policies contained in this
final rule will not have federalism implications and, thus, are not
subject to review under that Order. Specifically, the final rule adds
additional exclusions to the definition of income in the assisted
housing programs. As such, the final rule will not impinge upon the
relationship between the Federal Government and State and local
governments, and the final rule is not subject to review under the
order.
Executive Order 12606, The Family. The General Counsel, as the
Designated Official under Executive Order 12606, The Family, has
determined that this final rule has potential for significant impact on
family formation, maintenance, and general well-being. Families will
benefit from this final rule by being allowed additional exclusions
from annual income. Accordingly, since the impact on the family is
beneficial, no further review is considered necessary.
Regulatory Flexibility Act. The Secretary, in accordance with the
Regulatory Flexibility Act (5 U.S.C. 605(b)) has reviewed and approved
this final rule, and in so doing certifies that this final rule will
not have a significant economic impact on a substantial number of small
entities. This rule adds nine exclusions to HUD's definition of annual
income. With regard to the lump sum exclusion, the number of lump sum
exclusions in any one project will be minor, and will not significantly
impact any HA. With regard to the remaining income exclusions, since
HUD will supplement any lost rental income from the added exclusions,
the exclusions will not have an economic impact on housing authorities.
This rule also consolidates the nearly identical provisions of 24
CFR part 813 and 913 in a new subpart F to 24 CFR part 5. The
consolidation of these regulatory requirements merely eliminates
unnecessary repetition from title 24. New subpart F to 24 CFR part 5
does not affect or establish any substantive policy. Accordingly, it
will not have an economic impact on small entities.
Catalog of Federal Domestic Assistance. The Catalog of Federal
Domestic Assistance program number(s) are 14.146, 14.147, 14.850 and
15.141.
List of Subjects
24 CFR Part 5
Administrative practice and procedure, Aged, Claims, Drug abuse,
Drug traffic control, Grant programs--housing and community
development, Grant programs--Indians, Grant programs--low and moderate
income housing, Indians, Individuals with disabilities,
Intergovernmental relations, Loan programs--housing and community
development, Low and moderate income housing, Mortgage insurance,
Penalties, Pets, Public housing, Rent subsidies, Reporting and
recordkeeping requirements, Social Security, Unemployment compensation,
Wages.
24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Home improvement, Housing standards,
Incorporation by reference, Lead poisoning, Loan programs--housing and
community development, Minimum property standards, Mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social security, Unemployment
compensation, Wages.
24 CFR Part 236
Grant programs--housing and community development, Low and moderate
income housing, Mortgage insurance, Rent subsidies, Reporting and
recordkeeping requirements.
24 CFR Part 813
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements, Utilities.
24 CFR Part 913
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
24 CFR Part 950
Aged, Energy conservation, Grant programs--housing and community
development, Grant programs--Indians, Homeownership, Indians,
Individuals with disabilities, Lead poisoning, Loan programs--housing
and community development, Loan programs--Indians, Low and moderate
income housing, Public housing, Reporting and recordkeeping
requirements.
24 CFR Part 960
Aged, Grant programs--housing and community development,
Individuals with disabilities, Public housing.
Accordingly, subtitle A and chapters II, VIII, and IX of title 24
of the Code of Federal Regulations are amended as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
1. The authority citation for 24 CFR part 5 is revised to read as
follows:
Authority: 42 U.S.C. 3535(d), unless otherwise noted.
Subpart B--[Amended]
2. A new authority citation to subpart B is added to read as
follows:
Authority: 42 U.S.C. 3535(d), 3543, 3544, and 11901 et seq.
Subpart C--[Amended]
3. A new authority citation to subpart C is added to read as
follows:
Authority: 42 U.S.C. 1701r-1 and 3535(d).
Subpart E--[Amended]
4. A new authority citation to subpart E is added to read as
follows:
Authority: 42 U.S.C. 1436a and 3535(d).
5. A new subpart F is added to read as follows:
Subpart F--Income Limits, Annual Income, Adjusted Income, Rent, and
Examinations for the Public Housing and Section 8 Programs
Sec.
5.601 Purpose and applicability.
5.603 Definitions.
5.605 Overall income eligibility for admission.
[[Page 54499]]
5.607 Income limits for admission.
5.609 Annual income.
5.611 Adjusted income.
5.613 Total tenant payment.
5.615 Utility reimbursements.
5.617 Reexamination and verification.
Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n, and
3535(d).
Subpart F--Income Limits, Annual Income, Adjusted Income, Rent, and
Examinations for the Public Housing and Section 8 Programs
Sec. 5.601 Purpose and applicability.
