[Federal Register Volume 64, Number 141 (Friday, July 23, 1999)]
[Proposed Rules]
[Pages 40240-40248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18774]
[[Page 40239]]
_______________________________________________________________________
Part VIII
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 972
Voluntary Conversion of Developments From Public Housing Stock;
Proposed Rule
Federal Register / Vol. 64, No. 141 / Friday, July 23, 1999 /
Proposed Rules
[[Page 40240]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 972
[Docket No. FR-4476-P-01]
RIN 2577-AC02
Voluntary Conversion of Developments From Public Housing Stock
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule implements a recent revision to the statute
authorizing the public housing and Section 8 housing assistance
programs to allow a Public Housing Agency (PHA) to convert any public
housing project it owns to tenant-based assistance where the conversion
would satisfy statutory objectives. If, after conducting a conversion
assessment, the PHA determines that the following conditions are met,
it may convert the project: Conversion will not be more expensive than
continued operation of the project conversion will benefit residents
and the community; and conversion will not adversely affect the
availability of affordable housing in the community. The statute
requires every PHA to conduct and submit to HUD a conversion assessment
for its projects no later than October 1, 2001. However, HUD has the
authority to exclude developments or categories of developments from
the assessment requirement, or to streamline the conversion assessment
requirements, and this rule does include streamlining for specified
categories of developments.
DATES: Comments Due Date: September 21, 1999.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule to the Regulations Division, Office of General
Counsel, Room 10276, Department of Housing and Urban Development, 451
Seventh Street, SW, Washington, DC 20410-0500. Communications should
refer to the above docket number and title. Facsimile (FAX) comments
are not acceptable. A copy of each communication submitted will be
available for public inspection and copying between 7:30 a.m. and 5:30
p.m. weekdays at the above address.
FOR FURTHER INFORMATION CONTACT: Rod Solomon, Deputy Assistant
Secretary for Policy, Program and Legislative Initiatives, Department
of Housing and Urban Development, Office of Public and Indian Housing,
451 Seventh Street, SW, Room 4116, Washington, DC 20410; telephone
(202) 708-0713 (this is not a toll-free telephone number). Persons with
hearing or speech disabilities may access this number via TTY by
calling the free Federal Information Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Statutory Basis
Section 22 of the United States Housing Act of 1937 (42 U.S.C. 1437
et seq.) (the ``1937 Act''), as amended by section 533 of the Quality
Housing and Work Responsibility Act of 1998 (title V of the FY 1999 HUD
Appropriations Act; Public Law 105-276, approved October 21, 1998; 112
Stat. 2518-2680) (the ``Public Housing Reform Act''), authorizes Public
Housing Agencies (PHAs) to convert a development to tenant-based
assistance by removing the development or a portion of a development
from its public housing inventory and providing for relocation of the
residents or provision of tenant-based assistance to them. This action
is permitted only when that change would be economical, be beneficial
to residents of the development and the surrounding area, and not have
an adverse impact on the availability of affordable housing.
The statute requires a PHA to perform a conversion assessment as
the first step toward the change. If that produces support for
converting the units, the PHA may develop, and submit, a conversion
plan to HUD. A PHA may convert the public housing only if the
conversion plan has been approved by HUD. The statute also requires
certain assessment actions be taken before October, 1, 2001.
II. Relationship of Voluntary Conversions to Required Conversions
This proposed rule would implement the voluntary conversion
requirements set forth in section 22 of the 1937 Act through the
creation of a new 24 CFR part 972, subpart B. Subpart A of new 24 CFR
part 972 would implement section 537 of the Public Housing Reform Act,
which added a new section 33 to the 1937 Act. New Section 33 sets forth
provisions for the required conversion of distressed public housing to
tenant-based assistance. HUD is implementing section 33 of the 1937 Act
through a separate proposed rulemaking.
Section 202 of the Departments of Veterans Affairs and Housing and
Urban Development and Independent Agencies Appropriations Act, 1996 (42
U.S.C. 1437l note) provided for a program of required conversion of
distressed public housing. HUD implemented that statute by issuing the
regulations now found at 24 CFR part 971. In addition to creating new
section 33, section 537 of the Public Housing Reform Act repealed
section 202. However, those developments that have already been
identified by PHAs or by HUD for conversion, or for assessment of
whether such conversion is required, continue to be subject to the
requirements of section 202 and the part 971 regulations implementing
that section.
III. Description of Specific Sections
A. Conversion Assessment Requirements
The Public Housing Reform Act requires that a PHA conduct a
conversion assessment for each development that it operates as public
housing. HUD is given the authority to exempt certain classes of
developments from this requirement, or streamline the requirements of
the conversion assessment. In this rule, HUD has streamlined the
requirements of the conversion assessment, but requires that every PHA
review and determine the best course of action with respect to each
development that it operates as public housing.
Any PHA that has passed the Public Housing Assessment System (PHAS)
physical conditions indicator must either conduct a conversion
assessment for each public housing development, or certify that it has
reviewed the operations of the development, and has determined that a
full conversion assessment is unnecessary. Any PHA that has failed the
PHAS physical conditions indicator must conduct a conversion assessment
for each public housing development; however, a streamlined assessment
may be conducted. The streamlined conversion assessment for these PHAs
must include the cost analysis, comparing the cost of providing tenant-
based assistance with the cost of continuing to operate the development
as public housing, for each public housing development. This will
ensure that the PHA, with respect to each development, at least makes
and considers the threshold determination whether it is more economical
to convert the public housing. Any PHA that intends to convert a
development to tenant-based assistance must conduct the full conversion
assessment, including all of the elements listed in Sec. 972.209.
PHAs will be receiving their first PHAS scores at various times
during the period for which conversion assessments are required. The
last of
[[Page 40241]]
these scores would be received with ample time remaining in this period
for PHAs to conduct the required streamlined assessments, in the event
they fail the physical conditions indicator. PHAs that do not want to
wait for PHAS scores, however, may fulfill the assessment requirement
by conducting the streamlined assessments (cost test only) for each
development.
HUD believes that Congressional intent was to ensure that every PHA
review the operations of developments operated as public housing, and
determine if conversion would be appropriate. The Senate Committee
Report (S. Rep. No. 105-21, at 27 (1997)) states that this section
``provides a framework for assessing the relative costs of tenant-based
assistance and public housing so that PHAs can make informed judgements
about their policies.'' At the same time, Congress did not intend for
the requirements of a conversion assessment to place an undue burden on
PHAs, and therefore gave HUD broad authority to waive or provide for
streamlined assessments (S. Rep. No 105-21, at 27 (1997)).
