[Federal Register Volume 64, Number 203 (Thursday, October 21, 1999)]
[Rules and Regulations]
[Pages 56894-56915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27519]



[[Page 56893]]

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Part VI





Department of Housing and Urban Development





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24 CFR Parts 888 and 982



Section 8 Tenant-Based Assistance; Statutory Merger of Section 8 
Certificate and Voucher Programs; Housing Choice Voucher Program; Final 
Rule

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

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 888 and 982

[Docket No. FR-4428-F-04]
RIN 2577-AB91


Section 8 Tenant-Based Assistance; Statutory Merger of Section 8 
Certificate and Voucher Programs; Housing Choice Voucher Program

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: This final rule adopts as final certain provisions of the 
interim rule published on May 14, 1999, to implement the statutory 
merger of the Section 8 tenant-based certificate and voucher programs 
into the new Housing Choice Voucher Program, and makes amendments to 
other provisions of this interim rule. This final rule takes into 
consideration the public comments received on the interim rule, and 
most of the amendments made at this final rule stage are in response to 
public comment.

EFFECTIVE DATE: November 22, 1999.

FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Office of Public and 
Indian Housing, Department of Housing and Urban Development, Room 4210, 
451 Seventh Street, SW, Washington, DC 20410; telephone (202) 708-0477. 
(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:

I. Background

    On May 14, 1999 (64 FR 26632), HUD published for public comment an 
interim rule amending the regulations for the Section 8 tenant-based 
program. The interim rule implemented most of the Section 8 tenant-
based program provisions contained in the Quality Housing and Work 
Responsibility Act of 1998 (Title V of the FY 1999 HUD Appropriations 
Act; Public Law 105-276, approved October 21, 1998; 112 Stat. 2461) 
(the ``1998 Act''). Of particular significance, the May 14, 1999 
interim rule implemented section 545 of the 1998 Act. Section 545 
provides for the complete merger of the Section 8 tenant-based 
certificate and voucher programs.
    HUD had previously promulgated regulations (known as the 
``conforming rule'') that combined and conformed rules for Section 8 
tenant-based assistance to the extent permitted by prior law. The new 
tenant-based program has features of the previously authorized 
certificate and voucher programs, plus new features, as described in 
the preamble to the interim rule.
    HUD provided for a 90-day delayed effective date for the interim 
rule (in contrast to the customary 30-day delayed effective date for 
most HUD rules issued for effect), in order to afford public housing 
agencies (PHAs) additional time to prepare for the implementation of 
the interim rule. On August 11, 1999, HUD published a notice changing 
the effective date of the interim rule to October 1, 1999. (See 64 FR 
43613.)
    This rule does not implement the 1998 Act revisions to the project-
based certificate program, which is the subject of 24 CFR part 983. 
Until HUD issues revisions to part 983, PHAs may continue to provide 
project-based assistance in accordance with the published part 983.

II. Public Forums

    In addition to the comments submitted in response to publication of 
the interim rule, HUD convened three public forums on the May 14, 1999 
interim rule. Section 559 of the 1998 Act requires that before HUD 
publishes its final rule on the merger of the Section 8 certificate and 
voucher programs, HUD is to seek recommendations from organizations 
representing: (1) State or local PHAs; (2) owners and managers of 
tenant-based housing assistance under section 8 of the U.S. Housing Act 
of 1937; and (3) legal services organizations. Section 559 also 
requires HUD to convene not less than two public forums at which the 
persons or organizations making recommendations may express their views 
concerning the proposed disposition of their recommendations.
    The three public forums convened by HUD on this rule were held in 
Omaha, Nebraska on May 19, 1999, in Syracuse, New York on June 28, 
1999, and in Washington, DC, on July 28, 1999. At each of these forums, 
forum participants made helpful recommendations and suggestions, 
discussed issues and exchanged ideas on the merger of the section 8 
certificate and voucher programs, especially the requirements 
established in the May 14, 1999 interim rule. Consistent with the 
statutory requirements, HUD advised the forum participants of its 
proposed disposition of the participants recommendations when HUD had 
formulated a proposed disposition of a specific view or recommendation 
offered. For certain issues, HUD was unable to offer the forum 
participants a proposed disposition, because the issues required 
further deliberation by HUD, but HUD discussed with the participants 
the considerations involved in HUD's decisionmaking process.

III. Significant Changes Between the May 14, 1999 Interim Rule and 
This Final Rule

    This section highlights the significant changes made to the May 14, 
1999 interim rule at this final rule stage. This final rule adopts 
without change the amendments made to 24 CFR parts 248, 791, and 792 in 
the May 14, 1999 interim rule. This rule makes a conforming amendment 
to 24 CFR part 888 and also makes further amendments to several 
sections of part 982. The major changes made by this final rule to 
parts 888 and 982 are summarized below. Other changes are also noted in 
the discussion of the public comments.
     Amendments to 24 CFR part 888. The final rule amends part 
888, which describes the regulations governing fair market rents and 
contract annual adjustment factors for the Section 8 housing assistance 
payment program. Specifically, the final rule revises the part 888 
requirements regarding fair market rents to increase the FMR for a 
manufactured home space rental from 30 percent to 40 percent of the FMR 
for a two-bedroom unit to reflect the new procedures applicable to 
manufactured home space rental under the Section 8 Housing Choice 
Voucher program.
     Definitions. The final rule revises Sec. 982.4 
(Definitions) to provide three new definitions applicable to the 
Section 8 Housing Choice Voucher program--``Family rent to owner,'' 
``Utility reimbursement,'' and ``Welfare-to-work (WTW) families.'' 
Additionally, the final rule removes the definitions of ``extremely low 
income family'' and ``utility reimbursement'' from part 982 and 
replaces them with a cross-reference to part 5. The definitions of 
these terms are applicable to several HUD programs. Part 5 was 
established by HUD to provide the definitions and other program 
requirements that are generally applicable to HUD programs. 
Accordingly, it is unnecessary to repeat the definitions of these terms 
in part 982.
     Equal opportunity requirements. The rule revises paragraph 
(c) of Sec. 982.53 to provide that the actions to affirmatively further 
fair housing must be in accordance with the requirements of the PHA 
Plan regulation in 24 CFR 903.7(o).
     Administrative plan. The rule revises paragraph (b) of 
Sec. 982.54 to specify that the PHA's administrative plan is a 
supporting document to the

[[Page 56895]]

PHA plan and must be available for public review.
     Income targeting. The final rule amends the income 
targeting provisions at Sec. 982.201(b)(2). Specifically, the final 
rule establishes the limited circumstances in which a PHA may admit a 
percentage of extremely low income families lower than the 75 percent 
required under the income targeting provisions of the 1998 Act.
     Local admission preferences. The final rule amends 
Sec. 982.207 to provide that a PHA must not deny a local preference, 
nor otherwise exclude or penalize a family in admission to the 
programs, solely because the family resides in public housing. Further, 
the final rule clarifies and emphasizes certain requirements for PHA 
adoption of residency preferences. For example, the rule specifies that 
a PHA may only implement residency preferences in accordance with 
applicable non-discrimination and equal opportunity requirements.
    The rule provides that a PHA may establish local admission 
preferences for: (a) Working families; (b) persons with disabilities; 
(c) victims of domestic violence; and (d) single persons who are 
elderly, displaced, homeless, or a person with disabilities.
     PHA approval of assisted tenancy. The final rule amends 
Sec. 982.305(a), which describes the requirements that must be 
satisfied before a PHA may approve the assisted tenancy. Specifically, 
the final rule provides that at the time a family initially receives 
tenant-based assistance for occupancy of a dwelling unit, the PHA must 
ensure that the family share may not exceed 40 percent of the family's 
monthly adjusted income.
     PHA disapproval of owner. This rule adds to 
Sec. 982.306(d) a statement that the restriction against a PHA approval 
of a unit occupied by a family member only applies at the time a family 
initially receives tenant-based assistance for occupancy of a 
particular unit, but does not apply to PHA approval of a new tenancy 
with continued tenant-based assistance in the same unit.
     Lease and tenancy. The final rule makes various revisions 
to Sec. 982.308, which sets forth the lease and tenancy requirements 
under the Section 8 Housing Choice Voucher program. Among other 
changes, the final rule provides that owners may use another form of 
lease (such as a PHA model lease) if the owner does not use a standard 
lease form for rental to unassisted families. The final rule also 
defines what constitutes ``legal capacity'' to enter into a lease. 
Further, the rule specifies the minimum information that must be 
contained in the lease. The final rule also establishes certain 
requirements regarding changes to the lease or rent. For example, the 
final rule specifies that all changes to the lease must be in writing. 
Additionally, the rule specifies that in certain situations, Section 8 
assistance will not be continued unless the PHA has approved a new 
tenancy in accordance with program requirements and has executed a new 
HAP contract with the owner.
     Owner notice of grounds for termination of lease. This 
final rule amends Sec. 982.310 (captioned ``Owner termination of 
tenancy'') to clarify that the owner must give the tenant a written 
notice that specifies the grounds for termination of tenancy during the 
term of the lease. The tenancy does not terminate before the owner has 
given this notice, and the notice must be given before the commencement 
of the eviction action.
     Portability. The final rule amends Sec. 982.355, which 
establishes the portability procedures governing administration by the 
receiving PHA. The final rule provides that when a family has a right 
to lease a unit in the receiving PHA jurisdiction, the receiving PHA 
must provide assistance for the family. Receiving PHA procedures and 
preferences for selection among eligible applicants do not apply, and 
the receiving PHA waiting list is not used. However, the receiving PHA 
may deny or terminate assistance for family action or inaction in 
accordance with Sec. 982.552 (``PHA denial or termination of assistance 
for family'') and Sec. 982.553 (``Crime by family members'').
     PHA unit inspection. The final rule removes 
Sec. 982.405(f) of the interim rule. Paragraph (f) of Sec. 982.405 
required that a PHA adopt procedural guidelines and performance 
standards for conducting required HQS inspections.
     Late payment penalties. The final rule amends the late 
payment provisions located in Sec. 982.451(b)(5)(ii). Specifically, the 
final rule provides that the HAP contract shall provide for penalties 
against the PHA for late housing assistance payments due to the owner 
only if all of the following conditions apply: (a) The penalties are in 
accordance with generally accepted practices and law in the local 
housing market; (b) it is the owner's practice to charge such penalties 
for assisted and unassisted tenants; and (c) the owner also charges 
such penalties against the tenant for late payment of family rent to 
the owner. The interim rule provision regarding late payment penalties 
only referenced the first condition identified above (i.e., generally 
accepted local practice and law).
     Owner breach of contract. The final rule revises 
Sec. 982.453 (captioned ``Owner breach of contract''). Specifically, 
the final rule expands the list of owner actions considered to be a 
breach of the HAP contract to include violent criminal activity.
     Payment standard for pre-merger voucher tenancies. The 
final rule revises Sec. 982.502, which establishes the requirements 
governing conversion to the Section 8 Housing Choice Voucher program. 
The interim rule (and this final rule) provide that if the PHA entered 
into a HAP contract for a voucher tenancy before the merger date, the 
tenancy will continue to be considered and treated as a tenancy under 
the voucher program, and will be subject to the voucher program 
requirements of part 982. The final rule revises Sec. 982.502 to remove 
the provision for a shopping incentive for over-FMR certificate 
tenancies before the effective date of the second regular reexamination 
of family income and composition on or after the merger date. The 
shopping incentive was never applicable to over-FMR certificate 
tenancies and will not be triggered by conversion of these families to 
the voucher program.
     HUD approval of payment standard amount below the basic 
range. The final rule amends Sec. 982.503 (captioned ``Voucher tenancy: 
Payment standard amount and schedule'') to provide that HUD, in its 
sole discretion, may approve a PHA request for approval to establish a 
payment standard amount that is lower than the basic range. In 
determining whether to approve the PHA request, HUD will consider 
appropriate factors, including rent burden of families assisted under 
the program. HUD will not approve a lower payment standard if the 
family share for more than 40 percent of participants in the PHA's 
voucher program exceeds 30 percent of adjusted monthly income.
     How to calculate housing assistance payment. The final 
rule amends Sec. 982.505 (captioned ``Voucher tenancy: How to calculate 
housing assistance payment''). Specifically, the final rule provides 
that during the first 24 months of the HAP contract, the payment 
standard for a family is the higher of: (a) the initial payment 
standard (minus any amount by which the initial rent to owner exceeds 
the current rent to owner); or (b) the payment standard, as determined 
at the most recent regular reexamination of family income and 
composition after the beginning of the HAP contract term. After the 
first twenty four months of the HAP contract term, the payment standard 
is the

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payment standard as determined at the most recent regular reexamination 
of family income and composition after the beginning of the HAP 
contract term.
     PHA denial or termination of assistance for family. The 
final rule revises Sec. 982.552(c)(1)(x) to elaborate on factors that a 
PHA may consider in its decision to deny or terminate assistance 
because of action or failure to act by members of the family.
     FMR for manufactured home space. As explained in more 
detail in the comment section of this preamble, the final rule amends 
Sec. 982.623 (captioned ``Manufactured home space rental: Housing 
assistance payment'') to provide that the FMR for a manufactured home 
space is generally 40 percent of the published FMR. Previously, the 
FMRs for manufactured home spaces were based on a 30 percent figure.

IV. Discussion of Public Comments.

    The public comment period closed on July 13, 1999. During that 
period, HUD received written comments from PHAs; regional/State housing 
agencies; organizations representing PHAs; organizations representing 
women who are victims of domestic violence; legal services 
organizations; advocates for persons with disabilities; low income 
housing advocates; and various other organizations and individuals. At 
the close of the public comment period, HUD had received 97 written 
comments. The summary of public comments that follows presents the 
major issues, recommendations and questions raised by the public on the 
May 14, 1999 interim rule, whether made at the public forums, or 
provided as written comments during the 60-day comment period on the 
rule.
    The summary is organized by regulatory section (e.g., 
Sec. 982.201). The underlined headings that follow each regulatory 
section present the issue and are followed by a brief description of 
the comment. Comments that are not directed to a specific regulatory 
section are described under the heading ``Miscellaneous comments''.
    As previously indicated, the interim rule published on May 14, 1999 
(as modified by the technical corrections published on September 14, 
1999) was effective on October 1, 1999 and PHAs must implement that 
rule beginning October 1, 1999. This final rule includes additional 
changes to the interim rule, which PHAs must implement beginning on the 
effective date of this rule.

Section 982.4 Definitions.

    Comment: Definition of PHA. HUD should revise the definition of PHA 
to include non-profit disability organizations administering the 
Section 8 Mainstream Program for people with disabilities.
    HUD response. The rule contains the United States Housing Act of 
1937 (42 U.S.C. 1437n(d)) (1937 Act) definition of ``PHA.'' In addition 
to the traditional definition of a PHA as a governmental entity or 
public body authorized to administer a 1937 Act program, for 
administration of the tenant-based program only, the rule includes in 
the definition of ``PHA'' additional entities: a consortium of PHAs; a 
non-profit entity administering certificates or vouchers under a 
contract with HUD or a PHA on October 21, 1998; and for any area 
outside the jurisdiction of a PHA with a tenant-based program or where 
HUD determines that the PHA is not administering the tenant-based 
program effectively, a private non-profit or governmental entity or 
public body that would otherwise lack jurisdiction to administer the 
program in such area. A minor correction is made to this provision in 
this final rule.
    Comment: Definition of ``tenant rent''. Tenant rent should be 
defined as ``The amount payable by the tenant as rent to the unit 
owner. In the certificate program, it is the total tenant payment minus 
any utility allowance.''
    Rule needs to clarify whether the method of determining total 
tenant payment (TTP) in the Admissions and Occupancy proposed rule 
(published April 30, 1999) at Sec. 5.613 will apply to the voucher 
program. Section 982.505 incorporates the TTP concept, but 
Sec. 5.601(a)(2)(ii) of the current rule states that the definitions of 
``total rent'' and ``total tenant payment'' do not apply to the voucher 
program. Clarification is needed.
    HUD response. The definition of TTP in part 5 will apply to the 
voucher program resulting from the merger of the certificate and 
voucher programs. However, the definitions of tenant rent and utility 
reimbursement in part 5 will not apply to the voucher program. Instead, 
in this part 982 rule, the term ``family rent to owner'' is used 
instead of ``tenant rent.'' Definitions of ``family rent to owner'' and 
``utility reimbursement'' for the voucher program were added to 
Sec. 982.4. Family rent to owner is the portion of the rent to owner 
paid by the family. Family rent to owner is calculated by subtracting 
the housing assistance payment to the owner from the rent to owner. A 
utility reimbursement in the voucher program is the portion of the 
housing assistance payment which exceeds the rent to owner. A utility 
reimbursement is only paid when the housing assistance payment exceeds 
the rent to owner.
    Comment: Merger date of August 12, 1999. PHAs expressed concern 
about the merger date of August 12, 1999 because (1) the Admissions and 
Occupancy proposed rule, published April 30, 1999 (64 FR 23460), 
covered related topics; (2) HUD needs to revise the voucher contracts 
and forms; and (3) PHAs need to obtain computer software capable of 
implementing the changes required by part 982.
    HUD response. In a Federal Register notice of August 11, 1999 (64 
FR 43613), HUD extended the merger date defined in Sec. 982.4 of the 
interim merger rule to October 1, 1999.

