[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Proposed Rules]
[Pages 49932-49938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23700]



[[Page 49931]]

_______________________________________________________________________

Part VII





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 906



Public Housing Homeownership Programs; Proposed Rule

  Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / 
Proposed Rules  

[[Page 49932]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 906

[Docket No. FR-4504-P-01]
RIN 2577-AC15


Public Housing Homeownership Programs

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

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would set forth the requirements and 
procedures governing a new statutory homeownership program to be 
administered by public housing agencies (PHAs). Under this rule, a PHA 
makes public housing dwelling units, public housing projects, and other 
housing projects available for purchase by low-income families as their 
principal residences.

DATES: Comments Due Date: Comments on the proposed rule are due on or 
before November 15, 1999.

ADDRESSES: Interested persons are invited to submit written comments 
regarding this proposed rule to the Rules Docket Clerk, Office of 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410. Comments 
should refer to the above docket number and title. A copy of each 
comment submitted will be available for public inspection and copying 
between 7:30 a.m. and 5:30 p.m. weekdays at the above address. 
Facsimile (FAX) comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: David Sowell, Office of Public Housing 
Investments, Office of Public and Indian Housing, Department of Housing 
and Urban Development, Room 4138, 451 Seventh Street, SW, Washington, 
DC 20410; telephone (202) 401-8812, ext. 4641 (this is not a toll-free 
number). Hearing or speech impaired individuals may access this number 
via TTY by calling the toll-free Federal Information Relay Service at 
1-800-877-8339.

SUPPLEMENTARY INFORMATION: Section 536 of the Quality Housing and Work 
Responsibility Act of 1998 (Title V of Public Law 105-276, 112 Stat. 
2461, approved October 21, 1998) (``Public Housing Reform Act'') 
amended Title I of the United States Housing Act of 1937 (42 U.S.C. 
1437 et seq.) (1937 Act) by adding a new section 32, which authorized a 
new public housing homeownership program. The new homeownership program 
replaces the public housing agency homeownership program that was 
authorized under section 5(h) of the 1937 Act. Section 518 of the 
Public Housing Reform Act repealed the 5(h) homeownership program, and 
section 566 of the Public Housing Reform Act added a new section 5(h) 
that deals with audit requirements.
    This rule would revise 24 CFR part 906, which currently contains 
the regulations for the 5(h) homeownership program. Many of the 5(h) 
program requirements would be retained under the new section 32 (of the 
1937 Act) homeownership program. The authorizing statutory language for 
the 5(h) program was very brief, and the regulatory requirements at 
part 906 substantially fleshed out the program. Section 32, which 
provides many more explicit statutory requirements than section 5(h) 
did, adopted several of the regulatory requirements promulgated at part 
906 for the 5(h) program. For example, section 32 addresses the 
protection of nonpurchasing residents and the use of the proceeds from 
a sale. Similar provisions were provided in the 5(h) regulation. In 
addition, the 5(h) regulation permitted sales to residents through 
another entity, rather than directly from the PHA, and section 32 
permits sales directly to residents or to another entity for resale to 
residents.
    There is legislative history that indicates the similarities 
between the new, statutory section 32 program requirements and the 
section 5(h) program requirements at part 906 are deliberate. In 
reporting out S. 462, a bill entitled, ``The Public Housing Reform and 
Responsibility Act of 1997'', which was the model for the Public 
Housing Reform Act, the Senate Committee on Banking, Housing, and Urban 
Affairs stated: ``The Committee patterned the new homeownership 
provision according to the section 5(h) program which has proven to be 
a highly successful program for assisting public housing residents in 
becoming homeowners.'' (S. Rept. 105-21, at 28). This statement 
supports the retention of the 5(h) program requirements that HUD is 
proposing in this rulemaking.
    Part 906 is reorganized by this rule into five subparts according 
to the subjects covered: a general statement of the program; basic 
program requirements; purchaser requirements; program administration; 
and program submission and approval. The new statutory homeownership 
requirements are integrated with the 5(h) requirements that HUD has 
determined are appropriate to retain, such as proposed Sec. 906.39, 
which is based upon Sec. 906.20 of the 5(h) rule and covers what must 
be contained in a homeownership program.
    In order to make the new program more flexible than the 5(h) 
program, we have omitted some of the 5(h) program requirements, 
including the detailed eligibility and affordability requirements for 
purchasers found in Sec. 906.8, the nonroutine maintenance reserve 
requirement of Sec. 906.11, and the purchase price and financing 
provisions of Sec. 906.12. We specifically invite comments on whether 
HUD should specify underwriting standards or the types of documents to 
be used to secure that HUD's investment in a property ultimately serves 
program purposes.
    Section 32 gives a right of first refusal to the resident or 
residents occupying a public housing unit. The statute does not give 
that right to residents of other housing that is to be sold under the 
homeownership program. Section 906.13 implements this right of first 
refusal, noting that a prospective purchaser still must satisfy other 
program requirements.
    Section 32 provides for three categories of eligible purchasers: 
(1) Low-income families assisted by a PHA; (2) other low-income 
families; and (3) entities formed to purchase units for re-sale to low-
income families. This rule clarifies, at Sec. 906.15, that a family 
purchasing a property under a PHA homeownership program must be a low-
income family, as defined in section 3 of the 1937 Act, at the time the 
contract to purchase the property is executed. This provision 
eliminates the need to re-establish eligibility at the time of closing, 
and places no limitations on a family's future income as a condition of 
homeownership.
    Please note that the low-income eligibility requirement applies to 
public housing residents, thereby making public housing residents who 
earn more than 80 percent of area median income ineligible to 
participate in the homeownership program. The Department welcomes 
comment on this eligibility requirement.
    Section 32 also includes provisions for the protection of 
nonpurchasing public housing residents. One of these provisions 
requires that each public housing resident displaced by the sale of a 
unit will be offered comparable housing that is located in an area that 
is generally not less desirable than the location of the displaced 
resident's housing. (Relocation of residents of other housing that 
would be displaced by a homeownership program would be covered by the 
Uniform Relocation Act and part 42 of this title, as stated in 
Sec. 906.24.) In a Senate colloquy before