The certifications and streamlined assessments that HUD is
proposing will fulfill both of these intentions. PHAs whose
developments are most at risk, where HUD has found that the PHA's stock
does not meet basic standards, must conduct a streamlined assessment,
including the cost analysis. All others at least must consider the
relative costs of public housing and vouchers with respect to each
development. This will ensure that PHAs consider the most appropriate
future action for all developments, and that PHAs with substandard
physical conditions assess the relative costs of tenant-based
assistance and public housing before determining the best course of
action for each of these properties. HUD is considering the use of a
web-based cost comparison calculator on HUD's internet homepage that
would reduce the calculation burden on PHAs. HUD is also considering a
refinement of the existing cost calculation in the appendix to part 972
to include a more precise net present value calculation.
A conversion assessment, or certification with respect to any
development for which a conversion assessment is not necessary, must be
submitted to HUD no later than October 1, 2001. PHAs should include the
conversion assessments, or certifications as part of the next PHA
Annual Plan to be submitted to HUD, after their completion. If the next
PHA Annual Plan submission will not be submitted to HUD by October 1,
2001, a PHA must have the conversion assessment on file by October 1,
2001, and include it in the next PHA Annual Plan submission. A PHA may
otherwise elect to undertake a conversion assessment at any time for
any or all of its developments, and submit it to HUD as part of its
next PHA Annual Plan.
Although HUD believes that it has streamlined the conversion
assessment in such a way that PHAs will not be burdened by the
requirements, HUD specifically invites any comments regarding how the
requirements for conversion assessments can more efficiently fulfill
the purposes of this section.
A full conversion assessment is required for any PHA that seeks
approval to convert a property to tenant-based assistance. A full
conversion assessment includes the cost analysis, an analysis of the
market value of the public housing, an analysis of the rental market
conditions, an analysis of the likely impact of conversion on the
neighborhood, and, if applicable, a description of any actions that
will be taken to convert the public housing.
The cost analysis, which is required as part of the full conversion
assessment, and is necessary to implement a conversion plan, uses the
methodology currently used for purposes of required conversion
requirements (See Appendix to 24 CFR part 971). The appendix to new
part 972 would retain this comparison on a monthly cost basis; the
results would not change if one calculated a net present value for the
remaining useful life of the public housing, because the monthly costs
for both public housing and tenant-based assistance would be multiplied
by the number of months in question. In response to statutory language
that the cost of public housing must be based on ``the remaining useful
life of the project,'' HUD has made one specific change to the
methodology used for the cost analysis. This change is in the amount of
time on which a PHA may amortize its modernization spending. In the
current cost test, a PHA must use a time frame of twenty years in
keeping with the expected life of the capital improvements (30 years if
the work is equivalent to new construction). A PHA that is voluntarily
conducting a conversion assessment and seeking approval for conversion
may be permitted by HUD to use a time frame of less than 20 or 30
years, so long as the time frame is chosen in five year intervals (i.e.
5 years, 10 years, or 15 years), and the PHA provides HUD with a
justification to why a shorter time frame is a reasonable estimate of
the property's remaining useful life.
The cost analysis compares the cost of operating a revitalized
public housing development with the cost of providing tenant based
assistance to the residents of the public housing development. HUD
realizes, however, that those PHAs wishing to voluntarily convert a
development may not have a proposed revitalization plan. Further, HUD
is concerned that those PHAs wanting to voluntarily convert a public
housing development may not have sufficient incentive to fully consider
whether that development could be revitalized, and in particular may
not fully consider whether vacancies and operating costs could be
reduced through the reasonable investment of funds in the development.
Therefore, HUD is seeking comments on whether to give a PHA the option
to:
1. Prepare a revitalization plan for the public housing development
(for purposes of the cost analysis, the operating costs of the
development would be based on the revitalization plan); or
2. For purposes of the cost analysis, assume that a revitalized
development would result in a 10% reduction in current operating costs
(this option would only be available to those PHAs that calculate
current operating costs based on no greater than a 10% vacancy rate).
The statute states that the cost analysis should be conducted on
both a net present value basis, and in terms of new budget authority.
The appendix thus adds a calculation for new budget authority. The
difference between that calculation and the calculation for net present
value is that any capital investment in the public housing is not
amortized over the remaining useful life in a manner that reflects the
cost of expending the capital funds immediately. In order for a PHA to
convert a public housing development, the cost of tenant-based
assistance has to be less than the cost of public housing, both on a
net present value basis, and based on new budget authority.
The analysis of market value requires that a PHA purchase
independent appraisals. Although Congress states that it did not intend
for PHAs to need expensive, new appraisals (S. Rep. No. 105-21, at 27
(1997)), under the proposed rule this part of the conversion assessment
is not mandatory for any PHA except those that are planning to convert
a public housing development to tenant-based assistance. HUD believes
that appraisals are the most effective means to undertaking the
required estimates of market value.
[[Page 40242]]
An analysis of the rental market conditions, and an analysis of the
impact of conversion on the neighborhood must be included in the
conversion assessment as well. PHAs should rely, to the greatest extent
possible, on existing data sources. In addition, PHAs that are
conducting a conversion assessment for more than one property may be
able to use the same information and analyses in the assessments
submitted to HUD.
HUD specifically invites comments on whether additional guidance
should be given regarding how PHAs should conduct the analysis of
rental market conditions and the analysis of the impact on the
neighborhood and how these analyses relate to the PHA's obligation to
affirmatively further fair housing.
B. Conversion Plan
In order for a PHA to convert a public housing development to
tenant-based assistance, a PHA must submit, and HUD must approve a
conversion plan. A conversion plan must be consistent with any
settlement agreement that the PHA has entered into. A conversion plan
must be submitted to HUD as part of the PHA Annual Plan submission.
Although the conversion plan will be part of a PHA Annual Plan
submission, the conversion plan will be subject to a separate approval
from HUD. A separate approval is required because the standards for
approval of the conversion plan differ from the standards for approval
of the PHA Annual plan submission. A PHA may not proceed with
conversion until it receives a separate written approval of its
conversion plan from HUD.