Section 982.53 Equal opportunity requirements.

    Comment: State equal opportunity requirements. The language in 
Sec. 982.53(d) needs to be expanded to include not only State laws but 
also local ordinances. These tools are used increasingly by local 
communities to promote fair housing.
    HUD response. Section 982.53(d) was revised to change the ``state 
law'' references to ``State and local laws''.
    Comment: Affirmatively furthering fair housing requirements. The 
language of the section is too broad, requiring PHAs to take undefined 
actions based on undefined criteria. HUD should require PHAs to 
establish mechanisms to respond to complaints of discrimination in the 
Section 8 program, including informing voucher holders of their rights 
and the remedies available to them. This provision also should require 
conformity with any city or county laws that prohibit discrimination.
    The final rule should provide that the PHA must refrain from 
actions that are discriminatory or segregative, or that perpetuate the 
effects of past discrimination or segregation by the PHA; administer 
the program to remedy past discrimination and segregation in PHA 
programs and local government policies; administer the program to 
promote fair housing rights and choice; eliminate impediments to fair 
housing choice; and remedy the effects of discrimination and 
segregation in the market. HUD needs to clarify what it means by 
``impediments to fair housing choice''.
    HUD response. Many of the changes sought by the commenters are part 
of existing rules. For example, under Sec. 982.301(b), PHAs must 
include information about federal, State and local equal opportunity 
requirements and housing discrimination complaint forms in the briefing 
packet given to

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new families. Section 982.304 specifies that the PHA must give the 
family information on how to fill out and file a housing discrimination 
complaint if the family claims that illegal discrimination has 
prevented the family from finding or leasing a suitable unit. In 
addition, Sec. 982.52 specifies that the voucher program requires 
compliance with all equal opportunity requirements imposed by contract 
or federal law and the PHA must submit a signed certification that it 
will administer the program in conformity with civil rights laws.
    The PHA obligation to affirmatively further fair housing is 
identical to the requirement contained in the PHA plan final rule. It 
is important to note that in implementing program changes covered by 
the 1998 Act, both HUD and the PHA must ensure compliance with 
applicable nondiscrimination requirements and affirmatively further 
fair housing. The PHA obligation to affirmatively further fair housing 
is specifically required by both the part 982 (the housing choice 
voucher program) and part 903 (the PHA plan) rules.

Section 982.54 Administrative plan.

    Comment: Section 8 administrative plan. HUD should eliminate a 
separate Section 8 administrative plan and incorporate the information 
required by this plan in the PHA plan. A separate Section 8 
administrative plan should apply only to those PHAs that are not yet 
operating under an approved PHA plan.
    HUD response. Notice PIH 99-33 (HA) issued on July 30, 1999, 
provided further PHA plan instructions, including a mandatory 
electronic template for submission of the PHA plan. As stated in the 
HUD notice, PHAs will provide statements of policy using short 
responses and by checking boxes in the PHA plan template. To ensure 
that the public has access to detailed information about all of the 
PHA's discretionary policies, the HUD notice calls for the 
administrative plan to be a supporting document to the PHA Plan and 
available for public review. Therefore, the PHA will not be required to 
repeat administrative plan information in the PHA plan.

Section 982.151 Annual Contributions Contract.

    Comment: Funding. There should be no reduction in assistance 
amounts based upon differences between the Fair Market Rent (FMR) and 
payment standards in existing voucher Annual Contribution Contracts 
(ACCs) and merged ACCs. All funding must be transferred.
    HUD response. Conversion to the merged program will not result in 
the loss of PHA funding for the Section 8 program. HUD is publishing a 
separate rule on renewal funding for the Section 8 tenant-based 
assistance program.

Section 982.152 Administrative fee.

    Comment: Administrative fees. The final rule needs more specific 
guidance on when to apply for additional administrative funds, because 
PHAs may be reluctant to apply for such fees.
    HUD response. Guidance concerning PHA administrative fees is 
published annually in the Federal Register and in HUD handbooks and 
notices.
    Comment: Administrative fee bonuses for high performers. This 
section should provide for an additional administrative fee as a bonus 
or incentive to particularly high-performing PHAs, if HUD chooses to 
develop such an incentive.
    HUD response. The statute does not permit HUD to provide bonus 
administrative fees to high performance PHAs.
    Comment: Additional administrative fees for conversion to the 
merged program. HUD should provide additional administrative fees to 
facilitate conversion, and HUD should convert the certificate program 
quickly while ensuring rent neutrality through appropriate voucher 
payment standards.
    HUD response. There are no funds available for this purpose; the 
statute does not permit HUD to provide PHAs with additional 
administrative fees to facilitate the merger.

Section 982.154 ACC reserve account.

    Comment: ACC reserve account. A change in language (from the word 
``establishes'' to ``may'') will open the door to the elimination of 
individual PHA reserve accounts. It is both prudent and essential for 
the efficient operation of the Section 8 program that PHAs have access 
to funds for various unexpected cost increases. HUD should change the 
language back to the word ``establishes''.
    HUD response. The text of Sec. 982.154(a) was changed in the May 
14, 1999 interim rule to more clearly reflect the fact that HUD has 
discretion to determine the amount of the ACC reserve account as 
provided in the ACC for many years. This change in regulatory text does 
not signal a change in HUD authority to determine the amount of the ACC 
reserve account. HUD is publishing a separate rule on renewal funding, 
which will address the ACC reserve account.

Section 982.162 Use of HUD-required contracts and other forms.

    Comment: HUD forms and contracts. HUD needs to revise its required 
contracts in a timely manner and have an adequate supply for PHAs.
    HUD response. The merged program housing assistance payments (HAP) 
contract (form HUD-52641) and tenancy addendum (form HUD-52641-A) are 
posted on the HUD web at www.hudclips.org. Until other contracts and 
forms are issued, PHAs may continue to use the current voucher program 
forms (e.g., rental voucher and HAP contract for leasing manufactured 
home spaces).

Section 982.201 Eligibility and targeting.

    Comment: Targeting requirements effect on welfare reform and 
working poor. Targeting that limits assistance to extremely low income 
families is contrary to welfare reform efforts and will deny assistance 
to the working poor. Targeting rewards welfare recipients by moving 
them up on PHA waiting lists. Conversely, the rule penalizes the 
working poor by moving those individuals further down the list.
    HUD response. The targeting requirements are statutory, but the 
rule permits variations where needed and as authorized by the statute. 
Section 16(d) of the 1937 Act provides that at least 75 percent of 
annual admissions to the Section 8 tenant-based assistance program must 
be families whose incomes do not exceed 30 percent of area median 
income. In the final rule, such families are called ``extremely low 
income families'', a new term defined at Sec. 5.603 of this title.
    The statute permits HUD to exercise some discretion to modify the 
impact of the statutory requirement to target 75 percent of a PHA's 
tenant-based program admissions to extremely low income families. 
Section 16(b)(1) of the 1937 Act permits HUD to establish the extremely 
low income limit higher or lower than 30 percent of area median income 
where HUD determines a higher or lower limit is necessary because of 
unusually high or low incomes.
    HUD has determined that one-person households with incomes below 
their State Supplemental Security Income (SSI) benefit level are of 
unusually low income and that a modification to the income limit for 
extremely low income determination standards was needed. HUD issued 
Notice PDR 99-04 (on July 21, 1999) to make changes in the Section 8 
existing housing extremely low income limit determinations. The 
extremely low income limit amounts have been increased wherever 
necessary

[[Page 56898]]

so that the one-person 30 percent of median income limit is at least as 
high as the State SSI benefit level.
    HUD will not make further adjustments to this year's 30 percent of 
area median income determination to accommodate minimum wage 
households. Such a change would go far beyond other adjustments and 
drastically alter the thirty percent standard.
    In addition, under the authority of section 16(d) of the 1937 Act, 
a provision has been added to the final rule that allows a reduced 
targeting percentage for welfare-to-work voucher admissions, only if 
and to the extent the PHA has demonstrated that compliance with the 
targeting obligations for such welfare-to-work families would interfere 
with the objectives of the welfare-to-work voucher program. HUD expects 
this authority to be needed only in exceptional circumstances.
    Comment: Lower targeting requirements for good cause. The rule must 
specify the standard for good cause requests made by PHAs to establish 
different targeting requirements, and what documentation the PHAs must 
provide to HUD. The rule should provide that a targeting exception will 
be granted only in unusual or extraordinary circumstances.
    HUD should consider fair housing concerns and the consolidated plan 
in approving a different targeting percentage.
    HUD response. HUD has authority under section 16(d) of the 1937 Act 
to approve for good cause PHA establishment and implementation of 
different targeting requirements for the PHA's Section 8 tenant-based 
program, in accordance with the PHA plan. HUD will carefully scrutinize 
all requests for targeting exceptions and will only approve exceptions 
on a case-by-case when fully justified by exceptional circumstances. 
The final rule adds provisions that specify two cases when a PHA may 
adopt a different targeting standard:

--When HUD has approved a lower targeting requirement for a PHA in 
accordance with specific good cause standards specified in the rule, 
which are designed to demonstrate that the PHA is not able to find a 
sufficient number of extremely low income families to fill available 
program openings despite outreach and marketing and that the vouchers 
will substantially address worst case housing needs.
--The targeting disregard for families that receive vouchers funded 
under the HUD welfare-to-work program (or a renewal of that funding) 
explained above.

    The following is a more detailed description of the first type of 
targeting exception. In both cases, the use of a modified targeting 
standard must be consistent with the PHA plan. In addition, any HUD 
approval of a targeting exception must be consistent with the PHA 
obligation to administer the program in a manner that affirmatively 
furthers fair housing.
    The rule provides that a PHA may admit less than seventy five 
percent of extremely low income families during the PHA fiscal year if 
HUD determines there is good cause for, and approves the use of, a 
lower targeting standard by the PHA. HUD may approve a lower targeting 
requirement if HUD determines that:
    (1) The PHA has opened its waiting list for a reasonable time for 
admission of extremely low income families residing in the same 
metropolitan statistical area (MSA) or nonmetropolitan county, both 
within and without the PHA jurisdiction;
    (2) The PHA has provided full public notice of such opening to such 
families, and has conducted outreach and marketing to reach such 
families, including families on waiting lists of other PHAs in the same 
MSA or nonmetropolitan county.
    (3) Admission of the additional very low income families other than 
extremely low income families to the PHA's tenant-based voucher program 
will substantially address worst case housing needs as determined by 
HUD.
    If there are not enough extremely low income families to fill 
available program slots during the PHA fiscal year, even though the PHA 
has opened the waiting list, given public notice, and conducted 
outreach and marketing and the vouchers will address worst case housing 
needs, then HUD may approve the PHA's use of a lower targeting 
standard.
    Comment: Higher targeting goals. The rule should permit PHAs to 
meet their targeting obligations by targeting at least 75 percent of 
newly available vouchers to households with incomes below 20 or 25 
percent of area median income.
    HUD response. The statute requires that at least 75 percent of new 
admissions be families having incomes up to 30 percent of median. At 
its option, a PHA may choose to limit admissions to families with 
incomes lower than 30 percent of area median income. The extremely low 
income limit is the maximum qualifying income. Any family with an 
annual income below the extremely low income limit counts as an 
extremely low income family, and the admission of such a family counts 
toward satisfaction of the PHA's targeting responsibilities.
    Comment: Targeting requirements effect on the Section 8 
homeownership program. By giving preference to welfare recipients, the 
targeting limits negate the impact of HUD's recently issued Section 8 
homeownership proposed rule, published April 30, 1999 (64 FR 23488).
    HUD response. HUD anticipates that most participants in the Section 
8 homeownership program will be current program participants, not 
applicants. Since families continuing to receive assistance under the 
1937 Act are not considered as new admissions, their income levels are 
not examined for compliance with income targeting requirements. 
Therefore, the income targeting requirements may have minimal impact on 
the implementation of the Section 8 homeownership program.
    Comment: Targeting requirements effect on deconcentration goals and 
the number of families assisted. Targeting goals conflict with 
deconcentration goals. The targeting policy may add additional cost to 
the Section 8 tenant-based program, reducing the number of families 
assisted.
    HUD response. The statutory and regulatory targeting requirement is 
designed to assure that available assistance funds are targeted to the 
families that need it most. HUD is making adjustments in the final rule 
to assure reasonable use of the program by eligible families by 
allowing targeting exceptions in accordance with the law, as described 
above. Although assistance is targeted to extremely low income 
families, such families have the right to move anywhere in the PHA 
jurisdiction and may also receive housing assistance outside the PHA 
jurisdiction under portability procedures.
    Comment: Income used to determine ``extremely low income''. 
Adjusted income should be used to calculate targeting limits. Using 
adjusted income in the determination of income targeting requirements 
would be more appropriate, since it provides a more realistic picture 
of those persons in need of housing assistance.
    HUD response. HUD has not made the recommended change. Annual 
income, not adjusted income, is compared to the income limits to 
determine whether the family is extremely low income. Use of annual 
income for this purpose is consistent with both the statute and the 
method used to determine whether the family is very low income, low 
income, or moderate income.

