[Federal Register Volume 63, Number 169 (Tuesday, September 1, 1998)]
[Rules and Regulations]
[Pages 46566-46580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23421]
[[Page 46565]]
_______________________________________________________________________
Part VII
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 5, et al.
Uniform Physical Condition Standards and Physical Inspection
Requirements for Certain HUD Housing; Final Rule
Federal Register / Vol. 63, No. 169 / Tuesday, September 1, 1998 /
Rules and Regulations
[[Page 46566]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5, 207, 266, 880, 881, 882, 883, 884, 886, 891, 965,
and 983
[Docket No. FR-4280-F-03]
RIN 2501-AC45
Uniform Physical Condition Standards and Physical Inspection
Requirements for Certain HUD Housing
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule makes final a June 30, 1998 proposed rule that
proposed to establish for housing insured and/or assisted under certain
HUD programs uniform physical condition standards. These standards are
intended to ensure that such housing is decent, safe, sanitary and in
good repair. To the extent possible, HUD believes that its Section 8
housing, public housing, HUD-insured multifamily housing, and other HUD
assisted housing (collectively, HUD housing) should be subject to
uniform physical standards. Additionally, to the extent feasible, HUD
believes that the physical inspection procedures by which the standards
will be assessed should be uniform in the covered programs. Therefore,
this rule amends HUD's regulations to require that certain HUD housing,
as defined in this rule, must meet uniform physical condition standards
to ensure that the HUD housing is decent, safe, sanitary and in good
repair. This rule also generally establishes new physical inspection
procedures that will allow HUD to determine conformity with such
standards. This rule does not change the requirement for annual
physical inspections currently found in the covered HUD programs.
Additionally, this rule does not affect the existing requirements in
each covered HUD program regarding which entity is responsible for
conducting the physical inspection. This rule takes into consideration
public comment received on the June 30, 1998 proposed rule.
EFFECTIVE DATE: October 1, 1998.
FOR FURTHER INFORMATION CONTACT: For further information, contact the
Real Estate Assessment Center, Attention: William Thorson, Director of
Physical Inspection Management, Department of Housing and Urban
Development, 4900 L'Enfant Plaza East, SW, Room 8204, Washington, DC
20410; telephone (202) 755-0102. Persons with hearing and speech
impairments may contact the Center via TTY by calling the Federal
Information Relay Service at (800) 877-8399.
SUPPLEMENTARY INFORMATION:
I. The Proposed Rule
On June 30, 1998 (63 FR 35650), HUD published a proposed rule that
would establish for housing insured and/or assisted under certain HUD
programs uniform physical condition standards. HUD proposed the
standards in the June 30, 1998 proposed rule in an attempt to ensure
that such housing is decent, safe, sanitary and in good repair. HUD's
Section 8 housing, public housing, HUD-insured multifamily housing, and
other HUD assisted housing (collectively, HUD housing) must meet
certain standards and must undergo an annual physical inspection to
determine that the housing qualifies as decent, safe, sanitary and in
good repair. The description or components of what would constitute
acceptable physical housing quality and the physical inspection
procedures by which the standards are determined to be met, however,
varied from HUD program to HUD program. To the extent possible, HUD
believes that housing assisted under its programs should be subject to
uniform physical standards, regardless of the source of the subsidy or
assistance. Additionally, to the extent feasible, HUD believes that the
physical inspection procedures by which the standards will be assessed
should be uniform in the covered programs.
Proposed Standards and Inspection Process
HUD proposed that certain HUD housing, as defined in the rule, must
meet uniform physical condition standards to ensure that the HUD
housing is decent, safe, sanitary and in good repair. The proposed rule
also generally described new physical inspection procedures that would
allow HUD to determine conformity with such standards. HUD proposed the
standards and inspection process to achieve three significant
objectives:
(1) Consistency in physical condition standards for HUD housing;
(2) Standardization of the inspection to be undertaken to determine
compliance with the standards; and
(3) Implementation of an electronically-based inspection system to
evaluate, rate, and rank the physical condition of HUD housing
objectively.
In proposing uniform physical condition standards, HUD did not propose
to alter the statutory standard for maintaining HUD housing. Instead,
the proposed rule, by using the statutory terminology, clearly
acknowledged that the physical condition of the housing that is to be
met is one of ``decent, safe, and sanitary.'' Furthermore, the rule did
not propose to change the preexisting requirement for annual physical
inspections currently found in the covered HUD programs, nor did it
propose to affect the preexisting requirements in each covered HUD
program regarding which entity is responsible for conducting the
physical inspection.
Covered Programs
HUD proposed to apply the new physical condition standards to
housing insured and/or assisted by HUD under the following programs:
1. Section 8 Project-Based and Other Assisted Housing
--Section 8 Project-Based Assistance, including the Section 8 New
Construction, Substantial Rehabilitation, Loan Management Set-Aside,
Property Disposition, Moderate Rehabilitation (including the Single
Room Occupancy program for homeless individuals), and project-based
Certificate programs;
--Section 202 Program of Supportive Housing for the Elderly;
--Section 811 Program of Supportive Housing for Persons with
Disabilities; and
--Section 202 Program of Supportive Housing for the Elderly;
--Section 811 Program of Supportive Housing for Persons with
Disabilities; and
--Section 202 Loan Program for Projects for the Elderly and Handicapped
(including 202/8 projects and 202/162 projects).
2. Federal Housing Administration (FHA) Multifamily Housing
HUD also proposed to apply the standards to multifamily housing
with mortgages insured or held by HUD, or housing that is receiving
assistance from HUD, under the following authorities:
--Section 207 of the National Housing Act (NHA) (12 U.S.C. 1701 et
seq.) (Rental Housing Insurance);
--Section 213 of the NHA (Cooperative Housing Insurance);
--Section 220 of the NHA (Rehabilitation and Neighborhood Conservation
Housing Insurance);
--Section 221(d)(3) and (5) of the NHA (Housing for Moderate Income and
Displaced Families);
--Section 221(d)(4) of the NHA (Housing for Moderate Income and
Displaced Families);
--Section 231 of the NHA (Housing for Elderly Persons);
--Section 232 of the NHA (Mortgage Insurance for Nursing Homes,
[[Page 46567]]
Intermediate Care Facilities, Board and Care Homes);
--Section 234(d) of the NHA (Rental) (Mortgage Insurance for
Condominiums);
--Section 236 of the NHA (Rental and Cooperative Housing for Lower
Income Families);
--Section 241 of the NHA (Supplemental Loans for Multifamily Projects);
and
--Section 542(c) of the Housing and Community Development Act of 1992
(12 U.S.C. 1707 note) (Housing Finance Agency Risk Sharing Program).
3. Public Housing
--Housing receiving assistance under the U.S. Housing Act of 1937,
other than under section 8 of the Act (e.g., housing receiving
assistance under sections 5, 9, and 14 of the Act).
The proposed standards would address six major areas of the HUD
housing:
(1) Site;
(2) Building exterior;
(3) Building systems;
(4) Dwelling units;
(5) Common areas; and
(6) Health and safety.
II. Changes at the Final Rule Stage
HUD has made one change at the final rule stage in response to
implementation concerns about the new inspection protocol. HUD will not
require entities covered by this rule to conduct inspections in
accordance with the uniform physical condition standards and procedures
until HUD issues the final version of the inspection software and
accompanying guidebook. When these two items have been issued, HUD will
publish a notice in the Federal Register to inform the public when the
software and guidebook are available. The notice will provide 30 days
within which covered entities must prepare to conduct inspections in
accordance with this rule. Until the date that is 30 days after HUD
publishes the notice, any entity responsible for conducting a physical
inspection of HUD housing, to determine compliance with the uniform
physical condition standards in Sec. 5.703 of this rule, must continue
to comply with inspection requirements in effect immediately prior to
that date. The standards in Sec. 5.703 will become effective on the
effective date of this final rule, however, so that owners and
mortgagors of HUD housing will begin to bring such housing into
compliance with those standards.
III. Discussion of Public Comments
The initial deadline for the receipt of public comments on the
proposed uniform physical condition standards and inspection
requirements was July 30, 1998. HUD published a notice extending the
deadline for public comments until August 13, 1998 (63 FR 41754). HUD
received 77 comments on the proposed rule.
A. Qualified Support
Many commenters expressed support for HUD's goals of ensuring the
quality of housing, and streamlining and unifying its physical
condition standards and physical inspection requirements. One commenter
remarked that the new physical inspection system should help improve
the image of housing authorities, and should help identify both the
high performers and those in need of HUD intervention. The commenter
also remarked favorably on the thoroughness of the inspections and the
emphasis on safety. Another commenter remarked that the uniform
physical condition standards would assist in promoting and
strengthening a nationwide partnership of public and private
institutions. That commenter also supported the electronic reporting of
inspection information. The commenters who expressed support for the
new standards, however, expressed certain reservations about the
proposal, as discussed below.
B. General Comments on the Proposed Rule
The Public Comment Period for the Rule Was Not Sufficient. Several
commenters responded that a 30-day comment period for the proposed rule
was insufficient. The commenters stated that 30 days is inadequate for
a rule that addresses such critically important responsibilities of
housing providers.
The public comment period for this rule was extended through August
13, 1998 in response to commenters' requests. Additionally, this rule
does not impose new or significantly different requirements on the
owners and managers of HUD housing with respect to the maintenance of
HUD insured or assisted properties. This rule does not alter the
statutory standard for the maintenance of HUD housing, nor the
requirement to conduct annual property inspections. This rule more
clearly describes that statutory standard and makes that definition
consistent across HUD's applicable programs. The rule also sets forth
an inspection protocol that will be more objective and effective in
producing a higher quality assessment of the housing.