A PHA may not demolish or dispose of units or property until
completion of the required environmental review under 24 CFR part 58
(if a Responsible Entity has assumed environmental responsibility for
the project) or 24 CFR part 50 (if HUD is performing the environmental
review). Further, HUD will not approve a conversion plan until
completion of the required environmental review. However, before
completion of the environmental review, HUD may approve the targeted
units for deprogramming and may authorize the PHA to undertake other
activities proposed in the conversion plan that do not require
environmental review (such as certain activities related to the
relocation of residents), as long as the buildings in question are
adequately secured and maintained.
If a conversion plan is approved by HUD, the PHA may remove the
public housing from the inventory and relocate the residents using
tenant-based or project-based assistance. If the PHA proposes in its
conversion plan to demolish or dispose of the development, the
conversion plan will serve as the demolition or disposition
application, and a separate application will not be required by HUD.
Alternatively, the PHA may retain ownership of the converted buildings
as rental units or for other purposes.
Once a conversion plan is approved, tenants may be relocated using
tenant-based assistance. A PHA must apply for Section 8 tenant-based
assistance and the PHA will be given a priority for receiving tenant-
based assistance. Although the statute also gives HUD the authority to
consent to a transfer of the funds used for public housing to tenant-
based assistance, HUD believes that the most direct way to fund the
Section 8 tenant-based assistance is through annual appropriations. As
the development is removed from the public housing inventory, public
housing operating subsidy and modernization funding will phase out
under the usual process. HUD may require that funding for the initial
year of tenant based assistance be provided from the new public housing
Capital Fund, Operating Fund, or both.
IV. Issues Highlighted for Public Comment
Although HUD welcomes public comment on all aspects of this
proposed rule, in particular it seeks comments on the following issues.
Public comment is invited on this proposed rule in its entirety,
including those issues discussed elsewhere in the preamble. All
comments will be considered in the development of the final rule.
A. Use of Voluntary Conversion Process To Promote Housing
Deconcentration
HUD requests comments on the possible use of the voluntary
conversion process to promote deconcentration of assisted housing,
through partial conversion to vouchers of public housing developments,
and subject to compliance with the standards of this regulation. For
example, a PHA might decide to retain one third of a large public
housing development as public housing, and leverage private financing
to renovate the development. Two thirds of the public housing units
would be replaced with vouchers to be used elsewhere. If successful,
such an approach might result in public housing in a mixed-income
setting, vouchers used in a manner that deconcentrates poverty and
renovation of private market units in an area that needs revitalizing.
Would such a result be desirable, financially feasible, or workable, in
many situations? If such a result would be desirable, what would HUD
need to do to promote it in appropriate situations?
B. Total Development Cost (TDC) Calculation
Section 520 of the Public Housing Reform Act made several changes
to the requirements governing the Total Development Cost (TDC) limit
for public housing development. Due to these changes, it may no longer
be appropriate to use full TDC for accrual. It may be more appropriate
to use a housing construction cost component of TDC. This reflects the
idea that accrual should primarily be based on the hard costs of
revitalization. Unlike TDC, housing construction cost does not include
the soft costs associated with redevelopment, and therefore HUD
believes that using housing construction cost may yield a better
estimate of accrual. HUD may make this change at the final rule stage
and specifically requests comment on this issue.
C. Impact of Conversion on Minorities and Persons With Disabilities
HUD requests comments on the best means to ensure that fair housing
considerations are appropriately addressed during the voluntary
conversion process. In particular, HUD requests comments on whether a
description should be required, as part of a full conversion
assessment, of the proposed conversion's impact on racial and ethnic
minorities and persons with disabilities. This will assist the PHA to
carry out its responsibilities under the nondiscrimination requirements
of the Fair Housing Act (42 U.S.C. 3601 et seq.) to affirmatively
further fair housing.
V. Findings and Certifications
Public Reporting Burden
The information collection requirements contained in Secs. 972.209
and 972.217 have been submitted to the Office of Management and Budget
(OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
In accordance with the Paperwork Reduction Act, HUD may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless the collection displays a currently valid OMB
control number.
The burden of the information collections in this proposed rule is
estimated as follows:
[[Page 40243]]
Reporting and Recordkeeping Burden
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Estimated
Number of average time Estimated
Section reference Number of responses per for annual burden
parties respondent* requirement (in hours)
(in hours)*
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972.209........................................ 330 1 8 2,640
972.217........................................ 165 1.5 28 6,930
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Total Reporting and Recordkeeping Burden .............. ............... .............. 9,570
(Hours)...................................
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* The number of responses and times estimated are averages.
Although the information collections are largely specified by
section 22 of the United States Housing Act of 1937, HUD is nonetheless
interested in receiving comments on the most efficient way to collect
information necessary to reviewing the necessary elements of this
conversion program. In accordance with 5 CFR 1320.8(d)(1), HUD is
soliciting comments from members of the public and affected agencies
concerning this collection of information to:
(1) Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) Minimize the burden of the collection of information on those
who are to respond; including through the use of appropriate automated
collection techniques or other forms of information technology, e.g.,
permitting electronic submission of responses.
Interested persons are invited to submit comments regarding the
information collection requirements in this proposal. Comments must be
received within sixty (60) days from the date of this proposal.
Comments must refer to the proposal by name and docket number (FR-4476)
and must be sent to:
Joseph F. Lackey, Jr., HUD Desk Officer, Office of Management and
Budget, New Executive Office Building, Washington, DC 20503;
and
Mildred Hamman, Reports Liaison Officer, Office of the Assistant
Secretary for Public and Indian Housing, Department of Housing and
Urban Development, 451--7th Street, SW, Room 4244, Washington, DC 20410
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) (the RFA), has reviewed and approved this proposed rule,
and in so doing certifies that this rule will not have a significant
economic impact on a substantial number of small entities. The reasons
for HUD's determination are as follows:
(1) A Substantial Number of Small Entities Will Not be Affected.
The entities that would be subject to this rule are public housing
agencies that administer public housing. Under the definition of
``Small governmental jurisdiction'' in section 601(5) of the RFA, the
provisions of the RFA are applicable only to those few public housing
agencies that are part of a political jurisdiction with a population of
under 50,000 persons. The number of entities potentially affected by
this rule is therefore not substantial.