[[Page 56899]]

    Comment: Income targeting implementation. Will PHAs be forced to 
skip very low income families on the waiting list to attain the 
required percentage of extremely low income families? HUD should 
provide directions for waiting list management. Will program slots be 
held open until there are enough extremely low income applicants so 
that the 75 percent admission requirement is satisfied, or should such 
slots be filled by other eligible applicants until there is an 
extremely low income applicant?
    HUD response. HUD expects to provide further guidance on techniques 
for implementation of the income targeting requirements, and other 
questions concerning requirements under this rule. Meeting the income 
targeting requirements will require skipping higher income families on 
the waiting list as necessary to satisfy the PHA's annual targeting 
requirement.
    Comment: Effect of portability on targeting requirements. If a 
family moves under portability, is the admission counted against the 
initial PHA or the receiving PHA? If a family exercises its right of 
portability, and the recipient PHA decides to absorb the family, does 
the admission count toward the recipient PHA's targeting goal, or does 
the admission always count toward the initial PHA's targeting goal? If 
the receiving PHA bills but does not absorb, is the family classified 
as a new admission? May a proposed recipient PHA refuse to accept a 
porting family if acceptance will cause the recipient PHA to fall below 
its targeting requirement? If a recipient PHA bills the initial PHA for 
a participating family and the recipient PHA later decides to absorb 
the family, does the absorption count as an admission for the purposes 
of income targeting?
    HUD response. Admission of an applicant family that moves under 
portability procedures is charged against the initial PHA's targeting 
obligation--even if the family is initially assisted at the receiving 
PHA--if the receiving PHA bills the initial PHA. The admission is 
included in the initial PHA base of annual admissions (to which the 75 
percent minimum targeting percentage is applied). If a portable family 
is an extremely low income family at the time of admission, the 
admission also counts toward satisfaction of the initial PHA's minimum 
targeting percentage.
    As in the past, ``admission'' is the first execution of a HAP 
contract by a PHA on behalf of a family. For purposes of targeting, the 
initial PHA counts the admission of the portable family as an extremely 
low income admission if the family's annual income is at or below 30 
percent of median income at the location of the housing where the 
family is initially assisted at admission to the program (in the 
jurisdiction of the receiving PHA--if the family is initially assisted 
(admitted in the receiving PHA jurisdiction).) If a portable family is 
not an extremely low income family when admitted to the program (in the 
initial PHA or receiving PHA jurisdiction), the admission does not 
count towards meeting the initial PHA's income targeting requirements. 
However, if the receiving PHA decides to absorb the portable family (at 
admission), the receiving PHA counts the family towards the receiving 
PHA's targeting requirements.
    Comment: Targeting requirements for PHAs with identical 
jurisdictions. The rule provides that two or more PHAs with identical 
jurisdiction must jointly meet the targeting goals. No PHA should be 
responsible for the action of another PHA. This requirement unfairly 
penalizes a high-performing PHA that has the identical jurisdiction as 
a troubled PHA.
    HUD needs to define the meaning of ``identical jurisdiction.'' Does 
``overlapping'' mean the same as ``identical''?
    HUD response. The final rule has been revised to clarify--in 
accordance with the law, and as intended by the interim rule--that the 
requirement to jointly meet income targeting requirements only applies 
when the geographic jurisdictions of two or more PHAs are 
``identical''--not merely overlapping, as is frequently the case for 
county, regional and state PHAs. Thus, the obligation for PHAs to 
coordinate their income targeting only applies if every part of the 
jurisdiction of each PHA is also the jurisdiction of the other PHA. 
Section 982.201(b)(2)(v) was also revised in the final rule to require 
that coordination of income targeting only applies if the PHAs with 
identical jurisdictions agree to being treated as a single jurisdiction 
for purposes of income targeting.
    Comment: Income limit for issuance of a voucher. The reference to 
``family unit size'' in Sec. 982.201(b)(4) of the interim rule should 
be just ``family size.''
    HUD response. HUD made the recommended change in the technical 
corrections to the interim rule that were published in the Federal 
Register on September 14, 1999 (64 FR 49656).
    Comment: Income limit for admission. Section 982.201(b)(4) of the 
interim rule seems to permanently limit the use of a voucher to only 
those areas for which the family was eligible for admission. In 
reality, once admitted, the family is able to move to any area. The 
last sentence of paragraph (b)(4) should be revised to read: ``At 
admission, the family may only use the voucher to rent a unit in an 
area where the family is income eligible.''
    HUD response. HUD has adopted this recommended change.

Section 982.202 How applicants are selected: General requirements.

    Comment: Local admission preferences: income skipping. The 
prohibition against local preferences for admission of higher income 
families over families of lower income (Sec. 982.202(b)(3)(ii)) is not 
required by statute and should be deleted. It is inconsistent with the 
intent of the targeting requirements of the 1998 Act (section 513). 
Unlike the express prohibition on income-skipping in the project-based 
component of the Section 8 program, the parallel provision concerning 
income targeting in the tenant-based Section 8 program says absolutely 
nothing about income-skipping. Silence in the statute should not be 
interpreted as a prohibition of income-skipping.
    HUD response. HUD has decided to continue this requirement. 
Continuation of this requirement will help to ensure that extremely low 
income families are admitted to the tenant-based program.

Section 982.207 Waiting list: Local preferences in admission to 
program.

    Comment: Local admission preferences: victims of domestic violence. 
PHAs should consider preferences for individuals who are victims of 
domestic violence, as provided in HUD's admission and occupancy 
proposed rule (published in the Federal Register on April 30, 1999, 64 
FR 23460).
    HUD response. The 1998 Act states that it is the ``sense of 
Congress'' that each PHA involved in selection of families assisted in 
the public housing program, or in the Section 8 tenant-based assistance 
program, ``should * * * consider'' preferences for individuals who are 
victims of domestic violence (section 514(e) of the 1998 Act). HUD has 
amended this rule to provide that the PHA ``should consider'' whether 
to adopt a local preference for admission of families that include 
victims of domestic violence (Sec. 982.207). After such consideration, 
the PHA may or may not choose to adopt such a preference.
    Comment: Local admission preferences: preference for elderly, 
disabled and displaced over other singles. May a PHA continue to 
provide

[[Page 56900]]

an admission preference to elderly, disabled and displaced single 
persons over other single persons?
    HUD response. Yes. Even though the 1998 Act repealed the 
requirement that PHAs must provide an admission preference to single 
persons who are elderly, disabled, or displaced persons before other 
single persons, the PHA may opt to continue this practice as part of 
its local admission preference policies.
    Comment: Local admission preferences: equal opportunity 
requirements. The final rule should provide that HUD will approve an 
admission preference only if it is consistent with civil rights laws 
and affirmatively furthers fair housing.
    HUD response. By law, the PHA may adopt local preferences in 
accordance with local housing needs and priorities as determined by the 
PHA. HUD does not approve the PHA's local admission preferences. HUD 
only conducts a limited review to determine whether the PHA's selection 
procedures ``are consistent with information and data available to 
[HUD],'' and ``are not prohibited by or inconsistent with applicable 
law'' (section 511 of the 1998 Act, adding section 5A(i)(1) of the 1937 
Act).
    The PHA's local admission preferences must be consistent with the 
PHA plan and the consolidated plans for local governments in the PHA 
jurisdiction. Of course, PHAs must administer tenant-based assistance 
in conformity with civil rights laws and must affirmatively further 
fair housing. Equal opportunity requirements are specified in 
Sec. 982.53.
    Comment: Local admission preferences: local housing needs. In light 
of the demand and need for affordable housing, HUD should require that 
all admission preferences used by the PHA should be based on local 
housing needs.
    HUD response. Sections 982.207(a)(1) and (2) reflect the statutory 
requirements for local preferences in the merged program. The 
regulations require that the PHA system of local preferences be based 
on local housing needs and priorities, as determined by the PHA. The 
PHA must use generally accepted data sources in determining local 
housing needs and priorities, and must consider public comment on the 
PHA plan and the jurisdiction's consolidated plan.
    Local admission preferences: waiting list. The rule should 
explicitly require PHAs to consider the needs of persons on their 
waiting list in determining local preferences.
    The rule should provide that the waiting list is a ``generally 
accepted data source'' to be used by the PHA in determining housing 
needs and priorities.
    HUD response. PHA waiting lists may be an excellent source of local 
housing needs information in some communities, and an unreliable data 
source in other communities. PHA practices in purging or updating their 
waiting lists vary widely. Some PHAs periodically close the waiting 
list, while other PHAs have never closed the waiting list since the 
program began in 1975. For these reasons, HUD is not mandating use of 
the waiting list as a basis for local admission preferences.
    Comment: Local admission preferences: preference for workers. The 
rule currently provides that a PHA which grants an admission preference 
to a family who is employed must grant the same preference to people 
with disabilities and to the elderly. This requirement should be 
included in the final rule.
    HUD response. The rule is revised to clarify that the PHA may 
establish a preference for admission of working families 
(Sec. 982.207(b)). An applicant family must be given the benefit of the 
working family preference if the head and spouse, or sole member is 
either age 62 or older or a person with disabilities.
    Comment: Local admission preferences: public housing tenants. HUD 
should retain the prohibition against Section 8 preferences that 
discriminate against public housing tenants.
    HUD response. The 1998 Act repealed the statutory requirement (the 
so called ``Bartlett amendment'') that a PHA must permit public housing 
tenants to retain their pre-public housing preference status on the 
PHA's Section 8 waiting list. This prior requirement has therefore been 
removed from the program rule.
    However, the Congress has not repealed section 8(s) of the 1937 Act 
(42 U.S.C. 1437f(s)), which provides that a PHA must not deny a local 
preference, nor otherwise exclude or penalize a family in admission to 
the voucher program, solely because the family resides in a public 
housing project. HUD has, therefore, added a new provision that 
specifies this continuing statutory requirement (Sec. 982.207(a)(4)). 
In addition, the regulation clarifies that a PHA may establish a 
preference for public housing residents who are victims of a crime of 
violence.

Section 982.303 Term of voucher.

    Comment: Voucher term extensions. HUD should grant PHAs discretion 
to extend voucher time limits if a discrimination complaint has been 
filed with a proper fair housing enforcement agency, in connection with 
reasonable accommodation requests, and to increase housing choice 
opportunities.
    HUD response. The final rule is revised to allow PHA discretion to 
extend the cumulative voucher term beyond the prior 120 day limit, 
whether for reasonable accommodation or other good cause determined by 
the PHA and stated in the administrative plan (Sec. 982.303(b)). This 
change will permit additional local administrative flexibility 
consistent with the Congressional policy to grant PHAs maximum local 
discretion in administration of their programs.

Section 982.305 PHA approval of assisted tenancy.

    Comment: 15-day initial inspection requirement for PHAs with 1250 
units or less. The 15-day Housing Quality Standards (HQS) inspection 
requirement is not reasonable for rural areas, where rental units are 
scattered and often located miles away from a PHA office. The final 
rule should provide rural PHAs with the same flexibility the interim 
rule currently provides large PHAs in complying with the HQS inspection 
requirements.
    HUD should permit all PHAs (regardless of size) to comply with HQS 
inspection requirements within a ``reasonable time''.
    All PHAs should be required to comply with the 15-day inspection 
requirement. Failure to conduct a timely HQS inspection imposes a 
serious hardship on the family because voucher assistance cannot 
commence until completion of the inspection. Therefore, a family must 
usually pay a market rent for the unit pending completion of the HQS 
inspection.
    PHAs faced with uncooperative tenants or owners should be exempted 
from the 15-day inspection requirement.
    HUD response. The 15-day initial HQS inspection standard is 
statutory and applies to all PHAs with 1250 or fewer budgeted tenant-
based Section 8 units. The law provides a different standard for PHAs 
with more than 1250 budgeted units. HUD does not have discretion to 
provide rural (or non-rural) PHAs with relief from the 15-day deadline 
unless a PHA has more than 1250 units.
    Although HUD cannot exempt PHAs faced with uncooperative owners or 
tenants from the initial HQS inspection deadline, the regulation 
provides that the 15-day clock begins after both the family and owner 
request approval of the tenancy, and the 15-day clock is

[[Page 56901]]

suspended during any time when the unit is not available for 
inspection. ``Not available for inspection'' encompasses a multitude of 
reasons why the unit is unavailable, including lack of cooperation by 
tenants or owners.
    HUD expects to enforce the 15-day inspection deadline by including 
this element in the PHA's SEMAP rating, after appropriate rulemaking.
    Comment: 15-day initial inspection requirement for PHAs with more 
than 1250 units. HUD lacks authority to establish a presumptive 
standard of 15 days for inspections by large PHAs. The law only 
requires a maximum 15-day inspection period for PHAs with 1250 or fewer 
assisted units. For PHAs that provide assistance to more than 1250 
families, the statute requires that pre-assistance inspections be 
conducted ``before the expiration of a reasonable period.'' The interim 
rule text requires PHAs with more than 1250 units to conduct the 
initial HQS inspection within a reasonable time after the family 
submits a request for approval of the tenancy and, to the extent 
practicable, within 15 days after the family and the owner submit a 
request for approval of the tenancy.
    The rule should provide that the period for PHA inspection of the 
unit is tolled during any period when the unit is not available for 
inspection.
    HUD response. The interim rule provides that PHAs with more than 
1250 units must conduct the initial HQS inspection within a reasonable 
time after the family submits a request for approval of the tenancy. To 
the extent practicable, the inspection must be conducted within 15 days 
after the family and the owner submit a request for approval of the 
tenancy to the PHA. These provisions are an appropriate exercise of 
HUD's rulemaking authority in implementing the statutory inspection 
requirements for large PHAs. If it is practicable for a PHA to conduct 
the inspection within 15 days, then 15 days is a reasonable inspection 
deadline, and is consistent with the law.
    The interim rule already provides for suspending the clock for all 
PHAs when the unit is not available for inspection.
    Comment: Applicability of rent burden cap to lease renewals. The 
rule should require PHA approval of renewal tenancies. The rule should 
also provide that the PHA may not approve a renewal tenancy unless the 
family share (rent--including tenant-paid utilities--minus the Section 
8 subsidy payment) does not exceed 40 percent of the family's adjusted 
income.
    HUD response. The 40 percent rent burden threshold does not apply 
to lease renewals. The 40 percent rent burden threshold only applies 
when a unit is first leased by a family (on or after October 1, 1999--
the effective date of the merger rule) with tenant-based assistance 
under the voucher program. Thus the maximum rent burden requirement 
applies to: (1) the initial rent for the unit rented with voucher 
assistance by a family when admitted to the voucher program on or after 
October 1, 1999 (the merger date); and (2) the initial rent for any 
unit a participant first rents with voucher assistance on or after 
October 1, 1999--i.e., to all moves by program participants on or after 
October 1, 1999.

Section 932.306 PHA disapproval of owner.

    Comment: Optional PHA disapproval of owners. HUD should provide an 
appeals process for owners prohibited from participating in the 
program. HUD should act as independent arbitrator between the PHA and 
the owner.
    There must be clear definitions and processes for implementing this 
provision; otherwise, the provision may used to deny Section 8 
contracts to owners where local governmental officials or 
``influential'' residents simply do not want Section 8 families.
    Section 982.306(c)(5) of the interim rule provides that the PHA is 
authorized to disapprove an owner if the owner has a history or 
practice of ``failing'' to terminate tenancy of the undesirable tenants 
described in the statute. The statutory language does not use the term 
``fail'' but uses the term ``refuse.'' This minor change from the 
statutory language may seem innocuous, but in practice it can be 
significant. This section needs to conform to the statutory language.
    HUD's HUB offices should consider coordinating information in 
multi-State metropolitan areas to minimize chances for ``bad'' 
landlords to become Section 8 program participants by ``PHA-shopping.''
    HUD response. Owners have no statutory or regulatory right to 
participate in the housing choice voucher program, and consequently 
have no due process right to a hearing on a PHA's decision to 
disapprove owner participation. There is no federal mandate for PHAs or 
HUD to grant owners a process for appeal of a PHA decision to 
disapprove owner participation. The PHA has discretion whether to 
provide a local review or appeal process to owners disapproved by the 
PHA for the reasons authorized by the regulations, and the nature of 
any such process.
    HUD has not substantively changed the statutory requirement. HUD 
considers the term ``fail'' more appropriate to and consistent with the 
statutory requirement, and clarifies that the PHA's authority to 
disapprove an owner does not require a specific PHA demand and refusal 
of the PHA demand by the owner. This implementation of the law is 
within HUD's rulemaking authority.
    HUD will explore ways too coordinate this information as suggested 
by the commenters. In the meantime, PHAs may wish to establish a 
communication process to share information about owners denied 
participation in the voucher program.

Section 982.307 Tenant screening.

    Comment: Optional PHA screening of applicants: General. HUD should 
eliminate the option for PHAs to screen family behavior or suitability 
for tenancy. Does the PHA now owe any obligation to the landlord and 
can a participant appeal this determination?
    The voucher program is based on the private market principle that 
prospective private landlords (not PHAs or other third parties) can 
best determine a family's suitability for tenancy. The only purpose of 
PHA screening should be the provision of supplemental information for 
prospective private landlords.
    PHAs should be encouraged to share their screening information 
regarding family behavior and suitability for tenancy to owners to 
assist owners in making the required independent determination of 
suitability of potential tenants.
    The rule needs to clarify that the final decision on tenant 
acceptability rests with the owner. The PHA can choose to collect 
screening information and provide it to the private owner, but it is up 
to the private owner, based on this information, to make a decision on 
acceptability. However, if the final rule authorizes PHA denial of 
admission based on screening criteria, the rule must establish clear, 
objective and non-discriminatory guidelines on screening criteria.
    HUD response. The 1998 Act provides that PHAs ``may elect to screen 
applicants for the [housing choice voucher] program in accordance with 
such requirements as [HUD] may establish''. This final rule permits PHA 
screening of program applicants, and permits the PHA to deny admission 
as a result of the screening. In accordance with existing program 
requirements, the PHA must give the opportunity for informal review of 
the PHA decision to deny program admission as a result of the PHA 
screening.