(a) This subpart establishes definitions and requirements
concerning income limits for admission, annual income, adjusted income,
total tenant payment, utility allowances and reimbursements, and
reexamination of income and family composition for:
(1) HUD's public housing programs, including its public housing
homeownership programs.
(2) Housing assisted under section 8 of the United States Housing
Act of 1937 (the 1937 Act) (42 U.S.C. 1437f).
(i) Section 5.613 (Total tenant payment) and the definitions of
``tenant rent'' and ``total tenant payment'' found in Sec. 5.603 do not
apply to the Section 8 Rental Voucher Program.
(ii) Section 5.615 (Utility reimbursement) and the definition of
``utility reimbursement'' found in Sec. 5.603 also do not apply to the
Section 8 Rental Voucher Program. For the Voucher Program, in cases
where the amount of the HAP payment exceeds the rent to owner, the
excess will be paid to the family.
(iii) Section 5.607 (Income limits for admission) does not apply to
the Section 8 Rental Voucher and Rental Certificate Programs.
(3) Applicants and tenants assisted under sections 10(c) and 23 of
the 1937 Act as in effect before amendment by the Housing and Community
Development Act of 1974 (42 U.S.C. 1410 and 1421b (1970 ed.)).
(b) This subpart does not apply to HUD's Indian housing programs.
The analogous rule that applies to Indian housing is located at 24 CFR
part 950.
Sec. 5.603 Definitions.
As used in this subpart:
(a) The terms elderly person, low-income family, person with
disabilities, State, and very low-income family are defined in section
3(b) of the 1937 Act (42 U.S.C. 1437a(b)).
(b) The terms 1937 Act and public housing agency (PHA) are defined
in Sec. 5.100.
(c) The terms disabled family, elderly family, family, and live-in
aide are defined in Sec. 5.403.
(d) The following terms shall have the meanings set forth below:
Adjusted income. See Sec. 5.611.
Annual income. See Sec. 5.609.
Child care expenses. Amounts anticipated to be paid by the family
for the care of children under 13 years of age during the period for
which annual income is computed, but only where such care is necessary
to enable a family member to actively seek employment, be gainfully
employed, or to further his or her education and only to the extent
such amounts are not reimbursed. The amount deducted shall reflect
reasonable charges for child care. In the case of child care necessary
to permit employment, the amount deducted shall not exceed the amount
of employment income that is included in annual income.
Dependent. A member of the family (except foster children and
foster adults) other than the family head or spouse, who is under 18
years of age, or is a person with a disability, or is a full-time
student.
Disability assistance expenses. Reasonable expenses that are
anticipated, during the period for which annual income is computed, for
attendant care and auxiliary apparatus for a disabled family member and
that are necessary to enable a family member (including the disabled
member) to be employed, provided that the expenses are neither paid to
a member of the family nor reimbursed by an outside source.
Full-time student. A person who is carrying a subject load that is
considered full-time for day students under the standards and practices
of the educational institution attended. An educational institution
includes a vocational school with a diploma or certificate program, as
well as an institution offering a college degree.
Medical expenses. Medical expenses, including medical insurance
premiums, that are anticipated during the period for which annual
income is computed, and that are not covered by insurance.
Monthly adjusted income. One twelfth of adjusted income.
Monthly income. One twelfth of annual income.
Net family assets. (1) Net cash value after deducting reasonable
costs that would be incurred in disposing of real property, savings,
stocks, bonds, and other forms of capital investment, excluding
interests in Indian trust land and excluding equity accounts in HUD
homeownership programs. The value of necessary items of personal
property such as furniture and automobiles shall be excluded.
(2) In cases where a trust fund has been established and the trust
is not revocable by, or under the control of, any member of the family
or household, the value of the trust fund will not be considered an
asset so long as the fund continues to be held in trust. Any income
distributed from the trust fund shall be counted when determining
annual income under Sec. 5.609.
(3) In determining net family assets, PHAs or owners, as
applicable, shall include the value of any business or family assets
disposed of by an applicant or tenant for less than fair market value
(including a disposition in trust, but not in a foreclosure or
bankruptcy sale) during the two years preceding the date of application
for the program or reexamination, as applicable, in excess of the
consideration received therefor. In the case of a disposition as part
of a separation or divorce settlement, the disposition will not be
considered to be for less than fair market value if the applicant or
tenant receives important consideration not measurable in dollar terms.
Owner has the meaning provided in the relevant program regulations.
As used in this subpart, where appropriate, the term ``owner'' shall
also include a ``borrower'' as defined in 24 CFR part 885.
