[Federal Register Volume 64, Number 32 (Thursday, February 18, 1999)]
[Notices]
[Pages 8192-8208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3731]


      

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Part IV





Department of Housing and Urban Development





_______________________________________________________________________



Quality Housing and Work Responsibility Act of 1998; Initial Guidance; 
Notice

  Federal Register / Vol. 64, No. 32 / Thursday, February 18, 1999 / 
Notices  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4434-N-01]


Quality Housing and Work Responsibility Act of 1998; Initial 
Guidance

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Notice.

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SUMMARY: On October 21, 1998, President Clinton signed into law the 
Quality Housing and Work Responsibility Act of 1998. This new statute, 
part of HUD's fiscal year 1999 HUD Appropriations Act, embodies many of 
the reforms of the HUD 2020 Management Reform Plan that are directed at 
revitalizing and improving HUD's public housing and Section 8 
assistance programs. The purpose of this Notice is to advise the public 
of those public and assisted housing statutory provisions that are 
effective immediately and action that may or should be taken now. This 
Notice also provides guidance on certain other provisions in the FY 
1999 HUD Appropriations Act that impact public housing programs and 
Section 8 assistance.

FOR FURTHER INFORMATION CONTACT: For further information regarding 
public housing and the Section 8 certificate, voucher and moderate 
rehabilitation programs contact Rod Solomon, Senior Director for Policy 
and Legislation, Office of Public and Indian Housing, Department of 
Housing and Urban Development, 451 Seventh Street, SW, Room 4116, 
Washington, DC, 20410; telephone (202) 708-0713 (this is not a toll-
free number). For further information regarding other Section 8 
programs contact Willie Spearmon, Director, Office of Multifamily 
Business Products; telephone (202) 708-3000. Persons with hearing or 
speech impairments may access that number via TTY by calling the 
Federal Information Relay Service at (800) 877-8339. Program 
specialists for more specific HUD program areas are listed on the HUD 
web page at http://hudweb.hud.gov/offices.html.

SUPPLEMENTARY INFORMATION:

Introduction

    On October 21, 1998, President Clinton signed into law HUD's fiscal 
year (FY) 1999 Appropriations Act, which includes the Quality Housing 
and Work Responsibility Act of 1998 (title V of the FY 1999 HUD 
Appropriations Act) (QHWRA). The FY 1999 HUD Appropriations Act and the 
QHWRA (Pub.L. 105-276, 112 Stat. 2461), together, enact landmark 
measures that include transforming public housing, deconcentrating 
poverty, creating additional housing assistance vouchers, merging the 
Section 8 certificate and voucher programs, and enabling more families 
to obtain FHA mortgages to become homeowners. Of particular importance 
to HUD and its public housing and Section 8 program partners are the 
reforms made by the QHWRA. The QHWRA makes significant and numerous 
amendments to the United States Housing Act of 1937 (USHA). It is 
important to note, however, that the USHA remains in effect except as 
amended by the QHWRA.
    The QHWRA constitutes a substantial overhaul of HUD's public 
housing and Section 8 assistance programs. The QHWRA enacts into law 
many of the reforms originally proposed in Secretary Andrew Cuomo's HUD 
2020 Management Reform Plan, HUD's public housing bill and 
Congressional bills that are directed at revitalizing and improving 
HUD's public housing and Section 8 tenant-based programs. For public 
housing, the HUD 2020 Management Reform Plan provides for consolidation 
of public housing programs, decreased regulation of well-managed public 
housing agencies (PHAs), higher performance standards for all PHAs, and 
specific action to address PHAs with troubled management. The QHWRA 
adopts these reforms, and enacts additional measures to protect access 
to housing assistance for the poorest families, deconcentrate poverty 
in public housing, support families making the transition from welfare 
to work, and transform the public housing stock and the Section 8 
tenant-based assistance programs.
    The purposes of the QHWRA, as stated in section 502(b) of the 
QHWRA, are as follows:

    The purpose of this [the QHWRA] is to promote homes that are 
affordable to low-income families in safe and healthy environments, 
and thereby contribute to the supply of affordable housing, by--
    (1) Deregulating and decontrolling public housing agencies, 
thereby enabling them to perform as property and asset managers;
    (2) Providing for more flexible use of Federal assistance to 
public housing agencies, allowing the authorities to leverage and 
combine assistance amounts with amounts obtained from other sources;
    (3) Facilitating mixed income communities and decreasing 
concentrations of poverty in public housing;
    (4) Increasing accountability and rewarding effective management 
of public housing agencies;
    (5) Creating incentives and economic opportunities for residents 
of dwelling units assisted by public housing agencies to work, 
become self-sufficient, and transition out of public housing and 
federally assisted dwelling units;
    (6) Consolidating the voucher and certificate programs for 
rental assistance under section 8 of the United States Housing Act 
of 1937 into a single market-driven program that will assist in 
making tenant-based rental assistance under such section more 
successful at helping low-income families obtain affordable housing 
and will increase housing choice for low-income families; and
    (7) Remedying the problems of troubled public housing agencies 
and replacing or revitalizing severely distressed public housing 
projects.

Implementation of the QHWRA

    The QHWRA makes several of its provisions effective upon enactment 
(October 21, 1998). Other provisions of the QHWRA will take effect on 
various dates between October 21, 1998, the enactment date of the 
QHWRA, and October 1, 1999, the beginning of Federal fiscal year 2000. 
(A Federal fiscal year runs from October 1st to September 30th). The 
majority of the provisions of the QHWRA, however, will take effect on 
October 1, 1999. Provisions of the QHWRA which are effective upon 
enactment and which conflict with existing regulations prevail over the 
regulations unless HUD has specifically stated otherwise, in this 
Notice or elsewhere. In addition to specifying the dates by which 
various statutory sections will take effect, the QHWRA also specifies 
the method of implementation for many of its provisions. These methods 
include notice and comment rulemaking (proposed rulemaking), interim 
rulemaking, negotiated rulemaking, or issuance by direct notice or 
Federal Register notice.
    The purpose of this Notice is to advise HUD's public housing and 
Section 8 program partners, as well as members of the public, of 
certain provisions of the QHWRA and the FY 1999 HUD Appropriations Act 
that are effective immediately and to provide guidance with respect to 
actions that may now be taken or should be taken by PHAs and owners of 
Section 8 assisted projects. This Notice does not provide a section-by-
section analysis of the QHWRA, nor does it provide guidance on all 
sections. In this Notice, however, HUD has attempted to address those 
key statutory sections that are effective now, and which HUD believed 
would be helpful to PHAs and others to have early guidance. The 
statutory sections that are effective now and for which HUD is issuing 
initial guidance are covered in

[[Page 8193]]

Section I of this Notice. The majority of the statutory sections of the 
QHWRA that are not addressed in this Notice (1) require rulemaking by 
the QHWRA, (2) have been determined by HUD to be not immediately 
effective, or (3) need elaboration or interpretation, and therefore 
require rulemaking on the part of HUD or issuance of separate guidance 
that addresses in detail the subject matter of a particular statutory 
section. Section II of this Notice provides a list of those statutory 
provisions for which the QHWRA requires rulemaking for implementation 
or HUD has determined that rulemaking is necessary for implementation.
    The guidance provided in this Notice, read together with reference 
to the statutory language, will better assist the reader in 
understanding (1) the changes that are being implemented in HUD's 
public housing and Section 8 programs, (2) the prompt action that HUD 
recommends be taken now or in the very near future, and (3) the reasons 
for any deferred action with respect to certain statutory provisions. 
Accordingly, the guidance in this Notice is complete only when read in 
conjunction with the statutory language. The contents of the QHWRA are 
available on the Internet by Thomas Legislative Information Service at 
http://thomas.loc.gov or by contacting HUD's Office of Public and 
Indian Housing or HUD's Office of Housing.
    In addition to the guidance provided by this Notice, HUD staff, and 
specifically the staff in the Office of Public and Indian Housing at 
Headquarters and in the Field Offices, are ready to assist PHAs in 
understanding the provisions of the QHWRA and with carrying out their 
responsibilities under new provisions of the QHWRA. The Office of 
Public and Indian Housing has established a section of its web site 
that is devoted to providing additional information about the QHWRA and 
includes a detailed summary of the new law (please see http://
www.hud.gov/pih/legis/titlev.html). HUD is committed to working closely 
with its public housing and Section 8 partners to see that the changes 
made by the QHWRA to HUD's public housing and Section 8 programs are 
successfully implemented and these programs are significantly improved 
with respect to the services and assistance they provide to low-income 
families.

Other QHWRA Publications in Today's Federal Register

    Elsewhere in today's Federal Register, HUD is publishing:
    (1) One of the most significant rules required by the QHWRA--the 
interim rule that would implement the Public Housing Agency Plan. This 
rulemaking is required by section 511 of the QHWRA.
    (2) An Advance Notice of Proposed Rulemaking on HUD's public 
housing drug elimination program that solicits comments in advance of 
rulemaking on HUD's proposal to provide for formula funding of HUD's 
drug elimination grant funds.
    (3) A notice on Section 8 renewals. Section 556 of the QHWRA added 
a new provision, section 8(dd) to the U.S. Housing Act of 1937. Section 
8(dd) specifies the method for calculating the amount of assistance to 
be provided for renewal of all expiring tenant-based annual 
contributions contracts. PHAs were advised of this methodology for 
fiscal year 1999, by direct notice issued on December 31, 1998. Today's 
Federal Register on Section 8 renewals publishes this notice for the 
benefit of the public. The policy for Section 8 renewals for future 
years will be the subject of negotiated rulemaking for the development 
of final regulations.

Nondiscrimination Requirements

    HUD's responsibilities and the responsibilities of its program 
partners, in implementing new programs and program changes covered by 
the QHWRA include (1) ensuring compliance with applicable 
nondiscrimination requirements, such as the Fair Housing Act, title VI 
of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act 
of 1973, and Title II of the Americans with Disabilities Act, and (2) 
affirmatively furthering fair housing. These responsibilities are 
reiterated and reemphasized by amendments made by the QHWRA to the U.S. 
Housing Act of 1937 or to HUD's programs, generally.

Section I. Statutory Provisions That Are Immediately Effective and 
Accompanying Guidance

    This section of the Notice lists those statutory provisions of both 
the FY 1999 HUD Appropriations Act and the QHWRA that are immediately 
effective and may require prompt action on the part of HUD's program 
partners now or in the very near future. HUD notes that in many cases 
the statutory provisions listed in this Section I may require 
conforming rulemaking at a later date; that is, rulemaking that updates 
HUD's regulations so that the regulations conform to statutory changes 
to the programs.