[[Page 56902]]

    PHAs may establish local screening criteria. PHAs are encouraged to 
share screening information, when practicable. It is important to note, 
however, that regardless of whether the PHA opts to screen applicants, 
the owner remains responsible for screening and selection of the family 
to occupy the owner's unit.
    Comment: Optional PHA screening of applicants: equal opportunity 
concerns. Screening will disproportionately exclude person with 
physical or psychological disabilities. The final rule should require 
PHAs to consider measures for reasonable accommodation of disabilities 
before making a final decision to reject an applicant.
    HUD response. PHAs must administer tenant-based assistance in 
conformity with civil rights laws and affirmatively further fair 
housing. Equal opportunity requirements are specified in Sec. 982.53. 
In addition, PHA denials of admission are subject to the program 
requirements concerning informal reviews.
    Comment: Optional PHA screening of applicants: PHA plan. A PHA's 
screening criteria should be part of the PHA plan, and should be 
subject to public and resident scrutiny and comment.
    HUD response. Any PHA screening criteria will be included in PHA 
administrative plan which is a supporting document to the PHA plan and 
available for public review.
    Comment: Optional PHA screening of applicants: portability. The 
portability provisions must continue to allow the receiving PHA to 
screen participants with portable vouchers based on the receiving PHAs 
local policies consistent with Sec. 982.307.
    HUD response. The receiving PHA may opt to screen the portable 
family using the receiving PHA's screening criteria only if the family 
is not a current participant in the tenant-based program (i.e., the 
family is not receiving housing assistance pursuant to a certificate or 
voucher HAP contract).

Section 982.308 Lease and tenancy.

    Comment: Tenant's legal capacity. Additional guidance is required 
regarding the tenant's legal capacity.
    HUD response. The rule is revised to specify that the tenant must 
have legal capacity to enter a lease under State and local law, and 
that ``legal capacity'' means that the tenant is bound by the terms of 
the lease, and may enforce the terms of the lease against the owner 
(Sec. 982.308).
    Comment: PHA model lease. In several jurisdictions, most landlords 
use no written lease at all. In some jurisdictions, some landlords do 
not use a written lease. If the lease term is not defined, PHAs will 
not be able to plan reinspections and lease renewals in advance. Many 
landlords rely on a PHA to provide the written lease. Further, the 
landlords' standard leases might contain clauses that are contradictory 
to Section 8 voucher program requirements.
    HUD response. Section 982.308(b)(2) was revised to specify that if 
the owner does not use a standard lease form for rental to unassisted 
tenants, the owner may use another form of lease, such as a PHA model 
lease (including the HUD-prescribed tenancy addendum). The HAP contract 
prescribed by HUD will contain the owner's certification that if the 
owner uses a standard lease form for rental to unassisted tenants, the 
lease is in such standard form. The regulations provide that a 
participating owner must certify that the terms and conditions of the 
lease are consistent with State and local law. It will be a violation 
of the HAP contract if the owner certification of lease consistency 
with State and local law is deficient.
    Comment: Prohibited lease provisions. A list of prohibited lease 
provisions should be required by the final rule. The ``tenancy 
addendum'' is a HUD form that is not subject to rulemaking procedures, 
and the courts may not have access to the addendum or know what weight 
to give the addendum.
    HUD response. The recommendation is inconsistent with the statutory 
provision, which requires use of the lease that the owner uses in the 
locality. Congress revised the lease provisions to minimize differences 
between voucher tenancies and unassisted tenancies to facilitate 
expanded owner participation in the Section 8 voucher program.
    Comment: Lease and Tenancy Addendum. Many property owners may 
refuse to sign a written lease, but they will sign the HUD lease 
addendum. To ensure a broad range of housing choice, the only required 
rental agreement should be the HUD lease addendum. The voucher 
recipient should be allowed the choice of a verbal agreement or any 
type of written rental agreement or lease sufficient for execution of a 
HAP contract.
    The tenancy addendum should not be part of the HAP contract. There 
is an inherent conflict between including a legal document to be signed 
by the owner and tenant, as an attachment to or part of a lease, in a 
document (the HAP contract) to be signed by the owner and the PHA, and 
barring the tenant from using any legal process to involve the PHA in 
its enforcement.
    The regulations do not provide the tenant with all enforcement 
tools that it may need to protect itself from a bad landlord.
    HUD response. The statute now requires use in the voucher program 
of the lease the owner uses in the locality. The HUD-prescribed tenancy 
addendum states the special requirements of a voucher tenancy in 
accordance with federal law, but is not intended to be a substitute for 
a complete lease. The lease is composed of two parts: The owner's 
standard form lease, plus the federal tenancy addendum.
    Section 982.456 clarifies that the tenant is authorized to enforce 
rights under the tenancy addendum, but does not have the right to 
enforce other provisions of the HAP contract. The statute (section 
8(o)(7)) specifically authorizes HUD to specify an addendum to the HAP 
contract concerning the lease and the assisted tenancy. Accordingly, 
the tenancy addendum, dealing with requirements of tenancy, is included 
in the HAP contract executed between the PHA and owner. However, since 
the tenancy addendum also sets forth owner lease obligations, HUD has 
required that the tenancy addendum also be part of the lease executed 
by the tenant and the owner, directly enforceable by the tenant against 
the owner. The requirement that the tenancy addendum be part of the 
lease assures tenant access to a legal process to enforce the rights 
contained in the tenancy addendum.
    HUD has reexamined its position concerning whether a minimal amount 
of leasing information is needed since leases vary widely, and some 
owners do not typically provide a written lease. Accordingly, 
Sec. 982.308(d) of the final rule provides that the lease must include, 
in addition to the utilities and appliances to be furnished by the 
owner, the names of the owner and tenant, the address of the unit 
rented, the term of the lease, and the amount of monthly rent to owner.
    Comment: PHA approval of the lease. Final rule should require that 
the lease be approvable by the PHA. The only practical way to make sure 
that an owner's lease complies with State and local law is for the PHA 
to review and approve the lease.
    Both the tenant and PHA should have 60 days advance notice of any 
proposed changes to the lease so the PHA may screen leases and approve 
the tenancy. This is especially important for any new changes in 
security deposits, responsibility for utilities, and proposed rent 
changes that may be affected by the new lease.
    If HUD no longer will require a new HAP contract for a revised 
lease, which in itself is a welcome reduction in work,

[[Page 56903]]

it should retain the PHA's authority to disapprove the continued 
tenancy if the revised lease violates any program requirements or State 
and local law. The PHA should review the terms of the new tenancy, 
determine whether a HAP contract should be executed for this tenancy, 
and review the terms and conditions of the lease.
    HUD response. HUD has not revised the interim rule to require PHA 
approval of leases. Instead, the housing choice voucher program 
regulations provide that a participating owner must certify that the 
terms and conditions of the lease are consistent with State and local 
law. It will be a violation of the HAP contract if the owner 
certification of lease consistency with State and local law is 
deficient. PHAs are not required to review the lease to assure such 
consistency, although the rule provides in Sec. 982.308(c) that the PHA 
may opt to review leases for State and local law compliance.
    The PHA will only provide housing assistance for a tenancy approved 
by the PHA. If both parties agree to terminate the lease, the family is 
not considered to be moving in violation of the lease.
    The final rule is revised (Sec. 982.308(g)) to specify that PHA 
approval of the tenancy, and execution of a new HAP contract, are 
required for the following changes in the lease: (1) Changes in tenant 
or owner responsibilities for utilities or appliances; (2) changes in 
the lease term; and (3) if the family moves to a new unit, even if the 
unit is in the same building or complex. PHA approval of the tenancy, 
and execution of a new HAP contract, are not required for other changes 
in the lease such as a change in family composition or a change in the 
amount of rent to owner.
    Of course, lease changes are subject to the essential program 
requirements, as stated in the tenancy addendum. In addition, 
Sec. 982.308(g) of the final rule specifies that the owner must notify 
the PHA of any changes in the amount of the rent to owner at least 
sixty days before any such changes go into effect. Any such changes are 
subject to rent reasonableness requirements that bar owner from 
charging more than the market rent for comparable unassisted units.

Section 982.309 Term of assisted tenancy

    Comment: Lease term of less than one year. HUD appropriately allows 
PHAs ability to approve leases with initial terms of less than one 
year.
    PHAs should have greater flexibility to approve lease term of less 
than one year.
    Section 982.309(a) of the interim rule provides that a PHA may 
approve a lease term of less than one year if such a lease term is the 
prevailing local practice and the PHA determines that the shorter term 
will improve housing opportunities for the family. Some PHAs serve a 
number of communities, each with a prevailing local practice, thus 
making it difficult for the PHA to develop a consistent lease term 
policy. The final rule should provide PHAs with the latitude to allow a 
lease term of less than one year (whether or not it is the prevailing 
local practice in a particular community), as long as it appears to be 
the prevailing practice in the State.
    Clients who reside in college communities have difficulty finding 
owners who are willing to sign a one-year lease. Provision for leases 
of less than one year will expand housing choice for these clients.
    The final rule should provide that under no circumstances may a PHA 
allow for a lease term of less than 6 months; otherwise some PHAs may 
use month-to-month leases, which do not adequately protect tenants from 
arbitrary eviction.
    A lease term of less than one year should only be granted if the 
landlord would reject the lease because of the one-year lease term.
    Initial lease terms of less than one year seem inconsistent with 
the goal of family stabilization and allow a loophole for future rent 
increases. The term ``prevailing local market practice'' should be 
clarified.
    Rule should make clear that approval of lease terms of less than 
one year must meet two tests: (1) The PHA determines that such shorter 
term would improve housing opportunities for the tenant; and (2) such 
shorter term is considered to be a prevailing local market practice. 
This should be a case-by-case determination.
    HUD response. The statute authorizes PHA approval of initial lease 
terms of less than one year under certain circumstances. The conditions 
for approval of an initial lease term of less than one (1) year are 
statutory. HUD intends to permit PHAs to use local judgment to 
determine prevailing local practice with respect to lease terms.
    The regulatory text in the interim rule (and carried forward to the 
final rule) is clear that approval of initial lease terms of less than 
one year must meet both statutory tests. PHAs may opt to determine 
case-by-case whether approval will improve an individual family's 
housing opportunities, or the PHA may make a determination based on its 
overall (not case-by-case) judgment of market opportunities. PHAs will 
determine what is prevailing local practice with respect to lease 
terms.
    Comment: Automatic lease renewals. The final rule needs to include 
automatic renewal in the absence of the landlord or tenant 
affirmatively terminating the tenancy. The automatic renewal will 
protect a tenant from a landlord who decides at the last moment not to 
renew.
    HUD response. The recommendation is inconsistent with the statutory 
provision, which requires use of the lease that the owner uses in the 
locality. Congress revised the lease provisions to minimize differences 
between voucher tenancies and unassisted tenancies to facilitate 
expanded owner participation in the Section 8 voucher program.
    Comment: Mutual termination of the lease by the owner and tenant; 
termination of the lease by the tenant after notice. The mutual 
termination provision in former Sec. 982.309(b)(3) should be retained 
to clarify, at a minimum, that owners and tenants are free to negotiate 
a mutual termination during the lease term.
    Lease termination provisions should remain as in former 
Sec. 982.309(d) which provided that, after the initial term of the 
lease, the family may terminate the lease at any time, and that the 
lease may not require the family to give more than 60 calendar days 
notice of such termination to the owner. It is desirable to not allow 
the family's right to terminate the lease, after the initial term, to 
be dependent upon the terms of the particular lease used. Families may 
be locked into long periods, which will restrict their mobility.
    HUD response. The recommendations are inconsistent with the new 
statutory requirement to use the standard lease form that an owner uses 
for other tenancies in the locality. Congress revised the lease 
provisions to minimize differences between voucher tenancies and 
unassisted tenancies to facilitate expanded owner participation in the 
Section 8 voucher program.

Section 982.310 Owner termination of tenancy.

    Comment: Owner lease termination notice. The law provides that any 
termination of a voucher tenancy by the owner ``shall be preceded by 
the provision of written notice by the owner to the tenant specifying 
the grounds for that action.'' Section 982.310(e)(1) contradicts this 
statutory requirement because it permits an owner to combine the notice 
of grounds with an initial pleading used to begin an eviction action.

[[Page 56904]]

    The rule should specify how much notice the owner must give to end 
the lease without cause at the end of a lease term.
    HUD response. Section 982.310(e) has been revised to specify that 
the tenancy does not terminate during the term of the lease before the 
owner has given notice to the tenant that specifies the grounds for 
termination. The regulations continue to require that the notice must 
be given at or before the beginning of any eviction action.
    The termination notice must be in accordance with the lease and 
State and local law. HUD does not specify the length of notice periods 
required for eviction of the tenant.
    Comment: Applicability of Part 247 to lease terminations. Paragraph 
(g) of this section needs to be removed. It was originally included to 
minimize the landlord's burden when Section 8 requirements and Part 247 
requirements were roughly equivalent. Now the landlord is allowed to 
terminate the lease without good cause. Leaving this paragraph in the 
final rule would mean that Section 8 tenants in federally subsidized 
projects under part 247 would not be entitled to the same protections 
as other residents of the project.
    HUD response. HUD disagrees with the commenter. The same tenancy 
requirements should apply to all voucher tenancies.
    Comment: Lease termination for a lease with an initial term 
exceeding one year. Section 982.310(d)(2) needs to be revised because 
it requires, in the case of a lease with an initial term of two years, 
that the landlord cannot terminate the tenancy, except for tenant 
misfeasance or nonfeasance for a full two years. The opening clause for 
paragraph (d)(2) should read: ``During the shorter of the first year of 
the lease term or the initial lease term, the owner may not terminate 
the tenancy for `other good cause' unless. * * *''
    HUD response. The interim rule provision is not in error. The final 
rule continues to provide that an owner may opt to offer an initial 
lease term longer than one year. During the initial lease term, the 
owner can only terminate tenancy for cause. This is not a new 
requirement. Of course, the initial HAP contract term may not extend 
beyond the ACC expiration date for the funding source from which the 
HAP contact is to be funded.
    Definition of ``serious lease violation''. HUD should define what 
constitutes a ``serious lease violation.'' This should be changed to 
serious or repeated violation, the standard required for evictions in 
the Section 8 programs.
    Serious lease violations should not include late payments or 
``minor violations''. The definition of ``serious lease violation'' 
should not include ``other amounts due under lease.'' Tenants should 
not be subject to eviction for failure to pay late charges or disputed 
damage charges when a good faith dispute exists over liability for 
charges.
    The definition of serious lease violation should not include minor 
violations or repeated minor violations of the lease.
    HUD response. The regulation is clear that a ``minor'' lease 
violation is not a ``serious'' lease violation. HUD has determined that 
it would be impossible to provide an exhaustive list of actions or 
inactions that are considered serious lease violations. The eviction 
determination is ultimately made on a case-by-case basis by judges in 
State or local landlord/tenant courts. The courts determine whether a 
lease violation has occurred, and whether the violation is sufficiently 
``serious'' to justify eviction from the assisted unit.

Section 982.314 Move with continued tenant-based assistance.

    Comment: Prohibition on family moves. Permitting a PHA to prohibit 
a family from moving during the first year of the assisted tenancy may 
result in the termination of a family's assistance without good cause. 
This may occur when the initial lease term is less than one year and 
the landlord refuses to renew the lease without good cause. The family 
would be prohibited from moving and, therefore, lose its assistance. 
HUD should revise Sec. 982.314(c)(2) to authorize PHAs to prohibit any 
moves by a family during its initial lease term (instead of during its 
initial year of assisted occupancy); and to permit a family to move 
whenever the landlord refuses to renew the family's tenancy without 
good cause.
    HUD response. Consistent with the commenter's recommendation, 
Sec. 982.314(c)(2)(i) is revised to change the time frame from ``first 
year'' to ``initial lease term.''

Section 982.352 Eligible housing.

