[Federal Register Volume 64, Number 203 (Thursday, October 21, 1999)]
[Rules and Regulations]
[Pages 56870-56880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27301]



[[Page 56869]]

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Part III





Department of Housing and Urban Development





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24 CFR Part 964



Public Housing Agency Organization; Required Resident Membership on 
Board of Directors or Similar Governing Body; Final Rule

  Federal Register / Vol. 64, No. 203 / Thursday, October 21, 1999 / 
Rules and Regulations  

[[Page 56870]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 964

[Docket No. FR-4502-F-02]
RIN 2577-AC13


Public Housing Agency Organization; Required Resident Membership 
on Board of Directors or Similar Governing Body

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

ACTION: Final rule.

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

SUMMARY: On June 23, 1999, HUD published a proposed rule to implement 
section 2(b) of the United States Housing Act of 1937, which was added 
by section 505 of the Quality Housing and Work Responsibility Act of 
1998. Section 2(b) requires, with certain exceptions, that the 
membership of the board of directors or similar governing body of a 
public housing agency (PHA) must contain not less than one member who 
is directly assisted by the PHA. This final rule makes effective the 
policies and procedures described in the June 23, 1999 proposed rule 
and takes into consideration the public comments received on the 
proposed rule.

DATES: Effective Date: November 22, 1999.

FOR FURTHER INFORMATION CONTACT: Rod Solomon, Deputy Assistant 
Secretary for Policy, Programs, and Legislative Initiatives, Room 4116, 
U.S. Department of Housing and Urban Development, 451 Seventh Street, 
SW, Washington, DC 20410-5000; telephone (202) 708-0713; or Paula 
Blunt, Office of Public and Indian Housing, Room 4226, U.S. Department 
of Housing and Urban Development, 451 Seventh Street, SW, Washington, 
DC 20410-5000; telephone (202) 619-8201. Hearing- or speech-impaired 
individuals may access these numbers via TTY by calling the Federal 
Information Relay Service at (800) 877-8339. With the exception of the 
``800'' number, these are not toll-free telephone numbers.

SUPPLEMENTARY INFORMATION:

I. The June 23, 1999 Proposed Rule

    On June 23, 1999 (64 FR 33644), HUD published a proposed rule to 
implement section 505 of the Quality Housing and Work Responsibility 
Act of 1998 (Pub. L. 105-276, approved October 21, 1998; 112 Stat. 
2461, 2522) (the ``Public Housing Reform Act''). The Public Housing 
Reform Act constitutes a substantial overhaul of HUD's public housing 
and Section 8 assistance programs. Among other goals, the changes made 
by the Public Housing Reform Act are designed to provide for more 
resident involvement, and to increase resident participation and 
awareness in creating and maintaining a positive living environment.
    Section 505 of the Public Housing Reform Act amended section 2 of 
the United States Housing Act of 1937 (42 U.S.C. 1437) (the ``1937 
Act''). New section 2(b)(1) of the 1937 Act requires, except in certain 
cases, that:

the membership of the board of directors or similar governing body 
of each public housing agency shall contain not less than 1 member--
(A) who is directly assisted by the public housing agency; and (B) 
who may, if provided for in the public housing agency plan, be 
elected by the residents directly assisted by the public housing 
agency.

    New section 2(b)(2) of the 1937 Act establishes two exceptions to 
the resident board member requirement. First, public housing agencies 
(PHAs) that are located in a State that requires the members of a board 
of directors or similar governing body of a PHA to be salaried and to 
serve on a full-time basis are excepted from the resident board member 
requirement. Second, PHAs with less than 300 units are excepted from 
the resident board member requirement if they meet two conditions:
    (1) The PHA must provide reasonable notice to the resident advisory 
board of the opportunity for residents to serve on the PHA board of 
directors or similar governing body; and
    (2) The PHA must wait a reasonable time after the resident advisory 
board has received this notice.
    Resident advisory boards participate in the PHA planning process 
and assist and make recommendations regarding the PHA Plan. The 
membership of a resident advisory board is made up of individuals who 
adequately reflect and represent the residents assisted by the PHA. 
(See 24 CFR 903.13 for additional information regarding resident 
advisory boards.) Part 903 of 24 CFR (entitled ``Public Housing Agency 
Plans'') was established by interim rule published on February 18, 1999 
(64 FR 8170).
    The June 23, 1999 rule proposed to implement section 2(b) in a new 
subpart E to 24 CFR part 964, which contains HUD's regulations 
concerning resident participation and resident opportunities in public 
housing. The preamble to the June 23, 1999 proposed rule describes in 
detail the proposed amendments to 24 CFR part 964.

II. Significant Changes Between June 23, 1999 Proposed Rule and 
This Final Rule

    This final rule makes effective the policies and procedures 
contained in the June 23, 1999 proposed rule and takes into 
consideration the public comments received on the proposed rule. The 
major changes made by this final rule in response to public comment are 
described below. The rationale for these changes are discussed in 
greater detail in Section III of this preamble.
    1. Covered funding. The final rule clarifies that, subject to 
certain exceptions, the statutory resident board member requirement 
applies to any PHA that has a public housing annual contributions 
contract with HUD or that administers Section 8 tenant-based rental 
assistance. The requirement does not apply to any State financed 
housing assistance or Section 8 project-based assistance.
    2. State and local procedures. Sections 964.435 (which describes 
initial implementation of the resident board member requirement) and 
964.440 (which describes the procedures for filling an open board 
member seat) of the proposed rule are not included in this final rule. 
These sections established specific board-level procedures that were 
intended to assist PHAs in implementing the resident board member 
requirement. HUD decided not to include these sections in the final 
rule and instead leave the type of implementation details covered by 
Secs. 964.435 and 964.440 to State and local governments to resolve. It 
is important to note, however, that the exclusion of these sections 
from the final rule does not relieve covered PHAs of the responsibility 
to implement the resident board member requirement. The resident board 
member requirement took effect beginning on October 1, 1999. HUD 
believes that implementation of this new requirement should occur as 
soon as possible after this date. All covered PHAs must take the steps 
necessary to comply with this requirement if they have not done so 
already.
    In addition, as a result of the decision to remove Secs. 964.435 
and 964.440, the definitions of the terms ``elected board member'' and 
``related unit of general local government'' have not been included in 
the final rule because they are no longer necessary.
    3. Exceptions to resident board member requirement. For purposes of 
clarity, this final rule reorganizes the listing of the exceptions to 
the statutory resident board member requirement.

[[Page 56871]]