A. FY 1999 HUD Appropriations Act

    Elimination of Three-Month Delay on Reissuance of Section 8 
Certificates and Vouchers. The FY 1999 HUD Appropriations Act does not 
extend or continue the previous three month delay that was imposed on 
the reissuance of certificates and vouchers.
    Action Guidance for the Section 8 Certificate and Voucher Program: 
Effective October 1, 1998, neither Section 8 certificates and vouchers 
currently being held nor any further turnover of Section 8 certificates 
and vouchers are subject to any statutory delay period on reissuance.
    Elimination of the Shopping Incentive for Voucher Families Who 
Remain in the Same Unit upon Initial Receipt of Assistance. Section 209 
of the FY 1999 HUD Appropriations Act eliminates the ``shopping 
incentive'' in the following situation involving admission to the 
Section 8 voucher program by a family:
    (1) Who is admitted to the voucher program after December 20, 1998;
    (2) Who remains in the same unit or complex; and
    (3) Where the applicable payment standard exceeds the gross rent 
for the unit. (The applicable payment standards is the lower of the 
payment standard for the ``family unit size'' or the payment standard 
for the unit actually rented by the family.)
    Therefore, the voucher program housing assistance payment for a 
``stayer admission'' family who leases a unit with a gross rent (rent 
to owner plus the utility allowance) below the applicable payment 
standard for the family would be the amount by which the gross rent 
exceeds the greater of 30% of the family's monthly adjusted income, 10% 
of its monthly gross income, or the minimum rent.
    Action Guidance for the Section 8 Voucher Program: This statutory 
provision is effective for all voucher Housing Assistance Payment (HAP) 
contracts for ``stayer admissions'' effective on or after December 20, 
1998. HUD's Office of Public and Indian Housing (PIH) issued a notice 
of December 18, 1998, Notice PIH 98-64, which provides additional 
information on the statutory changes to the Section 8 voucher program. 
Additionally, at PIH's website, PIH provides information about HUD's 
Multifamily Tenant Characteristics System (MTCS). The January 1999 
``MTCS News Flash'' provides information on calculating the rent for 
voucher admissions and completing form HUD-50058. (Please see HUD's 
website at http://www.hud.gov/pih/systems/mtcs/pihmtcs.html.) The 
payment standard

[[Page 8194]]

on line 12(j) of form HUD-50058 for these stayer admissions is the 
lower of (1) the PHA's payment standard for the family unit size, (2) 
the PHA's payment standard for the unit actually rented by the family, 
or (3) the unit's gross rent at the time of admission to the program.
    Finally, it is noted that the section 209 amendment only applies 
until HUD issues regulations that make effective the voucher and 
certificate program merger legislation at section 545 of the QHWRA. 
These changes will eliminate the shopping incentive for all voucher 
families, not just for stayer admissions.
    Rent Payments of Families with Enhanced Tenant-Based Assistance in 
Conjunction with the Prepayment of Certain 236 and 221(d)(3) FHA 
Mortgages. The FY 1999 HUD Appropriations Act, under the Housing 
Certificate Fund heading, provides that during Federal fiscal year 1999 
(October 1, 1998 through September 30, 1999), the minimum rent of 
families who receive (or will receive) ``enhanced'' vouchers and whose 
income ``declines to a significant extent'' must not exceed the greater 
of:
    (1) 30% of monthly adjusted income; or
    (2) The percentage of monthly adjusted income paid by the family 
for rent at the time of the mortgage prepayment.
    This statutory rent limitation only applies to enhanced tenant-
based assistance that is provided to families located in projects where 
owners prepaid certain federally assisted mortgages. HUD construes the 
words ``significant extent'' to mean a decrease in income of fifteen 
percent (15%) or more.
    Action Guidance for the Section 8 Voucher Program. No action 
required by the PHA at this time. HUD will issue further implementation 
instructions on this statutory section.
    Ineligibility of Individuals Convicted of Manufacturing or 
Producing Methamphetamine (commonly referred to as ``speed'') for 
Certain Housing Assistance. Section 428 of the FY 1999 HUD 
Appropriations Act amends section 16 of the USHA to add a new 
subsection (f) that makes individuals convicted of manufacturing or 
producing methamphetamine (speed) ineligible for certain housing 
assistance. New subsection (f) applies to public housing and the 
certificate, voucher and moderate rehabilitation programs. PHAs must 
have standards to:
    (1) Permanently deny admission to public housing units and the 
Section 8 certificate, voucher and moderate rehabilitation programs; 
and
    (2) Immediately and permanently terminate tenancy in public housing 
or terminate Section 8 assistance, of persons convicted of 
manufacturing or producing methamphetamine on the premises of the 
assisted housing project in violation of any Federal or State law.
    ``Premises'' is defined as the building or complex in which the 
dwelling unit is located, including common areas and grounds. Although 
the statute does not define the term ``premises,'' HUD is defining the 
term in this Notice to provide PHAs with guidance on what are the 
parameters of ``premises.''
    Action Guidance for the Public Housing Program. PHAs must revise 
applicable occupancy policies and practices to reflect these standards. 
Except to the extent this is already covered by lease provisions that 
authorize eviction for drug-related criminal activity, public housing 
leases must be modified to provide for eviction on these grounds.
    Action Guidance for the Section 8 Certificate, Voucher and Moderate 
Rehabilitation Programs. PHAs must revise their occupancy policies to 
implement these admission and subsidy termination provisions.

B. Quality Housing and Work Responsibility Act of 1998 (QHWRA)

    This notice does not address all sections of the QHWRA but strives 
to provide as much guidance for as many sections of the QHWRA as 
possible. The following lists the sections of the QHWRA that are 
addressed in this Notice. The sections are either addressed in this 
Section I or in Section II of this Notice.

Sec. 506. Definitions
Sec. 507. Minimum Rent.
Sec. 508. Determination of Adjusted Income and Median Income.
Sec. 509. Family Self-Sufficiency Program.
Sec. 511. PHA Plan.
Sec. 512. Community Service and Family Self-Sufficiency 
Requirements.
Sec. 513. Income Targeting.
Sec. 514. Repeal of Federal Preferences.
Sec. 515. Joint Ventures and Consortia of Public Housing Agencies.
Sec. 519. Public Housing Capital and Operating Funds.
Sec. 520. Total Development Costs.
Sec. 522. Repeal of Modernization Fund.
Sec. 523. Family choice of rental payment.
Sec. 524. Occupancy by Police Officers and Over-Income Families.
Sec. 526. Pet Ownership in Public Housing.
Sec. 530. Housing Quality Requirements.
Sec. 531. Demolition and Disposition of Public Housing.
Sec. 533. Conversion of Public Housing to Vouchers; Repeal of Family 
Investment Centers.
Sec. 535. Demolition, Site Revitalization, Replacement Housing, and 
Tenant-Based Assistance grants for Projects.
Sec. 537. Required Conversion of Distressed Public Housing to 
Tenant-Based Assistance.
Sec. 539. Mixed Finance Public Housing.
Sec. 545. Merger of Certificate and Voucher Programs.
Sec. 547. Administrative Fees.
Sec. 548. Law Enforcement and Security Personnel in Assisted 
Housing.
Sec. 549. Advance Notice to Tenants of Expiration, Termination, or 
Owner Nonrenewal of Assistance Contract.
Sec. 551. Funding and Allocation.
Sec. 554. Leasing to Voucher Holders.
Sec. 555. Homeownership (voucher) Option.
Sec. 556. Section 8 Renewals for Tenant-Based Certificate and 
Vouchers Funds.
Sec. 559. Rulemaking and Implementation.
Sec. 561. Home rule flexible grant demonstration program.
Sec. 565. Expansion of powers for dealing with public housing 
agencies in substantial default.
Sec. 575. Provisions applicable only to public housing and section 8 
assistance.
Sec. 584. Use of American Products.
Sec. 586. Amendments to Public and Assisted Housing Drug Elimination 
Act of 1990.
Sec. 592. Use of Assisted Housing by Aliens.
Sec. 597. Moderate rehabilitation program.
Sec. 599. Tenant participation in multifamily housing projects.

    The following chart provides an overview of the above-listed 
sections of the QHWRA, which have been designated by Congress as 
immediately effective, and shows their applicability to HUD's public 
housing program, Section 8 certificate and voucher program, Section 8 
project-based certificate and moderate rehabilitation program, and 
other Section 8 programs.

BILLING CODE 4210-33-P

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[GRAPHIC] [TIFF OMITTED] TN18FE99.002



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[GRAPHIC] [TIFF OMITTED] TN18FE99.003



BILLING CODE 4210-33-C

Subtitle A of the QHWRA

    Section 507--Minimum Rent for Public Housing and Section 8 
Assistance. Section 507 amends section 3(a) of the USHA and follows the 
previous statutory authority of requiring minimum rents of up to $50 
for public housing and the Section 8 programs. In the public housing 
program and the Section 8 programs other than vouchers, ``minimum 
rent'' refers to minimum total tenant payment (TTP) and not a minimum 
tenant rent (TR). For families subject to a utility allowance in these 
programs, the families will be subject to a minimum total tenant 
payment but could still be entitled to a utility reimbursement if the 
utility allowance is greater than the TTP.
    Action Guidance for Public Housing and Section 8 Certificate, 
Voucher and Moderate Rehabilitation Programs. PHAs are not required to 
take any action to maintain any current minimum rents of up to $50 for 
the public housing, Section 8 certificate, voucher and moderate 
rehabilitation programs.
    Action Guidance for Other Section 8 Programs. The minimum rent of 
$25 which HUD has imposed for other Section 8 project-based assistance 
remains in place.
    Exceptions to Minimum Rent. The QHWRA also establishes certain 
exceptions to the minimum rent requirements for hardship circumstances. 
Section 3(a)(3)(B) of the USHA generally states that financial hardship 
includes the following situations (1) the family has lost eligibility 
for is awaiting an eligibility determination for a Federal, State, or 
local assistance program; (2) the family would be evicted as a result 
of the imposition of the minimum rent requirement; (3) the income of 
the family has decreased because of changed circumstance, including 
loss of employment; (4) a death in the family has occurred; and (5) 
other circumstances determined by the PHA or HUD.
    The QHWRA provides that an exemption may not be provided if the 
hardship is determined temporary. The QHWRA also provides, however, 
that the PHA or owner may not evict the family for nonpayment of rent 
on the basis of hardship if the hardship is determined by the PHA or 
HUD to be temporary during the 90-day period beginning upon the date of 
the family's request for the exemption. During this 90-day period, the 
family must demonstrate that the financial hardship is of a long-term 
basis. If the family demonstrates that the financial hardship is of a 
long-term basis, the PHA or HUD shall retroactively exempt the family 
from the applicability of the minimum rent requirement for the 90-day 
period. (HUD's responsibilities will be carried out by owners as 
appropriate.)
    Action Guidance for the Public Housing Program. PHAs must revise 
operating procedures to immediately carry out the new statutory minimum 
rent hardship exception policies, and must immediately grant such 
exceptions for families who qualify. The PHA can request reasonable 
documentation of hardship under the circumstances. While HUD may issue 
further guidance, HUD provides the following immediate guidance.
    (1) As soon as practicable, the PHA must notify all families of 
right to request a minimum rent hardship exemption under the law, and 
that determinations are subject to the grievance procedure;
    (2) If the family requests a hardship exemption, the minimum rent 
requirement is immediately suspended.
    (3) Suspension may be handled as follows: the minimum rent is 
suspended until a determination is made whether:

[[Page 8198]]

    (a) There is a hardship covered by the statute; and
    (b) The hardship is temporary or long-term.
    If the PHA determines that there is no hardship covered by the 
statute, minimum rent is imposed (including backpayment for minimum 
rent from time of suspension).
    If the PHA determines that the hardship is temporary, the minimum 
rent also is imposed (including backpayment for minimum rent from the 
time of suspension) but the family cannot be evicted for nonpayment 
during the 90-day period commencing on the date of the family's request 
for exemption of minimum rent in excess of the tenant rent otherwise 
payable. A reasonable repayment agreement must be offered for any such 
rent not paid during that period. If the family thereafter demonstrates 
that the financial hardship is of long-term duration, the PHA shall 
retroactively exempt the family from the minimum rent requirement.
    The new minimum rent policies are retroactive to the effective date 
of the QHWRA, October 21, 1998. If a tenant in occupancy has qualified 
for one of the mandatory hardship between October 21, 1998 and the date 
of this Notice and was charged minimum rent, the PHA must make 
arrangements to reimburse the tenant the overpayment by providing a 
cash refund or otherwise offsetting future rent payments in an 
equitable manner.
    Action Guidance for Section 8 Certificate, Voucher and Moderate 
Rehabilitation Programs. The entity responsible for determining rent 
(the PHA or owner) must revise operating procedures to immediately 
carry out the new statutory minimum rent hardship exception policies. 
As soon as practicable, the entity responsible for determining rent 
(the PHA or owner) must notify all families of the right to request 
minimum rent hardship exceptions, and that the hardship determinations 
are subject to applicable PHA informal hearing procedures. The entity 
responsible for determining rent (the PHA or owner) can request 
reasonable documentation of hardship under the circumstances. While HUD 
may issue further guidance, HUD provides the following immediate 
guidance.
    If a family requests a minimum rent hardship exception, the entity 
responsible for determining rent (the PHA or owner) must suspend 
payment of the minimum rent beginning the month following the family's 
hardship request. ``Suspension'' means that the entity responsible for 
determining rent (the PHA or owner) must not charge the family a 
minimum rent or, if applicable, discontinue charging the family a 
minimum rent. During the minimum rent suspension period, the family 
will not be required to pay a minimum rent and the housing assistance 
payment will be increased accordingly.
    The entity responsible for determining rent (the PHA or owner) must 
determine promptly whether the hardship under the statute exists and 
whether it is temporary or long term.
    If the entity responsible for determining rent (the PHA or owner) 
determines that there is no hardship covered by the statute, a minimum 
rent is imposed retroactively to the time of suspension.
    If the entity responsible for determining rent (the PHA or owner) 
determines that the hardship is temporary, a minimum rent may not be 
imposed for a period of 90 days from the date of the family's request. 
At the end of the 90 day suspension period, a minimum rent is imposed 
retroactively to the time of suspension. A reasonable repayment 
agreement must be offered for any minimum rent backpayment by the 
family. (Note that the statutory eviction prohibition is not applicable 
since the entity responsible for determining rent (the PHA or owner) 
will not charge a minimum rent for 90 days, and receipt of the contract 
rent will not be impacted by the family's inability to pay the minimum 
rent during the 90 day period.)
    If the entity responsible for determining rent (the PHA or owner) 
determines that the hardship is of long-term duration, the entity 
responsible for determining rent (the PHA or owner) must exempt 
(retroactively to the date of the family's request for a minimum rent 
exception) the family from the payment of the minimum rent until the 
hardship no longer exists.
    The new minimum rent policies are retroactive to the effective date 
of the QHWRA, October 21, 1998. If a tenant in occupancy has qualified 
for one of the mandatory exceptions between October 21, 1998 and the 
date of this Notice and was charged a minimum rent, the entity 
responsible for determining rent (the PHA or owner) must make 
arrangements to reimburse the tenant the overpayment by providing a 
cash refund or otherwise offsetting future rent payment in an equitable 
manner.
    Section 508--Determination of Adjusted Income and Median Income in 
the Public Housing and Section 8 Programs. Section 508 amends section 
3(b)(5) of the USHA and as amended provides the manner in which 
adjusted income and median income will be determined, and provides 
certain mandatory exclusions.
    Action Guidance for the Public Housing Program. Section 508 
generally is not yet effective, except that the establishment of 
separate public housing and Section 8 income units in Rockland County, 
New York, is effective immediately. HUD's Notice PD&R 98-04, issued 
November 23, 1998, implemented this provision for Rockland County, New 
York, and provided the relevant income limits. (This information may 
also be found under ``income limits'' at http//www.huduser.org/data/
factors.html.)
    HUD will provide implementation instructions for the QHWRA's 
revised mandatory earned income disregard for public housing residents, 
effective October 1, 1999, at a later date. The current 18-month 
disregard for earned income of public housing residents in training 
programs (see 24 CFR 5.607(c)(8)(i) and (v) and (c)(13)) continues in 
effect for families who:
    (1) Enroll in such programs before October 1, 1999; and
    (2) Continue to meet the requirements for receiving the income 
disregard.
    Action Guidance for Section 8 programs. The income limits 
referenced in the Action Guidance for Public Housing for Rockland 
County, New York, are applicable to the Section 8 programs.
    Section 509--Family Self-Sufficiency (FSS) Program in the Public 
Housing and Tenant-Based Section 8 Programs. Section 509 amends section 
23 of the USHA and, as amended, allows PHAs to reduce their family 
self-sufficiency obligation (mandatory minimum program size, prior to 
any reductions previously approved by HUD) by one family for each FSS 
graduate fulfilling the family's contract of participation obligations 
on or after October 21, 1998. Additionally, the QHWRA provides that the 
minimum FSS program size will not increase when a PHA receives 
incremental Section 8 funding and public housing units on or after 
October 21, 1998. The QHWRA continues the PHA's option to operate 
programs larger than the minimum FSS program size. The QHWRA also 
continues HUD's ability to authorize a reduced minimum program size. 
HUD is currently authorized to permit a PHA to operate a public housing 
or Section 8 FSS program that is smaller than the minimum program size 
if the PHA provides to HUD a certification that the operation of an FSS 
program of the minimum size is not feasible because of local 
circumstances (see 24 CFR 984.105(d)).

[[Page 8199]]

    These provisions are effective upon enactment of the QHWRA (October 
21, 1998).
    Action Guidance for the Public Housing Program. The FSS provisions 
are effective upon enactment of the QHWRA (October 21, 1998). For 
purposes of the FSS minimum program size, ``receipt of incremental 
public housing units'' means reservation of funds to acquire or 
construct additional public housing units on or after October 21, 1998. 
The HUD Field Office will advise PHAs of these reservation dates.
    Action Guidance for the Section 8 Certificate and Voucher Programs. 
The FSS provisions are effective upon enactment of the QHWRA (October 
21, 1998). For purposes of the FSS minimum program size, ``receipt of 
incremental Section 8 funding'' means reservation of funds for the 
Section 8 certificate or voucher program (other than renewal funding 
and other funding excluded by HUD Notice PIH 97-45, issued September 3, 
1997) on or after October 21, 1998. The HUD Field Office will advise 
PHAs of these reservation dates.
    Section 512--Public Housing Community Service and Public Housing 
and Tenant-Based Section 8 Family Self-Sufficiency Requirements. Public 
Housing Community Service Requirements. Section 512 amends section 12 
of the USHA and adds new subsections (c) through (g). Subsection (c) of 
section 12 of the U.S. Housing Act of 1937 (USHA) imposes a requirement 
on adult public housing residents, with important exceptions, to 
participate for at least 8 hours per month in community service or 
economic self-sufficiency program. In some circumstances, PHAs must 
refuse to renew a resident's 12-month lease for failure to satisfy this 
requirement.
    Action Guidance for the Public Housing Program. Subsection (c) is 
not yet effective, but will be effective October 1, 1999. HUD will 
issue implementing instructions and guidance before October 1, 1999. 
PHAs should begin considering how community service requirements may be 
fulfilled by residents, including the potential use of qualified 
resident councils or other qualified entities either as agents for 
program administration or providers of opportunities for fulfilling the 
community service requirement. The provision requiring 1-year public 
housing leases, automatically renewable except for failure to comply 
with community service requirements, also is not yet effective. HUD 
notes, however, that such leases may be self-renewing without an annual 
signing process, as long as the leases are terminable for failure to 
meet the community service obligation under the circumstances defined 
in the statute. Again, HUD will issue additional guidance at a later 
date, as well as amend HUD's applicable regulations.
    Treatment of Income Changes Resulting from Welfare Program 
Requirements. New subsection 12(d), Treatment of Income Changes 
Resulting From Welfare Program Requirements, is effective immediately, 
for public housing residents and tenant-based Section 8 certificate and 
voucher families whose welfare assistance is reduced specifically 
because of fraud or failure to participate in an economic self-
sufficiency program or comply with a work activities requirement. Such 
families must not have their public housing rent or Section 8 
contribution to rent reduced based on the benefit reduction. The 
prohibition on reduction of public housing rent or Section 8 tenant-
based assistance contribution is applicable only if the welfare 
reduction is neither the result of the expiration of a lifetime time 
limit on receiving benefits, nor a situation where the family has 
complied with welfare program requirements but cannot obtain employment 
(e.g., the family has complied, but loses welfare because of a 
durational time limit such as a cap on welfare benefits for a period of 
no more than two years in a five year period). Any PHA receiving a 
request for income reexamination and rent reduction predicated on a 
reduction in tenant income from welfare may deny the request only after 
obtaining written verification from the welfare agency that the 
family's benefits have been reduced because of noncompliance with 
economic self-sufficiency program or work activities requirements or 
because of fraud.
    Action Guidance for the Public Housing Program. Although this 
subsection (d) is effective immediately, PHAs should note that this 
subsection is subject to some procedural limitations. PHAs must first 
take the necessary procedural steps so that this rent policy change 
will be binding on affected families, and PHAs must take these steps 
expeditiously. Section 12(e) requires incorporation into leases of the 
provisions of this subsection (d). The PHA also must notify affected 
residents that they have the right to administrative review through the 
PHA's grievance procedure.
    PHAs are to make best efforts to enter into cooperation agreements 
with local welfare agencies, both to obtain the necessary information 
regarding welfare sanctions and to target economic self-sufficiency and 
other appropriate services to public housing residents and Section 8 
tenant-based certificate and voucher families. PHAs are encouraged to 
pursue the targeting of such services aggressively in these cooperation 
agreements, and are reminded that the QHWRA amends the public housing 
management assessment program to include the extent to which the public 
housing agency coordinates, promotes or provides effective programs and 
activities to promote the economic self-sufficiency of public housing 
residents (effective in fiscal year 2000).
    Action Guidance for Section 8 Tenant-Based Certificate and Voucher 
Programs. The guidance provided in the Action Guidance for Public 
Housing pertaining to the policies on cooperation agreements is 
applicable to the Section 8 tenant-based certificate and voucher 
programs. Rather than incorporating the provisions of subsection (d) 
into leases, PHAs must revise operating procedures as needed to 
effectuate this provision. The PHA also must notify affected families 
that they may use the informal hearing procedure under 24 CFR 
982.555(a)(i).
    Section 513--Public Housing and Section 8 Income Targeting. Section 
513 amends section 16 of the USHA to establish, among other things, 
public housing deconcentration requirements, annual requirements for 
admitting families with incomes below thirty percent (30%) of area 
median income, and related income targeting requirements.
    Prohibition of Concentration of Low-Income Families in Public 
Housing (Deconcentration of Poverty). The QHWRA requires PHAs to submit 
with their annual public housing agency plans an admissions policy 
designed to provide for deconcentration of poverty and income mixing, 
by bringing higher income tenants into lower income public housing 
projects and bringing lower income tenants into higher income public 
housing projects.
    Action Guidance for the Public Housing Program. Through this Notice 
and consistent with the immediate effective date of this section of the 
USHA, HUD is requiring PHAs to begin implementing this public housing 
deconcentration policy. PHAs must immediately develop this policy. 
Within 120 days of this Notice or a longer time period if HUD grants an 
extension for good cause, the PHA's Board of Commissioners must pass a 
resolution indicating that any necessary changes have been made in the 
PHA's admissions policy. PHAs must keep this Board resolution on file 
for possible HUD review. While PHAs must take any necessary actions now 
to have an