(2) No Significant Economic Impact. This rule requires PHAs to
perform conversion assessments for certain developments using readily
available data to determine whether those developments should be
converted to tenant-based assistance. HUD has provided for streamlined
assessments, including certifications for any PHA that has passed the
Public Housing Assessment System (PHAS) physical conditions indicator
and a conversion assessment limited to the cost analysis for other
PHAs.
This is a one-time requirement as contemplated by the Public
Housing Reform Act. Smaller PHAs will have fewer developments to
consider, and the burden on them should consequently be proportionally
smaller. Ultimately, the goal of the rule is to promote more efficient
delivery of affordable housing to residents of current public housing
developments. This efficiency should benefit small PHAs and large PHAs
alike.
Accordingly, the economic impact of this rule will not be
significant, and it will not affect a substantial number of small
entities. Notwithstanding HUD's determination that this rule will not
have a significant economic effect on a substantial number of small
entities, HUD specifically invites comments regarding any less
burdensome alternatives to this rule that will meet HUD's objectives as
described in this preamble.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969 (42 U.S.C. 4223). The Finding of No Significant Impact is
available for public inspection between the hours of 7:30 a.m. and 5:30
p.m. weekdays in the Office of the Rules Docket Clerk, Office of
General Counsel, Room 10276, Department of Housing and Urban
Development, 451 Seventh Street, SW, Washington, DC.
Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this rule
will not have federalism implications concerning the division of local,
State, and Federal responsibilities. The rule merely states the
preconditions for a PHA to voluntarily convert a public housing
development to tenant-based assistance. No programmatic or policy
change will result from this rule that will affect the relationship
between the Federal government and State and local governments.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. This proposed rule does not impose
any Federal mandates on any State, local, or tribal governments or the
private sector within the meaning of Unfunded Mandates Reform Act of
1995.
Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, Regulatory
[[Page 40244]]
Planning and Review. OMB determined that this rule is a ``significant
regulatory action'' as defined in section 3(f) of the Order (although
not an economically significant regulatory action under the Order). Any
changes made to this rule as a result of that review are identified in
the docket file, which is available for public inspection in the office
of the Department's Rules Docket Clerk, Room 10276, 451 Seventh Street,
SW, Washington, DC 20410-0500.
Catalog of Federal Domestic Assistance Number
The Catalog of Federal Domestic Assistance number for the program
affected by this rule is 14.850.
List of Subjects in 24 CFR Part 972
Grant programs--housing and community development, Low and moderate
income housing, Public housing.
For the reasons discussed in the preamble, HUD proposes to amend
title 24 of the Code of Federal Regulations as follows:
1. Add part 972, subpart B and an appendix to part 972 to read as
follows:
PART 972--CONVERSION OF PUBLIC HOUSING TO TENANT-BASED ASSISTANCE
Subpart A--[Reserved]
Subpart B--Voluntary Conversion of Public Housing Developments
Sec.
972.201 What is the definition of ``conversion''?
972.203 What is the purpose of this subpart?
972.205 What is the procedure for a PHA to follow if it wants to
convert a public housing project to tenant-based assistance?
972.207 For what developments must a PHA perform a conversion
assessment?
972.209 What does a conversion assessment contain?
972.211 When does a PHA submit a conversion assessment to HUD?
972.213 What conditions must be addressed in the conversion
assessment that will allow HUD to approve conversion?
972.215 What is the public and resident consultation process for
developing a conversion plan?
972.217 What are the components of a conversion plan?
972.219 When does a PHA submit a conversion plan to HUD?
972.221 What is the HUD process for approving the conversion plan?
972.223 What action does HUD take with respect to a PHA's
conversion plan?
972.225 When may a PHA proceed to convert a development?
Appendix to Part 972--Methodology of Comparing Cost of Public Housing
With the Cost of Tenant-Based Assistance
Authority: 42 U.S.C. 1437t, 14372-5, 3535(d).
Subpart A--[Reserved]
Subpart B--Voluntary Conversion of Public Housing Developments
Sec. 972.201 What is the definition of ``conversion''?
For purposes of this subpart, the term ``conversion'' means the
removal of public housing units from the inventory of a Public Housing
Agency (PHA), and the provision of tenant-based, or project-based
assistance for the residents of the public housing that is being
removed. The term ``conversion,'' as used in this subpart, does not
necessarily mean the physical removal of the public housing
development.
Sec. 972.203 What is the purpose of this subpart?
This subpart implements section 22 of the United States Housing Act
of 1937 (42 U.S.C. 1437t). The purposes of this subpart are to:
(a) Require PHAs to perform an assessment which considers
developments for which conversion of public housing may be appropriate;
and
(b) Provide a basis for a PHA to take action for conversion on a
voluntary basis.
Sec. 972.205 What is the procedure for a PHA to follow if it wants to
convert a public housing project to tenant-based assistance?
(a) A PHA must perform a full conversion assessment, in accordance
with Secs. 972.209-972.211, and submit it to HUD as part of the next
PHA Annual Plan submission.
(b) A PHA must prepare a conversion plan, in accordance with
Sec. 972.217, and submit it to HUD, as part of the next PHA Annual
Plan, within one year after submitting the conversion assessment.
(c) A PHA may proceed to convert the project if HUD approves the
conversion plan.
Sec. 972.207 For what developments must a PHA perform a conversion
assessment?
(a) General rule. (1) Required initial conversion assessment. A PHA
must conduct a full conversion assessment in accordance with
Sec. 972.209 for each development once during the period of October 1,
1999 through September 30, 2001, unless:
(i) The development is subject to required conversion, under
subpart A of this part or part 971 of this title;
(ii) The development is the subject of a plan for demolition that
has not been disapproved by HUD; or
(iii) A HOPE VI revitalization grant has been awarded for the
development.
(2) Optional future conversion assessments. A PHA may otherwise
elect to undertake a conversion assessment at any time for any or all
of its developments, and submit it to HUD as part of its next PHA
Annual Plan.
(b) Streamlined Assessment. With respect to the required initial
conversion assessment, the following streamlining will apply:
(1) PHAs that have passed the Public Housing Assessment System
(PHAS) physical conditions indicator. (i) Any PHA that passes the
physical condition component of PHAS (part 902, subpart B, of this
chapter) may designate developments for which it will not conduct a
conversion assessment.