The description of the exception for small PHAs is still located in 
Sec. 964.425 (which has been re-designated as ``Small public housing 
agencies''). The other two exceptions--for PHA boards with full-time 
salaried members and for PHAs with no governing boards--have been 
relocated to Sec. 964.405 (which describes the scope of the 
applicability of the resident board member requirement).
    4. PHAs that only administer Section 8 assistance. The final rule 
clarifies that PHAs that only administer Section 8 assistance qualify 
for the ``small PHA'' (i.e., those with less than 300 public housing 
units) exception to the resident board member requirement regardless of 
the number of Section 8 vouchers they administer.
    5. Eligibility for ``small PHA'' exception. The final rule 
clarifies that, in order to qualify for the ``small PHA'' exception, 
the PHA must satisfy all of the conditions described in Sec. 964.425. 
Specifically, the PHA must: (a) have less than 300 public housing units 
(or no public housing units); (b) provide reasonable notice to the 
resident advisory board of the opportunity for residents to serve on 
the governing board; (c) not be notified of the intention of any 
resident to participate on the governing board within a reasonable 
time; and (d) repeat notification to the resident advisory board at 
least once every year. If any of these conditions are not satisfied, 
the PHA is subject to the resident board member requirements. For 
example, if a small PHA (after providing the required notice to the 
resident advisory board) is notified of a resident's intention to serve 
on the governing board, the PHA must comply with the requirements of 
new 24 CFR part 964, subpart E.
    6. ``Reasonable time'' must not be less than 30 days. The final 
rule provides that, in order to qualify for the ``small PHA'' 
exception, the PHA must provide residents with at least 30 days to 
express their interest in serving on the PHA governing board.
    7. Resident participation on the board must include matters 
regarding covered assistance. The final rule clarifies that a resident 
board member must be allowed to take part in PHA board decisions 
related to the administration, operation, and management of Federal 
public housing programs and Section 8 tenant-based assistance programs. 
This rule does not extend to matters that: (a) Exclusively relate to 
other types of housing assistance (such as State financed housing 
assistance); or (b) do not involve housing assistance (as may occur 
where the city or county governing body also serves as the PHA board).
    However, a PHA may choose to expand the scope of resident member 
involvement to matters not covered by this rule.
    8. Eligible resident. The final rule provides that, in order for a 
resident to be eligible for board membership, the resident's name must 
appear on the lease and the resident must be at least 18 years of age.
    9. Resident board member no longer directly assisted. The final 
rule clarifies that a resident board member who is no longer directly 
assisted by the PHA may be removed for that cause from the PHA board, 
where such action is permitted under State or local law. Alternatively, 
the board member may be allowed to complete his/her current term as a 
member of the PHA governing board. However, the board member may not be 
re-appointed (or re-elected) to the governing board for purposes of 
serving as the statutorily required resident board member.
    10. Minimum qualifications for board membership. The final rule 
provides that any generally applicable qualifications for board 
membership also apply to residents, unless the application of the 
requirements would result in the governing board not containing at 
least one eligible resident as a member. Further, PHAs and localities 
may not establish eligibility requirements for board membership that 
are solely applicable to residents.
    11. Election procedures. The final rule adopts several of the 
relevant election procedures described in Sec. 964.130. This section 
establishes the requirements governing the election of public housing 
resident councils. Further, any election procedures devised by the PHA 
must facilitate fair elections.
    12. Conflicts of interest. The final rule clarifies that a resident 
board member may take part in any matters before the board so long as 
that matter is not applicable to that resident in a personal capacity. 
A resident board member may only be excluded from participation in a 
matter that uniquely applies to that resident, and the resident may be 
involved in any matter that is generally applicable to residents. The 
final rule also makes clear that having a lease with the PHA does not 
constitute a conflict of interest for the resident board member. 
Further, the rule clarifies that a board member's status as a public 
housing resident or recipient of Section 8 tenant-based assistance does 
not constitute a conflict of interest.
    13. Conforming change. The final rule also makes a technical, non-
substantive change to 24 CFR part 964. Specifically, the rule removes 
outdated Sec. 964.110, which describes HUD's policy regarding resident 
membership on the PHA governing board. These provisions have been 
incorporated in new subpart E.

III. Discussion of Public Comments Received on the June 23, 1999 
Proposed Rule

    The public comment period on the June 23, 1999 proposed rule closed 
on August 23, 1999. HUD received 71 comments on the proposed rule. 
Comments were submitted by PHAs; the three main organizations 
representing PHAs; legal services organizations; resident 
organizations; low-income housing advocates; and various other 
organizations and individuals.
    This section of the preamble presents a summary of the significant 
issues raised by the public commenters on the May 29, 1998 proposed 
rule and HUD's responses to these comments.

A. Support for Proposed Rule

    Several commenters supported the proposed amendments to 24 CFR part 
964. One of the commenters wrote to express his strong support for the 
rule based on his experience as the executive director of a PHA that 
has had a resident board member for 25 years. However, the majority of 
the commenters writing in support also expressed concerns regarding the 
implementation of the resident board membership requirements.

B. Opposition to Resident Board Member

    Several commenters opposed the resident board membership 
requirement. Although these commenters provided a variety of reasons 
for their opposition, they all agreed that a PHA board should not be 
required to include a public housing resident as a member.
    Comment: Residents are not qualified to serve on PHA board. Several 
of the commenters wrote that public housing residents lack the 
necessary experience and expertise to serve on a PHA board. One of 
these commenters wrote that resident board members, many of whom have 
never owned property or managed a bank account, will be required to 
make sound financial and management decisions. Another commenter wrote 
that most of the qualified residents are elderly or caring for families 
and, therefore, unable to serve on a PHA board. The commenters feared 
that resident board members would lower the standard for PHA board 
membership and weaken the PHA's ability to garner local support. The 
commenters also worried that the requirement would

[[Page 56872]]

discourage qualified persons from serving on the PHA board.
    Comment: Requirement will endanger confidentiality of board 
deliberations and create conflicts of interest. Several commenters 
wrote that resident members would endanger the confidentiality of board 
deliberations. Other commenters wrote that the requirement may pose a 
conflict of interest for a resident required to make decisions that 
will financially impact the resident's family. Several commenters 
worried about the potential for abuse of power by a resident board 
member.
    Comment: Requirement presents logistical difficulties. Several 
commenters wrote about the logistical difficulties presented by the PHA 
board membership requirement. For example, one commenter wrote that in 
rural areas PHAs will have difficulty ensuring that a resident board 
member travels the necessary distance to attend PHA board meetings. The 
commenter also wrote that board meetings are often held during working 
hours, which makes it difficult for employed residents to attend.
    Comment: Residents are not interested in serving on PHA boards. 
Other commenters wrote that PHAs often have difficulty attracting 
resident participation. According to the commenters, this could result 
in a resident board member who does not fully or enthusiastically 
participate in decisionmaking. One commenter wrote that the lack of 
resident interest indicates that public housing residents do not have 
the necessary responsibility or dedication to serve on a PHA board.
    Comment: Requirement is unnecessary--residents already have input 
in PHA management and operations. Several commenters wrote that the PHA 
board membership requirement is unnecessary. These commenters noted 
that residents currently have the right to provide input in public 
housing management and operations through the resident advisory board 
and other forums.
    HUD Response. (This response applies to all of the comments 
discussed in this section III.B.) HUD's part 964 regulations have 
always encouraged active resident participation in PHAs, including 
involvement in management and operation (Sec. 964.15) and resident 
membership on PHA governing boards (Sec. 964.110). HUD understands that 
these commenters have concerns regarding the effectiveness of requiring 
a resident board member. HUD is not in a position, however, to revise 
or rescind this requirement because it is a statutorily mandated 
requirement. As noted in the preamble to the July 2, 1999 proposed rule 
and the preamble to this rule, section 2(b) of the 1937 Act requires 
that each PHA governing board contain at least one member who is 
directly assisted by the PHA. Congress enacted new section 2(b) because 
Congress viewed the resident board member requirement as necessary to 
promote a better understanding of resident concerns and to foster 
better relations and communication between residents and PHAs (S. Rep. 
No. 105-21, at 7 (1998)).

