[Federal Register Volume 65, Number 247 (Friday, December 22, 2000)]
[Rules and Regulations]
[Pages 81214-81229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32550]



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Part VII





Department of Housing and Urban Development





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24 CFR Part 903



Rule to Deconcentrate Poverty and Promote Integration in Public 
Housing; Final Rule

  Federal Register / Vol. 65, No. 247 / Friday, December 22, 2000 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 903

[Docket No. FR-4420-F-10]
RIN 2577-AB89


Rule to Deconcentrate Poverty and Promote Integration in Public 
Housing

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

ACTION: Final rule.

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SUMMARY: This final rule amends HUD's Public Housing Agency Plan 
regulations to fully reflect the importance of deconcentration by 
income and affirmatively furthering fair housing in a PHA's admission 
policy, consistent with the directive to achieve ``One America,'' and 
to provide further direction to PHAs on the implementation of 
deconcentration and affirmatively furthering fair housing. This final 
rule follows publication of an April 17, 2000 proposed rule and takes 
into consideration public comment received on the proposed rule. The 
amendments made by this final rule concerning the deconcentration 
component of a PHA's admission policy are applicable to PHAs with 
fiscal years commencing on and after July 1, 2001.

DATES: January 22, 2001.

FOR FURTHER INFORMATION CONTACT: Rod Solomon, Deputy Assistant 
Secretary, Office of Policy, Program and Legislative Initiatives, 
Office of Public and Indian Housing, Department of Housing and Urban 
Development, 451 Seventh Street, SW, Room 4116, Washington, DC 20410; 
telephone (202) 708-0713 (this is not a toll-free number). Persons with 
hearing or speech impairments may access that number via TTY by calling 
the Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background--April 17, 2000 Proposed Rule

    On April 17, 2000 (65 FR 20686), HUD published a rule that proposed 
to amend the deconcentration provisions of HUD's October 21, 1999 
Public Housing Agency Plan final rule to achieve two purposes: (1) to 
assure that PHAs know what they must do to deconcentrate poverty in the 
public housing program; and (2) to assure that PHAs know what they must 
do to affirmatively further fair housing, as it relates to admissions 
to public housing.
    The approach to deconcentrate property provided in HUD's April 17, 
2000 proposed rule generally would have required public housing 
agencies (PHAs) to determine an overall average income for tenants in 
their family developments; characterize each building as higher income 
or lower income based on whether the average income in the building is 
above or below the overall average; and require that lower income 
families be admitted to higher income buildings and higher income 
families be admitted to lower income buildings.

II. Changes Made at the Final Rule Stage

    As will be discussed in more detail below in Section IV of this 
preamble, HUD received many good suggestions and recommendations on 
modification of HUD's April 17, 2000 proposal and on alternative 
strategies and methods that could be utilized by PHAs to deconcentrate 
poverty in public housing. After careful consideration of all comments, 
this final rule adopts a deconcentration of poverty approach similar to 
that provided in the proposed rule, an approach that focuses on a 
determination of average income, but with some significant changes that 
increase flexibility for PHAs in addressing concentration of poverty 
specific to their communities.
    The approach adopted at this final rule stage is as follows:

Deconcentration of Poverty in Public Housing

Public Housing Developments Exempt from Deconcentration and Income 
Mixing Requirements
    After further consideration of how the deconcentration and income 
mixing provisions would apply to various types of public housing 
developments, HUD determined that certain developments should be exempt 
from the requirement to deconcentrate poverty because of the 
development's resident population, type or types of units, or number of 
units. Public housing developments that are exempt from application of 
the requirement to deconcentrate poverty and mix incomes are the 
following:
     Public housing developments operated by a PHA with fewer 
than 100 public housing units;
     Public housing developments operated by a PHA which house 
only elderly persons or persons with disabilities, or both;
     Public housing developments operated by a PHA that 
operates only one general occupancy, family public housing development;
     Public housing developments approved for demolition or for 
conversion to tenant-based assistance; and
     Public housing developments which include public housing 
units operated in accordance with a HUD-approved mixed-finance plan 
using HOPE VI or public housing funds awarded before the effective date 
of this rule, provided that the PHA certifies (and includes reasons for 
the certification) as part of its PHA Plan (which may be accomplished 
either in the annual Plan submission or as a significant amendment to 
its PHA Plan) that exemption from the regulation is necessary to honor 
an existing contractual agreement or be consistent with a mixed finance 
plan, including provisions regarding the incomes of public housing 
residents to be admitted to that development, which has been developed 
in consultation with residents with rights to live at the affected 
development and other interested persons.
    Analyzing Concentration of Poverty as Part of PHA Annual Planning 
Process. The final rule clarifies that as part of a PHA's annual 
planning process, a PHA must submit with its Annual Plan an admissions 
policy designed to provide for deconcentration of poverty and income-
mixing by bringing higher income tenants into lower income developments 
and lower income tenants into higher income developments. To comply 
with this statutory requirement, the rule provides that a PHA must 
conduct an analysis of the incomes of the families residing in public 
housing developments that are subject to the requirement to 
deconcentrate poverty. Public housing developments that are subject to 
the requirement to deconcentrate poverty are general occupancy, family 
public housing developments, excluding those developments, identified 
earlier in this preamble, as being exempt from the requirement, and are 
referred to as ``covered developments.''
    Promoting Deconcentration of Poverty and Income Mixing in 
Developments with Concentration of Poverty. To meet the statutory 
requirement to develop an admissions policy designed to provide for 
deconcentration of poverty and income mixing in covered developments 
identified to have a concentration of poverty, the rule provides for a 
PHA to undertake the following steps.
    Step 1--Determine Average Income of All Families Residing in All 
Covered Developments. For Step 1, a PHA shall determine the average 
income of all families residing in all covered developments. A PHA may 
use median incomes, instead of average income,