Tenant rent. The amount payable monthly by the family as rent to
the PHA or owner, as applicable. Where all utilities (except telephone)
and other essential housing services are supplied by the PHA or owner,
tenant rent equals total tenant payment. Where some or all utilities
(except telephone) and other essential housing services are supplied by
the PHA or owner and the cost thereof is not included in the amount
paid as rent, tenant rent equals total tenant payment less the utility
allowance.
Total tenant payment. See Sec. 5.613.
Utility allowance. If the cost of utilities (except telephone) and
other housing services for an assisted unit is not included in the
tenant rent but is the responsibility of the family occupying the unit,
an amount equal to the estimate made or approved by a PHA or HUD of the
monthly cost of a reasonable consumption of such utilities and other
services for the unit by an energy-conservative household of modest
circumstances consistent with the requirements of a safe, sanitary, and
healthful living environment.
Utility reimbursement. The amount, if any, by which the utility
allowance for the unit, if applicable, exceeds the total tenant payment
for the family occupying the unit.
[[Page 54500]]
Welfare assistance. Welfare or other payments to families or
individuals, based on need, that are made under programs funded,
separately or jointly, by Federal, State or local governments.
Sec. 5.605 Overall income eligibility for assistance.
No family other than a low-income family shall be eligible for
admission to a program covered by this part.
Sec. 5.607 Income limits for admission.
(a) General. (1) Admission to units available before October 1,
1981. Not more than 25 percent of the dwelling units that were
available for occupancy under Annual Contributions Contracts (ACC) and
Section 8 Housing Assistance Payments (HAP) Contracts taking effect
before October 1, 1981 and that are leased on or after that date shall
be available for leasing by low-income families other than very low-
income families. HUD reserves the right to limit the admission of low-
income families other than very low-income families to these units.
(2) Admission to units available on or after October 1, 1981. Not
more than 15 percent of the dwelling units that initially become
available for occupancy under Annual Contributions Contracts (ACC) and
Section 8 Housing Assistance Payments (HAP) Contracts on or after
October 1, 1981 shall be available for leasing by low-income families
other than very low-income families. Except with the prior approval of
HUD under paragraphs (b) and (c) of this section, no low-income family,
other than a very low-income family shall be admitted to these units.
(b) Request for exception. A request by a PHA or owner for approval
of admission of low-income families other than very low-income families
to units described in paragraph (a)(2) of this section must state the
basis for requesting the exception and provide supporting data. Bases
for exceptions that may be considered include the following:
(1) For Section 8 Programs: (i) Low-income families that would
otherwise be displaced from Section 8 Substantial Rehabilitation or
Moderate Rehabilitation projects;
(ii) Low-income families that are displaced as a result of Rental
Rehabilitation or Development activities assisted under section 17 of
the 1937 Act (42 U.S.C. 1437o), or as a result of activities under the
Rental Rehabilitation Demonstration Program;
(iii) Need for admission of a broader range of tenants to preserve
the financial or management viability of a project because there is an
insufficient number of potential applicants who are very low-income
families;
(iv) Commitment of an owner to attaining occupancy by families with
a broad range of incomes, as evidenced in the application for
development. An application citing this basis should be supported by
evidence that the owner is pursuing this goal throughout its assisted
projects in the community; and
(v) Project supervision by a State Housing Finance Agency having a
policy of occupancy by families with a broad range of incomes,
supported by evidence that the Agency is pursuing this goal throughout
its assisted projects in the community, or a project with financing
through Section 11(b) of the 1937 Act (42 U.S.C. 1437i) or under
Section 103 of the Internal Revenue Code (26 U.S.C. 103).
(2) For public housing only. (i) Need for admission of a broader
range of tenants to obtain full occupancy;
(ii) Local commitment to attaining occupancy by families with a
broad range of incomes. An application citing this basis should be
supported by evidence that the PHA is pursuing this goal throughout its
housing program in the community;
(iii) Need for higher incomes to sustain homeownership eligibility
in a homeownership project; and
(iv) Need to avoid displacing low-income families from a project
acquired by the PHA for rehabilitation.
(c) Action on request for exception. Whether to grant any request
for exception is a matter committed by law to HUD's sole discretion,
and no implication is intended to be created that HUD will seek to
grant approvals up to the maximum limits permitted by statute, nor is
any presumption of an entitlement to an exception created by the
specification of certain grounds for exception that HUD may consider.
HUD will review exceptions granted to owners and PHAs at regular
intervals. HUD may withdraw permission to exercise those exceptions for
program applicants at any time that exceptions are not being used or
after a periodic review, based on the findings of the review.