    Comment: PHA-owned units. The rule should not require a PHA to 
obtain the services of an independent agency to determine rent 
reasonableness and conduct HQS inspections. PHAs should be trusted to 
offer a decent unit and reasonable rent to an otherwise eligible 
family. Generally accepted accounting practices permit a separation of 
duties and control within the same organization. The independent 
auditor should be required to conduct a random sampling of Section 8 
files where the PHA is the owner. PHA rent reasonableness data and 
other periodic checks on leased units provide adequate protection for 
the government and the taxpayer.
    HUD should permit high-performing PHAs to conduct their own 
inspections of PHA-owned units.
    The final rule should clarify how HUD will approve an independent 
agency. Is it HUD's intention to permit a neighboring PHA to perform 
such services?
    HUD response. The special requirements for independent inspections 
and contract rent negotiations and reviews for PHA-owned housing are 
statutory. These requirements reflect legitimate and substantial 
concern with the inherent conflict of interest when the PHA contract 
administrator--responsible for oversight of the Section 8 owner--is 
itself the Section 8 owner, or substantially controls the nominal 
ownership entity.
    The HUD field office will review any independent agency arrangement 
to ensure that the independent agency has an arms-length relationship 
with the PHA. A neighboring PHA may act as an acceptable independent 
agency--so long as the neighboring PHA is authentically independent of 
the PHA unit owner. A unit of general local government such as the 
Community Development Agency may also be an acceptable independent 
agency, unless the PHA is itself part of the same unit of general local 
government or an agency of such government.
    Comment: Administrative fees for PHA-owned units. The reasoning 
behind requiring PHAs to obtain the services of independent entity is 
sound, but PHAs should earn the full administrative fee for the unit.
    HUD response. The statute provides for a lower administrative fee 
for PHA-owned units.

Section 982.353 Where family can lease a unit with tenant-based 
assistance.

    Comment: Portable moves during first 12 months. The rule should 
provide that the PHA's discretion regarding whether to allow 
portability in the first 12 month period from a non-resident family's 
admission to the program must be exercised program-wide, not family-by-
family.
    Rule should clarify that the PHA will provide reasonable 
accommodation to families during the 12-month initial period that might 
include waiver of its policy under Sec. 982.353(c).

[[Page 56905]]

    HUD response. The statute permits PHAs to prohibit portability 
during the first 12 months from admission for families who did not live 
in the PHA jurisdiction when they applied for assistance. This 
provision maintains the local character of a PHA's voucher program, and 
prevents families from shopping for assistance from different PHAs, 
regardless of where the family intends to live with assistance under 
the program. The decision to allow or deny portability during the first 
12 months after family admission is appropriately left to PHA 
discretion--to exercise on a program-wide or case-by-case basis.
    Although HUD has not made the recommended change concerning 
reasonable accommodation, PHAs must consider reasonable accommodation 
in the context of all program requirements and functions in accordance 
with the statute and HUD equal opportunity requirements. Equal 
opportunity requirements are specified in Sec. 982.53.
    Comment: Income eligibility of portable family. HUD should 
eliminate the requirement to determine income-eligibility of a porting 
family admitted (initially assisted) in the jurisdiction of a receiving 
PHA (Sec. 982.353(d)(3)). If the family is found eligible by the 
initial PHA, there is no reason to impose the burden of a second 
income-eligibility determination by the receiving PHA.
    HUD response. The statute requires that an applicant be income 
eligible before initially receiving housing assistance. If the family 
will first receive assistance in the receiving PHA's jurisdiction, then 
the family must be income eligible in the receiving PHA's jurisdiction.

Section 982.355 Portability: Administration by receiving PHA.

    Comment: Effect of preferences on portability. The final rule 
should explicitly provide that a receiving PHA may not use a local 
residency preference to deny portability.
    HUD response. The rule is revised to clarify that when the family 
has a right to lease a unit in the receiving PHA jurisdiction under 
portability procedures, the receiving PHA must provide assistance for 
the family (Sec. 982.355(c)(10)). Receiving PHA selection preferences 
(including any residency preferences) do not apply, and the receiving 
PHA waiting list is not used. However, the receiving PHA may deny or 
terminate assistance for family action or inaction in accordance with 
Secs. 982.552 and 982.553.
    Comment: Portability to areas serviced by other PHAs. Section 
982.353(b) imposes restrictions on portability by requiring that the 
area to which the family wants to move must have a PHA administering a 
Section 8 Housing Choice Voucher Program. In many instances this will 
not allow families to leave urban areas for suburban areas or rural 
areas.
    HUD response. The statute provides for portability to any area in 
the United States that is in the jurisdiction of a PHA administering a 
tenant-based Section 8 program. In practice, in most communities there 
is a PHA that operates a Section 8 program. Often, multi-jurisdictional 
PHAs (such as state agencies) administer the certificate and voucher 
programs in areas where there are no local PHAs.

Section 982.405 PHA initial and periodic unit inspection.

    Comment: HQS procedural guidelines and performance standards. HUD 
needs to provide additional guidance regarding the procedural 
guidelines and performance standards that must conform to practice 
utilized in the private housing market.
    If the Secretary exercises discretion to issue procedural 
guidelines and performance standards, they must be published for notice 
and comment.
    The rule cannot directly delegate a secretarial duty to a PHA, and 
HUD guidelines and standards need to be published in an accessible 
format with no hidden criteria.
    HUD response. Section 982.405(f) of the interim rule which required 
the PHA to adopt procedural guidelines and performance standards for 
conducting required HQS inspections has been deleted. HUD has 
determined that the pre-merger HQS inspection requirements and the 
SEMAP HQS-related performance standards meet the section 8(o)(8)(E) 
statutory requirement for the Secretary to establish inspection 
guidelines and performance standards.

Section 982.451 Housing assistance payments contract.

    Comment: PHA penalties for late housing assistance payments to 
owners. The rule should exempt new or revised HAP contracts from 
penalties for late payment of housing assistance to owners. The 
paperwork and other administrative work involved in preparing a new or 
revised HAP contract may make it difficult for a PHA (and in particular 
a large PHA) to avoid a late payment. Recurring late payments should be 
penalized.
    The rule should clarify whether a owner that normally does not 
charge a late fee to tenants can still charge a late fee to the PHA. If 
the owner can charge late fees to the PHA, does the PHA have the right 
to determine the maximum amount of liability it will assume? Further 
clarification is needed on whether late fees will be determined based 
on date the payment is mailed.
    HUD response. The interim rule provided that the PHA may be 
assessed a late rental payment penalty only if it is in accordance with 
generally accepted practices and law in the local housing market. The 
interim rule also stated that a PHA is not obligated to pay any late 
payment penalty if HUD determines that the late payment is attributable 
to factors beyond the PHA's control. Section 982.451 of the final rule 
has been revised to add two more conditions for owner assessment of a 
late fee to the PHA: it must be the owner's practice to charge such 
penalties for assisted and unassisted tenants, and the owner must 
charge such penalties against the tenant for late payment of family 
rent to owner.
    The interim rule specified that the PHA may add to the HAP contract 
a provision which defines when the housing assistance payment by the 
PHA is deemed received by the owner. There is nothing that would 
prohibit a PHA from defining ``receipt of the housing assistance 
payment by the owner'' as the date the PHA mailed the funds to the 
owner or the date of actual receipt by the owner.
    Comment: Funding for PHA penalties for late housing assistance 
payments to owners. It is unfair to penalize PHAs for late payments 
unless HUD headquarters is willing to pay for the late payments.
    HUD response. The statute provides for payment of penalties for 
late payments of housing assistance under certain circumstances. The 
statute further provides that a late payment fee may only be paid from 
the PHA's administrative fee income, including any amounts in the PHA 
administrative fee reserve. The PHA is not obligated to pay any late 
fee if HUD determines that the late payment is due to factors beyond 
the control of the PHA.

Section 982.453 Owner breach of contract.

    Comment: Owner breach of HAP contract for ``drug-related criminal 
activity''. The change to Sec. 982.453(a)(5) to make ``drug-related 
criminal activity'' (instead of only ``drug trafficking'') an owner 
breach of contract was a good one. Why did the change not also include 
violent criminal activity as a contract breach?
    HUD response. Section 982.453(a) was revised to add commission of 
any violent criminal activity by the owner as a breach of the HAP 
contract.

[[Page 56906]]

Section 982.502 Conversion to voucher program.

    Comment: Deadline for conversion to the merged program after the 
merger date. Conversion from pre-merger assistance should be expedited. 
Conversion should be effective upon the next regular reexamination on 
or after the merger date. The final rule should provide that a landlord 
and tenant may jointly (not individually) convert their regular 
certificate tenancy to a voucher tenancy at any time after the merger 
date. Reducing the number of certificate conversions during the second 
year after the merger date will reduce PHA administrative burdens that 
may delay one or more assistance payments to a family.
    Conversion from pre-merger assistance should be delayed. Requiring 
that conversion take place at the second regular reexamination is too 
restrictive. HUD should permit an extension in situations where the 
tenant and owner cannot agree to convert.
    PHAs should be permitted to delay the transition of certificate 
families leased units with exception rents as a reasonable 
accommodation until the family leaves the Section 8 program or moves to 
another unit.
    HUD response. The interim rule provided for the complete conversion 
of all pre-merger tenant-based assistance to the merged program no 
later than the effective date of the second regular reexamination on or 
after the merger date (October 1, 1999). HUD considers this time frame 
reasonable and has not adopted the recommendations to shorten or 
lengthen the time. It is noted, however, if both a participant and the 
owner want to convert to the merged program sooner than required, they 
may do so by executing a new lease and HAP contract. In addition, the 
technical correction to the interim rule published on September 14, 
1999, addresses approval of higher payment standards and approval of 
exception payment standards as a reasonable accommodation for a tenant 
with disabilities.
    Comment: Continuing current benefits after conversion. HUD should 
not terminate program assistance upon conversion. HUD should allow 
``grandfathering'' of pre-existing benefits. Terminating program 
assistance will create undue hardship on the family and create an 
impact on PHA staff.
    HUD response. The conversion time frame is reasonable and the rule 
provides for a uniform delay in increases in the family share of rent 
that may result from implementation of the housing choice voucher 
program.
    Comment: Delayed reductions in subsidy for over-FMR tenancies based 
on payment standard revisions. To protect families with over-FMR 
tenancies, the final rule could simply require that over-FMR tenancies 
be treated no differently than other certificate tenancies. Alternately 
the final rule could require that the subsidy for over-FMR tenancies be 
calculated based on the higher of the FMR or payment standard for the 
transition period before the second annual reexamination after October 
1, 1999.
    HUD response. The regulation has been revised to require that any 
reduction in subsidy attributable to the decrease in the payment 
standard will be delayed until the effective date of the family's 
second regular reexamination on or after the payment standard decrease. 
This is a change in practice for the voucher program. Before this final 
rule, a voucher participant's subsidy was based on the higher of the 
current payment standard or the payment standard in effect when the 
participant initially leased a specific unit under the voucher program.
    Comment: New certificate HAP contracts after the merger date. The 
final rule should permit execution of a new certificate HAP contract 
until the family's second annual reexamination after August 12, 1999 
under certain circumstances.
    HUD response. HUD has not made the recommended change to permit 
execution of new certificate program HAP contracts after the October 1, 
1999 merger date. The requirement that only voucher HAP contracts may 
be executed on or after October 1, 1999, will facilitate conversion to 
the housing choice voucher program.
    Comment: Timing of HQS inspections and income reexaminations during 
conversion period. HUD should clarify whether the regularly scheduled 
annual HQS inspection and the family income determination for a 
continually assisted tenant will suffice for the purpose of the 
conversion. Unless the property is due for an annual HQS inspection, 
the PHA should not be required to conduct an HQS inspection upon 
conversion.
    HUD response. The regularly scheduled annual HQS inspection and 
family income reexamination will suffice for purposes of the conversion 
to the merged program. A new HQS inspection or income reexamination is 
not automatically triggered because a certificate program unit is being 
converted to the merged program and a voucher HAP contract will be 
executed. A new HQS inspection and a new income reexamination for the 
family is not required until 12 months lapse from the date of the last 
HQS inspection and income reexamination under the certificate program.
    Comment: Currency of income verifications during conversion period. 
HUD should clarify whether the period of time for which verifications 
are valid may be extended for more than 120 days to allow the PHA to 
determine income and the family share well in advance (more than 120 
days) of the conversion date. At the mandatory 120 day notification 
period, the PHA will not have income verifications for the current 
year, and the PHA should probably be collecting such information with 
the 120 day notice.
    HUD response. HUD recognizes that the PHA may not be able to meet 
the normal time frames for the currency of the family's income 
verification data during the transition period to the housing choice 
voucher program. Chapter 10 of Handbook 7420.7, PHA Administrative 
Practices Handbook, provides guidance (not requirements) with respect 
to income reexaminations. That handbook states that income verification 
data should not be older than 120 days. It is acceptable to HUD if the 
income verification data is older than the 120 day norm in order to 
facilitate the conversion to the housing choice voucher program and to 
provide needed information to participant families.
    Comment: Reporting of conversions on Form HUD-50058. HUD should 
confirm that the correct update type to be used is ``reexamination'' 
for all Form HUD-50058 reporting of conversions of certificate to 
voucher tenancies.
    HUD response. Termination of the certificate HAP contract and 
execution of a voucher HAP contract does not constitute an admission. 
The family is a current participant in the tenant-based Section 8 
program and, therefore, ``reexamination'' is the correct term to 
describe the process of updating the information concerning the 
family's income and composition.
    Comment: Grandfathering of pre-merger units rented from relatives. 
The final rule should clarify how current tenancies involving a 
landlord who is leasing to a relative are to be treated when the 
current certificate assistance is converted to a voucher HAP contract.
    HUD response. Section 982.306(d) was revised to clarify that the 
prohibition on renting a unit from a relative does not apply for 
continued assistance in the same unit. Therefore, the prohibition on 
renting a unit from a relative is not triggered by the conversion to 
the housing choice

[[Page 56907]]

voucher program if the Section 8 participant does not move from the 
unit assisted under the certificate program.
    Comment: Owner damage claims during the conversion period. HUD 
should clarify that all legitimate damage claims can be processed for 
payment at the conversion of the family's assistance regardless of 
whether the family moves or remains in place.
    HUD response. PHA reimbursement for damage claims was eliminated 
beginning on October 2, 1995. However, HAP contracts executed before 
that date permit owners to submit a damage claim to the PHA if the 
family moves in violation of the lease. If a participant remains in the 
same unit after conversion to the housing choice voucher program, there 
is no ``move in violation of the lease'' to trigger eligibility for a 
damage claim (for a unit under a HAP contract executed before October 
2, 1995). If a certificate participant moves to another unit as a 
result of the conversion to the voucher program (e.g., the owner does 
not wish to participate in the voucher program), the PHA may process 
any damage claim.
    Comment: Renewal of certificate tenancies during the conversion 
period. Section 982.502(d) should emphasize conversion of certificate 
assistance, not termination of assistance. The regulation should refer 
to the renewal of the certificate tenancies under the voucher program.
    HUD response. HUD has not made the recommended change to 
Sec. 982.502(d).
    The conversion process from the certificate program to the voucher 
program cannot be characterized as a ``renewal.'' Any remaining 
certificate HAP contracts must be terminated on the effective date of 
the family's second regular reexamination after the October 1, 1999 
merger date. Termination of the certificate HAP contract and the 
certificate program tenancy and lease permits the PHA to execute a new 
HAP contract under the housing choice voucher program on behalf of the 
family.
    Comment: Unit rent increases after conversion. Clarification is 
requested regarding whether owners will be able to raise rents they 
were receiving under the regular certificate program to market level 
(reasonable rent) at the time of conversion to a voucher tenancy. The 
result may be in excess of the voucher payment standard and require 
tenants to move.
    HUD response. Yes, if an owner were charging an artificially low 
rent under the certificate program, it is possible that the owner would 
be able to raise the rent after the certificate program HAP contract is 
canceled. The PHA must ensure that any increases in the rent to owner 
meet the program's rent reasonableness requirements.
    Comment: Rent burden caps during the conversion period. 
Clarification is requested concerning whether there are any 
restrictions on how great the family share can be if the family remains 
in the same unit. Many families will prefer to remain in place even 
though their family share will increase.
    HUD response. The initial rent burden cap does not apply to 
participants who remain in the same unit.