Before publication of the June 30, 1998 proposed rule, HUD sought
and obtained the participation of its program participants, industry
leaders, and industry experts with the development of: (1) physical
condition standards that are appropriate, uniform, and consistent; and
(2) an inspection protocol that is objective to the greatest degree
possible. HUD received valuable input, suggestions, and recommendations
from all these parties, as well as considerable support for replacing
vague and inconsistent standards and inspection procedures with
standards and a process that identifies housing deficiencies that make
HUD housing substandard. HUD also involved some program participants in
its testing of proposed inspection protocol. Given the importance of
this mission--providing HUD housing that is decent, safe, and sanitary
and in good repair--it is important for HUD and the Real Estate
Assessment Center to move forward with this rulemaking with deliberate
speed. While most housing developments that are assisted or insured by
HUD are maintained in good physical condition, some developments are in
deplorable condition and may even be unsafe or unhealthy. HUD must seek
to ensure that all HUD housing is decent, safe, and sanitary as
expeditiously as possible. Therefore, in light of the involvement of
program participants, the degree of changes to the physical maintenance
and inspection requirements, and the important benefits to be achieved
in the implementation of the new inspection system, HUD believes that
the comment period was adequate.
The Rule Needs to Provide Additional Information About the Physical
Inspection Standards and Protocol
Many commenters remarked that the proposed rule was too vague and
uninformative. Specific areas about which commenters asked for
additional details included how the inspection will be conducted; what
due process procedures HUD will provide for disputing scores,
correcting errors in reports, and enforcement; how scores will be
calculated; and how HUD will determine a statistically valid sample of
units.
The preamble to the proposed rule generally described the new
inspection protocol and the procedures by which the inspection would be
conducted. It has been HUD's practice to date, with the agreement and
support of its program participants, and consistent with Administrative
Procedure Act principles, that the lengthy details of an
[[Page 46568]]
inspection process, and the multiple examples of deficiencies (e.g.,
when the various types of electrical systems, heating systems, and
ventilation systems may be found to be seriously defective or in
disrepair) are provided through guidebooks, handbooks, and other
supplementary materials. Unlike the Code of Federal Regulations, which
is updated only annually, such guidance materials are easier for
program participants and other interested parties to obtain, and can be
easily and quickly supplemented as need may arise with charts and
additional examples. HUD followed this practice of providing more
detailed information through HUD handbooks with its Housing Quality
Standards (HQS) and with its FHA multifamily housing program
participants. (See, e.g., HUD Handbook 4350.5 and Form HUD-9602 for
HQS/contract administrator inspections; HUD Handbook 7420.7 for PHA HQS
inspections; HUD Handbook 4350.4 and Form HUD-9822 for FHA multifamily
housing mortgagee inspections.) HUD will continue to follow this
practice with the uniform physical condition standards. Handbooks and
other supplementary materials are the best vehicles to provide its
program participants with the materials that they need to serve as
guidance for the standards and inspection protocols. The following,
however, provides additional information on how HUD intends for the
inspections to be conducted under this new protocol.
All inspectors must be trained and certified in the use of HUD's
software. As an inspector prepares to inspect a property, the HUD-
certified inspector will download property profile information from HUD
databases. The inspector will arrive at the site to be inspected at the
predetermined date and time. The inspector will meet with a
representative of the owner/management agent or housing authority (HA),
who must accompany the inspector throughout the inspection. As
described in the proposed rule, the inspector will conduct the
inspection using a portable computer and HUD software, which will
prompt the inspector to make necessary observations regarding the
condition of the property. The inspector will inspect a randomly
selected, statistically valid sample of the units in the project.
Neither the inspector nor the owner will know exactly which units will
be inspected until the time of the inspection. The statistically valid
sample is generated by the software based on a determination of the
number and configuration of the dwelling units on the property, with a
high degree of confidence (95 percent) and a low margin for error (plus
or minus approximately 2 or 3 percentage points).
If the inspection results in the identification of any life
threatening health or safety deficiencies (e.g., electrical hazards,
blocked emergency exits, inoperative or missing smoke detectors), the
inspector will immediately note such deficiencies on a form, require
the owner or HA representative to sign the form, and leave a copy of
the form on site with the representative. The inspector will then
immediately transmit the form to the Real Estate Assessment Center
(REAC). All of the data obtained during the inspection will be
electronically transferred to the REAC, which will perform quality
assurance measures on the raw data (e.g., to ensure that the data
transmission was complete, to verify certain information about the
development, etc.). The REAC will then score the data and make an
inspection report available electronically via a HUD Web page to the
owner or HA, as well as to HUD's relevant field office. HUD expects
that the inspection report will be made available very quickly--
optimally within 48 hours of the inspection. HUD field offices will
review the results and work with the owner to ensure the timely
correction of any deficiencies.
HUD intends that all owners, housing authorities, mortgagees, or
contract administrators will receive notification of the inspection
results electronically via a HUD Web page. The entities' retrieval of
the inspection results from the Web page will trigger an electronic
receipt acknowledgement to HUD. However, HUD recognizes that not all
entities currently have the capability to receive information in this
manner. Therefore, for a limited interim period, if HUD does not
receive an electronic acknowledgement for a particular inspection
report after 10 business days, it will send the inspection report to
the owner or housing authority via certified mail.
If the owner or housing authority detects a technical error in the
inspection report, that entity is responsible for notifying HUD and for
providing HUD with sufficient justifying information. If HUD determines
that the owner or housing authority provided reasonable substantiation
regarding the error, HUD will allow for a full reinspection, which
would produce a whole new score.
As described in the proposed rule, the computer program will record
observations for the major areas (the site, the building exterior, the
building systems, the dwelling units, the common areas, and health and
safety factors) and their respective elements. The computer system will
then create a composite score for the physical condition of the housing
by calculating the component scores on a weighted average basis that is
sensitive to the relative importance of the individual inspectable
areas and the relative severity of the deficiencies observed. HUD
expects to examine and improve the detailed scoring methodology
continuously and to make improvements based on the cumulative results
of inspections. The values may also be subject to change based on the
extent to which a given property does not have a certain inspectable
element. For example, a property may not have any common areas such as
community rooms. The available weights for the other inspectable areas
would then automatically and proportionately increase. HUD does not
believe that it would be appropriate to include extensive details
regarding the calculations of the weighted scores. By not revealing
specific details of the calculations, property owners will be required
to provide a comprehensive approach to property maintenance--to
maintain their entire property in a decent, safe, and sanitary
condition and in good repair, in accordance with the standards in this
rule.
As described more fully in the rulemaking for the Public Housing
Assessment System (PHAS), the scores generated by the computer-based
inspection for public housing will allow HUD to rank the PHAs' public
housing developments objectively according to physical condition.
However, many owners and managers of multifamily HUD housing other than
public housing expressed concern about the implications of the rule.
HUD reminds such entities that this rule does not change the
responsibilities of the owners to maintain the housing, nor does it
change the responsibilities of the mortgagees to inspect the housing.
This rule simply sets forth a description of the statutory and
contractual standard with which the physical condition of the housing
must always comply, and makes that definition consistent across HUD's
applicable programs. The inspection protocol established in this rule
is simply the mechanism for gathering and transmitting the physical
inspection data to HUD more objectively and in a manner that will allow
HUD to assess more effectively the physical condition of the housing.
Similar to the new Public Housing Assessment System, HUD will use the
data obtained
[[Page 46569]]
through the inspections and the calculated scores for internal
monitoring purposes and as a way to determine how best to focus its
resources where they are most needed.
HUD will make the inspection software and the guidebook available
through the REAC Customer Service Center at no cost (besides the
nominal cost of shipping) by calling (888) 245-4860 or by writing to
the REAC at the following address: Real Estate Assessment Center,
Department of Housing and Urban Development, 4900 L'Enfant Plaza East,
SW, Washington, DC 20410.
Many commenters expressed concern with regard to inspections that
may result in a referral to HUD's new Enforcement Center. The
Enforcement Center is a fundamental programmatic reform measure that
will help restore public trust in HUD's fulfillment of its mission to
provide decent, safe, and sanitary housing for lower and moderate
income households. The Enforcement Center is intended to be the central
Departmental focus for taking aggressive action against owners of HUD's
troubled assisted housing and public housing portfolios. The
Enforcement Center will be responsible for correcting long-standing
noncompliance issues and will take action against owners who do not
cooperate with HUD during any recovery process or who may have put
housing developments in jeopardy by engaging in waste, fraud, or abuse.
Owners that do not maintain properties in decent, safe, and sanitary
condition and in good repair will be referred to the Enforcement
Center. However, this rule does not provide the Enforcement Center with
additional enforcement authority; the Enforcement Center will use
existing HUD authorities and procedures for enforcing owners'
responsibilities to maintain housing that is decent, safe, sanitary and
in good repair. These existing procedures provide entities with all
requisite due process. Each case may be different and requires analysis
to determine the most appropriate course of action.
Implementation Requires Additional Time
Several commenters objected to the implementation schedule and
suggested that HUD provide additional consideration, demonstration, and
transition time. In comparing this rulemaking with the rulemaking for
the new Public Housing Assessment System (PHAS), several commenters
objected that housing authorities will have at least a year before the
new physical condition requirements become effective for public
housing, while lenders must begin complying much sooner.
HUD's relationship with such private entities that own or manage
HUD-assisted or HUD-insured housing is necessarily different than HUD's
relationship with public housing authorities. This rule does not alter
the statutory standard for maintaining HUD housing, nor does it change
the requirement for annual inspections currently found in the covered
HUD programs or the requirements in each covered HUD program regarding
which entity is responsible for conducting the physical inspection.
Owners who are currently maintaining their housing in decent, safe, and
sanitary condition and in good repair should have no problem in meeting
the standard. Any experienced and qualified residential property
inspector should easily be able to complete the training and conduct
inspections using the new inspection protocol. Since it is essential
for HUD and the Real Estate Assessment Center to move forward with this
rulemaking with deliberate speed in order to ensure that deplorable and
life threatening housing conditions are remedied as quickly as
possible, HUD has determined that it is justifiable and necessary to
proceed to effectuate this rulemaking.
However, HUD understands that owners and managers of multifamily
housing that are not subject to PHAS may also require additional time
to gain the capability to conduct inspections in accordance with this
rule. Therefore, for all entities, besides housing authorities with
public housing that are subject to PHAS, HUD will not require such
entities to conduct inspections in accordance with this rule until HUD
issues the final version of the inspection software and accompanying
guidebook. HUD will publish a notice in the Federal Register to inform
the public when the software and guidebook are available. The notice
will provide 30 days within which such entities must prepare to conduct
inspections in accordance with this rule. Until the date that is 30
days after HUD publishes such notice, any entity responsible for
conducting a physical inspection of HUD housing, to determine
compliance with this subpart, must continue to comply with inspection
requirements in effect immediately prior to that date. The standards in
Sec. 5.703 will become effective on the effective date of this rule,
however, so that owners and mortgagors of HUD housing will begin to
bring such housing into compliance with those standards.