[[Page 8200]]

appropriate policy in place, the admissions policy to promote 
deconcentration of poverty also will be part of the PHA plan process 
from its inception. Material describing the deconcentration 
requirements more fully is included in the PHA plan interim rule 
published elsewhere in today's Federal Register.

Income Targeting Requirements

    (1) Public housing. With respect to income targeting, the general 
rule is that in each fiscal year, at least 40 percent of families 
admitted to public housing by a PHA must have incomes that do not 
exceed 30 percent of area median. The ``fungibility'' provisions allow 
a PHA to admit less than 40 percent of families with incomes below 30 
percent of median (``very poor families'') in a fiscal year, to the 
extent the PHA has provided more than seventy-five (75) percent of 
newly available vouchers and certificates (including those resulting 
from turnover) to very poor families. Thus, the provision is called 
``fungibility'' because to a limited extent, it makes the targeting 
requirements in public housing and tenant-based assistance 
interchangeable or fungible. There are three further limitations on a 
PHA's use of fungibility. Fungibility ``credits'' only can be used to 
drop the annual requirement for housing very poor families below 40 
percent of newly available units in public housing, by the lowest of 
the following amounts:
    (a) The number of units equivalent to ten (10) percent of the 
number of newly available vouchers and certificates in that fiscal 
year; or
    (b) The number of units that (i) are in projects located in census 
tracts having a poverty rate of 30% or more, and (ii) are made 
available for occupancy by and actually occupied in that year by very 
poor families; or
    (c) The number of units that cause the PHA's overall requirement 
for housing very poor families to drop to 30% of its newly available 
units.
    Action Guidance for the Public Housing Program. PHAs should 
promptly make any needed adjustments in admissions policies, subject to 
the usual procedures, to ensure compliance.
    The administration of income targeting should be facilitated if the 
requirements are applied on the same annual basis as the fiscal year of 
the PHA's public housing or tenant-based assistance program. To allow 
application of the requirements in this manner, the income targeting 
requirements will be applied on a pro rata basis to the remainder of 
the PHA's current fiscal year starting with April 1, 1999 to the end of 
the current fiscal year, and thereafter by applicable fiscal year. 
Alternatively, a PHA may apply the targeting initially to the period 
starting April 1, 1999 and ending at the conclusion of the next PHA 
fiscal year.
    (2) Section 8 tenant-based assistance. With respect to Section 8 
tenant-based assistance, for a PHA in each fiscal year, not less than 
75% of its new admissions to the program must have incomes at or below 
30% of the area median income. The income limits based on 30 percent of 
median are listed in HUD's 1999 income limits publication which is 
posted on the internet at http//www.huduser.org/data/factors.html. 
Other admissions must comply with eligibility limits under the current 
regulations (24 CFR 982.201(b)) and law.
    Action Guidance for the Section 8 Tenant-Based Certificate and 
Voucher Programs. The income targeting applies to admissions in each 
PHA fiscal year. PHAs may set the initial period in the same manner as 
is provided above for public housing.
    If an award of vouchers to prevent or ameliorate the effects of 
displacement (for instance, tenant-based assistance provided for a 
preservation prepayment or when an owner opts out of the Section 8 
program) would interfere with a PHA's compliance with the income 
targeting requirements, the PHA may request that HUD approve a 
different targeting requirement (which may take effect upon issuance of 
the tenant-based assistance in question) and the PHA then may include 
the HUD approved requirement in the PHA's next annual plan.
    (3) Section 8 project-based assistance. For Section 8 project-based 
assistance (including moderate rehabilitation and project-based 
certificates), not less than 40% of new admissions to a specific 
project must have incomes at or below 30% of the area median income. 
Other admissions to a specific project must be at or below 80% of the 
area median, with any HUD-instituted modifications for relatively low 
income or high income areas as discussed above. In addition, the 
previously existing nationwide targeting requirements for families with 
incomes at or below 50% of area median income in pre-1981 and post-1981 
projects continue to be applicable (see regulatory citation below). 
Income targeting requirements do not apply to project-based assistance 
made available to prevent or ameliorate the effects of displacement.
    Initial Guidance for Section 8 Project-Based Assistance. The 
following regulations will continue to apply:
    (1) Income limits for admission (24 CFR 5.607);
    (2) Anti-skipping for the purpose of selecting a relatively higher-
income family (24 CFR 5.410(e)(2)); and
    (3) Ability to use worker preferences subject to the antiskipping 
requirement (24 CFR 5.415(b)(1); provisions of 24 CFR 5.415(b)(1) that 
reference to federal preferences may be disregarded since federal 
preferences have been repealed).
    In addition, owners (other than project-based certificate and 
moderate rehabilitation owners) will have to modify their tenant 
selection plans to conform to statutory and program requirements. 
Owners' tenant selection plans should include how they will apply the 
new income targeting requirements to ensure that not less than 40 
percent of the units which become available each year will be leased to 
families with income that does not exceed 30 percent of the median 
income at the time they commence their lease.
    HUD will be issuing additional guidance in a notice in the near 
future.
    Section 514--Repeal of Federal Preferences in the Public Housing 
and Section 8 Programs. With respect to preferences, the QHWRA 
provides:
    (1) Permanent repeal of Federal preferences;
    (2) Permanent repeal of the right of certain public housing 
residents to retain federal preference status on the Section 8 
certificate and voucher waiting list;
    (3) Authorization for local preferences; and
    (4) Elimination of the previous statutory preference for the 
admission of elderly, disabled and displaced persons before other 
single persons in the public housing and Section 8 programs 
(accomplished by section 506 rather than section 514).
    Action Guidance for Public Housing, Section 8 Certificate and 
Voucher and Moderate Rehabilitation Programs. The QHWRA permanently 
repeals federal preference requirements for the public housing and 
Section 8 programs. PHAs are no longer required to select families from 
their waiting lists using the federal preferences or provide the 
singles preference. (PHAs may opt to continue the singles preference 
and one or more of the former federal preferences.) HUD urges PHAs to 
consider adopting admission preferences for victims of domestic 
violence.
    PHAs should promptly make any needed adjustments in admissions 
policies, subject to the usual procedures to ensure that the 
preferences they use will result in compliance with public housing 
deconcentration and public

[[Page 8201]]

housing and Section 8 income targeting requirements.
    Section 514 also provides that local preferences may be established 
taking into account generally accepted data sources, including any 
information obtained during the opportunity for public comment on the 
PHA plan and in the development of the local comprehensive housing 
affordability strategy (consolidated plan). Since to date there has not 
been a PHA plan process, full compliance with this statutory section is 
not possible with respect to local preferences that currently exist in 
these programs. Because there is no indication in the QHWRA that 
Congress intended to disrupt existing local preferences, existing local 
preferences may remain without further immediate PHA action or may be 
altered in the manner authorized before enactment of the QHWRA. Both 
existing and proposed local preferences, however, must comply with the 
new requirements for establishing preferences and the PHA plan process 
that will commence in 1999. The QHWRA permanently eliminated in the 
public housing and the Section 8 programs, the previous statutory 
preference for the admission of elderly, disabled and displaced persons 
before other single persons. PHAs may revise occupancy policies to 
reflect this change.
    Irrespective of these statutory changes, other public housing 
selection preference regulations which are unrelated to these changes 
continue to apply. In addition, the following regulations remain 
applicable to tenant-based assistance: 24 CFR 982.204(d) prohibiting 
the order of admission from the tenant-based waiting list based on 
family or unit size; the prohibited admissions criteria in 24 CFR 
982.202(b); and approval of any residency preferences in accordance 
with 24 CFR 982.208 and 24 CFR 5.410(h). The nondiscrimination 
requirement for public housing residents with respect to admissions to 
tenant-based assistance also continues to apply (Section 8(s) of the 
USHA).
    Action Guidance for Other Section 8 Project-Based Programs. The 
QHWRA permanently repeals federal preference requirements for Section 8 
newly constructed or substantially rehabilitated housing and other 
project-based Section 8 programs. Owners are no longer required to 
select families from their waiting lists using the federal preferences 
or provide the singles preference. Owners should make any changes 
needed to comply with income targeting requirements. Any changes in an 
owner's tenant selection system must be consistent with the Affirmative 
Fair Housing Marketing Plan approved by HUD. HUD's multifamily housing 
occupancy handbook, 4350.3, specifies that the tenant selection system 
must consist of a written plan, be equitable and guard against 
discrimination. Where an owner elects to make changes in the tenant 
selection system, HUD strongly encourages the owner to provide 
appropriate notification of implementation to applicants on the waiting 
lists and other interested persons (e.g., by newspaper publication or 
notice to applicants).