Section 982.503 Voucher tenancy: payment standard amount and schedule.

    Comment: Payment standards. The final rule should include guidance 
on the legal standards applicable to PHA determination of the payment 
standard schedule. Further, HUD should clarify a PHA's discretion to 
vary the payment standard by unit size within designated parts of an 
FMR area, and the final rule should specify requirements for HUD 
approval of a payment standard below 90 percent of FMR. If justified by 
rent burden and other data, HUD should be able to require a PHA to use 
a payment standard above 110 percent of FMR.
    PHAs should not be permitted to lower payment standards for 
existing certificate holders who will be converted, nor for current 
voucher holders, without prior HUD approval.
    HUD response. HUD will provide further guidance on implementation 
of the Housing Choice Voucher Program, including PHA establishment of 
the payment standard. The statute provides that PHAs may set the 
payment standard anywhere between 90 and 110 percent of the FMR. The 
statute does not authorize HUD to require a PHA to use a payment 
standard above 110 percent of FMR. The PHA may not set a lower standard 
applicable only to prior certificate program participants. One payment 
standard schedule will apply to participants in the pre-merger 
certificate and voucher programs.
    PHAs may opt to set different payment standards by unit size within 
the 90 to 110 percent FMR range. PHAs may opt to set different payment 
standards within the 90 to 110 percent of FMR range for different 
market areas of the PHA jurisdiction (e.g., a low poverty 
neighborhood). If more than one PHA operates in a jurisdiction, each 
PHA has discretion in deciding whether the PHA will use a uniform (or a 
different) payment standard within the 90 to 110 percent of FMR range 
for each unit size and geographic area.
    A new paragraph (d) was added to Sec. 982.503 to specify that HUD 
will not approve a payment standard below 90 percent of FMR if the 
family share for more than 40% of the current participants for the 
applicable unit sizes exceeds TTP. Such funding may be based on the 
most recent income examinations.
    Comment: Exception payment standards: HUD approval requirements. 
The final rule should not limit the total population of an exception 
area (i.e., an area where HUD has approved a payment standard higher 
than the applicable FMR) to 50% of the population of the FMR area. In 
FMR areas containing a large city, the granting of an exception rent 
for the city may preclude other portions of the FMR area from obtaining 
an exception rent. HUD should provide all PHAs with equal opportunity 
to represent their case for an exception rent.
    HUD should make clear that every PHA that administers a voucher 
program within an area for which HUD has approved an exception payment 
standard must use the approved exception standard.
    HUD should (1) permit PHAs seeking an exception payment standard 
above 120 percent of FMR to use the ``median rent method'' 
justification, (2) permit PHAs to use a recent HUD/RDD survey to 
justify an exception payment standard, and (3) in particularly tight 
markets, permit PHAs to justify a payment standard exception by a 
method that is not based on rent data.
    The rent for most decent, safe, and sanitary units in certain areas 
is often greater than 10 percent more than the FMR. This may result in 
tenants with more expensive special housing needs (such as persons with 
disabilities) paying greater than 40 percent of their incomes in rent.
    PHAs need increased flexibility in establishing exception rents 
based on local housing needs and demands.
    HUD response. The FMRs are housing market-wide estimates of rents 
that provide opportunities to rent standard quality housing of a modest 
nature. FMRs are set at the 40th percentile rent--the dollar amount 
below which 40 percent of standard quality rental housing units rent in 
the FMR geographic area. Consistent with the statute, the regulation 
provides for HUD approval of PHA requests for payment standards higher 
than 110 percent of the FMR.
    The rationale for limiting exception payment standards to 50 
percent of the population in the FMR area is that to do otherwise would 
result in approvals of exceptions being the norm, not an exception. If 
an exception payment standard is necessary for more than 50

[[Page 56908]]

percent of the population in an FMR area, then the FMR is inappropriate 
and should be revised. It is noted that the merger regulation permits 
additional flexibility in this area than did the previous regulations 
for the certificate and voucher program. The previous regulations for 
the certificate and voucher program restricted the number of exceptions 
over 100 percent of FMR, while the merger regulations restrict the 
number of exceptions over 110 percent of FMR.
    Section 982.503(b)(3) provides that exception rents above 120 
percent of the FMR will only be approved for the total area of a 
county, PHA jurisdiction, or a U.S. census ``place'' (e.g., city, 
borough, town, or village). Accordingly, the ``median rent method'' 
which provides census tract data is not appropriate justification for 
an exception rent applicable to areas larger than census tracts. 
Likewise, the random digit dialing survey which provides MSA wide data 
is not appropriate for an exception rent applicable to an area smaller 
than a MSA.
    If more than one PHA operates in a jurisdiction, each PHA has 
discretion in deciding whether they will use a uniform (or a different) 
exception payment standard for each unit size and geographic area. The 
final rule has not modified the interim rule requirement in Section 
982.503 that any PHA with jurisdiction in the exception area may use 
the HUD-approved exception payment standard amount.
    Comment: Exception payment standards: Persons with disabilities. 
PHAs should be required to use 120% of FMR as the payment standard for 
persons with disabilities who have already been granted an individual 
exception rent. HUD also should require PHAs to use up to 120 percent 
FMR as the payment standard when needed as a reasonable accommodation 
for a tenant with disabilities.
    The rule needs to permit PHAs to approve exceptions to the 
established payment standard to provide for reasonable accommodations 
for persons with disabilities.
    HUD should inform PHAs to consider the high rental costs of 
providing accessible units for people with disabilities. HUD should 
issue guidance on exception rents and have an expedited and simple 
process to grant such exceptions.
    HUD response. The technical correction to the interim rule 
published on September 14, 1999 authorizes approval of exception 
payment standards as a reasonable accommodation for a tenant with 
disabilities. Section 982.503 was corrected to specify that a PHA may 
establish a higher payment standard between 90 percent and 110 percent 
of the FMR when required as a reasonable accommodation for a family 
that includes a person with disabilities. In addition, HUD field 
offices may approve a payment standard over 110 percent and up to 120 
percent of the FMR for this purpose.
    Comment: Exception payment standards: equal opportunity concerns. 
Section 982.503(c)(4) describes the condition that will permit HUD to 
approve an exception rent. Among other factors, HUD will consider the 
ability of families to find housing outside areas of high poverty. The 
final rule should explicitly provide that PHAs have an obligation to 
affirmatively further fair housing.
    The rule fails to make clear that the payment standard must comply 
with the fair housing and civil rights laws, affirmatively further fair 
housing, and be consistent with the applicable Consolidated Plan. The 
rule should require PHAs to articulate the fair housing considerations 
that went into setting the payment standard.
    HUD response. The statute specifically delegates to the PHA the 
establishment of a payment standard between 90 to 110 percent of the 
FMR. The PHA rationale for establishing the payment standard is 
addressed in the PHA plan.
    HUD has retained the previous regulatory requirement that mandatory 
justifications for approval of an exception payment standard include 
that the higher amount is needed either (1) to help families find 
housing outside of areas of high poverty, or (2) because families have 
trouble finding housing for lease within the term of the voucher.
    Administration of all aspects of the merged program is subject to 
civil rights laws and fair housing laws. Equal opportunity requirements 
(including affirmatively furthering fair housing requirements) are 
specified in Sec. 982.53.
    Comment: HUD review of PHA payment standard schedules. The final 
rule should provide that HUD will initially monitor rent burdens of 
PHAs utilizing payment standards at 90 percent of FMR and that a review 
of payment standards should be triggered by a voucher failure rate 
above 30 percent.
    The final rule should specify that the scope of HUD's payment 
standard review includes mobility (i.e., the ability of families to 
find housing outside of high poverty areas) and fair housing choice 
(i.e., the ability of families to find housing outside areas of 
minority concentration).
    The trigger for HUD review of the adequacy of the payment standard 
should be when 30 (not 40) percent of the participants have high rent 
burdens.
    HUD response. The statute provides that HUD shall monitor rent 
burdens and review any payment standard that results in a significant 
percentage of the families occupying units of any size paying more than 
30 percent of adjusted income for rent. HUD intends to monitor rent 
burdens on a case-by-case basis, PHA-by-PHA, in consideration of the 
unique circumstances of different housing markets and PHA 
administrative policies. As required by the statute, HUD's review of 
the payment standard will be based on the rent burden of participants, 
not the success rates of applicants.
    HUD has not revised the regulatory standard specified in the 
interim rule for HUD review of the adequacy of the PHA payment 
standard. However, HUD will reexamine the appropriateness of the 
trigger for a HUD payment standard review after there is experience 
with implementation of the housing choice voucher program.

Section 982.504 Voucher tenancy: Payment standard for family in 
restructured subsidized multifamily project.

    Comment: Future funding for restructured subsidized projects. 
Funding for families converted from project-based assistance must be at 
an adequate level in the future, using the same comparability method as 
is used when the initial tenant-based contract is calculated.
    HUD response. HUD's policies for providing renewal funding for 
expiring ACCs have been developed pursuant to negotiated rulemaking. 
Actual costs are a factor in providing renewal funding.
    Comment: Payment standard for restructured subsidized projects. 
This regulatory section is more appropriately part of HUD's regulations 
in 24 CFR part 401. This section lacks clarity and consistency with the 
rules on HUD's Mark-to-Market program.
    HUD response. The regulatory provision is consistent with HUD's 
mark-to-market program. The regulations for the mark-to-market program 
specifically provide that the amount of the voucher program rental 
assistance will be as provided for in the voucher regulation.

Section 982.508 Rent to owner: maximum rent at initial occupancy.

    Comment: Initial rent burden cap. The 40 percent maximum initial 
rent burden requirement contradicts the intent of the Section 8 voucher 
program,

[[Page 56909]]

which was designed to give families the freedom to find housing outside 
of low income areas and to move closer to employment or educational 
opportunities. It is not unusual for families to choose to pay more 
than 40% of income in order to obtain good housing in non-impacted 
areas. As an example, seniors often spend a higher percentage of their 
income on housing in order to ensure their safety and security.
    The 40 percent maximum rent burden requirement might adversely 
impact certain families, such as large families, seniors and persons 
with disabilities requiring special amenities or services.
    In high-rent areas, such as New York, the 40 percent maximum rent 
burden is unrealistic and will make it more difficult for families to 
find safe and sanitary housing. A family may actually be prevented from 
reducing its rent burden (for example from 55% of income to 45% of 
income).
    The 40 percent rent burden limit should apply throughout the life 
of the tenancy.
    HUD response. The maximum initial rent burden requirement is 
statutory and cannot be waived by HUD. The 40 percent maximum rent 
burden requirement applies when an applicant receives Section 8 tenant-
based voucher assistance for the first time on or after October 1, 
1999, and every time a participant (in the certificate or voucher 
program) moves to different unit on or after October 1, 1999.
    After admission, the 40 percent maximum initial rent burden cap 
does not apply to future changes of tenant income or changes in the 
rent to owner amount if the participant stays in the same tenant-based 
assistance unit. Further, the 40 percent initial rent burden cap does 
not apply to families who will participate in the Section 8 tenant-
based homeownership program (for which a proposed rule was published on 
April 30, 1999, 64 FR 23488) since homeownership families do not pay 
rent, or any of the project-based Section 8 programs.
    Comment: Effect of the minimum rent on the initial rent burden cap. 
The part 5 regulation permits a PHA to set a minimum rent of up to $50. 
The merger rule requires an initial rent burden cap of 40 percent of 
the family's monthly adjusted income. These two regulations clash for 
families who have very little or no income at the time of admission (or 
at the time of a move while they are participants).
    HUD response. It is true that the initial 40 percent rent burden 
cap will limit admission of any family whose total tenant payment is 
based on a calculation other than 30 percent of adjusted income. For 
example, elderly and disabled families with large medical expenses, 
families with little or no income, welfare families in ``as paid'' 
States, and families with undocumented alien family members most likely 
will not be eligible to participate in the program because of this 40 
percent rent burden cap. HUD is seeking a technical correction to the 
40 percent rent burden legislative requirement to exempt families whose 
total tenant payment is based on a minimum rent, welfare rent or 10 
percent of gross income. In the meantime, a PHA should allow such 
families that cannot find housing below the 40 percent rent burden cap 
to retain their current position on the waiting list, in anticipation 
of the requested legislation being enacted into law.

Section 982.509 Rent to owner in subsidized projects

    Comment: Rent to owner in subsidized projects. The rule should 
retain the provisions of former Sec. 982.512. This section has been 
removed and should be retained.
    HUD response. The basic content of former Sec. 982.512 is now found 
in Sec. 982.521, but with respect to certificates only.

Section 982.521 Regular tenancy: Rent to owner in a subsidized project.

    Comment: HOME program rents. The HOME rent provisions should apply 
equally to the certificate and the housing choice voucher program. The 
previous clarifications with regard to rents in the HOME program have 
been lost in this new rule.
    HUD response. The HOME program regulations specify how rents are 
determined for HOME program units. Section 8 requirements do not over-
ride the HOME rental limitations. It is not necessary to repeat HOME 
rental requirements in the Section 8 rule.

Section 982.552 PHA denial or termination of assistance for family.

    Comment: Mandatory termination of assistance for a tenant-based 
program participant evicted for serious lease violations. A lease 
violation should not be grounds for terminating assistance to a family. 
There may be certain circumstances that merit leniency; for example, if 
an abusive spouse abandons the family resulting in the family's 
eviction for nonpayment of rent. The automatic termination provision 
unfairly favors landlords, because it effectively deprives tenants from 
the opportunity to contest a landlord's allegation of a serious lease 
violation.
    Termination of assistance due to lease violations should remain a 
discretionary ground for termination. This discretion is necessary to 
avoid unjust and inappropriate terminations.
    HUD response. HUD has determined that the mandatory nature of this 
provision is necessary in order to foster responsibility in the Section 
8 program. Section 8 assistance is a scarce benefit. This provision 
indicates that HUD will not reward serious lease violations, such as 
behavior that threatens other residents or the safety or maintenance of 
the premises, by providing continued Section 8 assistance in a 
different unit. Furthermore, this policy will address the complaint 
that some assisted families have kept their Section 8 benefits even 
after they have caused extensive damage or incurred a large unpaid rent 
debt. Additional efforts to hold families accountable for actions by 
family members should increase owner participation and provide expanded 
housing opportunities for low income families in nontraditional 
neighborhoods. It is noted that termination of assistance is only 
required for an eviction resulting from a serious lease violation (not 
repeated lease violations). Therefore, the family will be protected by 
the due process they receive through the judicial eviction process and, 
additionally, the PHA must give the family the opportunity for an 
informal hearing before assistance termination.
    Comment: Mandatory denial of admission if applicant is evicted from 
federally assisted housing for serious lease violations. The provision 
in Sec. 982.552(b) specifying denial of admission if the applicant is 
evicted from federally assisted housing for serious lease violations 
should be stated as a requirement and not a discretionary matter.
    HUD response. Section 982.552.(b)(1) is reserved and a new 
paragraph (c)(1)(ii) is added to permit PHAs to deny admission or 
terminate assistance if any member of the family has been evicted from 
Federally assisted housing in the last five years. This is a change 
from the interim rule, which prohibited admissions of families evicted 
from Federally assisted housing for serious lease violations. HUD may 
review this matter again as it finalizes the pending ``One Strike'' 
regulation.
    Comment: Termination of assistance if participant fails to meet 
welfare-to-work program obligations. HUD should remove 
Sec. 982.552(c)(1)(x), which authorizes PHAs to terminate section 8 
assistance if the family fails to fulfill its obligations under the 
section 8 welfare-to-work voucher program. If HUD

[[Page 56910]]

decides to keep the provision, HUD should, at a minimum, modify the 
rule to require a much higher threshold of improper behavior on the 
part of the family before the family puts its housing assistance in 
jeopardy.
    HUD response. The rule is revised to add requirements to the PHA 
briefing of the family participating in the welfare-to-work voucher 
program, and to the material provided in the family's information 
packet (Sec. 982.301(a) and (b)). Specifically, the PHA must advise 
(both verbally and in writing) the family of the local welfare-to-work 
voucher program family obligations and that failure to meet these 
obligations is grounds for PHA denial of admission or termination of 
assistance.
    HUD is not mandating federal standards for family obligations under 
the welfare-to-work voucher program, since there is local flexibility 
in designing such obligations. The option for PHA termination of 
assistance or denial of admission will permit PHAs to prevent program 
abuse by families that willfully and persistently violate work-related 
obligations under the welfare-to-work voucher program. Of course, the 
PHA must give the family the opportunity for an informal review or 
informal hearing before the PHA denies admission or terminates 
assistance.
    Comment: HUD authority to regulate terminations of assistance. HUD 
has exceeded Congressional authorization in mandating certain required 
grounds for termination. Any required grounds for termination should be 
limited to those which are mandated by Congress.
    HUD response. HUD has authority to define grounds for termination 
of assistance and has done so in a comprehensive manner since 1984.