HUD Should Focus on Correcting Problem Developments; Developments in
Good Condition Should Not Be Subject to Annual Inspections
Several commenters remarked that the uniform physical standards
will result in the expenditure of an inordinate amount of time, energy,
and money on the great majority of properties that are not ``a
problem.'' Some commenters asserted that HUD has, in the past,
effectively ignored lenders' recommendations regarding physically
troubled properties. Some commenters suggested that for entities or
properties that receive a favorable inspection report, those entities
or properties should only be inspected every 2, 3, or 4 years. HUD
agrees that most housing developments that are assisted or insured by
HUD are maintained in good physical condition. However, HUD is not at
this time relaxing the long-standing requirement for an annual
inspection. The greatest breach of the public trust at HUD is the
waste, fraud, and abuse in HUD's existing portfolio of millions of
housing units. Such abuse often includes or results in unacceptable
living conditions for the lower and moderate income families that rely
upon HUD assistance. HUD assures the commenters that HUD will not
ignore such abuse in the future.
Limited Funds Allocated for Improving Physical Condition of Housing
Several commenters remarked that housing authorities do not always
have adequate Federal funding for improving the physical condition of
housing. Some of these commenters suggested that the housing authority
should not be adversely scored for those items identified in their
Five-Year Plan that are not yet completed, since these items do not
reflect housing authority malfeasance or neglect.
The intent of this rule is to ensure that HUD housing is decent,
safe, and sanitary and in good repair, and to establish a uniform
standard and means of assessing the condition of HUD housing. It is
important that HUD housing is assessed accurately and objectively.
After the condition of the property is accurately assessed, the
analysis of the needed corrective actions can commence. That analysis
can take into account past, present, or future funding (e.g., the
Comprehensive Grant Five-Year Plan), the allocation of existing
resources, or other factors.
Rule Contravenes National Housing Act
Some commenters asserted that this rule contravenes section 203(e)
of the National Housing Act (12 U.S.C.
[[Page 46570]]
1709(e)). The commenters asserted that the statute clearly conditions
the existence and validity of a contract for insurance between HUD and
a lender solely on HUD's execution of the contract (in the absence of
fraud by the lender). The commenters objected to this rule's
implication that lenders' participation could be conditioned upon
additional, material terms such as the physical condition of the
property.
Section 203(e) of the National Housing Act prevents HUD from
contesting the contract of mortgage insurance in the absence of lender
fraud or material misrepresentation. It does not, however, prevent HUD
from defining or otherwise delineating the parameters of acceptable
physical condition of properties with insured mortgages, as necessary
to ensure residents of decent, safe, and sanitary housing and to
protect the insurance fund, which are the purposes of this rulemaking.
Proposed Rule Adversely Affects Contract Rights
Several commenters asserted that HUD may not amend its regulations
in a way that would adversely affect the interests of a mortgagee or
lender under the contract of insurance on any mortgage or loan already
insured. The commenters pointed to Sec. 207.260 (as it existed prior to
streamlining amendments on April 1, 1996), which required the mortgagee
to ascertain the general physical condition of the property and to
furnish HUD with its inspection report, along with recommendations for
necessary action. The commenters concluded that HUD is prohibited from
implementing this rule in a way that would alter that regulatory
provision in a manner adverse to lenders. These commenters asserted,
therefore, that HUD could only apply the new physical condition
standards and inspection requirements to new insurance contracts.
The mortgage insurance contract requires the mortgagee to perform
an annual inspection. However, the contract of insurance does not
``lock in'' any particular inspection protocol. HUD previously
established the parameters for an acceptable inspection through
guidance in a handbook (HUD Handbook 4350.4). HUD has the legal
authority and responsibility to change these parameters to meet
changing conditions. HUD has determined that it is necessary to
implement a more uniform, objective, and effective inspection protocol
in order to assess its insured portfolio more accurately.
Rule Should Not Apply to Healthcare Facilities
Two commenters suggested that the uniform physical condition
standards and physical inspection requirements in this rule should not
apply to facilities with mortgages insured under section 232 of the
National Housing Act (nursing homes, intermediate care facilities, and
board and care homes). These commenters urged HUD to recognize the
unique characteristics of such housing, particularly the fact that it
may otherwise be subject to detailed and comprehensive Federal and
State regulation. These commenters stated that since there is already
sufficient government oversight of such housing, the requirements of
this rule would be unduly duplicative and burdensome.
While HUD recognizes that healthcare facilities may be covered by
other regulatory requirements, HUD believes that the other requirements
focus on the medical aspects of such facilities, such as the delivery
of medical services and the proper maintenance of medical equipment.
HUD's focus is to ensure that the residents of such facilities, which
may vary widely in the level of healthcare services that are provided,
are living in decent, safe, and sanitary housing. Furthermore, HUD (as
an insurer) has an interest in the preservation of the housing asset,
and HUD is responsible for determining compliance with statutory,
regulatory, and contractual requirements. HUD believes that its new
physical inspection system will work well to assess the building's
compliance with the physical condition standards. Therefore, HUD has
decided that this rule will apply to facilities insured under section
232 of the National Housing Act.
C. Comments on the Uniform Physical Condition Standards
Physical Conditions Beyond Owner's Control
Several commenters questioned how the inspection system would treat
conditions that are beyond the control of the owner, such as resident
neglect (e.g., poor housekeeping) or intentional damage. Other
commenters stated that housing authorities should not be penalized for
conditions over which they have no control, or about which they could
not reasonably have known. Other commenters remarked on the fact that
the local governments are usually responsible for maintaining roads and
drainage systems, and that other entities are often responsible for
maintaining playground equipment. The commenters remarked that the
inspection system should take this into account.
The new physical inspection system is objective and does not
distinguish those defects that are the fault of the resident, nor does
the system in itself recognize good faith efforts of the owner. The
system is simply a tool for observing and transmitting data regarding
the physical condition of the property. As HUD has stated previously,
the owner of HUD housing is, as always, statutorily and contractually
responsible for maintaining the physical condition of the property. HUD
anticipates that such owners, like all landlords, would rely on lease
provisions regarding the resident maintenance or destruction of the
unit, and HUD would encourage them to do so in furtherance of
compliance with the physical condition standards. Good property
management, which includes regular housekeeping and preventative
maintenance inspections throughout the year, coupled with strict lease
enforcement, will result in well-maintained housing that meets the
standard.
However, the physical condition standards and inspection
requirements in this rule only apply to aspects of the housing that are
within the ownership of the owner. For instance, an owner of HUD
housing is not responsible for maintaining roads if the owner does not
own the roads. However, the owner will be responsible for maintaining
roads that are legally part of the property.
Physical Condition Standards Are Too Vague
Several commenters remarked that the physical condition standards
in the rule are too vague. Other commenters stated that such vague
standards are difficult for inspectors to interpret and difficult for
owners to achieve. The commenters stated that the standards must be
more clearly defined if HUD intends to initiate enforcement actions
against owners or managers.
The inspectors must meet minimum qualifications and will be trained
and certified, and they will be guided in their observations by the
inspection software and the guidebook. The software and the guidebook
will be made available through the REAC Customer Service Center at no
cost (besides the nominal cost of shipping) by calling (888) 245-4860
or by writing to the REAC at the following address: Real Estate
Assessment Center, Department of Housing and Urban Development, 4900
L'Enfant Plaza East, SW, Washington, DC 20410. However, with regard to
the vagueness of the standards, the physical condition standards are
intentionally broad,
[[Page 46571]]
defined with terms such as ``in proper operating condition,''
``adequately functional,'' and ``free of health and safety hazards.''
Given the differences in construction and design of HUD housing, and
the different types of electrical and utility systems that an inspector
will encounter, the rule itself cannot define or describe every type of
housing or system. The standards in the rule describe the inspectable
areas and items and require that they are all maintained in a condition
that is decent, safe, sanitary, and in good repair. Although time and
experience with standards may reveal the need for modifications to the
regulations at some point in the future, HUD believes that the
standards in this rule are sufficiently specific for purposes of
compliance and indeed provide a great deal more detail than previous
regulations for many of HUD's programs.
Odor and Ventilation
Section 5.703(f) of the rule requires that, as a matter of health
and safety, the dwelling units and common areas must have proper
ventilation and be free of mold, odor, or other observable
deficiencies. Several commenters objected that odor and ventilation
(often affected by resident cooking, preference for closed windows, or
personal hygiene) are subjective and are not otherwise matters of
decent, safe, and sanitary housing. These commenters remarked that
these factors should not be included in the physical condition
standards.
HUD recognizes that this requirement in the physical condition
standards could have caused confusion. For purposes of health and
safety, the inspectors will be prompted to observe whether there are
strong propane, natural gas, and/or methane gas odors that could pose
risk of explosion or fire, or a risk to health if inhaled. Such odors
are indeed a matter of decent, safe, and sanitary housing, and
therefore HUD has retained the requirement in this rule.
Physical Condition Standards Should Apply to Section 8 Certificate and
Voucher Program
Several commenters objected that the rule does not apply to housing
with tenants assisted by Section 8 Certificates and Vouchers. The
commenters stated that this exemption undermines the uniformity
position presented by HUD in the proposed rule. The housing quality
standards (HQS) in HUD's regulations were originally established by the
Secretary for the purpose of Section 8 tenant-based housing assistance
(the Rental Certificate and Rental Voucher programs). As HUD explained
in the proposed rule, unlike Section 8 project-based assistance, HUD is
continuously reviewing and approving new units into the Section 8
tenant-based assistance programs, and HUD has found that HQS is
appropriate for that purpose. HUD will continue considering the
application of the new uniform standards to housing with Section 8
tenant-based housing in the future, although it is not prepared to do
so in this rule. However, since this rule does not alter the standard
with which owners must comply, but merely describes the standard in
clear terms, there should be no conflicting results from the continuing
existence of HQS for the Certificate and Voucher program.