C. Federalism Concerns

    Many commenters raised concerns regarding the Federalism 
implications of the proposed rule. The comments reflect the belief that 
the proposed rule infringes on the rights of PHAs, as well as the 
rights of States and localities. The commenters wrote that 
accomplishing the statutory goal of including a resident member on each 
PHA board will be much more difficult than the proposed rule 
contemplates. A large portion of the comments point out that section 
2(b) conflicts with many State laws governing PHA board membership. 
Several of the commenters wrote that adding an additional seat to an 
elected board would conflict with the State election laws and infringe 
on the rights of States. Many of the commenters asked HUD to seek a 
change to the law where the organization of the board is not conducive 
to resident participation, such as where the board is the city council.
    One of the commenters wrote that section 2(b) may be 
unconstitutional. According to the commenter, section 2(b) would 
unconstitutionally ``rewrite State housing authority laws,'' and 
``prescribe the manner in which appointing authorities will exercise 
the prerogative of appointment, which derives from State statute.'' The 
commenter wrote that the ``Federal government may neither issue 
directives requiring the States to address particular problems, nor 
command the State's officers, or those of their political subdivisions, 
to administer or enforce a Federal regulatory program'' (quoting the 
United States Supreme Court decision in Printz v. United States, 521 
U.S. 98 (1997)). The commenter also noted that many PHAs operate 
programs that ``have nothing to do with the Federal government.'' 
However, the ``Federal mandate contained in (section 2(b) and the 
proposed rule) necessarily affects the nonfederal activities of'' PHAs.
    The commenter acknowledged that the Federal government may attach 
conditions to the receipt of Federal funding. However, the commenter 
wrote that ``the mandates involved here are directed, not to the [PHA] 
that is party to the (Annual Contributions Contract (ACC)), but to the 
appointing authority, which is not.'' The commenter also acknowledged 
that the Federal government can preempt State law, but did not believe 
that preemption was justified in this context. Specifically, the 
commenter did not find explicit statutory language authorizing 
peremption, nor the existence of ``a regulatory scheme so pervasive as 
to imply (a Federal) intent to occupy a particular field.'' Neither did 
the commenter believe that preemption would be justified due to a 
conflict between State law and section 2(b).
    HUD Response. HUD agrees that this rulemaking, which seeks to 
implement the explicit statutory directive of section 2(b), may have 
direct effects on States and localities. The Federalism implications of 
the rulemaking, however, derive solely from the statutory text and 
substance of section 2(b). The scope of the rule is exclusively 
concerned with implementation of the statutory resident board 
membership requirement.
    HUD believes that this rulemaking is necessary to: (1) Provide 
guidance to PHAs in fulfilling this requirement; (2) minimize the 
potential burdens on States and local governments in carrying out the 
statutory mandate; and (3) ensure that the Federal objective of 
increasing resident involvement in public housing is achieved. In most 
instances where section 2(b) provides HUD with the flexibility to leave 
a matter to the discretion of a State or locality, HUD has elected to 
do so. As is noted in the summary of comments below, many commenters 
requested additional regulatory guidance on a variety of matters 
related to the statutory resident board membership requirement. In most 
of these instances, HUD has declined to adopt the suggestion made by 
the commenters on the basis that States and localities should have 
flexibility in implementing the requirements of section 2(b). In one 
instance, HUD decided not to include two sections of the proposed rule 
(Secs. 964.435 and 964.440) specifically to provide States and 
localities with the flexibility to reconfigure their PHA governing 
boards to comply with the requirements of section 2(b) in a manner best 
suited to local conditions.
    HUD is not in a position to determine the Constitutionality of 
section 2(b). However, HUD has concluded that section 2(b) preempts any 
conflicting State laws regarding PHA board membership. This final rule 
reflects this

[[Page 56873]]

statutory preemption, and does not constitute a decision on HUD's part 
to preempt State law through its rulemaking authority.
    Executive Order 12612, Federalism, was issued on October 30, 1987 
(52 FR 41685). The Order requires that executive branch agencies take 
Federalism concerns into account when developing and implementing 
agency policy initiatives that have substantial, direct effects on 
States or their political subdivisions, or on the relationship or 
distribution of power among the various levels of government. Section 4 
of Executive Order 12612 contains special provisions governing the 
preemption of State law by Federal statutes and regulations. 
Specifically, section 4 of the Order provides that:

    To the extent permitted by law, Executive departments and 
agencies shall construe, in regulations and otherwise, a federal 
statute to preempt State law only when the statute contains an 
express preemption provision or there is some other firm and 
palpable evidence compelling the conclusion that the Congress 
intended preemption of State law, or when the exercise of State 
authority directly conflicts with the exercise of Federal authority 
under the Federal statute.

    Although section 2(b) does not expressly provide for the preemption 
of State laws governing PHA board membership, HUD has concluded that 
``firm and palpable'' evidence exists for concluding that the Congress 
intended the preemption of State law in those cases where the ``State 
authority directly conflicts'' with the Federal resident board 
membership requirement.
    The first reason for HUD's conclusion is the statutory language of 
section 2(b). The statutory resident board membership requirement is 
explicit:

    Except as provided * * * the membership of the board of 
directors or similar governing body of each (PHA) shall contain not 
less than 1 member * * * who is directly assisted by the (PHA).

    The exceptions referred to are: (1) For small PHAs with less than 
300 units; and (2) for PHAs in States that require that PHA board 
members be full-time salaried employees. The two statutory exceptions 
reflect Congressional awareness that the resident board membership 
requirement may be burdensome for small PHAs or conflict with certain 
State requirements. Nevertheless, the Congress elected to provide 
exceptions only for the two narrow situations described above. 
Accordingly, HUD has concluded that the statutory language of section 
2(b) contains firm and palpable evidence that the Congress intended the 
resident board membership requirement to be broadly applicable, 
regardless of conflicting State law.
    HUD's second reason for its conclusion is based on the dominant 
Federal interest in the public and assisted housing programs 
administered under the 1937 Act. HUD's August 22, 1988 (53 FR 31926) 
notice implementing Executive Order 12612 provides that HUD will infer 
preemption where ``the field is one in which Federal interest is 
sufficiently dominant to provide firm and palpable evidence that 
Congress intended to preclude enforcement of State laws on the same 
subject.'' HUD believes, for the following reasons, that the section 
2(b) requirements satisfy this test.
    The 1937 Act, a Federal statute, establishes the basic framework 
for most of the public and assisted housing programs operated by PHAs 
throughout the country. HUD is the Federal agency responsible for 
establishing and enforcing the regulatory and contractual requirements 
necessary to carrying out the purposes of the 1937 Act. With few 
exceptions, HUD is the primary source of funding for public housing 
developments assisted under the 1937 Act. Given this dominant Federal 
role in the administration of 1937 Act programs, HUD has concluded that 
section 2(b) preempts any conflicting State laws governing PHA board 
membership.
    Further, as one of the commenters acknowledges, the Federal 
government may establish conditions on the receipt of Federal funds. 
For the recipients of the Federal funds, these conditions preempt any 
conflicting State or local requirements. As this final rule makes 
clear, the resident board member requirement is a condition to the 
receipt of funding under the 1937 Act. For example, the requirements of 
section 2(b) apply solely to PHAs that have an ACC with HUD or that 
administer tenant-based rental assistance under section 8 of the 1937 
Act (see Sec. 964.405). Additionally, resident participation is 
required only for those PHA board decisions related to Federally funded 
public housing and Section 8 tenant-based assistance programs. The 
requirements of section 2(b) do not extend to PHA board decisions that 
exclusively affect other types of housing assistance, or that do not 
regard housing assistance. (See Sec. 964.430(a)(2).) As a condition of 
1937 Act funding, the statutory resident board member requirement 
supersedes any conflicting State or local requirements regarding PHA 
board membership for those PHAs receiving assistance under the 1937 
Act.