(ii) In order not to assess a particular development, the PHA must
certify that it:
(A) Has reviewed the development's operation as public housing;
(B) Considered converting the public housing to tenant-based
assistance; and
(C) Concluded that an assessment is unnecessary because conversion
would not satisfy the three conditions necessary for voluntary removal
set forth in Sec. 972.213(a).
(iii) A PHA must maintain documentation of the reasoning with
respect to each development for which it certifies that an assessment
is unnecessary.
(2) PHAs that fail the PHAS physical condition indicator. (i) Any
PHA that does not receive a passing score on the PHAS physical
conditions indicator must conduct an assessment for each development
except those listed in paragraphs (a)(1)-(3) of this section.
(ii) However, any PHA that is required to perform a conversion
assessment for a development, may submit to HUD a streamlined
conversion assessment that includes the cost analysis, comparing the
cost of providing tenant-based assistance with the cost of continuing
to operate the development as public housing, described at
Sec. 972.209(a).
(c) Full assessment required for conversion. A PHA must submit a
full conversion assessment (not a streamlined assessment under
paragraph (b) of this section) for any public housing project it wishes
to convert to tenant-based assistance.
Sec. 972.209 What does a conversion assessment contain?
The conversion assessment contains five elements, as described
below:
(a) Cost analysis. A PHA must conduct a cost analysis comparing the
[[Page 40245]]
cost of providing Section 8 tenant-based assistance with the cost of
continuing to operate the development as public housing for the
remainder of its useful life. See the Appendix to this part for the
required methodology for this cost analysis.
(b) Analysis of the market value. (1) A PHA must have an
independent appraisal conducted to compare the market value of the
development before and after rehabilitation. In both cases, the market
value must be based on the use of the development as public housing.
(2) In addition, the appraisal must compare:
(i) The market value of the development before rehabilitation,
based on the use of the development as public housing, with the market
value of the development after conversion; with
(ii) The market value of the development after rehabilitation,
based on the use of the development as public housing, with the market
value of the development after conversion.
(3) A copy of the appraisal findings and the analysis of market
value of the development in the conversion assessment must be provided
in the conversion assessment.
(c) Analysis of rental market conditions. (1) A PHA must conduct an
analysis of the likely success of using tenant-based assistance for the
residents of the public housing development. This analysis must include
an assessment of the availability of decent and safe dwelling units
rented at or below the payment standard established for Section 8
tenant-based assistance.
(2) In conducting this assessment, a PHA must take into account:
(i) Its overall use of rental certificates or vouchers under lease
and the success rates of using Section 8 tenant-based assistance in the
community for the appropriate bedroom sizes; and
(ii) Any particular characteristics of the specific residents of
the public housing which may affect their ability to be housed.
(d) Impact analysis. A PHA must describe the likely impact of
conversion of the public housing development on the neighborhood in
which the public housing is located. This should include:
(1) The impact on the availability of affordable housing in the
neighborhood; and
(2) The impact on the concentration of poverty in the neighborhood.
(e) Conversion implementation. If a PHA intends to convert the
development (or a portion of it) to tenant-based assistance, the
conversion assessment must include a description of any actions the PHA
plans to take in converting the development. This must include a
general description of the planned future uses of the development, and
the means, and timetable for accomplishing such uses.
Sec. 972.211 When does a PHA submit a conversion assessment to HUD?
(a) Required initial conversion assessment. (1) A PHA must submit a
conversion assessment, or certification that a conversion assessment is
unnecessary, for any development for which it is required under
Sec. 972.207(a) no later than October 1, 2001. The conversion
assessment, or the certification that a conversion assessment is
unnecessary, must be submitted to HUD as part of the next PHA Annual
Plan after its completion. If the next PHA Annual Plan submission will
not be submitted to HUD by October 1, 2001, a PHA must have the
conversion assessment on file by October 1, 2001, and include it in the
next PHA Annual Plan submission.
(b) Optional future conversion assessments. A PHA may otherwise
elect to undertake a conversion assessment for any or all of its
developments, and submit it to HUD as part of its next PHA Annual Plan.
(c) Required updated conversion assessment. Where a PHA proposes to
convert a development to tenant-based assistance, it must submit an
updated conversion assessment if the conversion assessment otherwise
would be more than one year older than the conversion plan to be
submitted to HUD. To update a conversion assessment, a PHA must ensure
that the analysis of rental market conditions is based on the most
recently available data, and must include any data that have changed
since the initial conversion assessment. A PHA may submit the initial
cost analysis and comparison of the market value of the public housing
before and after rehabilitation and/or conversion if there is no reason
to believe that such information has changed significantly.
Sec. 972.213 What conditions must be addressed in the conversion
assessment that will allow HUD to approve conversion?
(a) Conditions. In order to convert a public housing development,
the PHA must conduct a conversion assessment that demonstrates that the
conversion of the development:
(1) Will not be more expensive than continuing to operate the
development (or portion of it) as public housing;
(2) Will principally benefit the residents of the public housing
development to be converted and the community; and
(3) Will not adversely affect the availability of affordable
housing in the community.
(b) Evidence. (1) The relative expense of continuing operation as
public housing or conversion to tenant-based assistance may be
demonstrated by the cost analysis and market value analysis.
(2) The benefit to residents and the community may be demonstrated
in the rental market analysis, the analysis of the impact on the
neighborhood, the market value analysis, and the proposed future use of
the development.
(3) The impact on affordable housing may be demonstrated in the
rental market analysis and the analysis of the impact of conversion on
the neighborhood.
Sec. 972.215 What is the public and resident consultation process for
developing a conversion plan?
(a) A conversion plan must be developed in consultation with
appropriate public officials and with significant participation by
residents of the development.
(b) The requirement for consultation with public officials may be
satisfied by obtaining a certification from the appropriate State or
local officials that the conversion plan is consistent with that
government's Consolidated Plan. This may be the same certification as
is required for the PHA Annual Plan that includes the conversion plan,
so long as the certification specifically addresses the conversion
plan.
(c) To satisfy the requirement for significant participation by
residents of the development, in addition to the public participation
requirements for the PHA Annual plan, a PHA must:
(1) Hold a meeting with the residents of the affected sites at
which the PHA:
(i) Explain the requirements of section 22 of the United States
Housing Act and these regulations, especially as they apply to
residents of affected developments; and
(ii) Provides draft copies of the conversion plan to them.