[[Page 49933]]

passage of the Public Housing Reform Act, Senator Mack directly 
addressed this provision, and the way in which it was to be 
interpreted. The Senator stated:

    For purposes of this provision, the phrase ``location of the 
displaced resident's housing'' may be construed to mean the public 
housing development from which the family was vacated, rather than a 
larger geographic area. (Congressional Record of October 8, 1998, 
S.11840)

    Consistent with this guidance, this proposed rule provides, in 
Sec. 906.24, which deals with protections available to nonpurchasing 
residents, that ``comparable housing'' means housing that (among other 
factors) is located in an area that is generally not less desirable 
than the displaced resident's original development.

Findings and Certifications

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), 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 rule provides the 
parameters for the use of public housing properties to create 
homeownership opportunities for low-income residents of public housing 
and other low-income families should a public housing agency choose to 
do so with, at most, an incidental effect on small entities.

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. This 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 the General Counsel, Department of Housing and Urban 
Development, Room 10276, 451 Seventh Street, SW., Washington, DC 20410.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that this proposed 
rule will not have substantial direct effects on States or their 
political subdivisions, or the relationship between the Federal 
Government and the States, or on the distribution of power and 
responsibilities among the various levels of government. The rule's 
major effects would be on individuals; any involvement of States or 
their political subdivisions is limited to their cooperative efforts in 
promoting homeownership among public and housing residents and other 
low-income families.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal 
agencies to assess the effects of their regulatory actions on State, 
local, and tribal governments, and on the private sector. This proposed 
rule does not impose any Federal mandates on any State, local, or 
tribal governments, or on the private sector, within the meaning of the 
UMRA.

Paperwork Reduction Act Statement

    The information collection requirements contained in this rule, as 
described in Secs. 906.17, 906.19, 906.23, 906.27, 906.33, 906.39, 
906.41, and 906.49 have been submitted to the Office of Management and 
Budget for review under section 3507(d) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. Chapter 35).
    Estimates of the total reporting and recordkeeping burden that will 
result from the collection of information are as follows:

                                       Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
                                                                                  Est. avg. time
                                                     Number of     Annual freq.         for         Est. annual
                Section reference                     parties     of requirement    requirement    burden (hrs.)
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
906.17..........................................           5,000               1            4             20,000
906.19..........................................              30               1           40              1,200
906.23..........................................           2,000               1            1              2,000
906.27..........................................              50               1             .50              25
906.33..........................................              50               1           10                500
906.39..........................................              50               1           40              2,000
906.41..........................................              50               1           20              1,000
906.49..........................................              50               1             .25              12
                                                 ---------------------------------------------------------------
    Total Reporting and Recordkeeping Burden      ..............  ..............  ..............          25,737
     (Hours)....................................
----------------------------------------------------------------------------------------------------------------

    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-4504) 
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
Millie Hamman, Reports Liaison Officer, Office of the Assistant 
Secretary for Public and Indian Housing, Department of Housing & Urban 
Development, 451--7th Street, SW, Room 4238, Washington, DC 20410

[[Page 49934]]

List of Subjects in 24 CFR Part 906

    Grant programs--housing and community development, Low and moderate 
income housing, Public housing, Reporting and recordkeeping 
requirements.

    For the reasons discussed in the preamble, HUD proposes to revise 
part 906 of title 24 to read as follows:

PART 906--PUBLIC HOUSING HOMEOWNERSHIP PROGRAMS

Subpart A--General

Sec.
906.1  What is the purpose of this part?
906.3  What requirements are applicable to homeownership programs 
previously approved by HUD?