D. Other General Comments Regarding the Proposed Rule

    Comment: Stipends and Per Diems Should be Excluded from Income. Two 
commenters wrote that stipends and per-diem expenses are common for PHA 
board members. The commenters suggested that HUD exclude these items 
from the income of the resident board member. Otherwise, the board 
member would risk an increase in rent, which is calculated based on 
resident income.
    HUD Response. HUD agrees that counting such stipends as ``income'' 
for the purposes of determining rent could serve as a deterrent to 
residents who would otherwise be interested in serving on the PHA 
Board. HUD is addressing this issue in the final rule on Admission and 
Occupancy to reflect that stipends for services rendered as a resident 
board member are to be treated as resident services stipends, which are 
exempted from a resident's income to the extent other such stipends are 
exempt. (For additional details regarding the Admission and Occupancy 
rule, see the proposed rule published on April 30, 1999 (64 FR 23460).)
    Comment: What happens to a resident board member who is no longer 
``directly assisted'' by the PHA? Several commenters asked whether a 
resident who is no longer directly assisted by the PHA (due to 
eviction, etc.) could continue to serve on the PHA board. Some of the 
commenters wrote that requiring the resident to leave the board might 
conflict with State or local requirements governing the selection and 
removal of board members. Other commenters asked whether the resident 
who replaces the removed board member would complete the original board 
membership term or start a new term.
    HUD Response. A resident board member who ceases to be directly 
assisted by the PHA is no longer an ``eligible resident'' as defined in 
Sec. 964.410. Such a board member may be removed from the PHA board for 
that cause, where such action is permitted under State or local law. 
State laws and PHA policies should be changed, where necessary, to 
reflect that resident board members who cease to be directly assisted 
by the PHA may be removed from the board for cause. Alternatively, the 
board member may be allowed to complete his/her current term as a 
member of the PHA governing board. However, the board member may not be 
re-appointed (or re-elected) to the governing board for purposes of 
serving as the statutorily required resident board member.

[[Page 56874]]

    Comment: Final rule should provide for the removal of disruptive 
resident board members. One commenter suggested that HUD revise the 
proposed rule to provide for the removal of unruly or disruptive 
resident PHA board members.
    HUD Response. As previously noted, section 2(b) of the 1937 Act and 
Sec. 964.430 of this final rule, provide that a resident board member 
is a full member of the governing board. As a full member, the resident 
board member is subject to the same rules regarding behavior as any 
other board member. HUD does not see any need to impose additional 
procedures regulating the behavior of resident board members. Moreover, 
the imposition of such procedures specific to resident board members 
would undermine the resident board member's position as a full member 
of the governing board and would run counter to Congress' intent in 
enacting the resident board member requirement.
    Comment: Final rule should contain a mechanism for resident 
complaints, investigation, and consequences of PHA noncompliance. One 
commenter made this suggestion.
    HUD Response. HUD has not adopted the change suggested by this 
commenter. PHAs that fail to comply with the requirements of this final 
rule are subject to the same noncompliance and enforcement procedures 
that apply to other 1937 Act requirements. Consequently, HUD does not 
see the need to implement additional compliance procedures.
    Comment: Rule should provide for training and provision of 
resources to resident board member. Two commenters wrote that the final 
rule should provide for the training of resident board members by an 
independent training entity on all aspects of PHA operations. The 
commenters also suggested that resident board members should be 
provided with adequate resources (office space, phone, photocopier, 
etc.) to carry out their duties.
    HUD Response. HUD has not changed the rule to reflect this request. 
Resident board members are to be treated as any other member of the 
governing board. If all board members are provided with resources, such 
as office space and office equipment, these must also be made available 
to the resident board member. HUD will not, however, require that PHAs 
supply additional resources to the resident board member. HUD continues 
to encourage PHAs to maintain partnerships to provide training to 
residents consistent with Sec. 964.140.
    Comment: What happens if there is only one resident who expresses 
interest in serving on the board? Several commenters posed this 
question.
    HUD Response. Appointing authorities are not required to appoint 
any specific member to the board of directors. If there is limited 
interest among residents so that the PHA or appointing authority 
believes there is no real choice in who becomes a board member, the PHA 
or appointing authority may undertake outreach efforts to identify a 
pool of interested residents. However, a PHA is required to have a 
resident on its board, regardless of the number of residents who are 
interested.

E. Comments Regarding Sec. 964.405--Applicability

    Proposed Sec. 964.404 identifies the types of assistance to which 
the resident board membership requirement applies. The proposed rule 
provides that new subpart E is applicable to ``any [PHA] that has a 
public housing annual contributions contract with HUD or a housing 
assistance payments contract with HUD under section 8 of the United 
States Housing Act of 1937 (42 U.S.C. 1437f).''
    Comment: Does the resident board membership requirement apply to 
PHAs that only administer Section 8 assistance? Several commenters 
asked whether the resident board membership requirements are applicable 
to PHAs that do not administer public housing programs, but do 
administer Section 8 assistance. One of the commenters wrote that the 
wording of proposed Sec. 964.405 is confusing because it refers to a 
Section 8 ``housing assistance payment [HAP] contract with HUD.'' The 
commenter noted that under the tenant-based Section 8 program, there is 
no HAP contract with HUD. Another commenter noted that section 2(b) 
establishes an exception for small PHAs based on the number of ``public 
housing units'' operated by the PHA. According to the commenter, this 
statutory language implies that PHAs that do not operate any ``public 
housing units'' are totally exempt from the resident board membership 
requirements.
    HUD Response. PHAs that only administer Section 8 assistance are 
subject to the resident board membership requirement. However, they 
fall within the category of PHAs with less than 300 public housing 
units, regardless of the number of Section 8 vouchers they administer. 
This means that these PHAs are exempt from the resident board member 
requirement, provided: (1) They have given adequate prior notice to the 
resident advisory board of the opportunity for a resident to become a 
resident board member, and (2) that within a reasonable time of such 
notice, the PHA has not been notified of any residents who are 
interested in such participation. This rule makes the necessary 
qualification to Sec. 964.425, which describes the ``small PHA'' 
exception to the resident board member requirement.
    The final rule also clarifies that the resident board membership 
requirement applies to PHAs that ``administer tenant-based rental 
assistance under Section 8 of'' the 1937 Act. The change is in response 
to the commenter who noted that under the tenant-based Section 8 
program there is no HAP contract with HUD.
    HUD also notes that, under the interim rule on PHA Plans published 
in the Federal Register on February 18, 1998 (64 FR 8170), all PHAs 
(including those that only administer Section 8 assistance) are 
required to establish a resident advisory board. (The PHA Plan interim 
rule is codified at 24 CFR part 903.)

F. Comment Regarding Sec. 964.410--Additional Definitions

    Proposed Sec. 964.410 defines various terms that are applicable to 
the resident board membership requirements described in new 24 CFR part 
964, subpart E.
    Comment: Definition of ``directly assisted'' should be narrowed/
broadened. Proposed Sec. 964.410 defines ``directly assisted'' to mean 
``a public housing resident or a participant in the tenant-based 
section 8 program.'' Two commenters objected to this definition. One of 
the commenters suggested that the scope of the definition be narrowed 
to only include Federal programs. The commenter noted that many PHAs 
administer State housing programs that should not be subject to Federal 
requirements. However, the second commenter suggested that the 
definition include all persons assisted by the PHA, including those 
assisted under Department of Agriculture Rural Development projects.
    HUD Response. The final rule clarifies that ``directly assisted'' 
means residing in public housing or receiving Section 8 tenant-based 
assistance. Direct assistance does not include any State-financed 
housing assistance programs, section 8 project-based assistance, or 
Section 8 new construction assistance.
    Comment: Definition of ``elected board member'' should exclude 
residents who serve on PHA board as a result of being elected to 
another office. The proposed rule defines ``elected board member'' to 
mean ``either a