(d) Reporting. PHAs and owners shall comply with HUD-prescribed
reporting requirements that will permit HUD to maintain the reasonably
current data necessary to monitor compliance with the income
eligibility restrictions described in paragraph (a) of this section.
(e) Inapplicability to certain scattered site housing. The income
eligibility restrictions described in paragraph (a) of this section do
not apply to scattered site public housing dwelling units sold or
intended to be sold to public housing tenants under section 5(h) of the
1937 Act (42 U.S.C. 1437c(h)).
(f) Inapplicability to the Section 8 Rental Voucher and Rental
Certificate Programs. The provisions of this section do not apply to
the Section 8 Rental Voucher and Section 8 Rental Certificate Programs.
(Approved by the Office of Management and Budget under Control
number 2502-0204.)
Sec. 5.609 Annual income.
(a) Annual income means all amounts, monetary or not, which:
(1) Go to, or on behalf of, the family head or spouse (even if
temporarily absent) or to any other family member; or
(2) Are anticipated to be received from a source outside the family
during the 12-month period following admission or annual reexamination
effective date; and
(3) Which are not specifically excluded in paragraph (c) of this
section.
(4) Annual income also means amounts derived (during the 12-month
period) from assets to which any member of the family has access.
(b) Annual income includes, but is not limited to:
(1) The full amount, before any payroll deductions, of wages and
salaries, overtime pay, commissions, fees, tips and bonuses, and other
compensation for personal services;
(2) The net income from the operation of a business or profession.
Expenditures for business expansion or amortization of capital
indebtedness shall not be used as deductions in determining net income.
An allowance for depreciation of assets used in a business or
profession may be deducted, based on straight line depreciation, as
provided in Internal Revenue Service regulations. Any withdrawal of
cash or assets from the operation of a business or profession will be
included in income, except to the extent the withdrawal is
reimbursement of cash or assets invested in the operation by the
family;
(3) Interest, dividends, and other net income of any kind from real
or personal property. Expenditures for amortization of capital
indebtedness shall not be used as deductions in determining net income.
An allowance for depreciation is permitted only as authorized in
paragraph (b)(2) of this section. Any withdrawal of cash or assets from
an investment will be included in income, except to the extent the
withdrawal is reimbursement of cash or assets invested by the family.
Where the family has net family assets
[[Page 54501]]
in excess of $5,000, annual income shall include the greater of the
actual income derived from all net family assets or a percentage of the
value of such assets based on the current passbook savings rate, as
determined by HUD;
(4) The full amount of periodic amounts received from Social
Security, annuities, insurance policies, retirement funds, pensions,
disability or death benefits, and other similar types of periodic
receipts, including a lump-sum amount or prospective monthly amounts
for the delayed start of a periodic amount (except as provided in
paragraph (c)(14) of this section);
(5) Payments in lieu of earnings, such as unemployment and
disability compensation, worker's compensation and severance pay
(except as provided in paragraph (c)(3) of this section);
(6) Welfare assistance. If the welfare assistance payment includes
an amount specifically designated for shelter and utilities that is
subject to adjustment by the welfare assistance agency in accordance
with the actual cost of shelter and utilities, the amount of welfare
assistance income to be included as income shall consist of:
(i) The amount of the allowance or grant exclusive of the amount
specifically designated for shelter or utilities; plus
(ii) The maximum amount that the welfare assistance agency could in
fact allow the family for shelter and utilities. If the family's
welfare assistance is ratably reduced from the standard of need by
applying a percentage, the amount calculated under this paragraph
(b)(6)(ii) shall be the amount resulting from one application of the
percentage;
(7) Periodic and determinable allowances, such as alimony and child
support payments, and regular contributions or gifts received from
organizations or from persons not residing in the dwelling;
(8) All regular pay, special pay and allowances of a member of the
Armed Forces (except as provided in paragraph (c)(7) of this section).
