[Federal Register Volume 62, Number 92 (Tuesday, May 13, 1997)]
[Rules and Regulations]
[Pages 26207-26211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12315]


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

DEPARTMENT OF AGRICULTURE

Rural Housing Service; Rural Business-Cooperative Service; Rural 
Utilities Service; Farm Service Agency

7 CFR Part 1944

RIN 0575-AB43


Housing Preservation Grant Program

AGENCIES: Rural Housing Service, Rural Business-Cooperative Service, 
Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Final rule.

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

SUMMARY: The Rural Housing Service (RHS), a successor agency to the 
Farmers Home Administration (FmHA), is amending its Housing 
Preservation Grant regulations. The purpose is to allow replacement 
housing where the grantee has determined that the costs for repair and 
rehabilitation on the recipient's (individual homeowners only) existing 
housing are not economically feasible or practical. These revisions 
will bring the regulations into conformance with the Housing and 
Community Development Act of 1992 amending the Housing Preservation 
Grant program, section 533 of the Housing Act of 1949.

EFFECTIVE DATE: June 12, 1997.

FOR FURTHER INFORMATION CONTACT: Sue M. Harris-Green, Senior Loan 
Specialist, Multi-Family Housing Processing Division, Rural Housing 
Service, United States Department of Agriculture, Washington, DC 20250, 
telephone (202) 720-1606 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

Classification

    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget (OMB).

Paperwork Reduction Act

    The information collection requirements contained in this 
regulation have been approved by OMB under the provisions of 44 U.S.C. 
chapter 35 and have been assigned OMB control number 0575-0115 in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507). 
This final rule does not revise or impose any new information 
collection or recordkeeping requirement from those approved by OMB.

Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: (1) All state and 
local laws and regulations that are in conflict with this rule will be 
preempted; (2) No retroactive effect will be given to this rule; and 
(3) Administrative proceedings in accordance with the regulations of 
the agency published at 7 CFR part 11, must be exhausted before 
bringing suit.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, established requirements for Federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. Under section 202 of UMRA, Federal 
agencies generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to state, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires RHS to identify and 
consider a reasonable number of regulatory alternatives and adopt the 
least costly, more cost-effective or least burdensome alternative that 
achieves the objectives of the rule.
    The rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for state, local, and tribal 
governments or the private sector. Therefore, this rule is not subject 
to the requirements of sections 202 and 205 of the UMRA.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' It is the determination of RHS 
that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment and in 
accordance with the national Environmental Policy Act of 1969, Pub. L. 
91-190, an Environmental Impact Statement is not required.

Programs Affected

    This program is listed in the Catalog of Federal Domestic 
Assistance under number 10.433, Rural Housing Preservation Grants.

Intergovernmental Consultation

    This program is subject to the provisions of Executive Order 12372 
which requires intergovernmental consultation with state and local 
officials (7 CFR part 3015, subpart V, 48 FR 29115, June 24, 1983). The 
Rural Housing Service has conducted intergovernmental consultation in 
the manner delineated in RD Instruction 1940-J, ``Intergovernmental 
Review of

[[Page 26208]]

Farmers Home Administration Programs and Activities.''

Background Information

    The final rule incorporates title VII, section 711 of the Housing 
and Community Development Act of 1992 (Pub. L. 102-550, dated October 
28, 1992) amending section 533 of the Housing Act of 1949, 42 U.S.C. 
1490m, allowing for replacement housing where the grantee has 
determined that the costs for repair and rehabilitation on the 
recipient's (individual homeowners only) existing housing is not 
economically feasible. RHS is making no other significant changes other 
than to implement this statutory authority.

Public Comments

    The Rural Housing Service received 11 comments on the April 17, 
1995, proposed rule (60 FR 19168). The comments were from public and 
nonprofit organizations, governmental entities, and advocacy groups for 
housing.