[[Page 56875]]

member of the governing board who is elected directly to the governing 
board or who serves on the board as a result of being elected to 
another office'' (emphasis supplied). One commenter wrote that the 
definition should be revised to exclude resident board members who 
serve on the board as a result of being elected to another office. 
According to the commenter, including such members in the definition 
frustrates the democratic electoral process contemplated by section 
2(b).
    HUD Response. As a result of the decision to remove Sec. 964.435 
from the final rule, the definition of the term ``elected board 
member'' is no longer necessary and has also been removed from the 
final rule. This comment and the following discussion are included in 
the final rule, however, because the situation where a resident board 
member may serve on a governing board as a result of being elected to 
another office may still occur.
    There are a number of jurisdictions in which certain local elected 
officials may also act, by virtue of their elected office, as members 
of the PHA governing board. For example, a city council may also act as 
the local PHA governing board. In cases like these, when a person is 
elected to the city council they are also, automatically, ``elected'' 
to the PHA governing board. These members have dual roles. The 
definition of ``elected board member'' in the proposed rule makes clear 
that these elected officials are elected board members. If a PHA 
resident is elected to such a ``dual-purpose'' local office, then that 
resident may also serve as the statutorily required resident board 
member under section 2(b).
    The comment suggests that this creates a conflict if the PHA Plan 
provides for the resident board member to be ``elected by the residents 
directly assisted by the (PHA).'' The conflict appears to stem from the 
fact that the resident board member has not been directly elected by 
the residents, as provided for in the PHA Plan. In this case, however, 
there is no conflict.
    The requirement to have at least one resident board member is 
mandatory, while provision for direct elections is merely permissive. 
If provided for in the PHA Plan, section 2(b) states that a resident 
may be directly elected by residents. Even if it is provided for in the 
PHA Plan, section 2(b) does not require the direct election by 
residents. Therefore, if a resident becomes a board member by virtue of 
holding some other elected office, that resident may also qualify as 
the statutorily required board member under section 2(b), even though 
the resident was not directly elected by residents. However, the 
locality is free to decide that the ``dual purpose'' resident should 
not also serve as the statutorily required resident board member. The 
locality could then hold the election provided for in the PHA Plan, and 
have the resident board member directly elected by the public housing 
residents.
    Comment: Definition of ``eligible resident'' should include 
additional criteria. Proposed Sec. 964.410 provides that a resident is 
eligible to serve on a PHA board if the resident ``is directly assisted 
by a [PHA] and is eighteen years of age or older.'' Several commenters 
requested that the definition provide additional eligibility criteria. 
For example, one of the commenters suggested that the criteria for 
board membership should be the same as for membership in a public 
housing Resident Council. However, the commenter also suggested that 
the Resident Council eligibility requirements at Sec. 964.125 should be 
revised so that residents whose names do not appear on the lease are 
eligible for board membership. Other commenters recommended that only 
residents in good standing should be eligible for PHA board membership. 
One commenter suggested that any minimum qualifications for PHA board 
members should also apply to residents. Another commenter requested 
clarification on whether Section 8 Existing or New Construction 
residents are eligible to serve on a PHA board.
    HUD Response. In response to these comments, HUD reevaluated the 
requirements contained in the definition of the term ``eligible 
resident'' to make sure that the definition was appropriate and capable 
of being implemented in a fair and consistent manner. HUD is concerned 
about implementation of the resident board member requirement being 
delayed because of conflicts over secondary issues such as the 
definition of an eligible resident. Accordingly, HUD has made the 
following changes to the definition of ``eligible resident.''
    HUD has decided to include in the definition that to be eligible, a 
resident must be named in the lease. The reason for this change is to 
make clear exactly who may become a resident board member and to avoid 
any possible conflicts about who is a resident directly assisted by a 
PHA. A person is a resident directly assisted if he or she is are 
listed on the lease.
    HUD agrees with the commenters who wrote that any general minimum 
qualifications for board membership should also apply to residents. HUD 
has revised the proposed rule to adopt this suggestion. However, these 
requirements cannot excuse a PHA's failure to comply with the 
requirements of section 2(b). A PHA must have at least one resident 
board member despite these minimum qualifications. Further, PHAs and 
localities may not establish eligibility requirements for board 
membership that are solely applicable to residents.
    HUD has decided not to include a requirement that a resident be in 
good standing. HUD believes that the term ``good standing'' may be 
defined in different ways by each PHA and could be used to exclude a 
resident from participation without good cause. Other than the 
requirement that a resident must be named in the lease, the definition 
of ``eligible resident'' remains the same as in the proposed rule.

G. Comments Regarding Sec. 964.420--Election of Resident Board Member

    Proposed Sec. 964.420 provides that residents directly assisted by 
a PHA may elect a resident board member, if provided for in the PHA 
Plan.
    Comment: PHA should be required to advise residents of election 
procedures. One commenter suggested that a PHA should be required to 
advise all residents of the election procedures in writing. Another 
commenter recommended that the a PHA should be required to certify that 
it has advised the PHA resident advisory board that resident board 
members may be elected.
    HUD Response. HUD believes that most decisions regarding election 
procedure should be determined locally. However, HUD agrees that some 
minimal standards must be met. Accordingly, HUD has revised the 
proposed rule to adopt several of the relevant provisions of 24 CFR 
964.130, which describes the election procedures for public housing 
resident councils. Specifically, the final rule requires that the PHA 
must provide residents with at least 30 days advance notice for 
nominations and elections. The notice should include a description of 
the election procedures, eligibility requirements, and dates of 
nominations and elections. Further, any election procedures devised by 
the PHA must facilitate fair elections.
    Comment: Resident council election procedures should be 
incorporated in final rule. One commenter suggested that the resident 
council election procedures described in Sec. 964.130 should be 
incorporated in new subpart E. According to the commenter, this will 
ensure that sufficient notice is provided to residents before 
elections, and that election are held on a fair and frequent basis.

[[Page 56876]]

    HUD Response. As noted in the response to the previous comment, HUD 
has revised the proposed rule to adopt several of the relevant 
provisions of 24 CFR 964.130, which describes the election procedures 
for public housing resident councils.
    Comment: Final rule should require the election of resident board 
members. Several commenters wrote that the final rule should require 
that resident board members be elected. According to the commenters, 
this will ensure that the board membership process is fair and 
democratic.
    HUD Response. The statute provides that the decision to allow an 
elected resident board member is to be made locally. Section 2(b) does 
not establish a right to an elected resident board member, it merely 
allows for the possibility and requires that this choice become part of 
the PHA Plan. The purpose of informing residents of the fact that a 
resident board member may be elected is to allow residents to petition 
their PHAs to allow elected resident board members. In the end, 
however, the decision to allow elected resident board members is a 
local one.