(2) Provide a reasonable comment period for residents; and
(3) Summarize the resident comments for HUD and consider these
comments in developing the final conversion plan.
Sec. 972.217 What are the components of a conversion plan?
A conversion plan must:
(a) Describe the conversion and future use or disposition of the
public housing development. If the future use of the development is
demolition or disposition, the PHA is not required to submit a
demolition or disposition application, so long as the PHA submits,
[[Page 40246]]
and HUD approves a conversion plan, which includes a description of the
future uses of the development.
(b) Include a timetable, showing when any actions will be taken in
converting the development, relocating the tenants, and when the future
use will take place.
(c) Include an impact analysis of the conversion on the affected
community. This may include the description that is required as part of
the conversion assessment.
(d) Include a summary of the resident comments received when
developing the conversion plan.
(e) Include the statement used to notify each family residing in
the affected public housing 90 days before conversion that the
development will no longer be used as public housing and to explain the
benefits that will be offered, which must include at least the
following information:
(1) The PHA will offer the family comparable tenant-based or
project-based assistance that meets the Housing Quality Standards (HQS)
for decent, safe and sanitary housing, and that is located in an area
that is generally not less desirable than the displaced person's
original development;
(2) The PHA will provide the family with actual and reasonable
relocation expenses that they incur as a result of the conversion;
(3) The PHA will provide any counseling the family needs as a
result of being displaced by the conversion; and
(4) If the development is used as housing after conversion, the PHA
will ensure each resident may choose to remain in the housing, using
tenant-based assistance towards rent.
(f) Confirm that any proceeds received from the conversion are
subject to the limitations under section 18(a)(5) of the United States
Housing Act of 1937 (42 U.S.C. 1437p(a)(5)) applicable to proceeds
resulting from demolition or disposition.
(g) Summarize why the conversion assessment for the public housing
project supports the three condition necessary for conversion described
in Sec. 972.213(a).
Sec. 972.219 When does a PHA submit a conversion plan to HUD?
A PHA that wishes to convert a public housing project to tenant-
based assistance must submit a conversion plan to HUD. A PHA must
prepare a conversion plan, in accordance with Sec. 972.217, and submit
it to HUD, as part of the next PHA Annual Plan within one year after
submitting the conversion assessment.
Sec. 972.221 What is the HUD process for approving the conversion
plan?
Although a PHA will submit its conversion plan to HUD as part of
the PHA Annual Plan, the conversion plan will be treated separately for
purposes of HUD approval. A PHA needs a separate written approval from
HUD in order to proceed with conversion. HUD will make reasonable
efforts to respond to a conversion plan within 90 days.
Sec. 972.223 What action does HUD take with respect to a PHA's
conversion plan?
(a) When a PHA submits a conversion plan to HUD, HUD will review it
to determine whether:
(1) The conversion plan is complete and includes all of the
information required under Sec. 972.217; and
(2) The conversion plan is consistent with the conversion
assessment the PHA submitted.
(b) HUD will disapprove a conversion plan only if HUD determines
that:
(1) The conversion plan is plainly inconsistent with the conversion
assessment;
(2) There is reliable information and data available to the
Secretary that contradicts the conversion assessment; or
(3) The conversion plan is incomplete or otherwise fails to meet
the requirements under Sec. 972.217.
Sec. 972.225 When may a PHA proceed to convert a development?
(a) A PHA may proceed to convert a development covered by a
conversion plan only after receiving written approval of the conversion
plan from HUD. This approval will be separate from the approval that
the PHA receives for its PHA Annual Plan. A PHA may apply for tenant-
based assistance in accordance with Section 8 program requirements, and
will be given priority for receiving tenant-based assistance to replace
the public housing units.
(b) A PHA may not demolish or dispose of units or property until
completion of the required environmental review under part 58 of this
title (if a Responsible Entity has assumed environmental responsibility
for the project) or part 50 of this title (if HUD is performing the
environmental review). Further, HUD will not approve a conversion plan
until completion of the required environmental review. However, before
completion of the environmental review, HUD may approve the targeted
units for deprogramming and may authorize the PHA to undertake other
activities proposed in the conversion plan that do not require
environmental review (such as certain activities related to the
relocation of residents), as long as the buildings in question are
adequately secured and maintained.
(c) For purposes of determining operating subsidy eligibility, the
submitted plan will be considered the equivalent of a formal request to
remove dwelling units from the PHA's inventory and ACC and approval (or
acceptance). Units that are vacant or are vacated on or after the
written notification date will be treated as approved for deprogramming
under Sec. 990.108(b)(1) of this title, and will also be provided the
phase down of subsidy pursuant to Sec. 990.114 of this title.
(d) HUD may require that funding for the initial year of tenant
based assistance be provided from the new public housing Capital Fund,
Operating Fund, or both.
Appendix to Part 972--Methodology of Comparing Cost of Public
Housing With the Cost of Tenant-Based Assistance
I. Public Housing-Net Present Value
The costs used for public housing shall be those necessary to
produce a revitalized development as described in the next
paragraph. These costs, including estimated operating costs,
modernization costs and costs to address accrual needs must be used
to develop a per unit monthly cost of continuing the development as
public housing. That per unit monthly cost of public housing must be
compared to the per unit monthly Section 8 cost.
The estimated cost of the continued operation and modernization
as public housing shall be calculated as the sum of total operating,
modernization, and accrual costs, expressed on a monthly per
occupied unit basis. The costs shall be expressed in current dollar
terms for the period for which the most recent Section 8 costs are
available.
A. Operating Costs
1. The proposed revitalization plan must indicate how unusually
high current operating expenses (e.g, security, supportive services,
maintenance, utilities) will be reduced as a result of post-
revitalization changes in occupancy, density and building
configuration, income mix and management. The plan must make a
realistic projection of overall operating costs per occupied unit in
the revitalized development, by relating those operating costs to
the expected occupancy rate, tenant composition, physical
configuration and management structure of the revitalized
development. The projected costs should also address the comparable
costs of buildings or developments whose siting, configuration, and
tenant mix is similar to that of the revitalized public housing
development.