General

    Comment: One commented stated that the rule should permit 
replacement housing when it is less expensive than rehabilitation, even 
if the dwelling is not beyond repair or rehabilitation.
    Rural Housing Service Response: The law restricts the use of 
housing preservation grant funds for replacement housing if it is not 
economically feasible for rehabilitation regardless of expense. The 
Agency, therefore, must only consider the economic feasibility of 
rehabilitation. In light of the comment and to reduce confusion caused 
by the term ``beyond repair or rehabilitation,'' we have changed 
Sec. 1944.651(a), Sec. 1944.652 (a), and Sec. 1944.653 to state that 
individual housing that is owner occupied may qualify for replacement 
housing when it is determined by the grantee that the housing is not 
economically feasible for repair or rehabilitation.
    Comment: Comments were directed to the proposed rule in 
Sec. 1944.659(b)(2) which requires that an individual homeowner must 
have been denied an RHS Section 502 loan for replacement housing. The 
commenters stated that the process will take too long and the language 
should be materially modified.
    Rural Housing Service Response: Section 1944.659(b)(2) has been 
moved to Sec. 1944.659(b)(3) to require that the grantee and RHS both 
determine that the owner of the dwelling is unable to afford a loan 
under Section 502 for replacement housing.
    Comment: One commenter stated that the rule should permit the 
demolition of the existing housing after the new house is built so that 
families will have a place to live during construction.
    Rural Housing Service Response: The Rural Housing Service has 
modified Sec. 1944.659(c)(1) to require only that the house be 
demolished as part of the process of providing replacement housing. It 
will be determined by the grantee and individual homeowner when is the 
best time for demolition. However, the existing house must be 
demolished no later than occupation of the replacement house and cannot 
be sold.
    Comment: One commenter stated that the rule should allow on-site 
improvements, such as installation of sidewalks, curbs, and off-street 
parking.
    Rural Housing Service Response: Section 1944.664(d)(3) has been 
revised to add, ``and other on-site improvements required by local 
jurisdictions.''
    Comment: One commenter was concerned about the Rural Housing 
Service's definition of dwelling. The commenter stated that at times a 
mobile home is the only solution in rural areas.
    Rural Housing Service Response: The rule provides for the use of 
manufactured housing placed on permanent foundation or which will be 
put on permanent foundation with Housing Preservation Grant (HPG) 
funds. Manufactured housing is sometimes referred to as a mobile home.

Lists of Subjects in 7 CFR Part 1944

    Grant programs--housing and community development, Home 
improvement, Loan programs--housing and community development, 
Nonprofit organizations, Reporting and recordkeeping requirements, 
Rural housing.
    Therefore, chapter XVIII, title 7, Code of Federal Regulations is 
amended as follows:

PART 1944--HOUSING

    1. The authority citation for part 1944 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 42 U.S.C. 1480.

Subpart N--Housing Preservation Grants


Sec. 1944.651  [Amended]

    2. Section 1944.651 is amended by revising the phrase ``FmHA or its 
successor agency under Public Law 103-354'' to read ``RHS'' in 
paragraph (d); and by revising the last sentence and adding a new 
sentence to the end of paragraph (a) and revising paragraph (b) to read 
as follows:


Sec. 1944.651  General.

    (a) * * * Such assistance will be used to reduce the cost of repair 
and rehabilitation, to remove or correct health or safety hazards, to 
comply with applicable development standards or codes, or to make 
needed repairs to improve the general living conditions of the 
residents, including improved accessibility by persons with a 
disability. Individual housing that is owner occupied may qualify for 
replacement housing when it is determined by the grantee that the 
housing is not economically feasible for repair or rehabilitation.
    (b) The Rural Housing Service (RHS) will provide Housing 
Preservation Grant (HPG) assistance to grantees who are responsible for 
providing assistance to eligible persons without discrimination because 
of race, color, religion, sex, national origin, age, familial status, 
or disability.
* * * * *
    3. Section 1944.652 is revised to read as follows:


Sec. 1944.652  Policy.