(c) Annual income does not include the following:
(1) Income from employment of children (including foster children)
under the age of 18 years;
(2) Payments received for the care of foster children or foster
adults (usually persons with disabilities, unrelated to the tenant
family, who are unable to live alone);
(3) Lump-sum additions to family assets, such as inheritances,
insurance payments (including payments under health and accident
insurance and worker's compensation), capital gains and settlement for
personal or property losses (except as provided in paragraph (b)(5) of
this section);
(4) Amounts received by the family that are specifically for, or in
reimbursement of, the cost of medical expenses for any family member;
(5) Income of a live-in aide, as defined in Sec. 5.403;
(6) The full amount of student financial assistance paid directly
to the student or to the educational institution;
(7) The special pay to a family member serving in the Armed Forces
who is exposed to hostile fire;
(8)(i) Amounts received under training programs funded by HUD;
(ii) Amounts received by a person with a disability that are
disregarded for a limited time for purposes of Supplemental Security
Income eligibility and benefits because they are set aside for use
under a Plan to Attain Self-Sufficiency (PASS);
(iii) Amounts received by a participant in other publicly assisted
programs which are specifically for or in reimbursement of out-of-
pocket expenses incurred (special equipment, clothing, transportation,
child care, etc.) and which are made solely to allow participation in a
specific program;
(iv) Amounts received under a resident service stipend. A resident
service stipend is a modest amount (not to exceed $200 per month)
received by a resident for performing a service for the PHA or owner,
on a part-time basis, that enhances the quality of life in the
development. Such services may include, but are not limited to, fire
patrol, hall monitoring, lawn maintenance, and resident initiatives
coordination. No resident may receive more than one such stipend during
the same period of time;
(v) Incremental earnings and benefits resulting to any family
member from participation in qualifying State or local employment
training programs (including training programs not affiliated with a
local government) and training of a family member as resident
management staff. Amounts excluded by this provision must be received
under employment training programs with clearly defined goals and
objectives, and are excluded only for the period during which the
family member participates in the employment training program;
(9) Temporary, nonrecurring or sporadic income (including gifts);
(10) Reparation payments paid by a foreign government pursuant to
claims filed under the laws of that government by persons who were
persecuted during the Nazi era;
(11) Earnings in excess of $480 for each full-time student 18 years
old or older (excluding the head of household and spouse);
(12) Adoption assistance payments in excess of $480 per adopted
child;
(13) For public housing only: (i) The earnings and benefits to any
family member resulting from the participation in a program providing
employment training and supportive services in accordance with the
Family Support Act of 1988, section 22 of the 1937 Act (42 U.S.C.
1437t), or any comparable Federal, State, or local law during the
exclusion period.
(ii) For purposes of this paragraph, the following definitions
apply:
(A) Comparable Federal, State or local law means a program
providing employment training and supportive services that--
(1) Is authorized by a Federal, State or local law;
(2) Is funded by the Federal, State or local government;
(3) Is operated or administered by a public agency; and
(4) Has as its objective to assist participants in acquiring
employment skills.
(B) Exclusion period means the period during which the family
member participates in a program described in this section, plus 18
months from the date the family member begins the first job acquired by
the family member after completion of such program that is not funded
by public housing assistance under the 1937 Act. If the family member
is terminated from employment with good cause, the exclusion period
shall end.
(C) Earnings and benefits means the incremental earnings and
benefits resulting from a qualifying employment training program or
subsequent job;
(14) Deferred periodic amounts from supplemental security income
and social security benefits that are received in a lump sum amount or
in prospective monthly amounts.
(15) Amounts received by the family in the form of refunds or
rebates under State or local law for property taxes paid on the
dwelling unit;
(16) Amounts paid by a State agency to a family with a member who
has a developmental disability and is living at home to offset the cost
of services and equipment needed to keep the developmentally disabled
family member at home; or
(17) Amounts specifically excluded by any other Federal statute
from consideration as income for purposes of determining eligibility or
benefits under a category of assistance programs that includes
assistance under any program to which the exclusions set forth in 24
CFR 5.609(c) apply. A notice will be
[[Page 54502]]
published in the Federal Register and distributed to PHAs and housing
owners identifying the benefits that qualify for this exclusion.
Updates will be published and distributed when necessary.
(d) For public housing only. In addition to the exclusions from
annual income covered in paragraph (c) of this section, a PHA may adopt
additional exclusions for earned income pursuant to an established
written policy.
(1) In establishing such a policy, a PHA must adopt one or more of
the following types of earned income exclusions, including variations
thereof:
(i) Exclude all or part of the family's earned income;
(ii) Apply the exclusion only to new sources of earned income or
only to increases in earned income;
(iii) Apply the exclusion to the earned income of the head, the
spouse, or any other family member age 18 or older;
(iv) Apply the exclusion only to the earned income of persons other
than the primary earner;
(v) Apply the exclusion to applicants, newly admitted families,
existing tenants, or persons joining the family;
(vi) Make the exclusion temporary or permanent, for the PHA, the
family, or the affected family member;
(vii) Make the exclusion graduated, so that more earned income is
excluded at first and less earned income is excluded after a period of
time;
(viii) Exclude any or all of the costs that are incurred in order
to go to work but are not compensated, such as the cost of special
tools, equipment, or clothing;
(ix) Exclude any or all of the costs that result from earning
income, such as social security taxes or other items that are withheld
in payroll deductions;
(x) Exclude any portion of the earned income that is not available
to meet the family's own needs, such as amounts that are paid to
someone outside the family for alimony or child support; and
(xi) Exclude any portion of the earned income that is necessary to
replace benefits lost because a family member becomes employed, such as
amounts that the family pays for medical costs or to obtain medical
insurance.