Physical Standards Should Not Apply to PHA-Owned or Leased Projects
One commenter reviewed the conforming amendments in the proposed
rule, and objected to the amendments to 24 CFR part 965 (PHA-Owned or
Leased Projects), which would require that housing that is owned or
leased by a housing authority must be maintained in accordance with the
physical condition standards in this rule. The commenter remarked that
it is inappropriate for HUD to include housing that is owned by a
housing authority but that is not in any way funded through a HUD
program within the scope of its new standards or inspection
requirements.
HUD agrees that such an application of the standards would be
inappropriate, and HUD had no intention of applying them in that
manner. If a housing authority owns or leases housing that is not in
any way supported by HUD funds, the regulations in 24 CFR part 965
would not apply, nor would the provisions of this rule.
Uniform Physical Condition Standards Are Higher Than ``Good Repair''
Standard
Several commenters asserted that the physical condition standards
in the rule are different and more strict than the insured mortgage
standard of ``good repair.'' A few of these commenters asserted that
``good repair'' requires only that the project's original improvements
be maintained. The commenters asserted that ``good repair'' is merely a
general assessment of the overall physical condition of the property,
used to determine whether the property is at least worth the balance
due on the mortgage.
HUD maintains that the physical condition standards in this rule
are not significantly different than the standards to which all HUD
housing has previously been subject. As HUD explained in the proposed
rule, all HUD-assisted housing is statutorily subject to a standard of
decent, safe, and sanitary. In HUD-insured multifamily housing, the
mortgagors are required by contract to maintain the housing in good
repair and condition. Although HUD's regulations for its multifamily
programs did not specifically define ``good repair and condition,'' HUD
Handbook 4350.1 REV-1, Multifamily Asset Management and Project
Servicing, provides that in determining the level of management review
HUD should perform on site, it should review the mortgagee's annual
physical inspection ``to determine if the condition of the property is
consistent with the provision of ``decent, safe, and sanitary
housing.'' Regardless of whether the standard is labelled ``decent,
safe, and sanitary,'' ``good repair,'' or both (as in this rule),
owners and managers of HUD housing have always been required to
maintain the housing and to ensure that it is free from health and
safety hazards. This rule simply sets forth a uniform set of standards
for HUD housing and combines the familiar labels of ``decent, safe, and
sanitary'' and ``in good repair.''
Physical Condition Standards Should Allow Adjustments for Age and
Neighborhood Environment
Several commenters noticed that the proposed rule for the new
Public Housing Assessment System for public housing allowed for
adjustments for public housing based on the age of the development and
on neighborhood environment. Although the commenters recognized that
the public housing statute requires such allowance, the commenters
suggested that the physical condition standards should make similar
allowances for all housing.
As the commenters recognized, HUD is required by section
6(j)(1)(I)(2) of the U.S. Housing Act of 1937 (42 U.S.C.
1437d(j)(1)(I)(2)) to permit an adjustment to a housing authority's
assessment score based upon negative conditions related to the age of
the development or to the surrounding neighborhood. However, HUD has
determined that such an adjustment is not otherwise appropriate in
assessing the physical condition of property. As HUD mentioned above,
the new physical inspection system is objective; regardless of the age
of the development or the surrounding neighborhood, the housing must be
maintained for the residents in decent, safe, and sanitary condition.
[[Page 46572]]
D. Comments on the Uniform Physical Inspection Requirements
Rule Needs To Clarify Whether PHAs, Owners, and/or Mortgagees Would
Have Access to Inspection Report
Several commenters objected that the proposed rule was unclear
about when and how the owner (and the mortgagee, if applicable) would
be informed of the results of the inspection. With the direct
electronic submission described in the proposed rule, some of these
commenters expressed concern that an adverse inspection could lead to a
referral to the Enforcement Center without the mortgagee or owner
becoming aware of the findings in the inspection report. The commenters
remarked that it is essential for the owner and its site staff to
receive a copy of the inspection report immediately, which would be
easy and would result in the quick resolution of gross errors. The
commenters further stated that the inspection report is otherwise
important for asset management purposes and for presenting to third-
party investors upon request.
As HUD described above, the REAC will make an inspection report
available electronically via a HUD Web page to the owner, mortgagee, or
HA, as well as to HUD's relevant field office. HUD expects that the
inspection report will be provided to the owner or housing authority
very quickly--optimally within 48 hours of the inspection.
Mandatory Use of the Inspection Procedures
Several commenters objected to lenders being singled out for
adverse treatment, since housing authorities are not required to use
the inspection system to inspect public housing. These commenters
remarked that since other entities such as contract administrators and
mortgagees also have existing physical inspection systems in place,
HUD's argument for exempting public housing would also apply to them.
The commenters stated that those entities should also be allowed
maximum latitude for determining how best to assess compliance with the
new physical condition standards. These commenters stated that such
different treatment belies HUD's efforts toward uniformity.
HUD's relationship with such private entities that own or manage
HUD-assisted or HUD-insured housing is necessarily different than HUD's
relationship with public housing agencies in their operation of public
housing. Public housing agencies are basically governmental entities
that are government-funded under the U.S. Housing Act of 1937 for the
purpose of providing public housing to low income households. Public
housing agencies (PHAs) are subject to a statutory requirement to
inspect 100 percent of their units to determine maintenance and
modernization needs. Private entities are not subject to this same
requirement of 100 percent unit inspection. Additionally, for private
entities that own or manage HUD housing, participation in HUD programs
is voluntary. As the preamble to the June 30, 1998 proposed rule on the
new Public Housing Assessment System noted, HUD will be conducting
independent inspections of public housing units in accordance with this
new inspection protocol. The preamble also noted that HUD is
considering requiring PHAs at some future point to inspect their units
in accordance with the new inspection protocol. However, given the
statutory requirement to inspect all units, HUD decided not to impose
mandatory use of the new inspection protocol on PHAs in the first year
or first few years of implementation of the new protocol.
The consistent assessment and evaluation of HUD housing that is the
mission of the REAC depends upon the consistent, nationwide use of a
standardized analytical and risk evaluation tool for each property.
Therefore, HUD has determined that it is important to rely upon the
physical inspection system in this rule to the greatest extent
feasible. As HUD has stated previously, HUD is making the software
available to owners/agents and housing authorities at no cost (besides
shipping). Furthermore, HUD is not requiring the use of specific
hardware; the inspection software can be run on any portable computer
with certain minimum capacity (e.g., Pentium/100MHz processor or
equivalent; 320MB hard drive; 16MB RAM; battery life of 3.5 hours).
Therefore, required use of the inspection system should not be a
significant burden.
Objections Regarding the Number of Units to be Inspected
Several commenters objected that under HUD's current handbook
guidance for lenders with HUD-insured mortgages, lenders are only
required to conduct inspections for two vacant and two occupied units.
Several commenters objected that while the rule provides that a
statistically valid number of public housing units will be inspected,
it does not appear to limit the number of units that lenders must
inspect, and it could be read to require that all units must be
inspected.
To be accurate, under HUD's handbook guidance for lenders with HUD-
insured mortgages that was used prior to this rulemaking, lenders were
required to conduct an inspection ``of sufficiently high quality to
permit an accurate evaluation of the condition of the property.'' (HUD
Handbook 4350.4 CHG-7, Ch. 2, Sec. 5, 2-20) The guidance provided that
inspectors should randomly select at least two vacant units, and if
time and resources permit, select two additional vacant units--one just
after move-out and one ready for occupancy. In addition, the guidance
provided that the inspectors should randomly select several occupied
units for inspection.
This rule will not require lenders to inspect all units. The
inspection system established under this rule requires the inspection
of a statistically valid number of units. As described above,
immediately prior to the inspection, the HUD-certified inspector will
download relevant property profile information from HUD databases. The
inspector will determine a statistically valid sample of the units
based on the number and configuration of the dwelling units on the
property. In statistical validity tables, there is a point at which it
serves no useful purpose to inspect additional units. HUD recognizes
that the requirement to inspect a statistically valid sample of units
may pose an additional requirement on some mortgagees that were
previously inspecting fewer units. However, HUD's goal and mission is
to ensure that residents of HUD housing are provided decent, safe, and
sanitary housing, which obviously requires an accurate assessment of
the physical condition of such housing. In order to obtain an accurate
assessment of such housing, it is necessary to obtain inspection data
from a statistically valid number of units, and to put an end to lax
inspections.
Double Inspection
Several commenters asserted that under subsidy contracts (generally
Housing Assistance Payments contracts), HUD already requires contract
administrators, such as housing authorities and housing finance
agencies, to perform project inspections. These commenters objected
that the rule does not eliminate those duplicative inspections. HUD's
goal is to require a single inspection for such properties. HUD is
exploring ways to implement the new inspection system in a way that
will eliminate any duplicative inspections.
[[Page 46573]]
Accompanying Inspectors During Inspection
Three commenters asked whether owners would be allowed to accompany
inspectors. Other commenters objected to the increased administrative
burden of assigning staff to such a task. As noted earlier in this
rule, the new inspection system requires that a representative of the
owner/management agent accompany inspectors during these inspections.
This is necessary in order to gain access to units, utilities, and
other areas of the property. It is also important for the owner's
representative to observe and discover any significant deficiencies,
including health and safety deficiencies, so that corrective action can
be taken at the earliest possible time. It is customary in the
inspection industry for owner representatives to accompany third-party
inspectors during inspections. As such, HUD does not believe that this
is an undue requirement, but rather, as some of the commenters
remarked, an important and necessary feature.
Notice to Owners and Residents of Units to be Inspected
Two commenters asked how much advance notice the owner would
receive regarding the specific units to be inspected. Other commenters
objected to a potential administrative burden of notifying
``thousands'' of residents, especially with regard to the additional
notices required for the confirmatory inspections of public housing.
With respect to inspectors under contract to HUD, contractors are to
attempt to communicate, preferably by telephone, with the owners to
arrange for an inspection date. They are to confirm the inspection date
in writing. The owner is to have a minimum of 5 calendar days advance
written notice to provide time for notification to the residents.
Typically, owners will have more than 5 calendar days based on the
original telephone call from the inspector. HUD would expect mortgagees
and contract administrators to follow a similar procedure. While there
is a burden of notifying residents, such a burden is inherent when the
owner participates in HUD programs and is unavoidable.