    (a) The policy of RHS is to provide HPG's to grantees to operate a 
program which finances repair and rehabilitation activities to 
individual housing, rental properties, or co-ops for very low- and low-
income persons. Individual housing that is owner occupied may qualify 
for replacement housing when it is determined by the grantee that the 
housing is not economically feasible for repair or rehabilitation. 
Grantees are expected to:
    (1) Coordinate and leverage funding for repair and rehabilitation 
activities, as well as replacement housing, with housing and community 
development organizations or activities operating in the same 
geographic area; and
    (2) Focus the program on rural areas and smaller communities so 
that it serves very low and low-income persons.
    (b) RHS intends to permit grantees considerable latitude in program 
design and administration. The forms or types of assistance must 
provide the greatest long-term benefit to the greatest number of 
persons residing in individual housing, rental properties, or co-ops 
needing repair and rehabilitation or replacement of individual housing.
    (c) Repairs and rehabilitation or replacement activities affecting 
properties on or eligible for listing on the National Register of 
Historic Places will be accomplished in a manner that supports national 
historic preservation objectives as specified in Sec. 1944.673.

[[Page 26209]]

    4. Section 1944.653 is amended by adding a sentence to the end of 
the section to read as follows:


Sec. 1944.653  Objective.

    * * * Further, individual housing that is owner occupied may 
qualify for replacement housing when it is determined by the grantee 
that the housing is not economically feasible for repair or 
rehabilitation, except as specified in Sec. 1944.659.
    5. Section 1944.656 is amended by revising the definitions of 
``Housing preservation,'' ``Overcrowding,'' ``Rural area,'' and ``Very 
low-income,'' by removing the definition of ``Adjusted annual income,'' 
and by adding definitions of ``Adjusted income,'' ``HPG,'' 
``Replacement housing,'' and ``RHS'' in alphabetical order to read as 
follows:


Sec. 1944.656  Definitions.

* * * * *
    Adjusted income. As defined in 7 CFR 3550.54(c).
* * * * *
    Housing preservation. The repair and rehabilitation activities that 
contribute to the health, safety, and well-being of the occupant, and 
contribute to the structural integrity or long-term preservation of the 
unit. As a result of these activities, the overall condition of the 
unit or dwelling must be raised to meet RHS Thermal Standards for 
existing structures and applicable development standards for existing 
housing recognized by RHS in part 1924, subpart A, of this chapter or 
standards contained in any of the voluntary national model codes 
acceptable upon review by RHS. Properties included on or eligible for 
inclusion on the National Register of Historic Places are subject to 
the standards and conditions of Sec. 1944.673. The term ``housing 
preservation'' does not apply to replacement housing.
    HPG. Housing Preservation Grant.
* * * * *
    Overcrowding. The guidelines in the table in this definition are 
designed to assist grantees in implementing occupancy standards. Part 
1930, subpart C, exhibit B, paragraph VID2, of this chapter (available 
in any Rural Development State or District Office) gives further 
guidance. The table follows:

------------------------------------------------------------------------
                                                                Ideal   
                     Number of bedrooms                       number of 
                                                               persons  
------------------------------------------------------------------------
0..........................................................            2
1..........................................................            2
2..........................................................            4
3..........................................................            6
4..........................................................            8
5..........................................................           10
------------------------------------------------------------------------

* * * * *
    Replacement housing. The replacement of existing, individual owner 
occupied housing where repair and rehabilitation assistance is not 
economically feasible or practical. The term replacement housing does 
not apply to housing preservation. The overall condition of the unit or 
dwelling must meet RHS Thermal Standards for new or existing structures 
and applicable development standards for new or existing housing 
recognized by RHS in part 1924, subpart A, of this chapter or standards 
contained in any of the voluntary national model codes acceptable upon 
review by RHS. Properties included on or eligible for inclusion on the 
National Register of Historic Places are subject to the standards and 
conditions of Sec. 1944.673 prior to replacement.
    RHS. RHS means the Rural Housing Service, or a successor agency.
    Rural area. The definition in 7 CFR part 3550 applies.
* * * * *
    Very low-income. An adjusted annual income that does not exceed the 
very low-income limit according to size of household as established by 
HUD for the county of MSA where the property is located. Maximum very 
low-income limits are set forth in 7 CFR part 3550.