Subtitle B of the QHWRA--Public Housing

    Section 519--Public Housing Capital and Operating Funds. Section 
519 amends section 9 of the USHA to provide for the establishment of 
capital and operating funds with new formulas. Only a few parts of this 
statutory section are effective immediately. They are as follows:
    Use of capital or operating funds by small PHAs. New subsection 
9(g)(2) of the USHA, added by section 519 of the QHWRA, allows a PHA 
with less than 250 dwelling units (small PHAs), to use capital or 
operating funds for any eligible capital or operating expense if: (1) 
the PHA is not designated troubled; and (2) the PHA operates its public 
housing in a safe, clean and healthy condition, as determined by HUD. 
Until enactment of the QHWRA, these PHAs have been receiving capital 
funds for specific purposes under the competitive Comprehensive 
Improvement Assistance Program (CIAP). New subsection 9(a) of the USHA, 
however, provides for a merger of remaining CIAP funds into the Capital 
Fund on October 1, 1999.
    With the enactment of new subsection 9(g)(2) and the pending merger 
of funds, HUD construes Congressional intent to be that small, non-
troubled PHAs may immediately use any CIAP or operating funds for 
capital or operating purposes. Because CIAP funds were obtained 
competitively based on representations of need, HUD would expect PHAs' 
current use of CIAP funds for operating purposes to be judicious; for 
example, to address an emergency need.
    HUD reserves the right to determine, through its independent 
inspections or other monitoring, that a PHA is ineligible for the 
flexible use of capital and operating funds of subsection 9(g)(2) of 
the USHA because the PHA is not operating and maintaining its public 
housing in a safe, clean and healthy condition. HUD may notify a PHA of 
this determination. If a small PHA does not receive this notification 
from HUD, the PHA may use the flexibility of subsection 9(g)(2) unless 
the PHA's last public housing management assistance program (PHMAP) 
assessment contained a grade lower than ``E'' on Indicator #5, 
Component #1.
    Action Guidance. PHAs using this flexible funding authority must 
retain the necessary accounting to indicate the sources and uses of all 
funds, including their origination as capital (CIAP) or operating funds 
(i.e., their accounting for capital funds must indicate any amount of 
funds used for operating expenses). PHAs would continue to draw down 
CIAP funds under the LOCCS against the program grant authorized by the 
applicable annual contributions contract (ACC) amendment. PHAs also may 
draw down capital funds only under the current federal rules that 
require projected expenditure of the funds within three days. PHAs, 
therefore, cannot draw down capital funds directly to establish or 
augment reserves, or indirectly for this purpose by retaining larger 
than a reasonably sized operating reserve.
    Penalties for slow obligation or expenditure of capital funds. New 
subsection 9(j) of the USHA provides for penalties for slow obligation 
or expenditure of capital funds. While this subsection is generally not 
yet effective, the QHWRA states that capital funds made available to a 
PHA for fiscal year 1997 or prior fiscal years must be obligated by the 
PHA not later than September 30, 1999.
    The QHWRA also states that a PHA shall spend any assistance 
received under section 9 of the USHA not later than 4 years (plus the 
period of any extension approved by the Secretary in accordance with 
new section 9(j)(2)) after the date on which funds become available to 
the agency for obligation.
    Action Guidance. PHAs must take all necessary steps to meet the 
September 30, 1999 deadline.
    Authority to NYCHA to Expend Funds for Asthma Reduction. New 
subsection 9(n)(2) and (3) of the USHA allow the New York City Housing 
Authority to expend, from funds otherwise available to it, up to 
$500,000 annually for asthma reduction and $600,000 annually for a 
comprehensive plan to address the need for services for elderly 
residents, commencing in FY 1999.
    Ceiling Rents. Subsection 519(d) of the QHWRA provides transitional 
authority to implement ceiling rents, before the implementation of the 
new funding formulas.
    Action Guidance. During this transition period, PHAs may establish 
or retain ceiling rents allowed under all preexisting laws, including 
annual

[[Page 8202]]

appropriations laws and the Balanced Budget Downpayment Act, I. In 
addition, PHAs may adopt and apply ceiling rents that reflect the 
reasonable market value of the housing, but are not less than 75% of 
the monthly cost to operate the PHA's housing (100% for housing 
predominantly for elderly or disabled families, or both) and may 
include the costs of monthly deposit for a replacement reserve. HUD 
will define ``predominantly'' as at least 80 percent occupancy by such 
families. The latter authorization may be used immediately and without 
HUD approval, provided that PHAs keep reasonable documentation that the 
ceiling rents reflect reasonable market value and are not lower than 
the statutorily-required floors.
    Transitional Funding Before Implementation of New Capital and 
Operating Formulas. Subsection 519(e) provides requirements for 
transitional funding until the new capital and operating formulas are 
implemented. For FY 1999, HUD will provide funds to PHAs in accordance 
with prior law (unless HUD provides further notification regarding the 
distribution of capital funds). With respect to operating subsidy, this 
subsection specifically provides that ceiling rents and the optional 
earned income disregards authorized by the past several appropriations 
acts continue to be treated as provided under prior law.
    Action Guidance. In summary, prior law holds PHAs financially 
harmless for adoption of authorized ceiling rents, but allows the 
optional earned income disregards at PHAs' initial financial risk. This 
treatment will be continued until a new formula is adopted.
    Adoption of Rental Amount Other than Ceiling Rent or Optional 
Earned Income Disregard. Subsection 519(e) also states that during the 
transition period, if a PHA adopts a rental amount other than a ceiling 
rent or an optional earned income disregard authorized by the prior 
appropriations laws, which is less than the amount otherwise required 
to be charged (typically 30% of a family's adjusted income), the 
formula shall not be adjusted to compensate the PHA for this rent 
reduction.
    Action Guidance. HUD interprets this provision to authorize PHAs to 
begin immediately, subject to appropriate local process, to charge 
lower amounts than those otherwise required (or allowed under ceiling 
rent or previously existing optional earned income disregard authority; 
see the immediately preceding paragraph), as authorized by section 523 
of the QHWRA (typically, ``up to'' 30% of a family's adjusted income; 
new section 3(a)(2)(B)(ii) of the USHA). PHAs may take this step, prior 
to adoption of a new formula, for purposes PHAs deem appropriate such 
as promotion of resident self-sufficiency, even though the rest of 
section 523 is not yet effective. This would be done, however, at a 
PHA's financial risk. A PHA that chooses to implement this policy would 
need to submit rent rolls for the purpose of FY 1999 subsidy 
calculations that do not reflect the newly imposed rent decrease or 
disregard. Instead, such rent rolls must presume that the PHA is 
charging the rent otherwise required or allowed by law.
    Section 520--Total Development Costs. Section 520 amends the 
definition of ``development cost'' in section 3(c)(1) of the USHA to 
exclude from this definition the costs associated with demolition or 
remediation of environmental hazards associated with public housing 
units that will not be replaced on the project site, or other 
extraordinary site costs as determined by HUD.
    Section 520 also amends 6(b) of the USHA to add a new subsection 
6(b)(3) which provides that in calculating the total development cost 
of a project under section 6(b)(2), HUD shall consider only capital 
assistance provided by HUD to a PHA that are authorized for use in 
connection with the development of public housing and shall exclude all 
other amounts, including amounts provided under: (1) The HOME 
Investment Partnerships Program; or (2) the CDBG Program.
    Action Guidance. HUD will issue a separate notice in the near 
future to impose total development cost requirements that are 
consistent with the changes made by this section.
    Section 522--Repeal of Public Housing Modernization Fund. Section 
522 repeals section 14 of the USHA, but makes clear that before the 
implementation of the new capital formula, PHAs may utilize any 
authority under section 14(q) of the USHA, as amended. Section 14(q) of 
the USHA allows PHAs to use capital funds for public housing 
development and HOPE VI uses and allows mixed-finance public housing 
developments. (Section 201 of the FY 1999 HUD Appropriations Act 
clarified that such broader uses, but not operating expenses, are 
permissible uses of FY 1998 and 1999 funds. The ability for PHAs other 
than small PHAs to use capital funds partly for operating expenses does 
not become effective until Federal fiscal year 2000.) In addition, 
section 208 of the FY 1999 HUD Appropriations Act amended section 14(q) 
of the USHA to provide that such assistance may involve the drawdown of 
funds on a schedule commensurate with construction draws, for deposit 
into an interest-bearing escrow account to serve as collateral or 
credit enhancement for construction or rehabilitation bonds issued by a 
public agency.
    Section 523--Public Housing Family Choice of Rental Payment. 
Section 523 amends section 3(a) of the USHA, and provides that each 
family can elect annually whether the rent payment is a flat rate or 
income based. Flat rents are set by a PHA at a rate based on the rental 
value of the unit. Income based rents are calculated on the level of a 
tenant's income, the basic calculation was not changed from the current 
law calculation of the higher of 10% of income, 30% of adjusted income, 
or the housing portion of welfare, where applicable. The current law 
amounts for income-based rents, however, were changed from required 
amounts to maximum amounts a PHA can charge.
    Action Guidance. Although this section is not effective now except 
as indicated in the discussion above of section 519(e), PHAs should 
begin the process of setting flat rents as required by new section 
3(a)(2)(B)(i) of the USHA. These flat rents are to be based on the 
rental value of the unit, which HUD interprets to be the same as the 
reasonable market value of the unit authorized for ceiling rents. HUD 
will provide further guidance, but PHAs should anticipate that the rent 
choice authorized by section 523 would have to be offered to families 
admitted or subject to recertification after October 1, 1999.
    Section 524--Occupancy by Police Officers and Over-Income Families 
in Public Housing. Section 524 amends section 3(a) of the USHA to 
provide that PHAs may allow police officers to reside in public 
housing. Under this section, small PHAs may also rent units to over-
income families on a month-to-month basis, in accordance with statutory 
requirements, if there are no eligible families applying for assistance 
for that month, provided that the over-income family agrees to vacate 
(with at least 30 days notice) when the unit is needed for an income-
eligible family.
    Action Guidance. This section is effective immediately, but the 
provision pertaining to police officers is subject to inclusion in the 
PHA plan. Because current statutory provision is not repealed during 
this fiscal year, HUD will allow occupancy by police officers under the 
terms of current law until the PHA plan requirement can be implemented.
    With respect to the housing of over-income families where other 
families