Subpart B--Basic Program Requirements

906.5  What dwelling units and what types of assistance may a PHA 
make available under a homeownership program under this part?
906.7  What physical requirements must a property offered for sale 
meet?
906.9  What effect do existing restrictions and encumbrances have on 
the sale of a property?

Subpart C--Purchaser Requirements

906.11  Who is eligible to purchase housing under a homeownership 
program?
906.13  Do current residents have a right of first refusal on units 
made available for sale?
906.15  What requirements apply to a family purchasing a property 
under a homeownership program?
906.17  How does a family apply to purchase a unit under a 
homeownership program?
906.19  What requirements apply to a PRE (purchase and resale 
entity), an entity formed for the purpose of purchasing units for 
resale to low-income families?

Subpart D--Program Administration

906.23  What protections are available to nonpurchasing public 
housing residents?
906.24  What protections are available to nonpurchasing residents of 
housing other than public housing?
906.25  What ownership interest is conveyed to a purchaser?
906.27  What limitations apply to net proceeds on the sale of a 
property acquired through a homeownership program?
906.31  What requirements are applicable to net proceeds?
906.33  What reporting and recordkeeping requirements apply to 
homeownership programs?
906.35  Are the disposition provisions of section 18 of the United 
States Housing Act of 1937 applicable to a homeownership program?
906.37  What Davis-Bacon and HUD wage rate requirements apply to 
homeownership programs?

Subpart E--Program Submission and Approval

906.38  Does a PHA require HUD approval to implement a homeownership 
program under this part?
906.39  What must a homeownership program include?
906.40  What requirements apply to acquisition of non-public 
housing?
906.41  What supporting documentation must be submitted to HUD with 
the homeownership program?
906.43  Where does a PHA submit a homeownership program for HUD 
approval?
906.45  What criteria will HUD use to review a homeownership 
program?
906.47  What environmental provisions apply?
906.49  How is HUD approval and authorization indicated?

    Authority: 42 U.S.C. 14372-4 and 3535(d).

Subpart A--General


Sec. 906.1  What is the purpose of this part?

    (a) This part sets forth the requirements and procedures governing 
public housing homeownership programs carried out by public housing 
agencies (PHAs), as authorized by (42 U.S.C. 1437z-4) section 32 of the 
United States Housing Act of 1937 (``1937 Act''). A PHA may only 
transfer public housing units for homeownership under a homeownership 
program approved by HUD under this part, except as provided under 
Sec. 906.3.
    (b) Under a public housing homeownership program, a PHA makes 
available for purchase by low-income families for use as their 
principal residences public housing dwelling units, public housing 
projects, and other housing units or projects owned, assisted, or 
operated, or otherwise acquired by the PHA for sale under a 
homeownership program in connection with the use of assistance provided 
under the 1937 Act (``1937 Act funds''). A PHA may sell all or a 
portion of a property for purposes of homeownership in accordance with 
a HUD-approved homeownership program, and in accordance with the PHA's 
annual plan under part 903 of this title.


Sec. 906.3  What requirements are applicable to homeownership programs 
previously approved by HUD?

    (a) Any existing section 5(h) or Turnkey III homeownership program 
continues to be governed by the requirements of part 906 or part 904 of 
this title, respectively, as it existed before [effective date of 
Homeownership Program final rule] (contained in the April 1, 1999 
edition of 24 CFR, parts 700 to 1699). The use of other program income 
for homeownership activities continues to be governed by agreements 
executed with HUD.
    (b) A PHA may convert an existing homeownership program to a 
homeownership program under this part with HUD approval.

Subpart B--Basic Program Requirements


Sec. 906.5  What dwelling units and what types of assistance may a PHA 
make available under a homeownership program under this part?

    (a) A homeownership program under this part may provide for sale 
of:
    (1) Units that are public housing units; and
    (2) Other units owned, operated, assisted, or acquired for 
homeownership sale that have received the benefit of 1937 Act funds or 
are to be sold with the benefit of 1937 Act funds (``non-public housing 
units'').
    (b) A homeownership program under this part may provide for 
financing to eligible families (see Sec. 905.15) purchasing dwelling 
units under the program, or for acquisition of housing units or 
projects by the PHA for sale under the program.
    (1) Under this part, a PHA may use assistance from amounts it 
receives under the Capital Fund under section 9(d) of the 1937 Act or 
from other income earned from its 1937 Act programs to provide 
financing assistance to public housing residents only. Public housing 
residents may use such assistance to purchase the unit in which they 
reside, another public housing unit, or a residence not located in a 
public housing development.
    (2) A PHA may provide financing assistance for other eligible 
purchasers from other income, i.e., income not from 1937 Act programs, 
such as proceeds from selling public housing units, loan repayments, 
and public housing debt forgiveness funding not already committed to 
another purpose.
    (c) A PHA must not use 1937 Act funds to rehabilitate units that 
are not public housing units.