2. The development's operating cost (including all overhead
costs pro-rated to the development--including a Payment in Lieu of
Taxes (PILOT) or some other comparable payment, and including
utilities and utility allowances) shall be expressed as total
operating costs per month, divided by the
[[Page 40247]]
number of units occupied by households. For example, if a
development will have 1,000 units occupied by households and will
have $300,000 monthly in non-utility costs (including pro-rated
overhead costs and appropriate P.I.L.O.T.) and $100,000 monthly in
utility costs paid by the authority and $50,000 monthly in utility
allowances that are deducted from tenant rental payments to the
authority because tenants paid some utility bills directly to the
utility company, then the development's monthly operating cost per
occupied unit is $450--the sum of $300 per unit in non-utility
costs, $100 per unit in direct utility costs, and $50 per unit in
utility allowance costs.
3. In justifying the operating cost estimates as realistic, the
plan should link the cost estimates to its assumptions about the
level and rate of occupancy, the per-unit funding of modernization,
any physical reconfiguration that will result from modernization,
any planned changes in the surrounding neighborhood and security
costs. The plan should also show whether developments or buildings
in viable condition in similar neighborhoods have achieved the
income mix and occupancy rate projected for the revitalized
development. The plan should also show how the operating costs of
the similar developments or buildings compare to the operating costs
projected for the development.
4. In addition to presenting evidence that the operating costs
of the revitalized development are plausible, when the per-unit
operating cost of the renovated development is more than ten percent
lower than the current per-unit operating cost of development, then
the plan should detail how the revitalized development will achieve
its reduction in costs. To determine the extent to which projected
operating costs are lower than current operating costs, the current
per-unit operating costs of the development will be estimated as
follows:
a. If the development has reliable operating costs and if the
overall vacancy rate is less than twenty percent, then these costs
will be divided by the sum of all occupied units and vacant units
fully funded under PFS plus fifty percent of all units not fully
funded under PFS. For instance, if the total monthly operating costs
of the current development are $6.6 million and it has 1,000
occupied units and 200 vacant units not fully funded under PFS (or a
17 percent overall vacancy rate), then the $6.6 million is divided
by 1100--1000 plus 50 percent of 200--to give a per unit figure of
$600 per unit month. By this example, the current costs of $600 per
occupied unit are at least ten percent higher than the projected
costs per occupied unit of $450 for the revitalized development, and
the reduction in costs would have to be detailed.
b. If the development currently lacks reliable cost data or has
a vacancy rate of twenty percent or higher, then its current per
unit costs will be estimated as follows. First, the per unit cost of
the entire authority will be computed, with total costs divided by
the sum of all occupied units and vacant units fully funded under
PFS plus fifty percent of all vacant units not fully funded under
PFS. Second, this amount will be multiplied by the ratio of the
bedroom adjustment factor of the development to the bedroom
adjustment factor of the Housing Authority. The bedroom adjustment
factor, which is based on national rent averages for units grouped
by the number of bedrooms and which has been used by HUD to adjust
for costs of units when the number of bedrooms vary, assigns to each
unit the following factors:.70 for 0-bedroom units, .85 for 1-
bedroom units, 1.0 for 2-bedroom units, 1.25 for 3-bedroom units,
1.40 for 4-bedroom units, 1.61 for 5-bedroom units, and 1.82 for 6
or more bedroom units. The bedroom adjustment factor is the unit-
weighted average of the distribution. For instance, if the
development with one thousand occupied units had in occupancy 500
two-bedroom units and 500 three-bedroom units, then its bedroom
adjustment factor would be 1.125--500 times 1.0 plus 500 times 1.25,
the sum divided by 1,000. Where necessary, HUD field offices will
arrange for assistance in the calculation of the bedroom adjustment
factors of the Housing Authority and its affected developments.
c. As an example of estimating development operating costs from
PHA operating costs, suppose that the Housing Authority had a total
monthly operating cost per unit of $500 and a bedroom adjustment
factor of .90, and suppose that the development had a bedroom
adjustment factor of 1.125. Then, the development's estimated
current monthly operating cost per occupied unit would be $625--or
$500 times 1.25 (the ratio of 1.125 to .90).
B. Modernization
The cost of modernization is the initial revitalization cost to
meet viability standards, that cost amortized over twenty years
(which is equivalent to fifteen years at a three percent annual real
capital cost for the initial outlay). Expressed in monthly terms,
the modernization cost is divided by 180 (or 15 years times 12
months). Thus, if the initial modernization outlay to meet viability
standards is $60 million for 1,000 units, then the per-unit outlay
is $60,000 and the amortized modernization cost is $333 per unit per
month (or $60,000 divided by 180). However, when revitalization
would be equivalent to new construction and the PHA thus is
permitted to amortize the proposed cost over thirty years (which is
equivalent to twenty-two and one-half years at a three percent
annual real capital cost to the initial outlay), the modernization
cost will be divided by 270, the product of 22.5 and 12, to give a
cost per unit month of $ 222.
C. Accrual
The monthly per occupied unit cost of accrual (i.e., replacement
needs) will be estimated by using the latest published HUD unit
total development cost limits for the area and applying them to the
development's structure type and bedroom distribution after
modernization, then subtracting from that figure half the per-unit
cost of modernization, then multiplying that figure by .02
(representing a fifty year replacement cycle), and dividing this
product by 12 to get a monthly cost. For example, if the development
will remain a walkup structure containing five hundred two-bedroom
occupied and five hundred three-bedroom occupied units, if HUD's
Total Development Cost limit for the area is $70,000 for two-bedroom
walkup structures and $92,000 for three-bedroom walkup structures,
and if the per unit cost of modernization is $60,000, then the
estimated monthly cost of accrual per occupied unit is $85. This is
the result of multiplying the value of $51,000--the cost guideline
value of $81,000 minus half the modernization value of $60,000--by
.02 and then dividing by 12.
D. Overall Cost
The overall current cost for continuing the development as
public housing is the sum of its monthly post-revitalization
operating cost estimates, its monthly modernization cost per
occupied unit, and its estimated monthly accrual cost per occupied
unit. For example, if the operating cost per occupied unit month is
$450 and the amortized modernization cost is $333 and the accrual
cost is $85, the overall monthly cost per occupied unit is $868.
E. Adjustment for Shorter Remaining Useful Life (Used Only for
Voluntary Conversion--See Subpart B of This Part)
Where a PHA demonstrates that it is reasonable to use a
remaining useful life of five, ten or fifteen years rather than
twenty or thirty years, the PHA shall divide total modernization
costs by 45 to determine the monthly per unit cost if a five year
remaining useful life is used, 90 if a ten year remaining useful
life is used, and 135 if a fifteen remaining useful life is used.