[[Page 8203]]

are not available to small PHAs, a PHA must publish a 30-day notice of 
available units in at least one newspaper of general circulation.
    Section 530--Housing Quality Requirements. Section 530 amends 
section 6 of the USHA to add a new subjection (f) which requires annual 
contributions contracts to include a requirement that a PHA maintain 
its public housing units in compliance with safety and habitability 
standards specified by HUD. In developing these standards, HUD is to 
make them to the greatest extent practicable, consistent with the 
housing quality standards under the Section 8 voucher program. This 
section also requires PHAs to conduct annual inspections for each 
project to determine whether the units comply with the standards.
    Action Guidance. HUD's new Public Housing Assessment System (PHAS), 
which was established by final rule issued on September 1, 1998 (63 FR 
46596), utilizes new uniform physical condition standards that are 
consistent with the housing quality standards currently used in the 
Section 8 tenant-based assistance program. See also HUD's Uniform 
Physical Condition Standards final rule, published on September 1, 1998 
at 63 FR 46566. PHAs are currently required by statute to conduct an 
annual inspection of their projects.
    Section 531--Demolition and Disposition of Public Housing. Section 
531 amends section 18 of the USHA and provides that PHAs may demolish 
and dispose of projects upon application to HUD when the housing is 
determined obsolete and modifications are not cost-effective. This 
statutory section completely revises public housing demolition and 
disposition requirements, and also repeals one-for-one replacement 
requirements. The immediate effective date of this statutory section 
raised two threshold issues for HUD to consider.
    First, how should HUD treat the pipeline of demolition and 
disposition applications received prior to October 21, 1998, and those 
received after that date but prior to the effectiveness of the 
applicable regulations and processes?
    Second, how should HUD treat the new requirement found in amended 
section 18 of the USHA--that the public housing agency has specifically 
authorized the demolition or disposition in its PHA plan and has 
certified that the actions contemplated in the PHA plan comply with 
this section?
    HUD believes that it is consistent with Congressional intent not to 
interrupt the processing of applications.
    Action Guidance. 1. Pending Applications; New Applications. In view 
of the Congressional intent and to expedite the processing of 
demolition and disposition applications during this period prior to 
submission and approval of PHA plans under the new law, demolition/
disposition applications will be reviewed and processed in two groups. 
Group 1 are those applications received at HUD's Special Applications 
Center (SAC) on or before October 21, 1998, the date the QHWRA was 
signed into law. Group 2 are those applications received at the SAC 
after October 21, 1998.
    A. Group 1 Applications. Applications in Group 1 will generally be 
reviewed and approved in accordance with 24 CFR part 970 which was in 
effect at the time of the application submission. However, if the SAC 
staff identifies deficiencies in a Group 1 application, the PHA has the 
option at that time to either (a) correct the deficiencies in 
accordance with 24 CFR part 970 or (b) withdraw its application and 
resubmit it at a later date based on HUD's guidance as identified in 
this Notice for implementing section 531 of the QHWRA. In addition, HUD 
will implement four specific provisions of the QHWRA for all pending 
applications in Group 1, as follows:
     The one-for-one replacement requirement is eliminated;
     PHAs that request to demolish the lesser of 5 units or 5 
percent of the units in the PHA's inventory in a 5 year period, and 
where the vacant space will be used for meeting the service or other 
needs of the public housing residents or the units to be demolished are 
beyond repair, may demolish without submitting an application and 
requesting HUD approval (see paragraph 2 below on ``De Minimis 
Exception for Demolition'');
     Waiver of payment of debt (modernization or development 
debt) for bonded developments;
     Elimination of the requirement to make an offer to sell 
the property proposed for demolition to the resident organization where 
the PHA is requesting to demolish property; in view of the QHWRA's 
elimination of this requirement with respect to demolition, the 
purchase option will not be deemed ``appropriate'' for such property 
under the terms of section 18(b)(1) of the USHA before its amendment by 
the QHWRA.
    B. Group 2 Applications. Under Section 18(a)(3) of the revised 
USHA, in order for a demolition or disposition application to be 
approved, a PHA must have ``specifically authorized the demolition or 
disposition in the public housing agency plan, and has certified that 
the actions contemplated in the public housing agency plan comply with 
this section.''
    HUD's interim rule on PHA plans, published elsewhere in today's 
Federal Register, provides further guidance on the fulfillment of this 
requirement for demolition/disposition. In brief, HUD's rule allows the 
submission of interim PHA plans covering demolition or disposition, so 
that a PHA may receive a timely approval which otherwise may not occur 
because of the initial schedule for submitting PHA plans. A separate 
notice to be issued by HUD's Office of Public and Indian Housing will 
describe the procedures that govern a demolition or disposition 
application under section 18 of the USHA as amended by the QHWRA, in 
addition to those procedures and requirements related to the PHA plan, 
before conforming changes are made to the applicable regulations.
    2. De Minimis Exception for Demolition. PHAs proposing to demolish 
not more than the lesser of 5 dwelling units or 5 percent of the total 
dwelling units owned by the PHA over a 5-year period, and that plan to 
use the space for meeting the service or other needs of the public 
housing residents or are demolishing units that are beyond repair, may 
demolish without submitting an application. PHAs using the de minimis 
exception are required to complete Sections 1--5 of HUD Form 52860. HUD 
will use this information to track the demolition in HUD's data system 
for purposes such as determination of subsidy amounts; HUD will not use 
this information to determine whether a PHA can demolish the units. 
Once the demolition is completed, the PHA must report the actual date 
of demolition to the HUD Field Office. PHAs should note that before 
committing any funds for or proceeding with demolition that will be 
funded or reimbursed with USHA funds, the PHA must receive HUD approval 
of a Request for Release of Funds to the extent required in accordance 
with 24 CFR part 58.
    3. Uniform Relocation Act. Section 531(g) of the QHWRA provides 
that the Uniform Relocation and Real Property Acquisition Policies Act 
of 1970 (URA) shall not apply to activities under section 18 of the 
USHA. The URA, however, continues to apply to:
    (a) Any person displaced before October 21, 1998 (the date of 
enactment of the QHWRA);
    (b) Any person displaced as a result of HUD's approval of a 
demolition before October 21, 1998;

[[Page 8204]]

    (c) Any person displaced as a result of a demolition that is part 
of a HOPE VI project (demolitions under HOPE VI are subject to the URA 
because they are not subject to section 18 of the USHA);
    (d) Any person displaced as a result of a demolition or disposition 
that occurs from an assessment of a project for mandatory conversion to 
vouchers under section 202 of the FY 1996 HUD Appropriations Act or 
section 537 of the QHWRA or of voluntary conversion to vouchers out 
under section 533 of the QHWRA. (Demolitions under section 202 of the 
FY 1996 HUD Appropriations Act are subject to the URA because they are 
governed by the law as in effect before enactment of the QHWRA and 
because they are not subject to section 18 of the USHA. Demolitions 
under section 537 of the QHWRA are subject to the URA because these 
demolitions are not subject to section 18 of the USHA); and
    (e) Any person displaced as a result of the acquisition of the site 
for a project receiving Federal financial assistance.
    Section 535--Demolition, Site Revitalization, Replacement Housing, 
and Tenant-Based Assistance Grants for Public Housing Projects. Section 
535 amends section 24 of the USHA and provides the continued authority 
for the HOPE VI program, and establishes application selection and 
grant requirements.
    Action Guidance. Because this section is effective immediately, 
HUD's FY 1999 HOPE VI Notice of Funding Availability will reflect the 
terms of this section.
    Exemption for severely distressed public housing demolished in 
accordance with a revitalization plan. New section 24(g) of the USHA 
exempts severely distressed public housing demolished in accordance 
with a revitalization plan from the demolition requirements of section 
18 of the USHA. However, any such housing disposed of and any housing 
developed to replace the demolished housing are subject to section 18 
of the USHA.
    Action Guidance. HOPE VI revitalization plans approved after 
October 21, 1998 (the date of enactment of the QHWRA) will receive this 
exemption.
    Section 537--Required Conversion of Distressed Public Housing to 
Tenant-Based Assistance. Section 537 adds a new section 33 to the USHA 
and repeals its forerunner provision in the FY 1996 HUD Appropriations 
Act. A component of each PHA plan is its 5-year plan for the removal of 
public housing units identified as distressed from the public housing 
inventory and the ACC. This plan for removal of units is subject to 
review by HUD.
    Action Guidance. While this section is not yet effective, the 
language of this section clarifies that public housing developments 
identified by HUD or a PHA for conversion or for assessment of whether 
conversion is required under the preexisting law and regulations shall 
remain subject to that law and regulations (Section 202 of the VA/HUD/
Independent Agencies Appropriations Act of 1996 and implementing 
regulations at 24 CFR part 971).