(2) Any amounts that are excluded from annual income under this
paragraph (d) may not also be deducted in determining adjusted income,
as defined in Sec. 5.611.
(3) Housing agencies do not need HUD approval to adopt optional
earned income exclusions.
(4) In the calculation of Performance Funding System operating
subsidy eligibility, housing agencies will have to absorb any loss in
rental income that results from the adoption of any of the optional
earned income exclusions discussed in paragraph (d)(1) of this section,
including any variations of the listed options.
(e) If it is not feasible to anticipate a level of income over a
12-month period, the income anticipated for a shorter period may be
annualized, subject to a redetermination at the end of the shorter
period.
Sec. 5.611 Adjusted income.
Adjusted income means annual income less the following deductions:
(a) $480 for each dependent;
(b) $400 for any elderly family or disabled family;
(c) For any family that is not an elderly family or disabled family
but has a member (other than the head of household or spouse) who is a
person with a disability, disability assistance expenses in excess of
three percent of annual income, but this allowance may not exceed the
employment income received by family members who are 18 years of age or
older as a result of the assistance to the person with disabilities;
(d) For any elderly family or disabled family:
(1) That has no disability assistance expenses, an allowance for
medical expenses equal to the amount by which the medical expenses
exceed three percent of annual income;
(2) That has disability assistance expenses greater than or equal
to three percent of annual income, an allowance for disability
assistance expenses computed in accordance with paragraph (c) of this
section, plus an allowance for medical expenses that is equal to the
family's medical expenses;
(3) That has disability assistance expenses that are less than
three percent of annual income, an allowance for combined disability
assistance expenses and medical expenses that is equal to the amount by
which the sum of these expenses exceeds three percent of annual income;
and
(e) Child care expenses.
Sec. 5.613 Total tenant payment.
(a) Total tenant payment for families whose initial lease is
effective on or after August 1, 1982. (1) Total tenant payment is the
amount calculated under section 3(a)(1) of the 1937 Act (42 U.S.C.
1437a(a)(1)). If the family's welfare assistance is ratably reduced
from the standard of need by applying a percentage, the amount
calculated under paragraph (C) of section 3(a)(1) of the 1937 Act (42
U.S.C. 1437a(a)(1)(C)) shall be the amount resulting from one
application of the percentage.
(2) For public housing only. Total tenant payment for families
residing in public housing does not include charges for excess utility
consumption or other miscellaneous charges (see Sec. 966.4 of this
chapter).
(b) Total tenant payment for families residing in public housing
whose initial lease was effective before August 1, 1982. Paragraphs (b)
and (c) of 24 CFR 913.107, as it existed immediately before November
18, 1996 (contained in the April 1, 1995 edition of 24 CFR, parts 900
to 1699), will continue to govern the total tenant payment of families,
under a public housing program, whose initial lease was effective
before August 1, 1982.
(c) Inapplicability to the Section 8 Rental Voucher Program. The
provisions of this section do not apply to the Section 8 Rental Voucher
Program.
Sec. 5.615 Utility reimbursements.
(a) General. Where applicable, the utility reimbursement shall be
paid to the family in the manner provided in the pertinent program
regulations. If the family and the utility company consent, a PHA or
owner may pay the utility reimbursement jointly to the family and the
utility company, or directly to the utility company.
(b) Inapplicability to the Section 8 Rental Voucher Program. The
provisions of this section do not apply to the Section 8 Rental Voucher
Program. For the Voucher Program, in cases where the amount of the HAP
payment exceeds the rent to owner, the excess will be paid to the
family.
Sec. 5.617 Reexamination and verification.
(a) Responsibility for initial determination and reexamination. The
PHA or owner, as applicable, must conduct a reexamination of family
income and composition at least annually. The ``effective date'' of an
examination or reexamination refers to:
(1) In the case of an examination for admission, the effective date
of the lease; and
(2) In the case of a reexamination of an existing participant, the
effective date of the redetermined housing assistance payment with
respect to the Rental Voucher program and the effective date of the
redetermined total tenant payment in all other cases.
(b) Verification. (1) As a condition of admission to, or continued
occupancy of, any assisted unit, the PHA or owner, as applicable, shall
require the family head and other such family members as it designates
to execute a HUD-approved release and consent form (including any
release and consent as required under
[[Page 54503]]
24 CFR part 760) authorizing any depository or private source of
income, or any Federal, State or local agency, to furnish or release to
the PHA or owner, as applicable, and to HUD such information as the HA
or owner, as applicable, and HUD determines to be necessary.