H. Comments Regarding Sec. 964.425--Exceptions

    Proposed Sec. 964.425 describes the exceptions to the resident 
board membership requirements. Specifically, the proposed rule exempts 
PHAs that are not governed by a PHA board, or are located in a State 
that requires board members to serve on a full-time salaried basis. The 
proposed rule also provides that PHAs with less than 300 public housing 
units are exempted from the resident board member requirement, provided 
the PHA has: (1) Provided reasonable notice to the resident advisory 
board of the opportunity for residents to serve on the governing board; 
and (2) not been notified of the intention of any resident to 
participate on the governing board within a reasonable time of the 
resident advisory board receiving the notice.
    As noted in Section II of this preamble, this final rule 
reorganizes the listing of the exceptions to the statutory resident 
board member requirement. The description of the exception for small 
PHAs is still located in Sec. 964.425. The other two exceptions--for 
PHA boards with full-time salaried members and for PHAs with no 
governing boards--have been relocated to Sec. 964.405 (which describes 
the scope of the applicability of the resident board member 
requirement).
    Comment: Reasonable notice should be provided to all residents. 
Several commenters wrote that a PHA should be required to provide 
reasonable notice to all residents, not just the resident advisory 
board. One commenter wrote that the notice could accompany the monthly 
rent notifications, or the mailings regarding the PHA Plan process. 
Another commenter suggested that the notice could be posted at each 
public housing site and rental office.
    Several commenters were concerned that PHAs that do not administer 
public housing programs under the 1937 Act (but do administer Section 8 
assistance) might not be able to comply with the notification 
requirement. According to these commenters, such agencies do not have 
resident advisory boards.
    HUD Response. HUD has not incorporated this request into the final 
rule. Section 2(b) of the 1937 Act specifies that notice must be given 
to the resident advisory board. Section 2(b) does not require or 
provide for the notification of all public housing residents. The 
procedures for ensuring that residents are made aware of the 
opportunity to participate on the PHA board should be determined 
locally (including how the resident advisory board will notify the 
residents of such opportunities, and when that notice needs to be 
given).
    In response to the commenters concerned about the ability of PHAs 
that do not administer 1937 Act public housing programs to comply with 
the notification requirements, HUD again notes that its interim rule on 
PHA Plans (February 18, 1999; 64 FR 8170) requires that all PHAs 
establish resident advisory boards (see Sec. 901.13(b) of the interim 
rule).
    Comment: Final rule should specify what constitutes a ``reasonable 
time''. To qualify for exemption, small PHAs must also provide 
residents with a ``reasonable time'' to express their intention to 
participate on the governing board. Several commenters suggested that 
the final rule should specify what constitutes a ``reasonable time.'' 
Two commenters recommended that the rule provide for a 45-day period. 
Another commenter suggested a 120-day period. One of the commenters 
suggested that PHAs provide residents with written procedures for 
indicating their interest in serving on the governing board.
    HUD Response. In developing this final rule (and the June 23, 1999 
proposed rule), HUD wished to provide PHAs with flexibility in 
implementing the resident board member requirement. The language of 
this final rule tracks the statutory language of section 2(b) and 
requires that PHAs must provide residents with a reasonable time to 
express their interest in serving on the PHA governing board. HUD does 
not believe it would be appropriate to dictate by regulation exactly 
how much time is ``reasonable,'' nor what procedures should govern 
resident expressions of interest. HUD defers to PHAs to make these 
determinations on a local basis. However, HUD agrees that a minimum 
time period should be established to ensure that residents have 
adequate time to indicate their interest. Accordingly, this final rule 
provides that the ``reasonable time'' provided by PHAs must not be less 
than 30 days.
    Comment: HUD should establish additional exemptions. Several 
commenters advocated that HUD expand the list of exceptions to the 
resident board membership requirement. For example, one commenter 
recommended that HUD should exempt PHAs with less than 500 public 
housing units. Two commenters suggested that the final rule exempt PHAs 
already subject to State or local resident board membership 
requirements. Another commenter wrote that HUD should extend the 
exemption for full-time salaried PHA boards to include part-time board 
members. Several commenters advocated the exemption of PHAs that do not 
administer public housing or Section 8 programs as their principal 
means of providing housing assistance.
    Several commenters wrote that PHA boards consisting of elected 
officials (such as city council members or county commissioners) should 
not be subject to the resident board membership requirements. These 
commenters noted that these officials often take oaths of office and 
are, therefore, subject to a different standard of accountability than 
a public housing resident. Other commenters advocated an exemption for 
elected PHA boards.
    HUD Response. Section 2(b) provides clear and narrow exceptions to 
the resident board member requirement. The statute does not provide HUD 
with the authority to establish additional exceptions.
    Comment: Small PHAs should be required to comply with resident 
board membership requirement. One commenter wrote that all PHAs, even 
those with under 300 units, should be required to include a resident 
member on the governing board. Another commenter urged that HUD not 
revise the proposed rule to expand the list of exceptions.
    HUD Response. The statutory language of section 2(b) explicitly 
exempts small PHAs with less than 300 units from the resident board 
membership requirement if they follow certain procedures. Accordingly, 
HUD does not have the statutory authority to

[[Page 56877]]

adopt the suggestion made by the commenter.

I. Comments Regarding Sec. 964.430--Nondiscrimination

    Proposed Sec. 964.430 provides that a ``resident board member is a 
full member of the governing board.'' Further, proposed Sec. 964.430(c) 
provides that a PHA board ``may not exclude any resident board member 
from participating in any matter before the governing board on the 
grounds that the resident board member's lease with the [PHA] either 
results or may result in a conflict of interest, unless the matter is 
clearly applicable to the resident board member only in a personal 
capacity.''
    Comment: State or local conflict of interest requirements should be 
applicable to resident board members. Several commenters objected to 
the proposed conflict of interest language quoted above. According to 
these commenters, the proposed rule is not strict enough, and would 
allow residents to unfairly benefit from their policy making position. 
The commenters suggested that State and local conflict of interest 
requirements, which apply to the other members of the PHA board, should 
also be applicable to resident board members.
    HUD Response. Section 2(b) of the 1937 Act makes clear that 
resident board members must be treated as full members of the PHA 
governing board. In implementing this requirement, HUD has attempted to 
address possible conflicts of interest issues by providing a resident 
may not take part in any decisions or activities that relate 
specifically to that resident in a personal capacity. However, section 
2(b) is clear that a resident must not be precluded from board 
membership and activities based on his or her status as a resident of 
public housing or a recipient of Section 8 tenant-based assistance.
    Comment: Suggested clarification to conflict of interest provision. 
One commenter suggested that the language of proposed Sec. 964.430(c) 
be clarified to provide that a resident may vote on all matters of 
general applicability, including issues regarding rents. The commenter 
recommended the following addition to the proposed regulatory language: 
``* * * unless the matter is clearly applicable to the resident board 
member only in a personal capacity which applies uniquely to that 
member and not generally to residents or to a subcategory of 
residents'' (emphasis supplied to indicate additional language). 
Another commenter suggested that HUD issue additional guidance 
regarding the conflict of interest governing resident participation on 
a PHA board. The commenter wrote that such guidance would prevent 
misinterpretation of the conflict of interest provisions and facilitate 
compliance with these requirements.
    HUD Response. HUD has revised the rule generally to adopt the 
language suggested by the first commenter. HUD agrees with the 
commenter that the addition of this language clarifies the conflict of 
interest requirements, and will assist PHAs and residents to comply 
with these provisions. HUD believes that the regulatory language of 
revised Sec. 964.430(c) makes clear that a resident board member may 
take part in any matters before the board so long as that matter is not 
applicable to that resident in a personal capacity. A resident board 
member may only be excluded from participation in a matter that 
uniquely applies to that resident, and the resident may be involved in 
any matter that is generally applicable to residents.
    HUD wishes to reiterate that having a lease with the PHA does not 
constitute a conflict of interest for the resident board member. If 
such a lease could be viewed as constituting a conflict of interest, 
the intent of section 2(b) would be frustrated. Under such an 
interpretation, no resident with a lease with the PHA would be able to 
serve on its governing board. HUD also wishes to clarify that, for 
similar reasons, the board member's status as a public housing resident 
or recipient of Section 8 tenant-based assistance does not constitute a 
conflict of interest. Such an interpretation would prevent residents 
directly assisted by the PHA from serving on the governing board.
    In response to the second commenter, HUD may issue additional 
guidance regarding the conflict of interest provisions (or other 
provisions of this final rule) as necessary. Such guidance may be 
issued in a handbook, Federal Register notice, or other appropriate 
means.
    Comment: Resident participation should be limited to Federal 
programs. Several commenters noted that PHAs administer non-Federal 
housing programs. These commenters recommended that the final rule 
limit the participation of the resident board members to those 
decisions regarding Federal assistance.
    HUD Response. This final rule clarifies that a resident board 
member must be allowed to take part in decisions related to the 
administration, operation, and management of Federal public housing 
programs and Section 8 tenant-based rental assistance programs. This 
rule does not extend to matters that: (1) Exclusively relate to other 
types of housing assistance (such as State financed housing 
assistance); or (2) do not involve housing assistance (as may occur 
where the city or county governing body also serves as the PHA board). 
However, a PHA may choose to expand the scope of resident member 
involvement to matters not covered by this rule.