Subtitle C of the QHWRA--Section 8 Rental and Homeownership 
Assistance

    Section 547--Section 8 PHA Administrative Fees for the Certificate, 
Voucher and Moderate Rehabilitation Programs. Section 547 amends 
section 8(q) of the USHA and changes the prior administrative fee 
system slightly, by increasing the fee for the first 600 certificate, 
voucher and moderate rehabilitation units administered by a PHA from 
7.5% to 7.65% of a defined base amount beginning October 1, 1998. HUD 
will issue a separate notice indicating how the increase in FY 1999 
administrative fees is to be paid.
    Action Guidance for the Section 8 Certificate, Voucher and Moderate 
Rehabilitation Programs. A Senate colloquy on the QHWRA legislation 
indicated that HUD should allow administrative fee adjustments to cover 
any necessary additional expenses for serving persons with disabilities 
fully, such as additional counseling (housing search assistance) 
expenses (Congressional Record of October 8, 1998, p. S11840). PHAs 
that have undertaken or will undertake, such expenses may document the 
services provided, describe the expenses and propose administrative fee 
adjustments to HUD.
    Section 548--Law Enforcement and Security Personnel in Project-
Based Section 8 Housing. To increase security, Section 548 provides 
that Section 8 assistance may be provided to police officers and other 
security personnel who are not otherwise eligible for assistance.
    Action Guidance for the Section 8 Project-Based Certificate, 
Moderate Rehabilitation and Other Section 8 Project-Based Programs. 
Section 548 is applicable to FY 1999 and following fiscal years, and is 
applicable to Section 8 moderate rehabilitation, project-based 
certificate, new construction, substantial rehabilitation and other 
project-based Section 8 projects. Owners must apply to the HUD Field 
Office for authorization to house over-income police officers and other 
security personnel in the assisted units. Until otherwise notified, the 
owner application needs to include a statement demonstrating the need 
for increased security at the project, and a description of the 
proposed gross rent for the unit and any special conditions for 
occupancy. Processing instructions will be provided to HUD Field 
Offices.
    Section 549--Advance Notice to Tenants of Expiration, Termination, 
or Owner Nonrenewal of Section 8 Assistance Contract. Section 549(a) of 
the QHWRA amends section 8(c)(9) of the USHA to make permanent the 
tenant-based notice and endless lease provisions which had been 
effective through FY 1998 and to change the project-based contract 
termination notice requirement from 6 months to 1 year. Section 549(a) 
also eliminates the notice and rent adjustment provisions of sections 
8(c)(8) and (10).
    Section 549(b) amends section 8(c)(9) to require the project-based 
1-year notice to include information about the possibility of 
nonrenewal of assistance (when the owner seeks renewal but 
appropriations are uncertain) and the resulting protections. Section 
549(b) also requires a 6-month notice to HUD and tenants when the owner 
agrees to a 5-year renewal that is subject to the availability of 
appropriations.
    Section 549(c) amends section 514(d) of the Multifamily Assisted 
Housing Reform and Affordability Act that addresses the mortgage 
restructuring, to require that the owner who is not renewing project-
based assistance to give notice of the termination in addition to the 
1-year notice at least 120 days before termination.
    1. Tenant-based assistance. Subsection (a) of section 549, 
Permanent Applicability of Notice and Endless Lease Provisions, is 
effective October 21, 1999. That subsection makes permanent the 
suspension in recent annual appropriations acts of the 90-day owner 
termination notice to HUD and endless lease term with respect to the 
tenant-based Section 8 programs. Of course, landlords still must 
terminate leases and conduct evictions in accordance with other 
applicable laws.
    Action Guidance for Section 8 Tenant-Based Certificate and Voucher 
Programs. PHAs should advise interested owners who are participating or 
who are potential participants in the tenant-based assistance programs 
that the 90-day owner termination and endless lease term requirements 
have been permanently eliminated. Additional implementation guidance 
was issued December 18, 1998 in Notice PIH 98-64.
    2. Project-based assistance. Subsection (a) of section 549 also

[[Page 8205]]

requires owners of projects receiving project-based section 8 
assistance to provide not less than one-year written notification to 
tenants and HUD of the expiration or termination of the contract. Note 
that section 8(c)(8) of the USHA which required owners to provide a 90-
day notice to the tenants of any rent increase is repealed.
    Action Guidance for Section 8 Project-Based Certificate, Moderate 
Rehabilitation and Other Project-Based Programs. Owners who gave notice 
prior to the enactment of the QHWRA (October 21, 1998) are covered 
under the 180-day notice requirement. Owners who give notice to tenants 
and HUD on or after October 21, 1998 must fulfill the entire one-year 
notification requirement. HUD's Office of Housing will issue further 
guidance in the near future. Guidance concerning the Section 8 Moderate 
Rehabilitation Program notice requirements is found in Notice PIH 98-
62, issued December 15, 1998.
    Section 551--Funding and Allocation (of Public Housing and Section 
8 Funds). Section 551 amends section 213 of the Housing and Community 
Development Act of 1974 (42 U.S.C. 1439) which section addresses 
applications for housing assistance under the USHA or section 101 of 
the Housing and Urban Development Act of 1965. Section 551 most 
importantly repeals restrictions on funding allocations related to an 
obsolete nonmetropolitan set-aside and notification to jurisdictions 
and solicitation of comments regarding certain funding awards.
    Action Guidance for Public Housing and Section 8 Programs. This 
notice makes section 551 effective immediately. Local government 
comments with respect to affected PHA applications for Section 8 and 
public housing funds are no longer required.
    Section 554--Leasing to Voucher Holders. This section immediately 
repeals the so-called ``take one, take all'' Section 8 tenant-based 
provision that has been suspended in recent annual appropriations acts.
    Action Guidance for the Section 8 Tenant-Based Certificate and 
Voucher Programs. The intent of Congress was to make the tenant-based 
assistance program more attractive to private landlords and encourage 
participation. PHAs should make a concerted effort to inform the 
prospective owner community of this permanent change, particularly for 
marketing the tenant-based assistance program to owners of units in 
low-poverty areas.
    Section 555 and Section 545 [Sec. 8(o)(15)]--Section 8 Tenant-Based 
Homeownership Option. These sections provide necessary additional 
flexibility for PHAs to use vouchers to increase homeownership.
    Action Guidance for the Section 8 Tenant-Based Certificate and 
Voucher Programs. HUD will be providing further guidance in the near 
future.

Subtitle D of the QHWRA--Home Rule Flexible Grant Demonstration 
(Public Housing and Tenant-Based Section 8 Programs)

    Subtitle D of the QHWRA adds a demonstration program in which 
eligible jurisdictions, typically units of general local government, 
could receive public housing and tenant-based assistance for up to five 
years to meet specified performance goals.
    Action Guidance for Public Housing and Section 8 Tenant-Based 
Programs. While HUD may issue additional guidance later, any eligible 
jurisdiction wishing to participate in the demonstration may follow the 
statute's requirements and submit an application to the Assistant 
Secretary, Office of Public and Indian Housing. HUD will not approve 
such an application, however, unless the application presents a 
compelling case that the eligible jurisdiction's participation and 
proposal would achieve the goals of the statute (which include the 
underlying program management and performance goals of the public 
housing and tenant-based assistance programs) in a superior manner to 
continuation of program management with the affected PHA.

Subtitle E of the QHWRA--Accountability and Oversight of Public 
Housing Agencies Administering the Public Housing and Section 8 
Programs

    Section 565--Expansion of Powers for Dealing with Public Housing 
Agencies in Substantial Default. In addition to providing for an 
expansion of various powers to be exercised by HUD or receivers, this 
section requires HUD to petition for court-ordered receivership (or to 
implement an administrative receivership, in the case of PHAs with 
fewer than 1,250 public housing units) with respect to certain troubled 
PHAs. The troubled PHAs subject to that requirement are those that do 
not:
    (1) Within one year of the later of the date of enactment of the 
Act or receiving notice of a ``troubled'' designation, improve their 
performance score by at least half of the difference between their most 
recent score and the score necessary to remove the troubled 
designation; and
    (2) Within two years of the later of such dates, escape troubled 
designation.
    Section 565(d) states that HUD may administer these amendments as 
necessary to assure its efficient and effective initial administration. 
The initial administration of this section is affected by two ongoing 
processes.
    First, PHAs ordinarily receive performance scores throughout the 
calendar year after their staggered fiscal year ends. To meet the 
statutory requirement for PHAs that receive notice of a troubled 
designation after October 21, 1998, performance assessments will be 
scheduled specifically for years commencing with the beginning of the 
first quarter after receipt of that notice. For PHAs that were 
designated troubled before October 21, 1998, performance assessments 
will be scheduled specifically for years ending October 21, 1999, and 
if necessary, October 21, 2000. With respect to these assessments, 
which in most cases will not correspond to a PHA's fiscal year, HUD may 
utilize year-end financial information or the most recent resident 
satisfaction surveys where HUD determines that such use will reasonably 
reflect the PHA's situation as of the assessment date.
    Second, PHAs have been receiving performance scores under the 
Public Housing Management Assessment Program (PHMAP), but commencing 
with PHA fiscal years ending September 30, 1999, will receive scores 
under the new Public Housing Assessment System (PHAS). Thus, in some 
instances, during the transitional year PHAS scores will have to be 
compared with PHMAP scores to determine whether the 50% improvement 
requirement has been met. Where HUD determines that the 50% improvement 
has not been met, but that this failure is attributable to the 
transition between PHMAP and PHAS, HUD will not seek or impose court or 
administrative receiverships based on that requirement. (HUD will have 
the information needed to make that determination, largely based on the 
``management'' component of PHAS.) The requirement to escape troubled 
status within two years, however, will be imposed notwithstanding the 
transition from PHMAP to PHAS.

Subtitle F--Safety and Security in Public and Assisted Housing

    Section 575--Provisions Applicable Only to Public Housing and 
Section 8 Assistance. Section 575 amends several subsections of section 
6 of the USHA and contains a number of provisions concerning public 
housing and Section 8 applicant screening and subsidy termination for 
criminal activity. Except for subsection (e) of section 575, the 
provisions of section 575 are not yet applicable.

[[Page 8206]]

    Action Guidance for the Public Housing Program. Subsection (e) of 
section 575, Obtaining Information from Drug Abuse Treatment 
Facilities, was effective October 21, 1998 and is applicable only to 
public housing. Any PHA that wishes to use the authority of this 
subsection to obtain information whether public housing applicants are 
currently using illegal controlled substances from drug abuse treatment 
facilities must follow the specific requirements of subsection (e).