Qualification of Inspectors and Fairness of the Inspection
Several commenters asked about the quantity and type of training
the inspectors would receive. Two commenters specifically asked whether
the inspectors would be qualified to inspect all the various forms of
housing (highrise buildings to single family homes), and all state-of-
the-art systems (which otherwise the commenters asserted require
specifically trained technicians). Three commenters asked what quality
control measures HUD intends to use to ensure inspectors are fair and
accurate. These commenters expressed concern that the qualifications of
the inspectors are critical, and remarked that HUD must set parameters
for qualifications and training well above simply a general familiarity
with real estate of the type to be inspected, as provided in the
proposed rule.
HUD has developed a training curriculum and certification test that
all inspectors must take to conduct inspections using HUD inspection
software. The course is approximately 40 hours long, and the
certification test involves downloading property profile information
from HUD data bases, using HUD software to conduct inspections, and
uploading the completed inspection results to HUD. HUD has established
specific qualifications and criteria for inspectors who will be
conducting these inspections; such qualifications include but are not
limited to, at least 3 years of experience that demonstrates sufficient
knowledge of multifamily and public housing. HUD believes that it has
set a reasonable and sufficient level of qualifications for inspectors
to conduct inspections of this nature. Further, HUD will monitor the
inspectors with its own quality assurance staff to assure that the
inspectors are using the protocol as intended and that inspection
reports are valid.
Increased Costs of Inspection Under This Rule
Many commenters asserted that HUD's original estimate of the costs
of an inspection is several times higher than the current industry
average and would significantly exceed the servicers' average annual
income on loans. The commenters concluded that the increase in
servicing costs will result either in higher rents, increased mortgage
rates, higher rates of FHA claims, fewer lenders willing to service FHA
mortgages, fewer owners and investors interested in HUD housing, and/or
reduced availability of affordable financing.
HUD now estimates that the costs for the inspection will be
substantially lower than it originally projected, and HUD is exploring
possible ways of lowering the costs to program participants. HUD is
determined, however, to obtain accurate assessments of its housing
portfolio in an effort to ensure that residents are not living in
substandard HUD housing. HUD can no longer tolerate shoddy inspections.
If lenders have been performing adequate inspections, HUD believes that
the new inspection procedures should not substantially increase their
costs. HUD reiterates, however, that the software will be provided, and
HUD is not requiring that inspectors use a particular type of hand-held
computer.
Furthermore, HUD believes that the commenters' claims regarding the
adverse effects of increased servicing costs will not inevitably result
from improved inspections. In fact, HUD believes that such inspections
may have a beneficial impact on the industry. The overall image of the
industry will be enhanced, because the public will perceive that HUD
and its program partners care about the quality of the affordable
housing they are offering.
Rule Affects the Liability of the Mortgagee
Several commenters objected to the rule due to their claims that it
affects the liability of the mortgagee. These commenters stated that if
HUD is requiring lenders to be responsible for inspections on HUD's
behalf, and HUD intends to make determinations about enforcement
actions based upon those inspections, HUD should somehow indemnify
lenders in the event of lawsuits regarding inspections. The commenters
explained that such indemnification could be of the conventional sort,
or could take the form of a declaration that the inspectors are acting
as HUD's agents and HUD is liable for their conduct. Some of these
commenters stated that the new physical inspection system may create a
conflict of fiduciary responsibilities for the servicing lender--its
responsibilities to its investor(s) and its responsibilities to HUD
under this rule.
This rule does not alter the lenders' responsibilities with respect
to the inspection of HUD housing. Therefore, this rule does not impose
additional liability upon lenders, and HUD does not have plans to
indemnify lenders or to accept undue liability for their conduct. HUD
is establishing this inspection system as an objective and accurate
means of fulfilling HUD's assessment and monitoring responsibilities,
and of providing HUD an accurate basis for determining where to focus
its monitoring and enforcement resources. Any enforcement action taken
by the Enforcement Center will be within HUD's existing authority and
fully in accordance with due process procedures.
Frequency of Inspections
Several commenters commented on Sec. 5.705 of the proposed rule,
which
[[Page 46574]]
provided that responsible entities must conduct inspections annually
``(unless otherwise specifically notified by HUD).'' These commenters
objected that this would allow HUD to require more frequent inspections
solely upon notification, without notice and comment rulemaking.
HUD included this language in the rule in order to provide it with
flexibility in the event that poor-performing owners need follow-up
reinspection in some circumstances. It is necessary for HUD to have the
flexibility to meet the needs of the individual situation.
IV. Regulatory Amendments
New Subpart for Physical Condition Standards and Inspection
Requirements
This rule creates a new subpart G in 24 CFR part 5. The regulations
in part 5 represent HUD's general program requirements, as well as
requirements that cut across one or more HUD programs. This new subpart
G consists of three sections. Section 5.701 provides the lists of the
types of HUD housing to which the uniform physical condition standards
and inspection requirements apply. This section also describes the
unique applicability of the requirements to the Public Housing program.
Section 5.703 contains the physical condition standards for HUD
housing that is decent, safe, sanitary and in good repair. These are
the standards to which HUD housing must be maintained. Section 5.705
simply provides that any entity responsible for conducting a physical
inspection of HUD housing must inspect such housing annually (unless
HUD provides notice to the contrary), in accordance with HUD-prescribed
physical inspection procedures. This rule does not affect the existing
requirements under each covered HUD program regarding which entity is
responsible for conducting the physical inspection.
Conforming Amendments in Program Regulations
In accordance with the physical condition standards and inspection
requirements, this rule also makes several conforming amendments to
HUD's program regulations.
1. 24 CFR Part 207; Multifamily Housing Mortgage Insurance
This rule adds a new Sec. 207.260, which provides that for FHA-
insured multifamily properties, the mortgagor must maintain the insured
project in accordance with the physical condition standards in the new
subpart G of part 5. This section also requires the mortgagee to
inspect the project in accordance with the requirements in subpart G of
part 5. As described above, however, the requirements for the mortgagor
to maintain the property in a condition that is decent, safe, sanitary
and in good repair (and for the mortgagee to inspect the property) are
not new. This rule provides a clear set of physical condition standards
and inspection requirements to help ensure that these properties are
maintained in accordance with such obligations.
2. 24 CFR Part 266; Housing Finance Agency (HFA) Risk-Sharing
This rule adds a new Sec. 266.507 to provide that the mortgagor
must maintain the project in accordance with the new physical condition
standards in subpart G of part 5. This new section applies the new
standards to all projects insured previously or in the future. This
rule also removes Sec. 266.505(b)(6) regarding the maintenance
requirements of the Regulatory Agreement between the HFA and the
mortgagor, since the maintenance requirements will be in the new
Sec. 266.507. This rule also amends Sec. 266.510(a) to require HFAs to
perform their inspections in accordance with the inspection
requirements in subpart G of part 5.
3. 24 CFR Part 880; Section 8 New Construction
This rule amends Sec. 880.201 to revise the definition of the term
``Decent, safe, and sanitary.'' This rule provides that decent, safe,
and sanitary housing is housing that meets the requirements of subpart
G of part 5. This rule also removes paragraph (a) of Sec. 880.207
regarding HUD's minimum property standards, since compliance with the
new subpart G of part 5 replaces the requirement to comply with these
standards.
4. 24 CFR Part 881; Section 8 Substantial Rehabilitation
This rule amends Sec. 881.201 to revise the definition of the term
``Decent, safe, and sanitary.'' This rule provides that decent, safe,
and sanitary housing is housing that meets the requirements of subpart
G of part 5. This rule also removes paragraph (a) of Sec. 881.207
regarding HUD's minimum design standards, since compliance with the new
subpart G of part 5 replaces the requirement to comply with these
standards.
5. 24 CFR Part 882; Section 8 (Project-Based) Moderate Rehabilitation
(Including the Single Room Occupancy Program for Homeless Individuals)
HUD recently amended its regulations in part 882 to remove the
regulatory provisions on certificates. These provisions are now in part
982. (Please see the Section 8 Certificate and Voucher Programs
Conforming Rule, published in the Federal Register on April 30, 1998,
63 FR 23826.) The only regulatory provisions remaining in part 882 are
for two Section 8 project-based programs--Moderate Rehabilitation and
Single Room Occupancy for homeless individuals.
This rule amends part 882 further to recognize the new uniform
physical condition standards. This rule amends Sec. 882.102 to revise
the definition of the term ``Decent, safe, and sanitary.'' This rule
provides that decent, safe, and sanitary housing is housing that meets
the requirements of subpart G of part 5. This rule also removes the
definition of ``Housing Quality Standards'' from Sec. 882.102, since
those standards are replaced by the new uniform physical condition
standards in this rule.
This rule then amends Sec. 882.404 by replacing the Housing Quality
Standards with references to the new physical condition standards in
subpart G of part 5. This rule retains, however, the lead-based paint
requirements that were otherwise embedded in the Housing Quality
Standards. (HUD is developing consolidated final regulations to
implement portions of the Residential Lead-Based Paint Hazard Reduction
Act of 1992 (42 U.S.C 4851 et seq.). These final regulations will be
based upon a proposed rule published on June 7, 1996 (61 FR 29170), and
will be codified in 24 CFR part 35.) This rule does not affect the
applicability of HUD's lead-based paint requirements. This rule also
retains the requirements for special housing types. Single room
occupancy, congregate housing, and group homes have particular
requirements since the individual dwelling units or sleeping areas do
not contain kitchen and/or bathroom facilities; such facilities are
provided in common areas.
This rule also amends Sec. 882.803(b) for the SRO program by
replacing references to the Housing Quality Standards with references
to Sec. 882.404. This rule retains the requirements for the adequacy of
the location of the site (e.g., site must be suitable from the
standpoint of further fair housing laws); the new physical standards in
part 5 would relate to the condition of the site,
[[Page 46575]]
rather than the initial adequacy of the location of the site.