J. Comments Regarding Sec. 964.435--Initial Implementation of Resident 
Board Member Requirement

    Proposed Sec. 964.435 provides that if the PHA board consists of 
appointed board members, the first seat on the board that becomes open 
on or after October 1, 1999, would have to be filled by an eligible 
resident. If the board consists of elected board members, the chief 
executive officer of the unit of general local government whose 
jurisdiction coincides most directly with the jurisdiction of the PHA 
would have to create at least one additional seat on the board, by 
December 31, 1999, and would have to fill that seat with an eligible 
resident. In the case of multi-jurisdictional PHAs, the chief executive 
officers of each unit of general local government that comprises the 
jurisdiction of the PHA would be jointly responsible for creating and 
filling any additional seats.
    HUD received a number of public comments on the initial 
implementation procedures described in proposed Sec. 964.435. Several 
of these commenters raised the Federalism concerns summarized in 
section III.C of this preamble. As noted, HUD has responded to these 
concerns by not including Sec. 964.435 in the final rule. In developing 
the regulations implementing section 2(b), HUD wished to grant PHAs and 
localities flexibility in complying with the resident board member 
requirement. Rather than specifying regulatory procedures for the 
appointment of residents to a PHA board, HUD has decided to leave these 
procedures to each locality. HUD is mindful of the implementation 
difficulties presented by the statutory resident board member 
requirement, and encourages the development of local solutions to these 
problems.
    Several commenters raised questions or issues about the specific 
procedures described in proposed Sec. 964.435. As a result of the 
decision not to include Sec. 964.435 in the final rule, these public 
comments are no longer applicable to this final rule and are not 
discussed in the summary below.
    Comment: May a PHA choose to elect a resident board member in a 
jurisdiction where PHA board members

[[Page 56878]]

are typically appointed? One commenter posed this question.
    HUD Response. The statutory language of section 2(b) is clear--
residents directly assisted by the a PHA may elect a resident board 
member, if provided for in the PHA Plan. A PHA could, therefore, choose 
to elect a resident board member in a jurisdiction where PHA board 
members are usually appointed. The winner of the election would then be 
appointed and serve as the statutorily required board member under 
section 2(b). However, the choice to hold such an election would need 
to be provided for in the PHA Plan.
    Comment: HUD should postpone implementation date until July 1, 
2000. Several commenters wrote that the implementation dates provided 
in the proposed rule are unrealistic. The commenters noted that many 
jurisdiction will have to revise their local laws in order to permit 
the appointment of a resident board member. The commenters suggested 
that HUD delay the implementation dates to permit localities to conform 
their laws governing the selection and appointment of board members to 
the requirements of section 2(b). Several commenters proposed an 
implementation date of July 1, 2000, which reflects the probable 
effective date of the necessary legislation.
    HUD Response. While HUD has decided not to include Sec. 964.435 in 
the final rule, section 503 of the Public Housing Reform Act is clear 
that the amendments made by the statute, including the resident board 
member requirement, will take effect beginning on October 1, 1999. HUD 
believes that implementation of section 2(b) should occur as soon as 
possible after this date if a PHA is not already in compliance. 
Congress provided a one year period from enactment to implementation to 
provide PHAs and localities with adequate notice of the resident board 
member requirements.
    Comment: Implementation should be ``phased-in''. Many commenters 
suggested that HUD ``phase-in'' implementation of the board membership 
requirement. These commenters wrote that the final rule should allow 
PHAs to implement the new requirement at some point during a specified 
period (the next 5 board vacancies, 2 years, etc.) These commenters 
feared that the proposed implementation schedule might force the 
removal of the most knowledgeable PHA board member, in order to make 
room for a resident.
    HUD Response. HUD has not adopted the change suggested by these 
commenters. As noted in the response to the previous comment, the 
resident board member requirement becomes effective beginning October 
1, 1999. HUD believes that implementation of section 2(b) should occur 
as soon as possible after this date. All covered PHAs must take the 
steps necessary to comply with this requirement if they have not done 
so already. It has been one year since section 2(b) became law, 
providing States and PHAs time to address the concerns this provision 
raises and to determine how best to implement this statutory 
requirement.
    Comment: Implementation date should not be postponed. One commenter 
advocated that HUD adopt the proposed implementation schedule without 
change. The commenter wrote that implementation should not be delayed.
    HUD Response. HUD agrees with this commenter that implementation of 
the resident board member requirement should occur as soon as possible 
after October 1, 1999. All covered PHAs must take the steps necessary 
to comply with this requirement if they have not done so already. As 
noted above, States and PHAs have had time to address the concerns 
raised by section 2(b) and to determine how best to implement this 
statutory requirement.

K. Comments Regarding Sec. 964.440--Filling an Open Board Member Seat

    Proposed Sec. 964.440 describes the procedures governing the 
filling of an open board seat by a resident. HUD received a number of 
public comments on proposed Sec. 964.440. Several of these commenters 
raised the Federalism concerns summarized in Section III.C of this 
preamble, above. As noted, HUD has responded to these concerns by not 
including Sec. 964.440 in the final rule. In developing the regulations 
implementing section 2(b), HUD wished to grant PHAs and localities with 
flexibility in complying with the resident board member requirement. 
Rather than specifying regulatory procedures for the appointment of 
residents to a PHA board, HUD has decided to leave these procedures to 
each locality. HUD is mindful of the implementation difficulties 
presented by the statutory resident board member requirement, and 
encourages the development of local solutions to these problems.
    Several commenters raised questions or issues about the specific 
procedures described in proposed Sec. 964.440. As a result of the 
decision not to include Sec. 964.440 in the final rule, these public 
comments are no longer applicable to this final rule and are not 
discussed in this summary.

IV. Findings and Certifications

Environmental Impact

    This final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Therefore, under HUD's regulations at 24 CFR 
50.19(c)(1), this rule is categorically excluded from environmental 
review under the National Environmental Policy Act of 1969 (42 U.S.C. 
4321).

Regulatory Flexibility Act

    The Secretary has reviewed this final rule before publication and 
by approving it certifies, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), that this final rule will not have a 
significant economic impact on a substantial number of small entities. 
The final rule implements section 505 of the Public Housing Reform Act 
(42 U.S.C. 1437), which requires with certain exceptions, that the 
board of directors or similar governing body of a PHA contain not less 
than one member who is directly assisted by the PHA. Section 505 and 
this final rule provide flexibility for smaller PHAs through an 
exception for PHAs that have less than 300 public housing units. 
Consequently, HUD does not believe that this final rule will have a 
significant economic impact on a substantial number of small entities.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) requires Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and on 
the private sector. This final rule does not impose, within the meaning 
of the UMRA, any Federal mandates on any State, local, or tribal 
governments or on the private sector.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612 (captioned ``Federalism''), has determined 
that the policies contained in this final rule will have federalism 
implications. Specifically, the requirement that the membership of the 
board of directors or similar governing body of a PHA must contain not 
less than one member who is directly assisted by the PHA will have 
direct effects on any State or local laws that govern the organization 
of PHAs.

[[Page 56879]]

HUD provided copies of the June 23, 1999 proposed rule to each of the 
50 State Attorney Generals and specifically invited their comments on 
the proposed regulatory requirements. HUD has also prepared and 
submitted to the Office of Management and Budget a Federalism 
Assessment that addresses the Federalism implications raised by this 
rulemaking.