Section 982.623 Manufactured home space rental: Housing assistance 
payment, Section 888.111 Fair market rents for existing housing: 
Applicability, and Section 888.113 Fair market rents for existing 
housing: Methodology.

    Comment: Housing assistance payment calculation and FMR for 
manufactured home space rentals. HUD should clarify that tenant-paid 
utilities referenced in the regulations are directly related to the 
space (such as water or sewer charges) and not utilities related to the 
unit such as electricity or fuel.
    HUD response. The part 982 regulation refers to the utility 
allowance for tenant-paid utilities. The PHA utility allowance for 
manufactured home space rentals is not limited to the tenant-paid 
utilities directly related to the space rental, such as water and sewer 
expenses. Instead, the utility allowance covers all tenant-paid 
utilities including electricity and gas for the manufactured home.
    Section 888.111 is revised primarily to delete references to the 
certificate program and update the applicability language. Since the 
maximum subsidy now includes utilities for the manufactured home and 
the 1998 Act revised the subsidy formula, Sec. 888.113(e) is revised to 
increase the FMR for a manufactured home space rental from 30 percent 
to 40 percent of the FMR for a two-bedroom unit.

Miscellaneous Comments

    Comment: Applicability of rule to the Shelter Plus Care and Housing 
Opportunities for People with AIDS (HOPWA) programs. Clarification is 
requested concerning whether the requirements of new Housing Choice 
Voucher Program applicable to the tenant-based components of the 
Shelter Plus Care and HOPWA regulations.
    HUD response. Although the regulations for the tenant-based 
components of the Shelter Plus Care and HOPWA Programs are similar to 
the Section 8 tenant-based regulations, a change to part 982 will not 
automatically revise the Shelter Plus Care or HOPWA regulations unless 
the part 982 regulations are incorporated by reference.

III. Findings and Certifications

Paperwork Reduction Act Statement

    The information collection requirements contained in this rule have 
been approved by the Office of Management and Budget (OMB) in 
accordance with the requirements of the Paperwork Reduction Act of 1995 
(44 U.S.C. Chapter 35), and have been assigned OMB Control Number 2577-
0226. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless the 
collection displays a valid control number.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made on the May 14, 1999 interim rule in accordance with HUD 
regulations in 24 CFR part 50 that implement section 102(2)(C) of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4223). The Finding 
is available for public inspection between 7:30 a.m. and 5:30 p.m. 
weekdays in the Office of the Rules Docket Clerk, Office of General 
Counsel, Room 10276, Department of Housing and Urban Development, 451 
Seventh Street, SW, Washington, DC.

Unfunded Mandates Reform Act

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

Executive Order 12866

    The Office of Management and Budget (OMB) reviewed this final rule 
under Executive Order 12866, Regulatory Planning and Review. OMB 
determined that this final rule is a ``significant regulatory action,'' 
as defined in section 3(f) of the Order (although not economically 
significant, as provided in section 3(f)(1) of the Order). Any changes 
made to the final rule subsequent to its submission to OMB are 
identified in the docket file, which is available for public inspection 
in the office of the Department's Rules Docket Clerk, Room 10276, 451 
Seventh Street, SW, Washington, DC 20410-0500.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)) (the RFA), has reviewed and approved this final rule and 
in so doing certifies that this rule would not have a significant 
economic impact on a substantial number of small entities. The final 
rule is exclusively concerned with public housing agencies that 
administer tenant-based housing assistance under Section 8 of the 
United States Housing Act of 1937. Specifically, the final rule would 
establish requirements governing tenant-based assistance for an 
eligible family. The final regulatory amendments would not change the 
amount of funding available under the Section 8 voucher program. 
Accordingly, the economic impact of this rule will not be significant, 
and it will not affect a substantial number of small entities.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official for HUD under 
section 6(a) of Executive Order 12612, Federalism, has determined that 
this rule will not have federalism implications concerning the division 
of local, State, and Federal responsibilities. No programmatic or 
policy change under this rule will affect the relationship between the 
Federal government and State and local governments.

[[Page 56911]]

Catalog of Domestic Assistance Numbers

    The Catalog of Domestic Assistance numbers for the programs 
affected by this final rule are 14.146, 14.147, 14.850, 14.851, 14.852, 
14.855, 14.857, and 15.141.

List of Subjects

24 CFR Part 888

    Grant programs--housing and community development, Rent subsidies.

24 CFR Part 982

    Grant programs--housing and community development, Housing, Rent 
subsidies.

    For the reasons discussed in the preamble, HUD adopts the 
amendments made to 24 CFR parts 248, 791, and 792 in the interim rule 
published on May 14, 1999 at 64 FR 26632 without change, and HUD amends 
24 CFR parts 888 and 982 as follows:

PART 888--SECTION 8 HOUSING ASSISTANCE PAYMENT PROGRAM--FAIR MARKET 
RENTS AND CONTRACT RENT ANNUAL ADJUSTMENT FACTORS

    1. Revise the authority citation for part 888 to read as follows:

    Authority: 42 U.S.C. 1437f and 3535d.

    2. Revise Sec. 888.111 to read as follows:


Sec. 888.111  Fair market rents for existing housing: Applicability.

    (a) The fair market rents (FMRs) for existing housing are 
determined by HUD and are used in the Section 8 Housing Choice Voucher 
Program (``voucher program'') (part 982 of this title), Section 8 
project-based assistance programs and other programs requiring their 
use. In the voucher program, the FMRs are used to determine payment 
standard schedules. In the Section 8 project-based assistance programs, 
the FMRs are used to determine the maximum initial rent (at the 
beginning of the term of a housing assistance payments contract).
    (b) Fair market rent means the rent, including the cost of 
utilities (except telephone), as established by HUD, pursuant to this 
subpart, for units of varying sizes (by number of bedrooms), that must 
be paid in the market area to rent privately owned, existing, decent, 
safe and sanitary rental housing of modest (non-luxury) nature with 
suitable amenities.
    3. In Sec. 888.113, revise paragraph (e) to read as follows:


Sec. 888.113  Fair market rents for existing housing: Methodology.

* * * * *
    (e) Manufactured home space rental. The FMR for a manufactured home 
space rental (for the voucher program under part 982 of this title) is:
    (1) 40 percent of the FMR for a two bedroom unit, or
    (2) When approved by HUD on the basis of survey data submitted in 
public comments, the 40th percentile of the rental distribution of 
manufactured home spaces for the FMR area. HUD accepts public comments 
requesting revision of the proposed manufactured home spaces FMRs for 
areas where space rentals are thought to differ from 40 percent of the 
FMR for a two-bedroom unit. To be considered for approval, the comments 
must contain statistically valid survey data that show the 40th 
percentile manufactured home space rent (including the cost of 
utilities for the manufactured home) for the FMR area. Once approved, 
the revised manufactured home space FMRs establish new base-year 
estimates that will be updated annually using the same data used to 
update the FMRs.
    4. Amend Sec. 982.4 as follows:
    a. In paragraph (b), add, in alphabetical order, definitions of the 
terms ``family rent to owner'', ``utility reimbursement'', and 
``welfare-to-work (WTW) families'';
    b. In paragraph (b), in the definition of ``public housing agency'' 
remove from the end of paragraph (1) of this definition the word ``or'' 
and add in its place the word ``and'', and remove from paragraph (2)(i) 
of this definition the word ``consortia'' and add in its place the word 
``consortium''; and
    c. Revise paragraph (a)(4) of Sec. 982.4 to read as follows:


Sec. 982.4  Definitions.

    (a) * * *
    (4) Definitions concerning family income and rent. The terms 
``adjusted income,'' ``annual income,'' ``extremely low income 
family,'' ``tenant rent,'' ``total tenant payment,'' ``utility 
allowance,'' and ``utility reimbursement'' are defined in part 5, 
subpart F of this title. The definitions of ``tenant rent'' and 
``utility reimbursement'' in part 5, subpart F of this title, apply to 
the certificate program, but do not apply to the tenant-based voucher 
program under part 982.
    (b) * * *
    Family rent to owner. In the voucher program, the portion of rent 
to owner paid by the family. For calculation of family rent to owner, 
see Sec. 982.515(b).
* * * * *
    Utility reimbursement. In the voucher program, the portion of the 
housing assistance payment which exceeds the amount of the rent to 
owner. (See Sec. 982.514(b)). (For the certificate program, ``utility 
reimbursement'' is defined in part 5, subpart F of this title.)
* * * * *
    Welfare-to-work (WTW) families. Families assisted by a PHA with 
voucher funding awarded to the PHA under the HUD welfare-to-work 
voucher program (including any renewal of such WTW funding for the same 
purpose).
    5. Amend Sec. 982.53 as follows:
    a. Revise paragraph (c) as set forth below;
    b. Amend paragraph (d) by revising the reference to ``State law'' 
in the title to read ``State and local law''; and by revising both 
references to ``State laws'' in the rule text to read ``State and local 
laws''.


Sec. 982.53  Equal opportunity requirements.

* * * * *
    (c) Obligation to affirmatively further fair housing. The PHA shall 
affirmatively further fair housing as required by Sec. 903.7(o) of this 
title.
* * * * *
    6. In Sec. 982.54, revise paragraph (b) to read as follows:


Sec. 982.54  Administrative plan.

* * * * *
    (b) The administrative plan must be in accordance with HUD 
regulations and requirements. The administrative plan is a supporting 
document to the PHA plan (part 903 of this title) and must be available 
for public review. The PHA must revise the administrative plan if 
needed to comply with HUD requirements.
* * * * *
    7. Amend Sec. 982.201 as follows:
    a. Revise the section heading and paragraph (b)(2)(i) as set forth 
below;
    b. Redesignate paragraphs (b)(2)(ii) through (iv) as paragraphs 
(b)(2)(iv) through (vi) respectively.
    c. Add new paragraphs (b)(2)(ii) and (iii) as set forth below.
    d. Revise the first sentence of paragraph (b)(2)(vi), as 
redesignated, to read as set forth below:
    e. Add new paragraph (b)(2)(vii) as set forth below.
    f. Revise the last sentence of paragraph (b)(4) to read as set 
forth below:


Sec. 982.201  Eligibility and targeting.

* * * * *
    (b) * * *
    (2) * * *
    (i) Not less than 75 percent of the families admitted to a PHA's 
tenant-

[[Page 56912]]

based voucher program during the PHA fiscal year from the PHA waiting 
list shall be extremely low income families. Annual income of such 
families shall be verified within the period described in paragraph (e) 
of this section.
    (ii) A PHA may admit a lower percent of extremely low income 
families during a PHA fiscal year (than otherwise required under 
paragraph (b)(2)(i) of this section) if HUD approves the use of such 
lower percent by the PHA, in accordance with the PHA plan, based on 
HUD's determination that the following circumstances necessitate use of 
such lower percent by the PHA:
    (A) The PHA has opened its waiting list for a reasonable time for 
admission of extremely low income families residing in the same 
metropolitan statistical area (MSA) or non-metropolitan county, both 
inside and outside the PHA jurisdiction;
    (B) The PHA has provided full public notice of such opening to such 
families, and has conducted outreach and marketing to such families, 
including outreach and marketing to extremely low income families on 
the Section 8 and public housing waiting lists of other PHAs with 
jurisdiction in the same MSA or non-metropolitan county;
    (C) Notwithstanding such actions by the PHA (in accordance with 
paragraphs (b)(2)(ii)(A) and (B) of this section), there are not enough 
extremely low income families on the PHA's waiting list to fill 
available slots in the program during any fiscal year for which use of 
a lower percent is approved by HUD; and
    (D) Admission of the additional very low income families other than 
extremely low income families to the PHA's tenant-based voucher program 
will substantially address worst case housing needs as determined by 
HUD.
    (iii) If approved by HUD, the admission of a portion of very low 
income welfare-to-work (WTW) families that are not extremely low income 
families may be disregarded in determining compliance with the PHA's 
income-targeting obligations under paragraph (b)(2)(i) of this section. 
HUD will grant such approval only if and to the extent that the PHA has 
demonstrated to HUD's satisfaction that compliance with such targeting 
obligations with respect to such portion of WTW families would 
interfere with the objectives of the welfare-to-work voucher program. 
If HUD grants such approval, admission of that portion of WTW families 
is not counted in the base number of families admitted to a PHA's 
tenant-based voucher program during the fiscal year for purposes of 
income targeting.
* * * * *
    (vi) If the jurisdictions of two or more PHAs that administer the 
tenant-based voucher program cover an identical geographic area, such 
PHAs may elect to be treated as a single PHA for purposes of targeting 
under paragraph (b)(2)(i) of this section. * * *
    (vii) If a family initially leases a unit outside the PHA 
jurisdiction under portability procedures at admission to the voucher 
program on or after the merger date, such admission shall be counted 
against the targeting obligation of the initial PHA (unless the 
receiving PHA absorbs the portable family into the receiving PHA 
voucher program from the point of admission).
* * * * *
    (4) * * * At admission, the family may only use the voucher to rent 
a unit in an area where the family is income eligible.
 * * * * *
    8. Amend Sec. 982.207 as follows:
    a. Add paragraph (a)(4) to read as set forth below;
    b. Revise paragraphs (b) and (d) to read as set forth below:


Sec. 982.207  Waiting list: Local preferences in admission to program.

    (a) * * *
    (4) The PHA shall not deny a local preference, nor otherwise 
exclude or penalize a family in admission to the program, solely 
because the family resides in a public housing project. The PHA may 
establish a preference for families residing in public housing who are 
victims of a crime of violence (as defined in 18 U.S.C. 16).
    (b) Particular local preferences. (1) Residency requirements or 
preferences. (i) Residency requirements are prohibited. Although a PHA 
is not prohibited from adopting a residency preference, the PHA may 
only adopt or implement residency preferences in accordance with non-
discrimination and equal opportunity requirements listed at 
Sec. 5.105(a) of this title.
    (ii) A residency preference is a preference for admission of 
persons who reside in a specified geographic area (``residency 
preference area''). A county or municipality may be used as a residency 
preference area. An area smaller than a county or municipality may not 
be used as a residency preference area.
    (iii) Any PHA residency preferences must be included in the 
statement of PHA policies that govern eligibility, selection and 
admission to the program, which is included in the PHA annual plan (or 
supporting documents) pursuant to part 903 of this title. Such policies 
must specify that use of a residency preference will not have the 
purpose or effect of delaying or otherwise denying admission to the 
program based on the race, color, ethnic origin, gender, religion, 
disability, or age of any member of an applicant family.
    (iv) A residency preference must not be based on how long an 
applicant has resided or worked in a residency preference area.
    (v) Applicants who are working or who have been notified that they 
are hired to work in a residency preference area must be treated as 
residents of the residency preference area. The PHA may treat graduates 
of, or active participants in, education and training programs in a 
residency preference area as residents of the residency preference area 
if the education or training program is designed to prepare individuals 
for the job market.
    (2) Preference for working families. The PHA may adopt a preference 
for admission of working families (families where the head, spouse or 
sole member is employed). However, an applicant shall be given the 
benefit of the working family preference if the head and spouse, or 
sole member is age 62 or older, or is a person with disabilities.
    (3) Preference for person with disabilities. The PHA may adopt a 
preference for admission of families that include a person with 
disabilities. However, the PHA may not adopt a preference for admission 
of persons with a specific disability.
    (4) Preference for victims of domestic violence. The PHA should 
consider whether to adopt a local preference for admission of families 
that include victims of domestic violence.
    (5) Preference for single persons who are elderly, displaced, 
homeless or a person with disabilities. The PHA may adopt a preference 
for admission of single persons who are age 62 or older, displaced, 
homeless, or a person with disabilities.
* * * * *
    (d) Preference for higher-income families. The PHA must not select 
families for admission to the program in an order different from the 
order on the waiting list for the purpose of selecting higher income 
families for admission to the program.
* * * * *
    9. In Sec. 982.301, add new paragraph (a)(5) and revise paragraph 
(b)(14) to read as follows:


Sec. 982.301  Information when family is selected.