Sec. 906.7  What physical requirements must a property offered for sale 
meet?

    A property offered for sale under a homeownership program must meet 
local code requirements (or, if no local code exists, the housing 
quality standards established by HUD for the Section 8 Housing 
Assistance Payments Program for Existing Housing, under part 882 of 
this title) and the requirements for elimination of lead-based paint 
hazards in HUD-associated housing, under part 35, subpart C of this 
title. When a prospective purchaser

[[Page 49935]]

with disabilities requests accessible features, the features must be 
added in accordance with part 8 of this title. Further, the property 
must be in good repair, with the major components having a remaining 
useful life that is sufficient to justify a reasonable expectation that 
homeownership will be affordable by the purchasers. These standards 
must be met as a condition for conveyance of a dwelling to an 
individual purchaser.


Sec. 906.9  What effect do existing restrictions and encumbrances have 
on the sale of a property?

    (a) If the property is subject to indebtedness under the Annual 
Contributions Contract (ACC), HUD will continue to make any debt 
service contributions for which it is obligated under the ACC, and the 
property sold will not be subject to the encumbrance of that 
indebtedness.
    (b) Upon sale of a public housing unit, in accordance with the HUD-
approved homeownership program, HUD will execute a release of the title 
restrictions prescribed by the ACC. Because the property will no longer 
be subject to the ACC after sale, it will cease to be eligible for 
public housing Operating Fund or Capital Fund payments.

Subpart C--Purchaser Requirements


Sec. 906.11  Who is eligible to purchase housing under a homeownership 
program?

    Low-income families and entities that purchase units from the PHA 
for resale to low-income families (``purchase and resale entities'' or 
PREs) are eligible to purchase properties made available for sale under 
a PHA homeownership program.


Sec. 906.13  Do current residents have a right of first refusal on 
units made available for sale?

    (a) Yes, in selling a public housing unit under a homeownership 
program, the PHA must initially offer the unit to the resident 
occupying the unit, if any, or to an organization serving as a conduit 
for sales to any such resident. (See Sec. 906.19.) The resident must 
qualify to purchase the unit under the requirements specified by the 
PHA, in accordance with Sec. 906.15.
    (b) No, this program does not require the PHA, when selling a unit 
that is a non-public housing unit, to offer the unit for sale first to 
the current resident under the program.


Sec. 906.15  What requirements apply to a family purchasing a property 
under a homeownership program?

    (a)  Low-income requirement. A family purchasing a property under a 
PHA homeownership program must be a low-income family, as defined in 
section 3 of the 1937 Act (42 U.S.C. 1437a), at the time the contract 
to purchase the property is executed.
    (b) Principal residence requirement. The dwelling unit sold to an 
eligible family must be used as the principal residence of the family.
    (c) Financial capacity requirement. Eligibility must be limited to 
families who are capable of assuming the financial obligations of 
homeownership, under minimum income standards for affordability, taking 
into account the unavailability of public housing operating subsidies 
and modernization funds after conveyance of the property by the PHA. A 
homeownership program may, however, take account of any available 
subsidy from other sources.
    (d) Down payment requirement. (1) Each family purchasing housing 
under a homeownership program must provide a downpayment in connection 
with any loan for acquisition of the housing, in an amount determined 
by the PHA or PRE, in accordance with an approved homeownership 
program. Except as provided in paragraph (d)(2) of this section, the 
PHA or PRE must permit the family to use grant amounts, gifts from 
relatives, contributions from private sources, and other similar 
amounts in making the downpayment.
    (2) The family must use its own resources other than grants, gifts, 
contributions, or similar amounts, to contribute an amount of the 
downpayment that is not less than one percent of the purchase price of 
the housing. The PHA or PRE must take reasonable steps, and maintain 
records, that are verifiable by HUD through audits to verify the source 
of this one percent contribution.
    (e) Other requirements established by the PHA. A PHA may establish 
requirements or limitations for families to purchase housing under a 
homeownership program, including requirements or limitations regarding:
    (1) Employment or participation in employment counseling or 
training activities;
    (2) Criminal activity;
    (3) Participation in homeownership counseling programs;
    (4) Evidence of regular income; and
    (5) Other requirements.


Sec. 906.17  How does a family apply to purchase a unit under a 
homeownership program?

    Families who are interested in purchasing a unit must submit 
applications to the PHA or PRE for that specific purpose, and those 
applications must be handled separately from applications for other PHA 
programs. Application for homeownership must not affect an applicant's 
place on any other PHA waiting list for rental units.


Sec. 906.19  What requirements apply to a PRE (purchase and resale 
entity), an entity formed for the purpose of purchasing units for 
resale to low-income families?