(2) The PHA or owner shall also require the family to submit
directly documentation determined to be necessary. Information or
documentation shall be considered necessary if it is required for
purposes of determining or auditing a family's eligibility to receive
housing assistance, for determining the family's annual income,
adjusted income or total tenant payment.
(3) The use of disclosure of information obtained from a family or
from another source pursuant to this release and consent shall be
limited to purposes directly connected with administration of this part
or applying for assistance.
(Approved by the Office of Management and Budget under control
numbers 2502-0204 and 2577-0083.)
PART 200--INTRODUCTION TO FHA PROGRAMS
6. The authority citation for 24 CFR part 200 continues to read as
follows:
Authority: 12 U.S.C. 1701-1715z-18; 42 U.S.C. 3535(d).
Subpart W--Administrative Matters
7. A new Sec. 200.1303 is added to read as follows:
Sec. 200.1303 Annual income exclusions for the rent supplement
program.
The exclusions to annual income described in 24 CFR 5.609(c) apply
to those rent supplement contracts governed by the regulations at 24
CFR part 215 in effect immediately before May 1, 1996 (contained in the
April 1, 1995 edition of 24 CFR, parts 200 to 219), in lieu of the
annual income exclusions described in 24 CFR 215.21(c) (contained in
the April 1, 1995 edition of 24 CFR, parts 200 to 219).
PART 236--MORTGAGE INSURANCE AND INTEREST REDUCTION PAYMENT FOR
RENTAL PROJECTS
8. The authority citation for 24 CFR part 236 continues to read as
follows:
Authority: 12 U.S.C. 1715b and 1715z-1; 42 U.S.C. 3535(d).
9. A new Sec. 236.3 is added to subpart A to read as follows:
Sec. 236.3 Annual income exclusions.
The exclusions to annual income described in 24 CFR 5.609(c) apply
to those program participants governed by the regulations at subpart A
of 24 CFR part 236 in effect immediately before May 1, 1996 (contained
in the April 1, 1995 edition of 24 CFR, parts 220 to 499), in lieu of
the annual income exclusions described in 236.3(c) (contained in the
April 1, 1995 edition of 24 CFR, parts 220 to 499).
PART 813--[REMOVED]
10. Part 813 is removed.
PART 913--[REMOVED]
11. Part 913 is removed.
PART 950--INDIAN HOUSING PROGRAMS
12. The authority citation for 24 CFR part 950 continues to read as
follows:
Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437a, 1437aa, 1437bb,
1437cc, 1437ee; and 3535(d).
13. Section 950.102 is amended by:
a. Revising paragraphs (5) and (6) to the definition of ``Adjusted
income'';
b. Revising paragraphs (1)(iv), (1)(v), and (2) of the definition
of ``Annual Income'';
c. Revising the definition of ``Child care expenses''; and
d. Revising the definition of ``Dependent'' to read as follows:
Sec. 950.102 Definitions.
* * * * *
Adjusted income. * * *
* * * * *
(5) Child care expenses, as defined in this definition; and
(6) Excessive travel expenses, not to exceed $25 per family per
week, for employment- or education-related travel.