6. 24 CFR Part 883; Section 8 State Housing Agencies
This rule amends Sec. 883.302 to add a definition of the term
``Decent, safe, and sanitary.'' This rule provides that decent, safe,
and sanitary housing is housing that meets the requirements of subpart
G of part 5. This rule also removes the definition of ``MPS (Minimum
Property Standards)'' in Sec. 883.302, and paragraphs (a)(1) and (b)(1)
of Sec. 883.310 regarding HUD's minimum property and design standards,
since compliance with the new subpart G of part 5 replaces any
requirement to comply with these standards.
7. 24 CFR Part 884; Section 8 New Construction Set-Aside for Rural
Rental Housing
This rule amends Sec. 884.102 to revise the definition of the term
``Decent, safe, and sanitary.'' This rule provides that decent, safe,
and sanitary housing is housing that meets the requirements of subpart
G of part 5. This rule also removes the definition of ``Minimum
property standards'' in Sec. 884.102, and paragraph (b)(1) of
Sec. 884.110 regarding HUD's minimum property standards, since
compliance with the new subpart G of part 5 replaces any requirement to
comply with those standards.
8. 24 CFR Part 886; Section 8 Special Allocations (Loan Management Set-
Aside (LMSA) and Property Disposition (PD))
This rule amends Secs. 886.102 (LMSA) and 886.302 (PD) to revise
the definition of the term ``Decent, safe, and sanitary.'' This rule
provides that decent, safe, and sanitary housing is housing that meets
the requirements of subpart G of part 5. This rule also amends
Secs. 886.113 (LMSA) and 886.307 (PD) by replacing the Housing Quality
Standards with references to the new physical condition standards in
subpart G of part 5. This rule retains, however, the specific occupancy
requirements (i.e., the number of residents per dwelling unit); such
requirements are not addressed by the new uniform physical condition
standards. This rule also retains the lead-based paint requirements
that are otherwise embedded in the Housing Quality Standards. This rule
does not affect the applicability of HUD's lead-based paint
requirements (although please see the reference above to the separate
regulations that are under development for lead-based paint). This rule
also retains the special requirements for congregate housing and/or
independent group residences in Secs. 886.113 and 886.307.
9. 24 CFR Part 891; Supportive Housing for the Elderly and Persons With
Disabilities
This rule adds a new Sec. 891.180 to provide that housing assisted
under these supportive housing programs must be maintained and
inspected in accordance with the physical condition standards and
inspection requirements in subpart G of part 5.
10. 24 CFR Part 965; PHA-Owned or Leased Projects--General Provisions
This rule adds a new subpart F (consisting of Sec. 965.601) to part
965. Section 965.601 requires that housing that is owned or leased by a
PHA must be maintained in accordance with the new uniform physical
condition standards. Section 965.601 also provides that for each PHA,
HUD intends to perform independent inspections to confirm that Public
Housing is being maintained in accordance with the new uniform physical
condition standards using the new inspection system, based upon a
statistically valid sample of Public Housing units for each PHA.
11. 24 CFR Part 983; Section 8 Project-Based Certificate Program
This rule amends Sec. 983.5 by replacing the Housing Quality
Standards with references to the new physical condition standards in
subpart G of part 5. This rule retains, however, the specific occupancy
requirements, since these requirements are not addressed by the new
uniform physical condition standards. This rule also retains the lead-
based paint requirements that were otherwise embedded in the Housing
Quality Standards. This rule does not affect the applicability of HUD's
lead-based paint requirements (although please see the reference above
to the separate regulations that are under development for lead-based
paint).
V. Findings and Certifications
Executive Order 12866
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, Regulatory Planning and Review, issued by the
President on September 30, 1993. OMB determined that this rule is a
``significant regulatory action,'' as defined in section 3(f) of the
Order (although not economically significant, as provided in section
3(f)(1) of the Order). Any changes made to this rule subsequent to its
submission to OMB are identified in the docket file, which is available
for public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the
Office of the Rules Docket Clerk, Office of General Counsel, Room
10276, Department of Housing and Urban Development, 451 Seventh Street,
SW, Washington, DC.
Environmental Impact
During the development of the June 30, 1998 proposed rule, a
Finding of No Significant Impact with respect to the environment was
made in accordance with HUD regulations in 24 CFR part 50 that
implement section 102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4223). That Finding continues to apply 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 the Rules Docket Clerk, Office of
General Counsel, Room 10276, Department of Housing and Urban
Development, 451 Seventh Street, SW, Washington, DC.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule is not anticipated to have a
significant economic impact on a substantial number of small entities.
All HUD housing is currently subject to physical condition standards
and a physical inspection requirement. There are statutory directives
to maintain HUD housing in a condition that is decent, safe, and
sanitary. Accordingly, this rule does not alter that requirement, nor
does the rule shift responsibility with respect to who conducts the
physical inspection of the property. The entities and individuals
previously responsible for the inspection of HUD subsidized properties
remain responsible. The rule, however, provides for uniform physical
inspection standards for the majority of HUD programs. These standards
are not significantly different from those standards to which HUD
housing is currently subject. The previous applicable standards are
similar, but there were some variations from HUD program to program.
Making these standards uniform and consistent for the HUD programs
covered by this rule should ease the administrative burden for
participants in the covered HUD programs, including and particularly
small entities. As with the implementation of any new or modified
program requirement, HUD intends to provide guidance to the covered
entities, particularly small entities, to assist them in understanding
the changes being made. As stated earlier in this preamble, HUD will be
providing the inspection software and guidebook,
[[Page 46576]]
and HUD is not requiring the use of specific hardware (so long as it
meets certain minimum capacity requirements). Therefore, HUD is
anticipating that the cost for the inspections will be substantially
lower than initial estimates. Entities that have been conducting
adequate inspections as previously required should not experience a
significant increase in costs. HUD is also providing additional time
for entities that are not subject to the new Public Housing Assessment
System to gain the capability to conduct inspections. Therefore, HUD
has considered the effects of this rule on small entities. Since this
rule does not impose additional responsibilities on HUD's program
partners, and since HUD estimates that the cost differences will not be
substantial, this rule is not anticipated to have a significant
economic impact on a substantial number of small entities.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule will not have substantial direct effects on
States or their political subdivisions, on the relationship between the
Federal Government and the States, or on the distribution of power and
responsibilities among the various levels of government. This rule
provides a uniform set of physical condition standards and physical
inspection requirements for HUD housing, which make HUD's requirements
clearer and more objective. As a result, this rule is not subject to
review under the Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal
agencies to assess the effects of their regulatory actions on State,
local, and tribal governments, and the private sector. Several
commenters asserted that this rule would violate the Unfunded Mandates
Reform Act, arguing that HUD failed to assess the costs of the
inspections on private sector lenders, failed to estimate the
disproportionate effects of the rule on the private sector, and failed
to consider and select the least costly, most cost-effective, or least
burdensome alternative for the private sector. Section 201 of the UMRA
requires agencies to assess the effects of Federal regulatory actions
on State, local, and tribal governments, and the private sector. HUD
has assessed the effects of this rule on housing authorities and other
owners and managers of HUD housing. While this rule provides a uniform
set of physical condition standards for HUD housing, these standards
are not significantly different from the standards with which program
participants already have had to comply. While this rule establishes a
new physical inspection system, it does not change the requirements in
HUD's programs for annual physical inspections. HUD has determined that
the quality of the inspections to be performed under this rule are
necessary to replace the lax inspections that may have been conducted
in the past. The uniform standards and the inspection system
established in this rule are necessary in order to bring consistency,
objectivity, accuracy, and efficiency to the assessment of the physical
condition of HUD housing.
This rule would not impose a Federal mandate within the definitions
provided in section 101 of the UMRA, because this rule merely provides
standards relating to duties that arise from participation in a
voluntary Federal program, for which funds are provided through budget
authority that is not entitlement authority. Since HUD has assessed the
effects of this rule on State, local, and tribal governments, and on
the private sector, and since this rule does not include a Federal
mandate, HUD has complied with the Unfunded Mandates Reform Act of
1995.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance numbers for the programs
that are affected by this rule are:
14.126--Mortgage Insurance--Cooperative Projects (Section 213)
14.129--Mortgage Insurance--Nursing Homes, Intermediate Care
Facilities, Board and Care Homes and Assisted Living Facilities
(Section 232)
14.134--Mortgage Insurance--Rental Housing (Section 207)
14.135--Mortgage Insurance--Rental and Cooperative Housing for
Moderate Income Families and Elderly, Market Rate Interest (Sections
221(d) (3) and (4))
14.138--Mortgage Insurance--Rental Housing for Elderly (Section 231)
14.139--Mortgage Insurance--Rental Housing in Urban Areas (Section
220 Multifamily)
14.157--Supportive Housing for the Elderly (Section 202)
14.181--Supportive Housing for Persons with Disabilities (Section
811)
14.188--Housing Finance Agency (HFA) Risk Sharing Pilot Program
(Section 542(c))
14.850--Public Housing
14.851--Low Income Housing--Homeownership Opportunities for Low
Income Families (Turnkey III)
14.852--Public Housing--Comprehensive Improvement Assistance Program
14.856--Lower Income Housing Assistance Program--Section 8 Moderate
Rehabilitation
14.859--Public Housing--Comprehensive Grant Program
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, Individuals with disabilities,
Loan programs--housing and community development, Low- and moderate-
income housing, Mortgage insurance, Pets, Public housing, Rent
subsidies, Reporting and recordkeeping requirements.
24 CFR Part 207
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements, Solar energy.
24 CFR Part 266
Aged, Fair housing, Intergovernmental relations, Mortgage
insurance, Low and moderate income housing, Reporting and recordkeeping
requirements.
24 CFR Part 880
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 881
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 882
Grant programs--housing and community development, Homeless, Lead
poisoning, Manufactured homes, Rent subsidies, Reporting and
recordkeeping requirements.
24 CFR Part 883
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 884
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements, Rural areas.
24 CFR Part 886
Grant programs--housing and community development, Lead poisoning,
Rent subsidies, Reporting and recordkeeping requirements.
[[Page 46577]]
24 CFR Part 891
Aged, Capital advance programs, Civil rights, Grant programs--
housing and community development, Individuals with disabilities, Loan
programs--housing and community development, Low- and moderate-income
housing, Mental health programs, Rent subsidies, Reporting and
recordkeeping requirements.