    (a) In general. In the case of a purchase of units for resale to 
low-income families by a PRE, the PHA must have an approved 
homeownership program that describes the use of a PRE to sell the units 
to low-income families within 5 years from the date of the PRE's 
acquisition of the units.
    (b) PRE requirements. The PHA must demonstrate in its homeownership 
program that the PRE has the necessary legal capacity and practical 
capability to carry out its responsibilities under the program. The 
PHA's homeownership program also must contain a written agreement that 
specifies the respective rights and obligations of the PHA and the PRE 
and which include:
    (1) Assurances that the PRE will comply with all provisions of the 
HUD-approved homeownership program;
    (2) Assurances that the PRE will be subject to a title restriction 
providing that the property may be resold or otherwise transferred only 
by conveyance of individual dwellings to eligible families, in 
accordance with the HUD-approved homeownership program, or by 
reconveyance to the PHA, and that the property will not be encumbered 
by the PRE without the written consent of the PHA;
    (3) Protection against fraud or misuse of funds or other property 
on the part of the PRE, its employees, and agents;
    (4) Assurances that the resale proceeds will be used only for the 
purposes specified by the HUD-approved homeownership program;
    (5) Limitation of the PRE's administrative and overhead costs, and 
of any compensation or profit that may be realized by the PRE, to 
amounts that are reasonable in relation to its responsibilities and 
risks;
    (6) Accountability to the PHA and residents for the recordkeeping, 
reporting and audit requirements of Sec. 906.33;
    (7) Assurances that the PRE will administer its responsibilities 
under the plan on a nondiscriminatory basis, in accordance with the 
Fair Housing Act and implementing regulations; and
    (8) Adequate legal remedies for the PHA and residents, in the event 
of the PRE's failure to perform in accordance with the agreement.
    (c) Sale to low-income families. The requirement for a PRE to sell 
units

[[Page 49936]]

under a homeownership program only to low-income families must be 
recorded as a deed restriction at the time of purchase by the PRE.
    (d) Resale within five years. A PRE must agree that, with respect 
to any units it acquires under a homeownership program under this part, 
it will transfer ownership to the PHA if the PRE fails to resell the 
unit to a low-income family within 5 years of the PRE's acquisition of 
the unit.
    (e) Required notices to families. A PRE must provide the notices to 
purchasing families that are required by the PHA, in accordance with 
the environmental and other requirements referenced in Sec. 906.47.

Subpart D--Program Administration


Sec. 906.23  What protections are available to nonpurchasing public 
housing residents?

    (a) If a public housing resident does not exercise the right of 
first refusal under Sec. 906.13, the PHA:
    (1) Must notify the resident residing in the unit 90 days prior to 
the displacement date, except in cases of imminent threat to health or 
safety, that:
    (i) The public housing unit will be sold;
    (ii) The transfer of possession of the unit will not occur until 
the resident is relocated; and
    (iii) Each resident displaced by such action will be offered 
comparable housing (as defined in paragraph (b) of this section);
    (2) Must provide for the payment of the actual costs and reasonable 
relocation expenses of the resident to be displaced;
    (3) Must ensure that the resident is offered comparable housing 
under paragraph (a)(1)(iii) of this section;
    (4) Must provide counseling for displaced residents of their rights 
to comparable housing, including their rights under the Fair Housing 
Act to choice of a unit on a nondiscriminatory basis, without regard to 
race, color, religion, national origin, disability, age, sex, or 
familial status; and
    (5) Must not transfer possession of the unit until the resident is 
relocated.
    (b) For purposes of this section, the term ``comparable housing'' 
means housing:
    (1) That meets housing quality standards;
    (2) That is located in an area that is generally not less desirable 
than the displaced resident's original development; and
    (3) Which may include:
    (i) Tenant-based assistance (tenant-based assistance must only be 
provided upon the relocation of the resident to the comparable 
housing);
    (ii) Project-based assistance; or
    (iii) Occupancy in a unit owned, operated, or assisted by the PHA 
at a rental rate paid by the resident that is comparable to the rental 
rate applicable to the unit from which the resident is vacated.


Sec. 906.24  What protections are available to nonpurchasing residents 
of housing other than public housing?

    Residents of non-public housing that would be displaced by a 
homeownership program are eligible for assistance under the Uniform 
Relocation Act and part 42 of this title. For purposes of this part, a 
family that was over-income at the time of admission to public housing 
and was admitted in accordance with section 3(a)(5) of the 1937 Act, is 
treated as a nonpurchasing resident of non-public housing.


Sec. 906.25  What ownership interest is conveyed to a purchaser?

    A homeownership program may provide for sale to the purchasing 
family of any ownership interest that the PHA considers appropriate 
under the homeownership program, including:
    (a) Ownership in fee simple;
    (b) A condominium interest;
    (c) An interest in a limited dividend cooperative; or
    (d) A shared appreciation interest with a PHA providing financing.


