[Federal Register Volume 63, Number 225 (Monday, November 23, 1998)]
[Rules and Regulations]
[Pages 64802-64803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31106]



[[Page 64801]]

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Part IV





Department of Housing and Urban Development





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24 CFR Parts 246 and 891



Rent Control Preemption for Supportive Housing for the Elderly and 
Persons With Disabilities; Final Rule

  Federal Register / Vol. 63, No. 225 / Monday, November 23, 1998 / 
Rules and Regulations  

[[Page 64802]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 246 and 891

[Docket No. FR-4346-F-01]
RIN 2502-AH21


Rent Control Preemption for Supportive Housing for the Elderly 
and Persons With Disabilities

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Final rule.

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SUMMARY: HUD's rules regarding preemption of local rent control for 
assisted housing projects have not been updated to reflect the 
statutory replacement of the section 202 direct loan program with the 
section 202 and section 811 programs for capital advances and project 
rental assistance for projects for the elderly and persons with 
disabilities. This final rule accomplishes the necessary updating 
through revision of 24 CFR part 246 concerning rent control and 24 CFR 
part 891 concerning the current section 202 and section 811 programs. 
There is no change in HUD's policy of preempting local rent control for 
assisted housing programs.

EFFECTIVE DATE: December 23, 1998.

FOR FURTHER INFORMATION CONTACT: Willie Spearmon, Director, Office of 
Business Products, Room 6134, Department of Housing and Urban 
Development, 451 Seventh Street, Washington, DC 20410-0500. Telephone 
(202) 708-2866. For hearing-and speech-impaired persons, this number 
may be accessed via TTY by calling the Federal Relay Service at 1-800-
877-8339.

SUPPLEMENTARY INFORMATION: HUD's regulations at 24 CFR part 246 set 
forth the circumstances under which local rent control laws are 
preempted by HUD regulations from applying to housing projects which 
are owned by HUD or which are involved in HUD mortgage insurance or 
subsidy programs. In Sec. 246.20, HUD identifies the projects that are 
subject to subpart C of the rule regarding subsidized projects, 
including ``all projects with mortgages held by HUD that receive a 
subsidy in the form of * * * direct loans at below-market interest 
rates under section 202 of the Housing Act of 1959 * * *'' In 
Sec. 246.21, HUD states: ``* * * it is in the national interest to 
preempt, and it (HUD) does hereby preempt, the entire field of rent 
regulation by local rent control boards (hereinafter referred to as 
board), or other authority acting pursuant to state or local law as it 
affects projects covered by this subpart.'' Section 246.22 sets forth 
procedures for project owners to seek HUD approval of increases in HUD-
approved rental levels.
    Section 246.20 is outdated because it does not reflect subsequent 
legislation affecting the section 202 program. At the time Sec. 246.20 
was issued, and until October 1, 1991, the section 202 program involved 
direct below-market interest mortgage loans from HUD to owners of 
projects for the elderly or persons with disabilities. After that date, 
section 801 of the Cranston-Gonzalez National Affordable Housing Act 
(NAHA) amended section 202 to provide a new Supportive Housing for the 
Elderly Program with capital advances and project rental assistance 
instead of direct loans. Existing section 202 projects continued to be 
subject to the ``old'' section 202 program. Section 811 of NAHA 
established a new program of Supportive Housing for Persons with 
Disabilities with capital advances and project rental assistance 
instead of direct loans. This program replaces the section 202 program 
for direct loans for projects for persons with disabilities. The 
regulations for the amended section 202 program and the section 811 
program are in 24 CFR part 891.
    The Department regards the section 202/811 programs as successors 
to the old section 202 direct loan program for purposes of rent control 
preemption. HUD controls the rents in section 202/811 projects through 
the Regulatory Agreement without regard to local rent control that 
would otherwise apply. However, HUD did not previously make a technical 
correction to Sec. 246.20 to reflect the statutory development. In this 
final rule, HUD therefore amends Sec. 246.20 to refer to section 202 as 
it existed prior to October 1, 1991. Rather than amend Sec. 246.20 to 
also specifically refer to the successor section 202/811 programs, HUD 
instead has chosen to keep intact in part 891 all of the rules 
applicable to those programs, and therefore has provided a parallel 
rent control preemption in new Sec. 891.185.
    HUD is also updating the heading of Chapter VIII of 24 CFR to 
recognize that the chapter includes the regulations for the section 202 
and section 811 Supportive Housing Programs.