Sec. 1944.658  [Amended]

    6. Section 1944.658 is amended by adding the words ``as well as for 
replacement housing'' after the word ``assistance'' in paragraph 
(a)(2).
    7. Section 1944.659 is added to read as follows:


Sec. 1944.659  Replacement housing.

    Replacement housing applies only to existing, individual owner 
occupied housing. Replacement housing does not apply to rental 
properties (single-unit or multiple-unit) or to cooperative housing 
projects. The grantee is responsible for determining the extent of the 
repairs and rehabilitation prior to any assistance given to an 
individual homeowner. If the cost of such repairs and rehabilitation is 
not economically feasible, then the grantee may consider replacing the 
existing housing with replacement housing, subject to the following:
    (a) The HPG grantee:
    (1) Shall document the total costs for all repairs and 
rehabilitation of the existing housing; and
    (2) Shall document the basis for the determination that the costs 
for all repairs and rehabilitation for the existing housing are not 
economically feasible.
    (b) The individual homeowner:
    (1) Must meet all requirements of Sec. 1944.661;
    (2) Must lack the income and repayment ability to replace their 
existing home without the assistance of the HPG grantee;
    (3) Must have been determined by the HPG grantee and RHS to be 
unable to afford a loan under section 502 for replacement housing; and
    (4) Must be able to afford the replacement housing on terms set 
forth by the HPG grantee.
    (c) The existing home:
    (1) Must be demolished as part of the process of providing 
replacement housing. It will be determined by the grantee and 
individual homeowner when is the best time for demolition; and
    (2) May not be sold to make way for the replacement housing.
    (d) The replacement housing:
    (1) May be either new housing or a dwelling brought onto the site 
of the existing housing;
    (2) May use no more than $15,000 in HPG funds;
    (3) Must meet all applicable requirements of 7 CFR 3550.57; and
    (4) May not be sold within 5 years of completion of the project.
    (e) Any moneys received by the homeowner from selling salvaged 
material after demolishing the existing home must be used towards the 
replacement housing.


Sec. 1944.661  [Amended]

    8. Section 1944.661 is amended by revising the reference 
``Sec. 1944.8 of subpart A of this part'' to read ``7 CFR 3550.54(c)'' 
in paragraph (a), and by revising the introductory text of paragraph 
(b)(2) and paragraph (b)(3) to read as follows:


Sec. 1944.661  Individual homeowners--eligibility for HPG assistance.

* * * * *
    (b) * * *
    (2) An undivided or divided interest in the property to be 
repaired, rehabilitated, or replaced when not all of the owners are 
occupying the property. HPG assistance may be made in such cases when:
* * * * *
    (3) A leasehold interest in the property to be repaired, 
rehabilitated, or replaced. When the potential HPG recipient's 
``ownership'' interest in the property is based on a leasehold

[[Page 26210]]

interest, the lease must be in writing and a copy must be included in 
the grantee's file. The unexpired portion of the lease must not be less 
than 5 years and must permit the recipient to make modifications to the 
structure without increasing the recipient's lease cost.
* * * * *


Sec. 1944.664  [Amended]

    9. Section 1944.664 is amended by redesignating paragraphs (d) 
through (g) as paragraphs (e) through (h), respectively; by revising 
the words ``to make improvements that'' to read ``where they'' in the 
first sentence of the introductory text of newly redesignated paragraph 
(f); by adding the words ``or replacement housing'' after the word 
``preservation'' in the introductory text of newly redesignated 
paragraph (g); and by revising the section heading, paragraph (a), and 
newly redesignated paragraphs (h)(1) and (h)(3) and by adding a new 
paragraph (d) to read as follows:


Sec. 1944.664  Housing preservation and replacement housing assistance.