Sec. 906.27  What limitations apply to net proceeds on the sale of a 
property acquired through a homeownership program?

    (a) A PHA must establish such limitations (by an appropriate form 
of title restriction) on the resale of property acquired through a 
homeownership program as the PHA considers appropriate for the PHA to 
recapture:
    (1) Some or all of the economic gain derived from any such resale 
(i.e., appreciation) occurring during the 5-year period beginning upon 
purchase of the dwelling unit by the eligible family, in addition to 
some or all of the assistance provided under the homeownership program 
to the family; and
    (2) After the expiration of such 5-year period, only such amounts 
as are equivalent to the assistance provided under the homeownership 
program to the family.
    (b) In establishing the limitations described in paragraph (a)(1) 
of this section, the PHA may consider:
    (1) The aggregate amount of assistance provided under the 
homeownership program to the family;
    (2) The contribution of equity by the purchasing family;
    (3) The period of time elapsed between purchase by the homebuyer 
under the homeownership program and resale by the homebuyer;
    (4) The reason for resale;
    (5) Any improvements made by the family purchasing under the 
homeownership program;
    (6) Any appreciation in the value of the property; and
    (7) Any other factors that the PHA considers appropriate.
    (c) For the purposes of this section, the value of the property 
must be determined by a certified appraiser within one month before the 
resale.


Sec. 906.31  What requirements are applicable to net proceeds?

    (a) PHA use of net proceeds. The PHA must use any net proceeds of 
any sales under a homeownership program remaining after payment of all 
costs of the sale for purposes relating to low-income housing and in 
accordance with the PHA plan of the PHA carrying out the program.
    (b) PRE use of resale net proceeds. The PHA may require the PRE to 
return the net proceeds from the resale and from managing the units to 
the PHA. If the PHA permits the PRE to retain the net proceeds, the PRE 
must use these proceeds for low-income housing purposes.


Sec. 906.33  What reporting and recordkeeping requirements apply to 
homeownership programs?

    The PHA is responsible for the maintenance of records (including 
sale and financial records) for all activities incident to 
implementation of the HUD-approved homeownership program. Where a PRE 
is responsible for the sale of units, the PHA must ensure that the 
PRE's responsibilities include proper recordkeeping and accountability 
to the PHA, sufficient to enable the PHA to monitor compliance with the 
approved homeownership program and to meet its audit responsibilities. 
All books and records must be subject to inspection and audit by HUD 
and the General Accounting Office (GAO). The PHA must report annually 
to HUD on the progress of each program approved under this part.


Sec. 906.35  Are the disposition provisions of section 18 of the United 
States Housing Act of 1937 applicable to a homeownership program?

    The provisions of section 18 of the United States Housing Act of 
1937 (42 U.S.C. 1437p) do not apply to disposition of public housing 
dwelling units under a homeownership program approved by HUD.

[[Page 49937]]

Sec. 906.37  What Davis-Bacon and HUD wage rate requirements apply to 
homeownership programs?

    (a) Type of activities covered. Rehabilitation, repairs and 
accessibility modifications performed pursuant to Sec. 906.7 are 
subject to Davis-Bacon or HUD-determined wage rate requirements when 
involving units that are:
    (1) Public housing units that will be sold under a homeownership 
program; and
    (2) Non-public housing units owned or acquired by a PHA with the 
intent to use 1937 Act funds to rehabilitate the units, finance the 
sale of the units, or otherwise provide assistance to purchasers of the 
units.
    (b) Type of workers covered. These prevailing wage requirements 
cover laborers and mechanics involved in the construction work and 
technical workers, such as architects, technical engineers, draftsmen, 
and technicians. See Secs. 968.110(e) and 968.105 of this title for 
further guidance concerning Davis-Bacon and HUD-determined wage rates.

Subpart E--Program Submission and Approval


Sec. 906.38  Does a PHA require HUD approval to implement a 
homeownership program under this part?

    A PHA must obtain HUD approval before implementing a homeownership 
program. A homeownership program must be carried out in accordance with 
the requirements of this part and the PHA's plan submitted under part 
903 of this title.


Sec. 906.39  What must a homeownership program include?