II. Public Housing-New Budget Authority (Used Only for Voluntary
Conversion--See Subpart B of This Part)
This cost analysis shall be conducted in the same manner as the
net present value analysis, with one exception. The total capital
cost shall be divided by the total number of months in the remaining
useful life used in the analysis (e.g. for a 20 year remaining
useful life, divide the total capital cost by 240) rather than the
lower denominator which reflects amortization of capital costs,
taking into account the immediate expenditure of capital funds, in
the net present value model.
III. Tenant-Based Assistance
The estimated cost of providing tenant-based assistance under
Section 8 for all households in occupancy shall be calculated as the
unit-weighted averaging of the monthly Fair Market Rents for units
of the applicable bedroom size; plus the most recent administrative
fee applicable to newly funded Section 8 rental assistance during
the year used for calculating public housing operating costs (e.g.,
the administrative fee for units funded in fiscal years 1995 and
1996 is the monthly administrative fee amount in column C of the
January 24, 1995 Federal Register at 60 FR 4764); plus the amortized
cost of demolishing the occupied public housing units, where the
cost per unit is not to exceed ten percent of the TDC prior to
amortization. For example, if the development has five hundred
occupied two-bedroom units and five hundred occupied three-bedroom
units and if the Fair Market
[[Page 40248]]
Rent in the area is $600 for two bedroom units and is $800 for three
bedroom units and if the administrative fee comes to $46 per unit,
and if the cost of demolishing 1000 occupied units is $5 million,
then the per unit monthly cost of tenant based assistance is $774
($700 for the unit-weighted average of Fair Market Rents, or 500
times $600 plus 500 times $800 with the sum divided by 1,000; plus
$46 for the administrative fee; plus $28 for the amortized cost of
demolition and tenant relocation (including any necessary
counseling), or $5000 per unit divided by 180 in this example). In
voluntary conversion, this Section 8 cost would then be compared to
the cost of revitalized public housing development, both in terms of
net present value and new budget authority--in the example of this
section, both the revitalized public housing cost (net present
value) of $868 monthly per occupied unit, and the revitalized public
housing cost (new budget authority) of $785 monthly per occupied
unit would exceed the Section 8 cost of $774 monthly per occupied
unit. Therefore, the PHA would have the option of preparing a
conversion plan for the development under subpart B of this part.
In required conversion, the Section 8 cost would be compared
with the cost of the revitalized public housing development on a net
present value basis. In the example in this section, the revitalized
public housing cost on a net present value basis of $868 per month
would exceed the Section 8 cost of $774 monthly per occupied unit.
Therefore the PHA would be required to convert the development under
the requirements of subpart A of this part.
IV. Detailing the Section-8 Cost Comparison: A Summary Table
The section 8 cost comparison methods are summarized, using the
example provided in this section IV.
A. Key Data, Development
The revitalized development has 1000 occupied units. All of the
units are in walkup buildings. The 1000 occupied units will consist
of 500 two-bedroom units and 500 three-bedroom units. The total
current operating costs attributable to the development are $300,000
per month in non-utility costs, $100,000 in utility costs paid by
the PHA, and $50,000 in utility allowance expenses for utilities
paid directly by the tenants to the utility company. Also, the
modernization cost for revitalization is $60,000,000, or $60,000 per
occupied unit. This will provide standards for viability but not
standards for new construction. The cost of demolition and
relocation of the 1000 occupied units is $5 million, or $5000 per
unit, based on recent experience.
B. Key Data, Area
The unit total development cost limit is $70,000 for two-bedroom
walkups and $92,000 for three-bedroom walkups. The two-bedroom Fair
Market Rent is $600 and the three-bedroom Fair Market Rent is $800.
The applicable monthly administrative fee amount, in the most recent
Federal Register Notice, is $46.
C. Preliminary Computation of the Per-Unit Average Total
Development Cost of the Development
This results from applying the location's unit total development
cost by structure type and number of bedrooms to the occupied units
of the development. In this example, five hundred units are valued
at $70,000 and five hundred units are valued at $92,000 and the
unit-weighted average is $81,000.
D. Current Per Unit Monthly Occupied Costs of Public Housing (Net
Present Value)
1. Operating Cost............ $450 (total monthly costs divided by
occupied units: in this example, the sum
of $300,000 and $100,000 and $50,000--
divided by 1,000 units).
2. Amortized Modernization $333 ($60,000 per unit divided by 180 for
Cost. standards less than those of new
construction).
3. Estimated Accrual Cost.... $85 (the per-unit average total
development cost minus half of the
modernization cost per unit, times .02
divided by 12 months: in this example,
$51,000 times .02 and then divided by
12).
4. Total Per Unit Public $868.
Housing Costs.
E. Per Unit Monthly Occupied Costs of Public Housing (New Budget
Authority)
1. Operating Cost............ $450 (total monthly costs divided by
occupied units: in this example, the sum
of $300,000 and $100,000 and $50,000--
divided by 1,000 units).
2. Modernization Cost........ $250 ($60,000 per unit divided by 240 for
standards less than those of new
construction).
3. Estimated Accrual Cost.... $85 (the per-unit average total
development cost minus half of the
modernization cost per unit, times .02
divided by 12 months: in this example,
$51,000 times .02 and then divided by
12).
4. Total Per Unit Public $785.
Housing Costs.
F. Current per Unit Monthly Occupied Costs of Section 8
1. Unit-weighted Fair Market $700 (the unit-weighted average of the
Rents. Fair Market Rents of occupied bedrooms:
in this example, 500 times $600 plus 500
times $800, divided by 1000).
2. Administrative Fee........ $46.
3. Amortized Demolition and $28 ($5000 per unit divided by 180).
Relocation Cost.
4. Total Per Unit Section 8 $774.
Costs.
G. Result
In this example, because revitalized public housing costs, both
on a net present value basis, and based on new budget authority,
exceeds current Section 8 costs, a conversion plan would be
permissible under voluntary conversion, Subpart B of this Section.
Under required conversion, because revitalized public housing costs
on a net present value basis exceed Section 8 costs, the PHA would
be required to convert the public housing development under subpart
A of this Section.
Dated: June 23, 1999.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-18774 Filed 7-22-99; 3:35 pm]
BILLING CODE 4210-33-P