Other Matters

Justification for Final Rulemaking

    In general, the Department publishes a rule for public comment 
before issuing a rule for effect, in accordance with its own 
regulations on rulemaking at 24 CFR part 10. Part 10, however, does 
provide for exceptions from that general rule where the Department 
finds good cause to omit advance notice and public participation. The 
good cause requirement is satisfied when the prior public procedure is 
``impracticable, unnecessary, or contrary to the public interest''. (24 
CFR 10.1)
    The Department finds that good cause exists to publish this interim 
rule for effect without first soliciting public comment, in that prior 
public procedure is unnecessary and contrary to the public interest. 
Public procedure is unnecessary because no change in policy is 
involved. HUD is simply making a technical correction to its rent 
control regulations applicable to subsidized projects on which HUD 
holds a mortgage to reflect the legislative division of former section 
202 into two sections of law, which collectively continue to provide 
for subsidy to the same classes of projects as the previous section 
202, through a modified subsidy mechanism under which HUD will continue 
to hold a mortgage on the project. The public policy reasons for the 
rent control preemption stated in Sec. 246.20 apply equally to the 
current section 202/811 programs. HUD considers that a change in policy 
necessitating public comment would be involved if HUD abandoned rent 
control preemption, rather than retaining it.
    HUD also considers that prior public procedure would be contrary to 
the public interest because it could raise doubts as to whether HUD's 
preemption of rental control currently applies to section 202/811 
projects with capital advances.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this interim rule, and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. This rule merely 
clarifies the application of existing regulations to the section 202/
811 programs. The rule will have no disproportionate economic impact on 
small businesses.

Environmental Impact

    This final rulemaking is exempt from the environmental review 
procedures under 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. 4332) because of the exemption under Sec. 50.19(c)(1). This 
final rulemaking simply continues without substantial change the 
existing HUD policy of preempting local rent

[[Page 64803]]

control in connection with subsidized projects for the elderly or 
persons with disabilities.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that this rule 
will not have substantial direct effects on States or their political 
subdivisions, or the relationship between the Federal Government and 
the States, or on the distribution of power and responsibilities among 
the various levels of government. No programmatic or policy changes 
will result from this rule that would affect the relationship between 
the Federal Government and State and local governments. Although the 
rule involves preemption of local rent control laws, it continues 
rather than initiates preemption in the area involved.

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 on the private sector. This rule 
does not impose any Federal mandates on any State, local, or tribal 
governments, or on the private sector, within the meaning of the UMRA.

Catalog

    The Catalog of Federal Domestic Assistance numbers for the programs 
affected by this rule are 14.157 (section 202) and 14.181 (section 
811).

List of Subjects

24 CFR Part 246

    Grant programs--housing and community development, 
Intergovernmental relations, Loan programs--housing and community 
development, Low and moderate income housing, Rent subsidies.

24 CFR Part 891

    Aged, Capital advance programs, Grant programs--housing and 
community development, Low and moderate income housing, Rent subsidies, 
Reporting and recordkeeping requirements.
    Accordingly, title 24 of the Code of Federal Regulations is amended 
as follows:

PART 246--[AMENDED]

    1. The authority citation for part 246 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b; 42 U.S.C. 3535(d).

    2. Section 246.20 is revised to read as follows:


Sec. 246.20  Applicability.

    This subpart applies to all projects with mortgages insured or held 
by HUD that receive a subsidy in the form of:
    (a) Interest reduction payments under section 236 of the National 
Housing Act;
    (b) Below-market interest rates under section 221(d)(3) and (5) of 
the National Housing Act;
    (c) Direct loans at below-market interest rates under section 202 
of the Housing Act of 1959 (as in effect immediately before October 1, 
1991);
    (d) Rent supplement payments under section 101 of the Housing and 
Urban Development Act of 1965;
    (e) Housing assistance payments under 24 CFR part 886, subpart A 
(Section 8 Loan Management Set Aside), for projects that converted 
their rent supplement contracts under section 101 of the Housing and 
Urban Development Act of 1965 to such assistance for the term of the 
HAP contract; or
    (f) Housing assistance payments pursuant to a contract under 
section 8 of the United States Housing Act of 1937 or section 23 of 
that Act (as in effect immediately before January 1, 1975), except that 
this subpart will only apply with respect to units occupied by tenants 
receiving housing assistance thereunder if the contract covers fewer 
than all units in the project.

CHAPTER VIII--OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL 
HOUSING COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 
(SECTION 8 HOUSING ASSISTANCE PROGRAMS, SECTION 202 DIRECT LOAN 
PROGRAM, SECTION 202 SUPPORTIVE HOUSING FOR THE ELDERLY PROGRAM AND 
SECTION 811 SUPPORTIVE HOUSING FOR PERSONS WITH DISABILITIES PROGRAM)

    3. The authority citation for part 891 continues to read as 
follows:

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 1436f, 3535(d), and 8013.

    4. The heading of Chapter VIII is revised to read as set forth 
above.
    5. Part 891 is amended by adding a new Sec. 891.185 to read as 
follows:


Sec. 891.185  Preemption of rent control laws.

    The Department finds that it is necessary and desirable to assist 
project owners to preserve the continued viability of each project 
assisted under this part (except subpart E) as a housing resource for 
very low-income elderly persons or persons with disabilities. The 
Department also finds that it is necessary to protect the substantial 
economic interest of the Federal Government in those projects. 
Therefore, the Department concludes that it is in the national interest 
to preempt, and it does hereby preempt, the entire field of rent 
regulation by local rent control boards or other authority acting 
pursuant to state or local law as it affects those projects. Part 246 
of this title applies to projects covered by subpart E of this part.

    Dated: October 22, 1998.
Ira Peppercorn,
General Deputy Assistant Secretary for Housing-Federal Housing 
Commissioner.
[FR Doc. 98-31106 Filed 11-20-98; 8:45 am]
BILLING CODE 4210-27-P