* * * * *
Annual Income. * * *
(1) * * *
(iv) The full amount of periodic amounts received from Social
Security, annuities, insurance policies, retirement funds, pensions,
disability or death benefits, and other similar types of periodic
receipts, including a lump sum amount or prospective monthly amounts
for the delayed start of a periodic amount (except as provided in
paragraph (2)(xiv) of this definition);
(v) Payments in lieu of earnings, such as unemployment and
disability compensation, worker's compensation and severance pay
(except as provided in paragraph (2)(iii) of this definition);
* * * * *
(2) Annual income does not include the following:
(i) Income from employment of children (including foster children)
under the age of 18 years;
(ii) Payments received for the care of foster children or foster
adults (usually individuals with disabilities, unrelated to the tenant
family, who are unable to live alone);
(iii) Lump-sum additions to family assets, such as inheritances,
insurance payments (including payments under health and accident
insurance and worker's compensation), capital gains and settlement for
personal or property losses (except as provided in paragraph (1)(v) of
this definition);
(iv) Amounts received by the family, that are specifically for, or
in reimbursement of, the cost of medical expenses for any family
member;
(v) Income of a live-in aide;
(vi) The full amount of student financial assistance paid directly
to the student or to the educational institution;
(vii) The special pay to a family member serving in the Armed
Forces who is exposed to hostile fire;
(viii)(A) Amounts received under training programs funded by HUD;
(B) Amounts received by a disabled person that are disregarded for
a limited time for purposes of Supplemental Security Income eligibility
and benefits because they are set aside for use under a Plan to Attain
Self-Sufficiency (PASS);
(C) Amounts received by a participant in other publicly assisted
programs which are specifically for or in reimbursement of out-of-
pocket expenses incurred (special equipment, clothing, transportation,
child care, etc.) and which are made solely to allow participation in a
specific program;
(D) Amounts received under a resident service stipend. A resident
service stipend is a modest amount (not to exceed $200 per month)
received by an Indian housing resident for performing a service for the
IHA, on a part-time basis, that enhances the quality of life in the
development. Such services may include, but are not limited to, fire
patrol, hall monitoring, lawn maintenance, and resident initiatives
coordination. No resident may receive more than one such stipend during
the same period of time;
(E) Incremental earnings and benefits resulting to any family
member from participation in qualifying State or local employment
training programs (including training programs not affiliated with a
local government) and training of a family member as resident
management staff. Amounts excluded by this provision must be received
under employment training programs
[[Page 54504]]
with clearly defined goals and objectives, and are excluded only for
the period during which the family member participates in the
employment training program;
(ix) Temporary, nonrecurring or sporadic income (including gifts);
(x) Reparation payments paid by a foreign government pursuant to
claims filed under the laws of that government by persons who were
persecuted during the Nazi era;
(xi) Earnings in excess of $480 for each full-time student 18 years
old or older (excluding the head of household and spouse);
(xii) Adoption assistance payments in excess of $480 per adopted
child;
(xiii) The earnings and benefits to any family member resulting
from the participation in a program providing employment training and
supportive services in accordance with the Family Support Act of 1988,
section 22 of the Act (42 U.S.C. 1437t), or any comparable Federal,
State, Tribal or local law during the exclusion period. For purposes of
this paragraph (2)(xiii) of this definition, the following definitions
apply.
(A) Comparable Federal, State, Tribal or local law means a program
providing employment training and supportive services that:
(1) Is authorized by a Federal, State, Tribal or local law;
(2) Is funded by the Federal, State, Tribal or local government;
(3) Is operated or administered by a public agency; and
(4) Has as its objective to assist participants in acquiring
employment skills.
(B) Exclusion period means the period during which the family
member participates in a program described in this definition, plus 18
months from the date the family member begins the first job acquired by
the family member after completion of such program that is not funded
by public housing assistance under the Act. If the family member is
terminated from employment with good cause, the exclusion period shall
end.
(C) Earnings and benefits means the incremental earnings and
benefits resulting from a qualifying employment training program or
subsequent job;
(xiv) Deferred periodic amounts from supplemental security income
and social security benefits that are received in a lump sum amount or
in prospective monthly amounts;
(xv) Amounts received by the family in the form of refunds or
rebates under State or local law for property taxes on the dwelling
unit;
(xvi) Amounts paid by a State agency to a family with a
developmentally disabled family member living at home to offset the
cost of services and equipment needed to keep the developmentally
disabled family member at home; or
(xvii) Amounts specifically excluded by any other Federal statute
from consideration as income for purposes of determining eligibility or
benefits under a category of assistance programs that includes
assistance under the Act. A notice will be published in the Federal
Register and distributed to IHAs identifying the benefits that qualify
for this exclusion. Updates will be published and distributed when
necessary.
* * * * *
Child care expenses. Amounts anticipated to be paid by the family
for the care of children under 13 years of age during the period for
which annual income is computed, but only where such care is necessary
to enable a family member to actively seek employment, be gainfully
employed, or to further his or her education and only to the extent
such amounts are not reimbursed. The amount deducted shall reflect
reasonable charges for child care, and, in the case of child care
necessary to permit employment, the amount deducted shall not exceed
the amount of countable income received from such employment.
* * * * *
Dependent. A member of the family (except foster children and
foster adults) other than the family head or spouse, who is under 18
years of age or is a disabled person or handicapped person, or is a
full-time student.
* * * * *
Sec. 950.103 [Removed]
14. Section 950.103 is removed.
PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING
15. The authority citation for 24 CFR part 960 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, and 3535(d).
16. Section 960.208 is revised to read as follows:
Sec. 960.208 Rent.
The amount of rent payable by the tenant to the PHA shall be the
Tenant Rent, as defined in 24 CFR part 5, subpart F.
Dated: September 6, 1996.
Henry G. Cisneros,
Secretary.
[FR Doc. 96-26496 Filed 10-17-96; 8:45 am]
BILLING CODE 4210-32-P