Subtitle G--Repeals and Related Provisions

    Section 584--Use of American Products. This section reflects 
Congressional intent that, to the greatest extent practicable, all 
equipment and products purchased with funds made available under the FY 
1999 HUD Appropriations Act should be American made.
    Action Guidance. In providing financial assistance under the FY 
1999 HUD Appropriations Act or in entering into any contract with any 
entity using funds made available under the FY 1999 HUD Appropriations 
Act, HUD, to the greatest extent practicable, is to provide a notice 
that describes Congressional intent in this regard. HUD is bringing 
this matter to the attention of the readers of this notice and urges 
them to take appropriate action.
    Section 592--Use of Assisted Housing by Aliens. This section 
removes the option of PHAs to elect not to comply with section 214 of 
the Housing and Community Development Act of 1980 (Restriction on 
Assistance to Noncitizens). This option was provided by the Immigration 
Reform and Immigrant Responsibility Act of 1996 (Pub.L. 104-298, 
approved September 30, 1996). In its place, the QHWRA provides that 
PHAs, notwithstanding the requirement of section 214(h)(1), may elect 
not to affirmatively establish and verify eligibility before providing 
financial assistance to an individual or family. Section 214(h)(1) 
provides that ``No individual or family applying for financial 
assistance may receive such financial assistance prior to the 
affirmative establishment and verification of eligibility of at least 
the individual or one family member under subsection (d) by the 
applicable Secretary or other appropriate entity.''
    Action Guidance for Public Housing and Section 8 Certificate, 
Voucher, and Moderate Rehabilitation Programs. The amendments to 
section 214 made by the QHWRA essentially reinstate HUD's noncitizens 
regulations as they were in existence before the amendments made by the 
Illegal Immigration Reform and Immigrant Responsibility Act of 1996. 
The pre-1996 requirements did not require PHAs to affirmatively 
establish and verify eligibility of at least the individual or one 
family member before the individual or family may receiving financial 
assistance. Additionally, the pre-1996 requirements did not provide 
PHAs with the option not to comply with section 214. With the 
amendments made by QHWRA, PHAs must comply with section 214 except that 
they are not required to affirmatively establish and verify eligibility 
of at least one family member before providing financial assistance. 
PHAs, however, have the option to adhere to that requirement if they so 
choose.
    In the event a PHA elected to opt out of compliance with section 
214, the PHA may, but is not required to, immediately commence 
verification of eligibility of families for whom eligibility status 
under section 214 has not yet been undertaken. A PHA must, however, 
verify eligibility status in accordance with the requirements of 
section 214 and the regulations at 24 CFR part 5, subpart E, no later 
than the date of the family's annual reexamination.
    Section 597--Section 8 Moderate Rehabilitation Program. In part, 
Section 597 establishes rules for determining contract rent levels at 
which expiring moderate rehabilitation contracts will be renewed.
    Action Guidance for Section 8 Moderate Rehabilitation Program. PHAs 
must generally extend for one year the project-based HAP contracts for 
non-SRO, non-mark-to-market multifamily moderate rehabilitation 
projects at contract rents that are the lower of (1) current rents 
adjusted by HUD's operating cost adjustment factor, (2) comparable 
rents, or (3) FMR less any amounts allowed for tenant-purchased 
utilities. HUD Field Offices were provided information concerning 
moderate rehabilitation renewals on October 23, 1998; HUD provided 
further implementing guidance in Notice PIH 98-62 (HA), issued December 
15, 1998.
    Section 599--Tenant Participation in Multifamily Housing Projects. 
Section 599 of the QHWRA amends section 202 of the Housing and 
Community Development Amendments of 1978 to extend the rights of 
tenants to organize to include all projects receiving project-based 
Section 8 assistance (including moderate rehabilitation and project-
based certificate projects) and to tenants receiving ``enhanced'' 
vouchers under the provisions of the Emergency Low Income Housing 
Preservation Act of 1987, or the Low-Income Housing Preservation and 
Resident Homeownership Act of 1990, or the Multifamily Assisted Housing 
Reform and Affordability Act of 1997.
    Action Guidance for Project-Based Section 8 and Enhanced Vouchers. 
HUD will issue rulemaking governing tenants' rights to organize at 
projects receiving project-based Section 8 assistance or enhanced 
vouchers in connection with preservation projects or restructuring 
projects (ELIHPA, LIHPRA and MAHRA).

Section II--Certain Statutory Provisions That Require Rulemaking

    The following additional provisions of the QHWRA either require 
rulemaking for implementation by statute or HUD has determined in its 
review of the statutory provision that rulemaking is necessary for 
implementation. This list does not include conforming rules that simply 
amend existing HUD regulations to reflect the new statute. HUD may 
determine that other sections need rulemaking as the implementation 
process progresses. These sections will be identified in HUD's 
Semiannual Agenda of Regulations to be published in April 1999 as part 
of the Federal Government's Unified Regulatory Agenda.
    Section 511--Public Housing Agency Plan (for Public Housing and 
Section 8 Programs). This section establishes a comprehensive planning 
process for PHAs--a 5-year plan and an annual plan update. The 5 year 
plan describes the mission of the PHA and the PHA's long range goals 
and objectives for achieving its mission over the next 5 years. The 
annual plan provides details about the PHA's immediate operations, 
residents, programs and services, and the PHA's strategy for handling 
operational concerns, residents concerns and needs, programs and 
services for the upcoming fiscal year.
    Implementation Method. The QHWRA requires HUD to implement this 
section by issuing an interim rule no later than 120 days after 
enactment of the QHWRA; that is, by February 18, 1999. The interim rule 
must provide a 60-day public comment period. The QHWRA also requires 
HUD to solicit recommendations from (1) State or local PHAs, (2) public 
housing residents, and (3) other appropriate parties. The QHWRA also 
requires HUD to convene at least two public forums. The final rule, 
which must be issued no later than by October 21, 1999, must discuss 
the recommendations, public comments and HUD responses to the 
recommendations and comments.

[[Page 8207]]

    Please note that the interim rule is published elsewhere in today's 
Federal Register.
    Section 515 --Joint Ventures and Consortia of Public Housing 
Agencies. This section permits two or more PHAs to participate in a 
consortium to administer any or all of their housing programs. This 
section also permits a PHA, in accordance with its PHA plan, to form a 
subsidiary or joint venture to administer programs or provide 
supportive or social services. A consortium must operate in accordance 
with a consortium agreement and a joint PHA plan. The income generated 
by a subsidiary or joint venture must be used for low-income housing or 
to benefit the residents, and will not result in lower funding to the 
PHA unless the capital and operating fund formulas so provide.
    Implementation Method. HUD has determined that proper 
implementation of at least the consortium provisions requires 
rulemaking.
    Section 519--Public Housing Capital and Operating Funds. Section 
519 creates two grants for funding public housing activities--the 
Capital Fund and Operating Fund. Assistance through these new funding 
mechanisms is to commence for FY 2000, except that HUD may extend the 
implementation of the Operating Fund allocation formula by up to six 
months if necessary. (Please see discussion of this statutory provision 
under Section I for those provisions of section 519 that are 
immediately effective.)
    Implementation Method. The QHWRA requires HUD to develop allocation 
formulas for these funds through the negotiated rulemaking process.
    Section 526--Pet Ownership for Public Housing. Section 526 permits 
a resident of public housing, as defined in new section 31 of the USHA, 
to have one or more pets in the unit if the resident maintains each pet 
responsibly in accordance with applicable State and local laws and with 
the PHA's policies stated in the PHA plan.
    Implementation Method. The QHWRA provides that section 526 will 
take effect upon the effective date of regulations issued by HUD to 
carry out this section. The QHWRA also provides that HUD shall issue 
effective regulations after notice and opportunity to comment by the 
public.
    Section 533--Conversion of Public Housing to Vouchers; Repeal of 
Family Investment Centers. Section 533 requires PHAs to perform a 
``conversion assessment'' of each of its public housing projects to 
determine the relative benefit of converting to tenant-based assistance 
under the section 8 program.
    Implementation Method. HUD has determined that proper 
implementation of section 533 requires rulemaking.
    Section 537--Required conversion of distressed public housing to 
tenant-based assistance. Section 537 adds a new section 33 to the USHA 
and repeals its forerunner provision in the FY 1996 HUD Appropriations 
Act. A component of each PHA plan is its 5-year plan for the removal of 
public housing units identified as distressed from the public housing 
inventory. This plan for removal of units is subject to review by HUD.
    Implementation Method. HUD has determined that proper 
implementation of section 537 requires rulemaking. See guidance in 
Section I of this Notice regarding continued applicability of prior law 
and regulations.
    Section 539--Mixed-Finance Public Housing. Section 539 adds a new 
section 37 to the USHA authorizing development of projects financially 
assisted by private resources as well as public housing program funds.
    Implementation Method. New section 37 provides that HUD shall issue 
such regulations as may be necessary to promote the development of 
mixed-finance projects.
    Section 545--Merger of Certificate and Voucher Programs. Section 
545 amends section 8(o) of the USHA to merge the Section 8 certificate 
and voucher programs.
    Implementation Method. In general, the merger of certificates and 
vouchers is not yet effective. HUD will be issuing a rule that merges 
these two programs. Therefore, PHAs should continue to operate these 
programs as previously operated, except with respect to specific 
changes highlighted by this Notice or as otherwise notified by HUD. 
This includes assistance for families currently under lease and the 
provision of turnover or newly awarded assistance to new families.
    Section 556--Section 8 Renewals for Tenant-Based Certificate and 
Voucher Funds. Section 556 amends section 8 of the USHA to add a new 
subsection (dd) and authorizes HUD to renew all expiring tenant-based 
contracts. New subsection (dd) directs HUD to establish an allocation 
baseline amount of assistance to cover the renewals, and to apply an 
inflation factor (based on local or regional factors) to the baseline.
    Implementation Method. Section 556 requires HUD to issue a notice 
by December 31, 1998, and to develop final regulations through the 
negotiated rulemaking process.
    Please note that elsewhere in today's Federal Register HUD has 
published for the benefit of the public the notice that was issued 
directly to PHAs on December 31, 1998.
    Section 559--Rulemaking and Implementation. Section 559 provides 
for implementation of sections 545 through 558 and other provisions in 
title V that relate to the voucher program (most notably, the merger of 
the certificate and voucher programs) through ``such interim 
regulations as may be necessary'' and final regulations necessary to 
implement these provisions. This section also requires HUD to seek 
recommendations from various types of organizations on the 
implementation of sections 8(o)(6)(B), 7(B), 10(D) of the USHA and 
renewals of expiring tenant-based assistance. HUD is to convene not 
less than two public forums to seek such recommendations.
    Section 586--Amendments to Public and Assisted Housing Drug 
Elimination Act of 1990. Section 586 amends the Anti-Drug Abuse Act of 
1988 to include additional eligible activities and provide for more 
predictable fund distribution.
    Implementation Method. The statute directs HUD to prescribe by 
regulation the criteria for establishing a class of PHAs that have 
urgent or serious crime problems, for which funds may be reserved under 
this program.
    Please note that elsewhere in today's Federal Register, HUD is 
publishing an Advance Notice of Proposed Rulemaking to solicit public 
comments on HUD's proposed approach to this rulemaking.

Section III--Future Guidance

    The QHWRA makes many significant changes to HUD's public housing 
and Section 8 programs. With many of the changes immediately effective, 
substantial responsibility is placed on PHAs and Section 8 owners to 
implement these changes promptly. HUD is committed to working closely 
with its public housing and Section 8 partners to make the changes in 
its public housing and Section 8 programs a success. The successful 
administration of the new programs created by the QHWRA or program 
changes made by the QHWRA benefits those most in need of these 
programs--low-income families. HUD welcomes comments from its program 
partners, and HUD will continue to provide additional guidance through 
direct notices to PHAs and Section 8 owners, additional Federal 
Register notices, or through other means that may be determined 
appropriate.

[[Page 8208]]

Section IV--Findings

    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). The Finding 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 7th Street, SW, Washington, DC 
20410.

    Dated: February 10, 1999.
Deborah Vincent,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-3731 Filed 2-17-99; 8:45 am]
BILLING CODE 4210-33-P