Regulatory Planning and Review

    The Office of Management and Budget has reviewed this rule under 
Executive Order 12866 (captioned ``Regulatory Planning and Review'') 
and 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 during regular business hours 
(7:30 a.m. to 5:30 p.m.) at the Office of the General Counsel, Rules 
Docket Clerk, Room 10276, U.S. Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410-0500.

List of Subjects in 24 CFR Part 964

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

    For the reasons discussed in the preamble, HUD amends 24 CFR part 
964 as follows:

PART 964--TENANT PARTICIPATION AND TENANT OPPORTUNITIES IN PUBLIC 
HOUSING

    1. The authority citation for 24 CFR part 964 is revised to read as 
follows:

    Authority: 42 U.S.C. 1437, 1437d, 1437g, 1437l, 1437r, 1437t, 
and 3535(d).

    2. Amend Sec. 964.3 as follows:
    a. Revise paragraph (a);
    b. Redesignate paragraph (e) as paragraph (f); and
    c. Add new paragraph (e).
    The addition and revision to Sec. 964.3 read as follows:


Sec. 964.3  Applicability and scope.

    (a) The policies and procedures contained in this part apply to any 
PHA that has a Public Housing Annual Contributions Contract (ACC) with 
HUD. This part, except for subpart E, does not apply to PHAs with 
housing assistance payments contracts with HUD under section 8 of the 
U.S. Housing Act of 1937.
* * * * *
    (e) Subpart E of this part implements section 2(b) of the United 
States Housing Act of 1937 (42 U.S.C. 1437), which provides for 
resident membership on the board of directors or similar governing body 
of a PHA. Subpart E applies to any public housing agency that has a 
public housing annual contributions contract with HUD or administers 
tenant-based rental under section 8 of the United States Housing Act of 
1937 (42 U.S.C. 1437f).
* * * * *


Sec. 964.110  [Removed]

    2. Remove Sec. 964.110.
    3. Add subpart E to read as follows:

Subpart E--Resident Board Members

Sec.
964.400  Purpose.
964.405  Applicability.
964.410  Additional definitions.
964.415  Resident board members.
964.420  Resident board member may be elected.
964.425  Small public housing agencies.
964.430  Nondiscrimination.

Subpart E--Resident Board Members


Sec. 964.400  Purpose.

    The purpose of this subpart is to implement section 2(b) of the 
United States Housing Act of 1937 (42 U.S.C. 1437).


Sec. 964.405  Applicability.

    (a) General. Except as described in paragraph (b) of this section, 
this subpart applies to any public housing agency that has a public 
housing annual contributions contract with HUD or administers tenant-
based rental assistance under section 8 of the United States Housing 
Act of 1937 (42 U.S.C. 1437f).
    (b) Exceptions. The requirements of this subpart do not apply to a 
public housing agency that is:
    (1) Located in a State that requires the members of a governing 
board to be salaried and to serve on a full-time basis; or
    (2) Not governed by a governing board.


Sec. 964.410  Additional definitions.

    The following additional definitions apply to this subpart only:
    Directly assisted. Directly assisted means a public housing 
resident or a recipient of housing assistance in the tenant-based 
section 8 program. Direct assistance does not include any State 
financed housing assistance or Section 8 project-based assistance.
    Eligible resident. An eligible resident is a person:
    (1) Who is directly assisted by a public housing agency;
    (2) Whose name appears on the lease; and
    (3) Is eighteen years of age or older.
    Governing board. Governing board means the board of directors or 
similar governing body of a public housing agency.
    Resident board member. A resident board member is a member of the 
governing board who is directly assisted by that public housing agency.


Sec. 964.415  Resident board members.

    (a) General. Except as provided in Secs. 964.405(b) and 964.425, 
the membership of the governing board of each public housing agency 
must contain not less than one eligible resident board member.
    (b) Resident board member no longer directly assisted. (1) A 
resident board member who ceases to be directly assisted by the public 
housing agency is no longer an ``eligible resident'' as defined in 
Sec. 964.410.
    (2) Such a board member may be removed from the PHA board for that 
cause, where such action is permitted under State or local law.
    (3) Alternatively, the board member may be allowed to complete his/
her current term as a member of the governing board. However, the board 
member may not be re-appointed (or re-elected) to the governing board 
for purposes of serving as the statutorily required resident board 
member.
    (c) Minimum qualifications for board membership. Any generally 
applicable qualifications for board membership also apply to residents, 
unless the application of the requirements would result in the 
governing board not containing at least one eligible resident as a 
member. Further, PHAs and localities may not establish eligibility 
requirements for board membership that are solely applicable to 
residents.


Sec. 964.420  Resident board member may be elected.

    (a) General. Residents directly assisted by a public housing agency 
may elect a resident board member if provided for in the public housing 
agency plan, adopted in accordance with 24 CFR part 903.
    (b) Notice to residents. The public housing agency must provide 
residents with at least 30 days advance notice for nominations and 
elections. The notice should include a description of the election 
procedures, eligibility requirements, and dates of nominations and 
elections. Any election procedures devised by the public housing agency 
must facilitate fair elections.


Sec. 964.425  Small public housing agencies.

    (a) General. The requirements of this subpart do not apply to any 
public housing agency that:

[[Page 56880]]

    (1) Has less than 300 public housing units (or has no public 
housing units):
    (2) Has provided reasonable notice to the resident advisory board 
of the opportunity for residents to serve on the governing board;
    (3) Has not been notified of the intention of any resident to 
participate on the governing board within a reasonable time (which 
shall not be less than 30 days) of the resident advisory board 
receiving the notice described in paragraph (a)(3) of this section; and
    (4) Repeats the requirements of paragraphs (a)(2) and (a)(3) of 
this section at least once every year.
    (b) Public housing agencies that only administer Section 8 
assistance. A public housing agency that has no public housing units, 
but administers Section 8 tenant-based assistance, is eligible for the 
exception described in paragraph (a) of this section, regardless of the 
number of Section 8 vouchers it administers.
    (c) Failure to meet requirements for exception. A public housing 
agency that is otherwise eligible for the exception described in 
paragraphs (a) and (b) of this section, but does not meet the three 
conditions described in paragraphs (a)(2) through (a)(4) of this 
section, must comply with the requirements of this subpart.


Sec. 964.430  Nondiscrimination.

    (a) Membership status.--(1) General. A resident board member is a 
full member of the governing board.
    (2) Resident participation must include matters regarding Federal 
public housing and Section 8 tenant-based assistance. A resident board 
member must be allowed to take part in decisions related to the 
administration, operation, and management of Federal public housing 
programs and Section 8 tenant-based rental assistance programs. This 
rule does not extend to matters that:
    (i) Exclusively relate to other types of housing assistance (such 
as State financed housing assistance); or
    (ii) Do not involve housing assistance (as may occur where the city 
or county governing body also serves as the PHA board).
    (3) Public housing agency may expand scope of resident 
participation. A public housing agency may choose to expand the scope 
of resident member involvement to matters not required under paragraph 
(a)(2) of this section.
    (b) Residence status. A governing board may not prohibit any person 
from serving on the governing board because that person is a resident 
of a public housing project or is assisted under section 8 of the 
United States Housing Act of 1937 (42 U.S.C. 1437f).
    (c) Conflict of interest. A governing board may not exclude any 
resident board member from participating in any matter before the 
governing board on the grounds that the resident board member's lease 
with the public housing agency, or the resident board member's status 
as a public housing resident or recipient of Section 8 tenant-based 
assistance, either results or may result in a conflict of interest, 
unless the matter is clearly applicable to the resident board member 
only in a personal capacity and applies uniquely to that member and not 
generally to residents or to a subcategory of residents.

    Dated: October 14, 1999.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-27301 Filed 10-20-99; 8:45 am]
BILLING CODE 4210-33-P