    (a) Grantees are responsible for providing loans, grants, or other 
comparable assistance to homeowners, owners of rental properties or co-
ops for housing preservation or for replacement housing as described in 
Sec. 1944.656.
* * * * *
    (d) Authorized replacement housing assistance includes, but is not 
limited to:
    (1) Building a dwelling and providing related facilities for use by 
the individual homeowner as a permanent resident;
    (2) Providing a safe and sanitary water and waste disposal system, 
together with related plumbing and fixtures, which will meet local 
health department requirements;
    (3) Providing minimum site preparation and other on-site 
improvement including grading, foundation plantings, and minimal 
landscaping, and other on-site improvements required by local 
jurisdictions;
    (4) Providing special design features or equipment when necessary 
because of physical handicap or disability of the HPG recipient or 
member of the household;
    (5) Purchasing and installing approved energy saving measures and 
approved furnaces and space heaters which use a type of fuel that is 
commonly used, and is economical and dependably available;
    (6) Providing storm cellars and similar protective structures, if 
typical for the area;
    (7) Paying real estate taxes which are due and payable on the 
existing dwelling or site at the time of closing, if this amount is not 
a substantial part of the HPG assistance. (HPG assistance may not be 
made available if the real estate taxes which are due and payable are 
not paid at the time assistance is granted.);
    (8) Providing living area for the HPG recipient and all members of 
the household as required in 7 CFR 3550.54(c);
    (9) Moving a dwelling onto the site of the demolished, previously 
existing housing and meeting all HPG housing preservation requirements 
for repair and rehabilitation;
    (10) Providing funds for demolishing the existing housing; and
    (11) Any other cost that is reasonable and justifiable directly 
related to replacement activities.
* * * * *
    (h) * * *
    (1) Assist in the construction or completion of an addition 
(excluding paragraph (c)(11) of this section) or a new dwelling. This 
paragraph does not apply to replacement housing.
* * * * *
    (3) Repair or rehabilitate as well as replace any property located 
in the Coastal Barrier Resources System.
    10. Section 1944.665 is amended by revising the section heading and 
the first sentence to read as follows:


Sec. 1944.665  Supervision and inspection of work.

    Grantees are responsible for supervising all rehabilitation and 
repair work, as well as replacement housing financed with HPG 
assistance. * * *


Sec. 1944.666  [Amended]

    11. Section 1944.666 is amended by revising the reference 
``Sec. 1944.64(f)'' to read ``Sec. 1944.664(g)'' in the last sentence 
of paragraph (b)(3); and by adding the words ``as well as for 
replacement housing (individual homeowners only)'' after the word 
``rehabilitation'' in paragraph (b)(6).


Sec. 1944.667  [Amended]

    12. Section 1944.667 is amended by adding the words ``or for 
individual homes replaced,'' after the word ``rehabilitated'' in the 
second sentence of the introductory text of paragraph (a).
    13. Section 1944.670 is amended by revising paragraph (b) to read 
as follows:


Sec. 1944.670  Project income.

* * * * *
    (b) Grantees are encouraged to establish a program which reuses 
income from loans after the grant period for continuing repair and 
rehabilitation activities, as well as for individual housing replaced.


Sec. 1944.671  [Amended]

    14. Section 1944.671 is amended by adding ``/disability'' after the 
word ``handicap'' in the first sentence of the introductory text of 
paragraph (a), and by revising paragraph (a)(2) to read as follows:


Sec. 1944.671  Equal opportunity requirements and outreach efforts.

* * * * *
    (a) * * *
    (2) The term ``residential and real estate-related transaction'' 
includes the making or purchasing of loans, grants, or other financial 
assistance for purchasing, constructing, improving, repairing, or 
rehabilitating a unit or dwelling, as well as for replacement housing 
for individual homeowners.
* * * * *
    15. Section 1944.672 is amended by revising paragraphs (a), (b), 
and (d) to read as follows:


Sec. 1944.672  Environmental requirements.