24 CFR Part 965
Energy conservation, Government procurement, Grant programs--
housing and community development, Lead poisoning, Loan programs--
housing and community development, Public housing, Reporting and
recordkeeping requirements, Utilities.
24 CFR Part 983
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, title 24 of
the CFR is amended as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
1. The authority citation for 24 CFR part 5 continues to read as
follows:
Authority: 42 U.S.C. 3535(d), unless otherwise noted.
2. A new subpart G is added to part 5 to read as follows:
Subpart G--Physical Condition Standards and Inspection Requirements
Sec.
5.701 Applicability.
5.703 Physical condition standards for HUD housing that is decent,
safe, sanitary and in good repair (DSS/GR).
5.705 Uniform physical inspection requirements.
Subpart G--Physical Condition Standards and Inspection Requirements
Sec. 5.701 Applicability.
(a) This subpart applies to housing assisted by HUD under the
following programs:
(1) All Section 8 project-based assistance. ``Project-based
assistance'' means Section 8 assistance that is attached to the
structure (see Sec. 982.1(b)(1) of this title regarding the distinction
between ``project-based'' and ``tenant-based'' assistance);
(2) Section 202 Program of Supportive Housing for the Elderly;
(3) Section 811 Program of Supportive Housing for Persons with
Disabilities;
(4) Section 202 loan program for projects for the elderly and
handicapped (including 202/8 projects and 202/162 projects).
(b) This subpart also applies to housing with mortgages insured or
held by HUD, or housing that is receiving assistance from HUD, under
the following authorities:
(1) Section 207 of the National Housing Act (NHA) (12 U.S.C. 1701
et seq.) (Rental Housing Insurance);
(2) Section 213 of the NHA (Cooperative Housing Insurance);
(3) Section 220 of the NHA (Rehabilitation and Neighborhood
Conservation Housing Insurance);
(4) Section 221(d)(3) and (5) of the NHA (Housing for Moderate
Income and Displaced Families);
(5) Section 221(d)(4) of the NHA (Housing for Moderate Income and
Displaced Families);
(6) Section 231 of the NHA (Housing for Elderly Persons);
(7) Section 232 of the NHA (Mortgage Insurance for Nursing Homes,
Intermediate Care Facilities, Board and Care Homes);
(8) Section 234(d) of the NHA (Rental) (Mortgage Insurance for
Condominiums);
(9) Section 236 of the NHA (Rental and Cooperative Housing for
Lower Income Families);
(10) Section 241 of the NHA (Supplemental Loans for Multifamily
Projects); and
(11) Section 542(c) of the Housing and Community Development Act of
1992 (12 U.S.C. 1707 note) (Housing Finance Agency Risk Sharing
Program).
(c) This subpart also applies to Public Housing (housing receiving
assistance under the U.S. Housing Act of 1937, other than under section
8 of the Act).
(d) For purposes of this subpart, the term ``HUD housing'' means
the types of housing listed in paragraphs (a), (b), and (c) of this
section.
Sec. 5.703 Physical condition standards for HUD housing that is
decent, safe, sanitary and in good repair (DSS/GR).
HUD housing must be decent, safe, sanitary and in good repair.
Owners of housing described in Sec. 5.701(a), mortgagors of housing
described in Sec. 5.701(b), and PHAs and other entities approved by HUD
owning housing described in Sec. 5.701(c), must maintain such housing
in a manner that meets the physical condition standards set forth in
this section in order to be considered decent, safe, sanitary and in
good repair. These standards address the major areas of the HUD
housing: the site; the building exterior; the building systems; the
dwelling units; the common areas; and health and safety considerations.
(a) Site. The site components, such as fencing and retaining walls,
grounds, lighting, mailboxes/project signs, parking lots/driveways,
play areas and equipment, refuse disposal, roads, storm drainage and
walkways must be free of health and safety hazards and be in good
repair. The site must not be subject to material adverse conditions,
such as abandoned vehicles, dangerous walks or steps, poor drainage,
septic tank back-ups, sewer hazards, excess accumulations of trash,
vermin or rodent infestation or fire hazards.
(b) Building exterior. Each building on the site must be
structurally sound, secure, habitable, and in good repair. Each
building's doors, fire escapes, foundations, lighting, roofs, walls,
and windows, where applicable, must be free of health and safety
hazards, operable, and in good repair.
(c) Building systems. Each building's domestic water, electrical
system, elevators, emergency power, fire protection, HVAC, and sanitary
system must be free of health and safety hazards, functionally
adequate, operable, and in good repair.
(d) Dwelling units. (1) Each dwelling unit within a building must
be structurally sound, habitable, and in good repair. All areas and
aspects of the dwelling unit (for example, the unit's bathroom, call-
for-aid (if applicable), ceiling, doors, electrical systems, floors,
hot water heater, HVAC (where individual units are provided), kitchen,
lighting, outlets/switches, patio/porch/balcony, smoke detectors,
stairs, walls, and windows) must be free of health and safety hazards,
functionally adequate, operable, and in good repair.
(2) Where applicable, the dwelling unit must have hot and cold
running water, including an adequate source of potable water (note for
example that single room occupancy units need not contain water
facilities).
(3) If the dwelling unit includes its own sanitary facility, it
must be in proper operating condition, usable in privacy, and adequate
for personal hygiene and the disposal of human waste.
(4) The dwelling unit must include at least one battery-operated or
hard-wired smoke detector, in proper working condition, on each level
of the unit.
(e) Common areas. The common areas must be structurally sound,
secure, and functionally adequate for the purposes intended. The
basement/garage/carport, restrooms, closets, utility, mechanical,
community rooms, day care, halls/corridors, stairs, kitchens, laundry
rooms, office, porch, patio, balcony, and trash collection areas, if
applicable, must be free of health and safety hazards, operable, and in
good repair. All common area ceilings, doors, floors,
[[Page 46578]]
HVAC, lighting, outlets/switches, smoke detectors, stairs, walls, and
windows, to the extent applicable, must be free of health and safety
hazards, operable, and in good repair. These standards for common areas
apply, to a varying extent, to all HUD housing, but will be
particularly relevant to congregate housing, independent group homes/
residences, and single room occupancy units, in which the individual
dwelling units (sleeping areas) do not contain kitchen and/or bathroom
facilities.
(f) Health and safety concerns. All areas and components of the
housing must be free of health and safety hazards. These areas include,
but are not limited to, air quality, electrical hazards, elevators,
emergency/fire exits, flammable materials, garbage and debris, handrail
hazards, infestation, and lead-based paint. For example, the buildings
must have fire exits that are not blocked and have hand rails that are
undamaged and have no other observable deficiencies. The housing must
have no evidence of infestation by rats, mice, or other vermin, or of
garbage and debris. The housing must have no evidence of electrical
hazards, natural hazards, or fire hazards. The dwelling units and
common areas must have proper ventilation and be free of mold, odor
(e.g., propane, natural gas, methane gas), or other observable
deficiencies. The housing must comply with all requirements related to
the evaluation and reduction of lead-based paint hazards and have
available proper certifications of such (see 24 CFR part 35).
(g) Compliance with State and local codes. The physical condition
standards in this section do not supersede or preempt State and local
codes for building and maintenance with which HUD housing must comply.
HUD housing must continue to adhere to these codes.
Sec. 5.705 Uniform physical inspection requirements.
(a) Any entity responsible for conducting a physical inspection of
HUD housing, to determine compliance with this subpart, must inspect
such HUD housing annually (unless otherwise specifically notified by
HUD), in accordance with HUD-prescribed physical inspection procedures.
For Public Housing, PHAs have the option to inspect Public Housing
units using the procedures prescribed in accordance with this section.
(b) Inspections in accordance with the physical inspection
procedures identified in paragraph (a) of this section shall not be
required until HUD has issued the inspection software and accompanying
guidebook. When the software and guidebook have been issued, HUD will
publish a notice in the Federal Register to inform the public when the
software and guidebook are available. The notice will provide 30 days
within which covered entities must prepare to conduct inspections in
accordance with this subpart. Until the date that is 30 days after HUD
publishes such notice, any entity responsible for conducting a physical
inspection of HUD housing, to determine compliance with this subpart,
must continue to comply with inspection requirements in effect
immediately prior to that date.
PART 207--MULTIFAMILY HOUSING MORTGAGE INSURANCE
3. The authority citation for 24 CFR part 207 continues to read as
follows:
Authority: 12 U.S.C. 1701z-11(e), 1713, and 1715b; 42 U.S.C.
3535(d).
4. A new Sec. 207.260 is added, immediately after Sec. 207.259a, to
read as follows:
Sec. 207.260 Maintenance and inspection of property.
As long as the mortgage is insured or held by the Commissioner, the
mortgagor must maintain the insured project in accordance with the
physical condition requirements in 24 CFR part 5, subpart G; and the
mortgagee must inspect the project in accordance with the physical
inspection requirements in 24 CFR part 5, subpart G.
PART 266--HOUSING FINANCE AGENCY RISK-SHARING PROGRAM FOR INSURED
AFFORDABLE MULTIFAMILY PROJECT LOANS
5. The authority citation for 24 CFR part 266 continues to read as
follows:
Authority: 12 U.S.C. 1707; 42 U.S.C. 3535(d).
Sec. 266.505 [Amended]
6. Section 266.505 is amended by removing and reserving paragraph
(b)(6).
7. A new Sec. 266.507 is added, to read as follows:
Sec. 266.507 Maintenance requirements.
The mortgagor must maintain the project in accordance with the
physical condition standards in 24 CFR part 5, subpart G.
8. In Sec. 266.510, paragraph (a) is revised to read as follows:
Sec. 266.510 HFA responsibilities.
(a) Inspections. The HFA must perform inspections in accordance
with the physical inspection procedures in 24 CFR part 5, subpart G.
* * * * *
PART 880--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW
CONSTRUCTION
9. The authority citation for 24 CFR part 880 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and
13611-13619.
10. Section 880.201 is amended by revising the definition of
``Decent, safe and sanitary'', to read as follows:
Sec. 880.201 Definitions.
* * * * *
Decent, safe, and sanitary. Housing is decent, safe, and sanitary
if it meets the physical condition requirements in 24 CFR part 5,
subpart G.