    A homeownership program must include the following matters, as 
applicable to the particular factual situation:
    (a) Property description. (1) If the program involves only 
financing assistance to the family purchasing the unit, the PHA need 
not specify property addresses, but it must describe the area in which 
the assistance is to be used.
    (2) If the PHA is selling existing public housing, it must describe 
the property, including identification of the property by project 
number, or street address if there is no project number, and the 
specific dwellings to be sold, with bedroom distribution by size and 
type broken down by project.
    (3) If the PHA is acquiring units with 1937 Act funds to sell under 
the program, it must comply with the provisions of Sec. 906.40 
concerning this element of the program.
    (b) Repair or rehabilitation. If applicable, a plan for any repair 
or rehabilitation required under Sec. 906.7, based on the assessment of 
the physical condition of the property that is included in the 
supporting documentation.
    (c) Purchaser eligibility and selection. The standards and 
procedures to be used for homeownership applications and the 
eligibility and selection of purchasers, consistent with the 
requirements of Sec. 906.15. If the homeownership program allows 
application for purchase of units by families who are not presently 
public housing or Section 8 residents and not already on the PHA's 
waiting lists for those programs, the program must include an 
affirmative fair housing marketing strategy for such families, 
including specific steps to inform them of their eligibility to apply, 
and to solicit applications from those in the housing market who are 
least likely to apply for the program without special outreach.
    (d) Sale and financing. Terms and conditions of sale and financing.
    (e) Consultation with residents and purchasers. A description of 
resident input obtained during the resident consultation process 
required by the PHA plan under part 903 of this title, and a plan for 
consultation with purchasers during the implementation stage to help 
insure program solvency.
    (f) Counseling. Counseling, training, and technical assistance to 
be provided to purchasers.
    (g) Sale via PRE. If the plan contemplates sale to residents by an 
entity other than the PHA, a description of that entity's 
responsibilities and information demonstrating that the requirements of 
Sec. 906.19 have been met or will be met in a timely fashion.
    (h) Nonpurchasing residents. If applicable, a plan for 
nonpurchasing residents, in accordance with Sec. 906.23.
    (i) Sale proceeds. An estimate of the sale proceeds and an 
explanation of how they will be used, in accordance with Sec. 906.31.
    (j) Administration. An administrative plan, including estimated 
staffing requirements and a listing of staff positions that will be 
responsible for the day-to-day implementation and monitoring of the 
program, the percentage of time each staff member will spend on 
homeownership activities and the funding source for staff salaries.
    (k) Records, accounts and reports. A description of the 
recordkeeping, accounting and reporting procedures to be used, 
including those required by Sec. 906.33.
    (l) Budget. A budget estimate, showing any rehabilitation or repair 
cost, any financing assistance, and the costs of implementing the 
program, and the sources of the funds that will be used.
    (m) Timetable. An estimated timetable for the major steps required 
to carry out the plan.


Sec. 906.40  What requirements apply to acquisition of non-public 
housing?

    (a) Proposal contents. The PHA must submit an acquisition proposal 
to the HUD Field Office for review and approval before its 
homeownership plan containing acquisition of non-public housing can be 
approved. This proposal must contain the following:
    (1) Project description. A description of the housing, including 
the number of units, unit types and number of bedrooms, and any 
nondwelling facilities of the project to be acquired;
    (2) Certification. Certification by the PHA that the property was 
not constructed or is not being constructed with the intent that it 
would be sold to the PHA;
    (3) Site information. A description of the proposed general 
location of the property to be acquired, or where specific properties 
have been identified, street addresses of the properties;
    (4) Project costs. The detailed budget of costs for acquiring the 
project, including relocation and closing costs, and an identification 
of the sources of funding;
    (5) Appraisal. An appraisal of the proposed property by an 
independent, state-certified appraiser (when the sites have been 
identified);
    (6) Project acquisition schedule. A copy of the PHA acquisition 
schedule;
    (7) Environmental information. All available environmental 
information on the properties to be acquired (when sites have been 
identified), to expedite the environmental review under part 58 of this 
title (if a responsible entity has assumed environmental responsibility 
for the project) or under part 50 of this title (if HUD is performing 
the environmental review);
    (8) Additional HUD-requested information. Any additional 
information that may be needed for HUD to determine whether it can 
approve the proposal.
    (b) Cost limit. The acquisition cost of the project is limited by 
the housing cost cap limit, as described in HUD Notice PIH 99-17, 
issued on March 15, 1999.


Sec. 906.41  What supporting documentation must be submitted to HUD 
with the homeownership program?

    The following supporting documentation must be submitted to

[[Page 49938]]