    (a) * * *

[[Page 56913]]

    (5) In briefing a welfare-to-work family, the PHA must include 
specification of any local obligations of a welfare-to-work family and 
an explanation that failure to meet these obligations is grounds for 
PHA denial of admission or termination of assistance.
* * * * *
    (b) * * *
    (14) Family obligations under the program, including any 
obligations of a welfare-to-work family.
* * * * *
    10. In Sec. 982.303, revise paragraph (b) to read as follows:


Sec. 982.303  Term of voucher.

* * * * *
    (b) Extensions of term. (1) At its discretion, the PHA may grant a 
family one or more extensions of the initial voucher term in accordance 
with PHA policy as described in the PHA administrative plan. Any 
extension of the term is granted by PHA notice to the family.
    (2) If the family needs and requests an extension of the initial 
voucher term as a reasonable accommodation, in accordance with part 8 
of this title, to make the program accessible to a family member who is 
a person with disabilities, the PHA must extend the voucher term up to 
the term reasonably required for that purpose.
* * * * *
    11. Amend Sec. 982.305 as follows:
    a. In paragraph (a)(3), remove the word ``and''.
    b. In paragraph (a)(4), remove the period at the end and insert in 
its place ``; and''.
    c. Add new paragraph (a)(5) to read as follows:


Sec. 982.305  PHA approval of assisted tenancy.

    (a) * * *
    (5) At the time a family initially receives tenant-based assistance 
for occupancy of a dwelling unit, the family share does not exceed 40 
percent of the family's monthly adjusted income.
* * * * *
    12. In Sec. 982.306, revise the section heading, amend the 
introductory paragraph (c)(5) to add the words ``engaged in'' after the 
words ``for activity'' and amend paragraph (d) to add a new final 
sentence to that paragraph to read as follows:


Sec. 982.306  PHA disapproval of owner.

* * * * *
    (d) * * * This restriction against PHA approval of a unit only 
applies at the time a family initially receives tenant-based assistance 
for occupancy of a particular unit, but does not apply to PHA approval 
of a new tenancy with continued tenant-based assistance in the same 
unit.
* * * * *
    13. In Sec. 982.308, revise paragraphs (a), (b), (d), and (f), and 
add new paragraph (g), to read as follows:


Sec. 982.308  Lease and tenancy.

    (a) Tenant's legal capacity. The tenant must have legal capacity to 
enter a lease under State and local law. ``Legal capacity'' means that 
the tenant is bound by the terms of the lease and may enforce the terms 
of the lease against the owner.
    (b) Form of lease. (1) The tenant and the owner must enter a 
written lease for the unit. The lease must be executed by the owner and 
the tenant.
    (2) If the owner uses a standard lease form for rental to 
unassisted tenants in the locality or the premises, the lease must be 
in such standard form (plus the HUD-prescribed tenancy addendum). If 
the owner does not use a standard lease form for rental to unassisted 
tenants, the owner may use another form of lease, such as a PHA model 
lease (including the HUD-prescribed tenancy addendum). The HAP contract 
prescribed by HUD will contain the owner's certification that if the 
owner uses a standard lease form for rental to unassisted tenants, the 
lease is in such standard form.
* * * * *
    (d) Required information. The lease must specify all of the 
following:
    (1) The names of the owner and the tenant;
    (2) The unit rented (address, apartment number, and any other 
information needed to identify the contract unit);
    (3) The term of the lease (initial term and any provisions for 
renewal);
    (4) The amount of the monthly rent to owner; and
    (5) A specification of what utilities and appliances are to be 
supplied by the owner, and what utilities and appliances are to be 
supplied by the family.
* * * * *
    (f) Tenancy addendum. (1) The HAP contract form required by HUD 
shall include an addendum (the ``tenancy addendum''), that sets forth:
    (i) The tenancy requirements for the program (in accordance with 
this section and Secs. 982.309 and 982.310); and
    (ii) The composition of the household as approved by the PHA 
(family members and any PHA-approved live-in aide).
    (2) All provisions in the HUD-required tenancy addendum must be 
added word-for-word to the owner's standard form lease that is used by 
the owner for unassisted tenants. The tenant shall have the right to 
enforce the tenancy addendum against the owner, and the terms of the 
tenancy addendum shall prevail over any other provisions of the lease.
    (g) Changes in lease or rent. (1) If the tenant and the owner agree 
to any changes in the lease, such changes must be in writing, and the 
owner must immediately give the PHA a copy of such changes. The lease, 
including any changes, must be in accordance with the requirements of 
this section.
    (2) In the following cases, tenant-based assistance shall not be 
continued unless the PHA has approved a new tenancy in accordance with 
program requirements and has executed a new HAP contract with the 
owner:
    (i) If there are any changes in lease requirements governing tenant 
or owner responsibilities for utilities or appliances;
    (ii) If there are any changes in lease provisions governing the 
term of the lease;
    (iii) If the family moves to a new unit, even if the unit is in the 
same building or complex.
    (3) PHA approval of the tenancy, and execution of a new HAP 
contract, are not required for changes in the lease other than as 
specified in paragraph (g)(2) of this section.
    (4) The owner must notify the PHA of any changes in the amount of 
the rent to owner at least sixty days before any such changes go into 
effect, and any such changes shall be subject to rent reasonableness 
requirements (see Sec. 982.503).
    14. In Sec. 982.310, paragraph (e)(1)(i) is revised to read as 
follows:


Sec. 982.310  Owner termination of tenancy.

* * * * *
    (e) * * *
    (1) * * *
    (i) The owner must give the tenant a written notice that specifies 
the grounds for termination of tenancy during the term of the lease. 
The tenancy does not terminate before the owner has given this notice, 
and the notice must be given at or before commencement of the eviction 
action.
* * * * *
    15. In Sec. 982.314, paragraph (c)(2)(i) is revised to read as 
follows:


Sec. 982.314  Move with continued tenant-based assistance.

* * * * *
    (c) * * *
    (2) * * *

[[Page 56914]]

    (i) Policies that prohibit any move by the family during the 
initial lease term; and * * * * *
    16. Amend Sec. 982.355 as follows:
    a. Revise the section heading;
    b. In paragraph (c)(9), remove the phrase ``with Sec. 982.552'', 
insert in its place the phrase ``with Secs. 982.552 and Sec. 982.553''; 
and
    c. Add new paragraph (c)(10), to read as follows:


Sec. 982.355  Portability: Administration by receiving PHA.

* * * * *
    (c) * * *
    (10) When the family has a right to lease a unit in the receiving 
PHA jurisdiction under portability procedures in accordance with 
Sec. 982.353(b), the receiving PHA must provide assistance for the 
family. Receiving PHA procedures and preferences for selection among 
eligible applicants do not apply, and the receiving PHA waiting list is 
not used. However, the receiving PHA may deny or terminate assistance 
for family action or inaction in accordance with Secs. 982.552 and 
982.553.
* * * * *


Sec. 982.405  [Amended]

    17. Amend Sec. 982.405 by removing paragraph (f).
    18. In Sec. 982. 451, revise paragraph (b)(5)(ii) to read as 
follows:


Sec. 982.451  Housing assistance payments contract.

* * * * *
    (b) * * *
    (5) * * *
    (ii)(A) The HAP contract shall provide for penalties against the 
PHA for late payment of housing assistance payments due to the owner if 
all the following circumstances apply:
    (1) Such penalties are in accordance with generally accepted 
practices and law, as applicable in the local housing market, governing 
penalties for late payment of rent by a tenant;
    (2) It is the owner's practice to charge such penalties for 
assisted and unassisted tenants; and
    (3) The owner also charges such penalties against the tenant for 
late payment of family rent to owner.
    (B) The PHA is not obligated to pay any late payment penalty if HUD 
determines that late payment by the PHA is due to factors beyond the 
PHA's control. The PHA may add HAP contract provisions which define 
when the housing assistance payment by the PHA is deemed received by 
the owner (e.g., upon mailing by the PHA or actual receipt by the 
owner).
* * * * *
    19. Amend Sec. 982.453, by adding new paragraph (a)(6) to read as 
follows:


Sec. 982.453  Owner breach of contract.

    (a) * * *
    (6) If the owner has committed any violent criminal activity.
* * * * *
    20. Amend Sec. 982.502 by revising the last sentence of paragraph
    (c) and adding paragraphs (c)(1) and (2) to read as follows:


Sec. 982.502  Conversion to voucher program.

* * * * *
    (c) * * * However, before the effective date of the second regular 
reexamination of family income and composition on or after the merger 
date, the payment standard for the family shall be the higher of:
    (1) The initial payment standard for the family at the beginning of 
the HAP contract term; or
    (2) The payment standard for the family as calculated in accordance 
with Sec. 982.505, except that Sec. 982.505(b)(2) shall not be 
applicable.
* * * * *
    21. Amend Sec. 982.503 by revising paragraph (d) and adding a new 
paragraph (e) to read as follows:


Sec. 982.503  Voucher tenancy: Payment standard amount and schedule.

* * * * *
    (d) HUD approval of payment standard amount below the basic range. 
HUD may consider a PHA request for approval to establish a payment 
standard amount that is lower than the basic range. At HUD's sole 
discretion, HUD may approve PHA establishment of a payment standard 
lower than the basic range. In determining whether to approve the PHA 
request, HUD will consider appropriate factors, including rent burden 
of families assisted under the program. HUD will not approve a lower 
payment standard if the family share for more than 40 percent of 
participants in the PHA's voucher program exceeds 30 percent of 
adjusted monthly income. Such determination may be based on the most 
recent examinations of family income.
    (e) HUD review of PHA payment standard schedules. (1) HUD will 
monitor rent burdens of families assisted in a PHA's voucher program. 
HUD will review the PHA's payment standard for a particular unit size 
if HUD finds that 40 percent or more of such families occupying units 
of that unit size currently pay more than 30 percent of adjusted 
monthly income as the family share. Such determination may be based on 
the most recent examinations of family income.
    (2) After such review, HUD may, at its discretion, require the PHA 
to modify payment standard amounts for any unit size on the PHA payment 
standard schedule. HUD may require the PHA to establish an increased 
payment standard amount within the basic range.
    22. Amend Sec. 982.505 as follows:
    a. Amend paragraph (b)(1) by removing the phrase ``payment 
standard'' and inserting instead the phrase ``payment standard for the 
family'';
    b. Revise paragraph (c)(1) introductory text;
    c. Amend paragraph (c)(3) by inserting ``first 24 months of the'' 
after the words ``During the'';
    d. Redesignate paragraph (c)(4) as paragraph (c)(5); and
    e. Add new paragraph (c)(4) to read as follows:


Sec. 982.505  Voucher tenancy: How to calculate housing assistance 
payment.

* * * * *
    (c) * * * (1) The payment standard for the family is the lower of:
* * * * *
    (4) After the first 24 months of the HAP contract term, the payment 
standard for a family is the payment standard as determined in 
accordance with paragraphs (c)(1) and (c)(2) of this section, as 
determined at the effective date of the most recent regular 
reexamination of family income and composition after the beginning of 
the HAP contract term.
* * * * *
    23. Revise Sec. 982.508 to read as follows:


Sec. 982.508  Maximum family share at initial occupancy.

    At the time the PHA approves a tenancy for initial occupancy of a 
dwelling unit by a family with tenant-based assistance under the 
program, the family share must not exceed 40 percent of the family's 
adjusted monthly income. The determination of adjusted monthly income 
must be based on verification information received by the PHA no 
earlier than 60 days before the PHA issues a voucher to the family.


Sec. 982.514  [Amended]

    24. In Sec. 982.514, amend paragraph (b) by inserting the 
parenthetical ``(``utility reimbursement'')'' after the phrase ``the 
balance of the housing assistance payment''.
    25. Amend Sec. 982.515 by revising paragraph (b) and adding a new 
paragraph (c) to read as follows:

[[Page 56915]]

Sec. 982.515  Family share: Family responsibility.

* * * * *
    (b) The family rent to owner is calculated by subtracting the 
amount of the housing assistance payment to the owner from the rent to 
owner.
    (c) The PHA may not use housing assistance payments or other 
program funds (including any administrative fee reserve) to pay any 
part of the family share, including the family rent to owner. Payment 
of the whole family share is the responsibility of the family.
    26. Amend Sec. 982.516 by revising paragraph (a)(1) and by adding 
new paragraph (g) to read as follows:


Sec. 982.516  Family income and composition: Regular and interim 
examinations.

    (a) * * *
    (1) PHA responsibility for reexamination and verification. The PHA 
must conduct a reexamination of family income and composition at least 
annually.
* * * * *
    (g) Execution of release and consent. (1) As a condition of 
admission to or continued assistance under the program, the PHA shall 
require the family head, and such other family members as the PHA 
designates, to execute a HUD-approved release and consent form 
(including any release and consent as required under part 760 of this 
title) authorizing any depository or private source of income, or any 
Federal, State or local agency, to furnish or release to the PHA or HUD 
such information as the PHA or HUD determines to be necessary.
    (2) The PHA and HUD must limit the use or disclosure of information 
obtained from a family or from another source pursuant to this release 
and consent to purposes directly in connection with administration of 
the program.
    27. Amend Sec. 982.552 as follows:
    a. Revise the section heading and remove and reserve paragraph 
(b)(1);
    b. Revise paragraphs (c)(1)(ii) and (c)(1)(x) to read as set forth 
below;
    c. Remove paragraph (c)(3), and revise paragraph (c)(2) to read as 
follows:


Sec. 982.552  PHA denial or termination of assistance for family.

* * * * *
    (c) * * *
    (1) * * *
    (ii) If any member of the family has been evicted from federally 
assisted housing in the last five years;
* * * * *
    (x) If a welfare-to-work (WTW) family fails to fulfill its 
obligations under the welfare-to-work voucher program.
    (2) PHA discretion to consider circumstances. In determining 
whether to deny admission or terminate assistance because of action or 
failure to act by members of the family:
    (i) The PHA has discretion to consider all of the circumstances in 
each case, including the seriousness of the case, the extent of 
participation or culpability of individual family members, mitigating 
circumstances related to the disability of a family member, and the 
effects of denial or termination of assistance on other family members 
who were not involved in the action or failure.
    (ii) The PHA may impose, as a condition of continued assistance for 
other family members, a requirement that other family members who 
participated in or were culpable for the action or failure will not 
reside in the unit. The PHA may permit the other members of a 
participant family to continue receiving assistance.
    (iii) If the family includes a person with disabilities, the PHA 
decision concerning such action is subject to consideration of 
reasonable accommodation in accordance with part 8 of this title.
* * * * *
    28. Amend Sec. 982.623 by revising paragraph (b)(1) to read as 
follows:


Sec. 982.623  Manufactured home space rental: Housing assistance 
payment.

* * * * *
    (b) * * *
    (1) There is a separate fair market rent for a manufactured home 
space. The FMR for a manufactured home space is determined in 
accordance with Sec. 888.113(e) of this title. The FMR for a 
manufactured home space is generally 40 percent of the published FMR 
for a two-bedroom unit.
* * * * *

    Dated: October 14, 1999.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-27519 Filed 10-20-99; 8:45 am]
BILLING CODE 4410-33-P