* * * * *
Sec. 880.207 [Amended]
11. Section 880.207 is amended by removing and reserving paragraph
(a).
PART 881--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR
SUBSTANTIAL REHABILITATION
12. The authority citation for 24 CFR part 881 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and
13611-13619.
13. Section 881.201 is amended by revising the definition of
``Decent, safe and sanitary'', to read as follows:
Sec. 881.201 Definitions.
* * * * *
Decent, safe, and sanitary. Housing is decent, safe, and sanitary
if it meets the physical condition requirements in 24 CFR part 5,
subpart G.
* * * * *
Sec. 881.207 [Amended]
14. Section 881.207 is amended by removing and reserving paragraph
(a).
PART 882--SECTION 8 MODERATE REHABILITATION PROGRAMS
15. The authority citation for 24 CFR part 882 continues to read as
follows:
Authority: 42 U.S.C. 1437f and 3535(d).
16. In Sec. 882.102, paragraph (b) is amended by revising the
definition of ``Decent, safe, and sanitary''; and by removing the
definition of ``Housing quality standards (HQS)''; to read as follows:
Sec. 882.102 Definitions.
* * * * *
(b) * * *
Decent, safe, and sanitary. Housing is decent, safe, and sanitary
if it meets the
[[Page 46579]]
physical condition standards in 24 CFR part 5, subpart G.
* * * * *
17. Section 882.404 is revised to read as follows:
Sec. 882.404 Physical condition standards; physical inspection
requirements.
(a) Compliance with physical condition standards. Housing in this
program must be maintained and inspected in accordance with the
requirements in 24 CFR part 5, subpart G.
(b) Space and security. In addition to the standards in 24 CFR part
5, subpart G, a dwelling unit used in the Section 8 moderate
rehabilitation program that is not SRO housing must have a living room,
a kitchen area, and a bathroom. Such a dwelling unit must have at least
one bedroom or living/sleeping room for each two persons.
(c) Special housing types. The following provisions in 24 CFR part
982, subpart M (Special Housing Types) apply to the Section 8 moderate
rehabilitation program:
(1) 24 CFR 982.605(b) (for SRO housing). For the Section 8 moderate
rehabilitation SRO program under subpart H of this part 882, see also
Sec. 882.803(b).
(2) 24 CFR 982.609(b) (for congregate housing).
(3) 24 CFR 982.614(c) (for group homes).
(d) Compliance with lead-based paint requirements. Housing used in
the Section 8 moderate rehabilitation program must comply with the
lead-based paint requirements in Sec. 982.401(j). For purposes of the
SRO program, however, see Sec. 882.803(b).
18. Section 882.803 is amended by revising paragraph (b), to read
as follows:
Sec. 882.803 Project eligibility and other requirements.
* * * * *
(b)(1) Physical condition standards. Section 882.404 applies to
this program; however, the lead-based paint requirements in
Sec. 982.401(j) of this title do not apply to this program, since these
SRO units will not house children.
(2) Site standards. (i) The site must be adequate in size,
exposure, and contour to accommodate the number and type of units
proposed; adequate utilities and streets must be available to service
the site. (The existence of a private disposal system and private
sanitary water supply for the site, approved in accordance with local
law, may be considered adequate utilities.)
(ii) The site must be suitable from the standpoint of facilitating
and furthering full compliance with the applicable provisions of title
VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d-4), title
VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601-19), E.O. 11063
(as amended by E.O. 12259; 3 CFR, 1959-1963 Comp., p. 652 and 3 CFR,
1980 Comp., p. 307), and HUD regulations issued pursuant thereto.
(iii) The site must be accessible to social, recreational,
educational, commercial, and health facilities, and other appropriate
municipal facilities and services.
* * * * *
PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE
HOUSING AGENCIES
19. The authority citation for 24 CFR part 883 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.
20. Section 883.302 is amended by adding a definition of ``Decent,
safe, and sanitary'', in alphabetical order; and by removing the
definition of ``MPS (Minimum Property Standards''; to read as follows:
Sec. 883.302 Definitions.
* * * * *
Decent, safe, and sanitary. Housing is decent, safe, and sanitary
if it meets the physical condition requirements in 24 CFR part 5,
subpart G.
* * * * *
Sec. 883.310 [Amended]
21. Section 883.310 is amended by removing and reserving paragraphs
(a)(1) and (b)(1).
PART 884--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM, NEW
CONSTRUCTION SET-ASIDE FOR SECTION 515 RURAL RENTAL HOUSING
PROJECTS
22. The authority citation for 24 CFR part 884 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.
23. Section 884.102 is amended by revising the definition of
``Decent, safe, and sanitary''; and by removing the definition of
``Minimum property standards''; to read as follows:
Sec. 884.102 Definitions.
* * * * *
Decent, safe, and sanitary. Housing is decent, safe, and sanitary
if it meets the physical condition requirements in 24 CFR part 5,
subpart G.
* * * * *
24. In Sec. 884.110, paragraph (b) is revised to read as follows:
Sec. 884.110 Types of housing and property standards.
* * * * *
(b) Participation in this program requires compliance with:
(1) [Reserved]
(2) In the case of congregate housing, the appropriate HUD
guidelines and standards;
(3) HUD requirements pursuant to section 209 of the HCD Act for
projects for the elderly, disabled, or handicapped;
(4) HUD requirements pertaining to noise abatement and control; and
(5) Applicable State and local laws, codes, ordinances, and
regulations.
* * * * *
PART 886--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--SPECIAL
ALLOCATIONS
25. The authority citation for 24 CFR part 886 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.
26. Section 886.102 is amended by revising the definition of
``Decent, Safe and Sanitary'', to read as follows:
Sec. 886.102 Definitions.
* * * * *
Decent, Safe, and Sanitary. Housing is decent, safe, and sanitary
if it meets the physical condition requirements in 24 CFR part 5,
subpart G.
* * * * *
27. Section 886.113 is amended by revising the heading; by removing
the introductory text; by revising paragraphs (a) and (b); by removing
and reserving paragraphs (c) through (h); by removing and reserving
paragraphs (j) through (m); and by revising the introductory text of
paragraph (n); to read as follows:
Sec. 886.113 Physical condition standards; physical inspection
requirements.
(a) General. Housing used in this program must be maintained and
inspected in accordance with the requirements in 24 CFR part 5, subpart
G.
(b) Space and security. In addition to the standards in 24 CFR part
5, subpart G, the dwelling unit must have a living room, a kitchen
area, and a bathroom. The dwelling unit must have at least one bedroom
or living/sleeping room for each two persons.
* * * * *
[[Page 46580]]
(n) Congregate housing. In addition to the foregoing standards, the
following standards apply to congregate housing:
* * * * *
28. Section 886.302 is amended by revising the definition of
``Decent, safe, and sanitary'', to read as follows:
Sec. 886.302 Definitions.
* * * * *
Decent, safe, and sanitary. Housing is decent, safe, and sanitary
if it meets the physical condition requirements in 24 CFR part 5,
subpart G.
* * * * *
29. Section 886.307 is amended by revising the heading; by removing
the introductory text; by revising paragraphs (a) and (b); by removing
and reserving paragraphs (c) through (h); by removing and reserving
paragraphs (j) through (l); by revising the introductory text of
paragraphs (m) and (n); and by removing paragraphs (o) and (p); to read
as follows:
Sec. 886.307 Physical condition standards; physical inspection
requirements.
(a) General. Housing assisted under this part must be maintained
and inspected in accordance with the requirements in 24 CFR part 5,
subpart G.
(b) Space and security. In addition to the standards in 24 CFR part
5, subpart G, the dwelling unit must have a living room, a kitchen
area, and a bathroom. The dwelling unit must have at least one bedroom
or living/sleeping room for each two persons.
* * * * *
(m) Congregate housing. In addition to the foregoing standards, the
following standards apply to congregate housing:
* * * * *
(n) Independent group residence. In addition to the foregoing
standards, the standards in 24 CFR 887.467 (a) through (g) apply to
independent group residences.
PART 891--SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH
DISABILITIES
30. The authority citation for 24 CFR part 891 continues to read as
follows:
Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.
31. In subpart A of part 891, a new Sec. 891.180 is added, to read
as follows:
Sec. 891.180 Physical condition standards; physical inspection
requirements.
Housing assisted under this part must be maintained and inspected
in accordance with the requirements in 24 CFR part 5, subpart G.
PART 965--PHA-OWNED OR LEASED PROJECTS--GENERAL PROVISIONS
32. The authority citation for 24 CFR part 965 continues to read as
follows:
Authority: 2 U.S.C. 1437, 1437a, 1437d, 1437g, and 3535(d).
Subpart H is also issued under 42 U.S.C. 4821-4846.
33. In part 965, a new subpart F, consisting of Sec. 965.601, is
added, to read as follows:
Subpart F--Physical Condition Standards and Physical Inspection
Requirements
Sec. 965.601 Physical condition standards; physical inspection
requirements.
Housing owned or leased by a PHA, and public housing owned by
another entity approved by HUD, must be maintained in accordance with
the physical condition standards in 24 CFR part 5, subpart G. For each
PHA, HUD will perform an independent physical inspection of a
statistically valid sample of such housing based upon the physical
condition standards in 24 CFR part 5, subpart G.
PART 983--SECTION 8 PROJECT-BASED CERTIFICATE PROGRAM
34. The authority citation for 24 CFR part 983 continues to read as
follows:
Authority: 42 U.S.C. 1437f and 3535(d).
35. Section 983.5 is revised to read as follows:
Sec. 983.5 Physical condition standards; physical inspection
requirements.
(a) General. Housing used in this program must be maintained and
inspected in accordance with the requirements in 24 CFR part 5, subpart
G.
(b) Space and security. In addition to the standards in 24 CFR part
5, subpart G, the dwelling unit must have a living room, a kitchen
area, and a bathroom. The dwelling unit must have at least one bedroom
or living/sleeping room for each two persons.
(c) Lead-based paint. 24 CFR 982.401(j) applies to assistance under
this part.
Dated: August 26, 1998.
Andrew Cuomo,
Secretary.
[FR Doc. 98-23421 Filed 8-31-98; 8:45 am]
BILLING CODE 4210-32-P