* * * * *
    (a) The approval of an HPG grant for the repair, rehabilitation, or 
replacement of dwellings shall be a Class I action. As part of their 
preapplication materials, applicants shall submit Form RD 1940-20, 
``Request for Environmental Information,'' for the geographical areas 
proposed to be served by the program. The applicant shall refer to 
exhibit F-1 of this subpart (available in any Rural Development State 
or District Office) when completing Form RD 1940-20. Further guidance 
on completing this form is available from the Agency office servicing 
the program.
    (b) The use of HPG funds by the grantee to repair, rehabilitate, or 
replace on the same site, specific dwellings is generally exempt from 
an RHS environmental review. However, if such dwellings are located in 
a floodplain, wetland, or the proposed work is not concurred in by the 
Advisory Council on Historic Preservation under the requirements of 
Sec. 1944.673, an RHS environmental review is required. Dwellings 
within the Coastal Barrier Resources System are not eligible for HPG 
assistance. Applicants must include in their preapplication a process 
for identifying dwellings that may receive housing preservation or 
replacement housing assistance that will require an environmental 
assessment. This may be accomplished through use of exhibit F-2 of this 
subpart (available in any Rural Development State or District Office) 
or another process

[[Page 26211]]

supplying similar information acceptable to RHS.
* * * * *
    (d) When a dwelling requiring an environmental assessment is 
proposed for HPG assistance, the grantee will immediately contact the 
RHS office designated to service the HPG grant. Prior to approval of 
HPG assistance to the recipient by the grantee, RHS will prepare the 
environmental assessment in accordance with part 1940, subpart G, of 
this chapter with the assistance of the grantee, as necessary. 
Paragraph VIII of exhibit C of this subpart (available in any Rural 
Development State or District Office) provides further guidance in this 
area.
* * * * *
    16. Section 1944.673 is amended by revising the section heading and 
paragraph (b) to read as follows:


Sec. 1944.673  Historic preservation and replacement housing 
requirements and procedures.

* * * * *
    (b) Each applicant for an HPG grant will provide, as part of its 
preapplication documentation submitted to RHS, a description of its 
proposed process for assisting very low-and low-income persons owning 
historic properties needing rehabilitation, repair, or replacement. 
``Historic properties'' are defined as properties that are listed or 
eligible for listing on the National Register of Historic Places. Each 
HPG proposal shall comply with the provisions of Stipulation I, A-G of 
the PMOA (RD Instruction 2000-FF), available in any Rural Development 
State or District Office. Should RHS be required to assume 
responsibility for compliance with 36 CFR part 800 in accordance with 
Stipulation III of the PMOA, the grantee will assist RHS in preparing 
an environmental assessment. RHS will work with the grantee to develop 
alternative actions or mitigation measures, as appropriate.
* * * * *


Sec. 1944.683  [Amended]

    17. Section 1944.683 is amended by redesignating paragraphs (b)(3) 
through (b)(7) as paragraphs (b)(4) through (b)(8), respectively; by 
adding the words ``as well as for replacement housing'' after the word 
``rehabilitation'' in newly redesignated paragraph (b)(4)(i) and after 
the word ``financed'' in newly redesignated paragraph (b)(8); and by 
adding a new paragraph (b)(3) to read as follows:


Sec. 1944.683  Reporting requirements.

* * * * *
    (b) * * *
    (3) The use of HPG and any other funds for replacement housing.
* * * * *
    18. Section 1944.700 is revised to read as follows:


Sec. 1944.700  OMB control number.

    According to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 
35), no persons are required to respond to a collection of information 
unless it displays a valid OMB control number. The valid OMB control 
number for the information collection in this subpart is 0575-0115.

    Dated: April 17, 1997.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 97-12315 Filed 5-12-97; 8:45 am]
BILLING CODE 3410-XV-U