HUD with the proposed homeownership program, as appropriate for the 
particular program:
    (a) Property value estimate. An estimate of the fair market value 
of the property, including the range of fair market values of 
individual dwellings, with information to support the reasonableness of 
the estimate. (The purpose of this data is merely to assist HUD in 
determining whether, taking into consideration the estimated fair 
market value of the property, the plan adequately addresses any risks 
of fraud and abuse and of windfall profit upon resale, pursuant to 
Sec. 906.27. A formal appraisal need not be submitted with the proposed 
homeownership program.)
    (b) Physical assessment. An assessment of the physical condition of 
the property, based on the standards specified in Sec. 906.7.
    (c) Workability. An itemized statement demonstrating the practical 
workability of the program, based on analysis of data on such elements 
as purchase prices, costs of repair or rehabilitation, homeownership 
costs, family incomes, availability of financing, and the extent to 
which there are eligible residents who are expected to be interested in 
purchase. (See Sec. 906.45(a).)
    (d) PHA performance in homeownership. A statement of the commitment 
and capability of the PHA (and any other entity with substantial 
responsibility for implementing the homeownership program) to 
successfully carry out the homeownership program. The statement must 
describe the PHA's (and other entity's) past experience in carrying out 
homeownership programs for low income families, and (if applicable) its 
reasons for considering such programs to have been successful. A PHA 
that has not previously implemented a homeownership program for low 
income families instead must submit a statement describing its 
experience in carrying out public housing modernization and development 
projects under parts 941 and 968 of this title, respectively.
    (e) Nondiscrimination certification. The PHA's or PRE's 
certification that it will administer the plan on a nondiscriminatory 
basis, in accordance with the Fair Housing Act, Title VI of the Civil 
Rights Act of 1964, Executive Order 11063, and implementing 
regulations, and will assure compliance with those requirements by any 
other entity that may assume substantial responsibilities for 
implementing the program.
    (f) Legal opinion. An opinion by legal counsel to the PHA, stating 
that counsel has reviewed the program and finds it consistent with all 
applicable requirements of Federal, State, and local law, including 
regulations as well as statutes. At a minimum, the attorney must 
certify that the documents to be used will fully implement the sale to 
a low-income family restriction of Sec. 906.41(e), the resale reverter 
of Sec. 906.41(d), and the restriction of use of resale proceeds of 
Sec. 906.27.
    (g) Board resolution. A resolution by the PHA's Board of 
Commissioners, evidencing its approval of the program.
    (h) Other information. Any other information that may reasonably be 
required for HUD review of the program. Except for the PHA-HUD 
implementing agreement under Sec. 906.49, HUD approval is not required 
for documents to be prepared and used by the PHA in implementing the 
program (such as contracts, applications, deeds, mortgages, promissory 
notes, and cooperative or condominium documents), if their essential 
terms and conditions are described in the program. Consequently, those 
documents need not be submitted as part of the program or the 
supporting documentation.


Sec. 906.43  Where does a PHA submit a homeownership program for HUD 
approval?

    A PHA must submit its proposed homeownership program together with 
supporting documentation, in a format prescribed by HUD, to the Special 
Applications Center, 77 W. Jackson Street, Chicago, Illinois, with a 
copy to the appropriate HUD Field Office.


Sec. 906.45  What criteria will HUD use to review a homeownership 
program?

    HUD will use the following criteria in reviewing a homeownership 
program:
    (a) Workability. The program must be practically workable, with 
sound potential for long-term success. Financial viability, including 
the capability of purchasers to meet the financial obligations of 
homeownership, is a critical requirement.
    (b) Legality. The program must be consistent with law, including 
the requirements of this part and any other applicable Federal, State, 
and local statutes and regulations, and existing contracts. Subject to 
the other two criteria stated in this section, any provision that is 
not contrary to those legal requirements may be included in the 
program, at the discretion of the PHA, whether or not expressly 
authorized in this part.
    (c) Documentation. The program must be clear and complete enough to 
serve as a working document for implementation, as well as a basis for 
HUD review.
    (d) PHA performance in homeownership. The PHA (and any other entity 
with substantial responsibility for implementing the homeownership 
program) must have demonstrated the commitment and capability to 
successfully implement the homeownership program based upon the 
criteria stated in 906.41(d).


Sec. 906.47  What environmental provisions apply?

    (a) Generally, the environmental provisions applicable to HUD-
financed programs are found in part 58 of this title (if a responsible 
entity has assumed environmental review responsibility for the project) 
and part 50 of this title (if HUD is performing the environmental 
review).
    (b) Where the PHA's homeownership program involves no acquisition 
or rehabilitation of units in anticipation of the sale but assistance 
to the homebuyer will be provided with 1937 Act funds, an environmental 
review is not required under part 58 or part 50 of this title. However, 
the requirements of Sec. 58.6 or Sec. 50.19(b)(15) of this title are 
still applicable.


Sec. 906.49  How is HUD approval and authorization indicated?

    HUD may approve a homeownership program as submitted or return it 
to the PHA for revision and resubmission. Upon HUD notification to the 
PHA that the homeownership program is approvable (in final form that 
satisfies all applicable requirements of this part), the PHA and HUD 
will execute a written implementing agreement, in a form prescribed by 
HUD, to evidence HUD approval and authorization for implementation. The 
program itself, as approved by HUD, must be incorporated in the 
implementing agreement. Any of the items of supporting documentation 
may also be incorporated, if agreeable to the PHA and HUD. The PHA is 
obligated to carry out the approved homeownership program and other 
provisions of the implementing agreement without modification, except 
with written approval by HUD.

    Dated: August 27, 1999.
Deborah Vincent,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-23700 Filed 9-13-99; 8:45 am]
BILLING CODE 4210-33-P