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provided that the PHA includes a written explanation in its PHA Annual 
Plan justifying use of median incomes in the PHA's Annual Plan.
    Step 2--Determine Average Income of Families in Each Covered 
Development. For Step 2, a PHA shall determine the average income of 
all families residing in each covered development. In determining 
average income for each development, a PHA has the option of adjusting 
its income analysis for unit size in accordance with procedures 
prescribed by HUD. The range of incomes calculated by a PHA using this 
method is referred to as the Established Income Range.
    Step 3--Determining Which Developments Are Outside the Established 
Income Range. For Step 3, a PHA shall determine whether each of its 
covered developments falls above, within or below the Established 
Income Range, which is defined as those covered developments where the 
average income is between 85 percent and 115 percent (inclusive of 
those percentages) of the PHA-wide average for covered developments.
    Step 4--Option to Provide Reasons Developments Are Outside of the 
Established Income Range. For Step 4, a PHA which has covered housing 
developments with average incomes outside the Established Income Range 
may explain or justify the development income profile for these 
developments as being consistent with and furthering both the goals of 
deconcentration as specified by the statute (bringing higher income 
tenants into lower income developments and vice versa) and the local 
goals and strategies contained in the PHA Annual Plan. Elements of 
explanations or justifications that may satisfy these requirements may 
include, but shall not be limited to the following:
    (1) The covered development or developments are subject to consent 
decrees or other resident selection and admission plans mandated by 
court action;
    (2) The covered development or developments are part of the PHA's 
programs, strategies or activities specifically authorized by statute, 
such as mixed-income or mixed-finance developments, homeownership 
programs, self-sufficiency strategies, or other strategies designed to 
deconcentrate poverty, promote income mixing in public housing, or 
increase the incomes of public housing residents, or the income mix is 
otherwise subject to individual review and approval by HUD;
    (3) The covered development's or developments' size, location and/
or configuration promote income deconcentration, such as scattered site 
or small developments;
    (4) The income characteristics of the covered development or 
developments are explained by other circumstances.
    Step 5--Policy for Deconcentrating Poverty and Income Mixing in 
Developments Outside the Established Income Range. Where the income 
profile for a covered development is not sufficiently explained or 
justified in the PHA Annual Plan submission, the PHA shall include in 
its admissions policy specific strategies to promote deconcentration of 
poverty and income mixing in such covered development. Compliance with 
the statutory deconcentration requirement is not intended to impair or 
adversely affect the PHA's ability to exercise the authority to 
institute or implement other provisions in the statute such as local 
preferences or site-based waiting lists. Depending on local 
circumstances, a PHA's deconcentration strategy, included as part of 
the PHA's admissions policy (which may be undertaken in conjunction 
with other efforts such as efforts to increase self-sufficiency or 
current residents), may include but is not limited to one or more of 
the following:
    (1) Providing incentives designed to encourage families with 
incomes below the Established Income Range to accept units in 
developments with incomes above the Established Income Range or the 
reverse situation--to encourage families with incomes above the 
Established Income Range to accept units in developments with incomes 
below the Established Income Range. Incentives include rent incentives, 
affirmative marketing plans, or added amenities;
    (2) Targeting investment and capital improvements toward 
developments with an average income below the Established Income Range 
to encourage applicant families whose income is above the Established 
Income Range to accept units in those developments;
    (3) A preference for admission of working families in developments 
below the Established Income Range;
    (4) PHAs may skip a family on the waiting list to reach another 
family in an effort to further the goals of the PHA's deconcentration 
policy. Skipping to promote deconcentration shall not be considered an 
adverse action;
    (5) Other strategies as permitted by statute and determined by the 
PHA in consultation with the residents and the community, through the 
PHA Annual Plan process, to be responsive to the local context and the 
PHA's strategic objectives.
    Consistent with the Public Housing Reform Act, a PHA's admissions 
policy and any specific deconcentration strategies that are part of the 
admissions policy may not impose or require any specific income or 
racial quotas for any developments.
    Determining Compliance with Deconcentration and Income Mixing 
Requirements. HUD shall consider a PHA to be in compliance with the 
deconcentration requirements if:
    (1) The PHA's income analysis shows that the PHA has no general 
occupancy family developments to which the deconcentration requirements 
apply--that is the average incomes of the covered development are 
within the Established Income Range;
    (2) The PHA has covered developments with average incomes above or 
below the Established Income Range and the PHA provides a sufficient 
explanation in its Annual Plan that supports that (1) the income mix is 
consistent with the requirements for deconcentration of poverty and 
income mixing, despite the categorization of the covered developments 
as above and below the Established Income Range, and (ii) the income 
mix of such development or developments is consistent with and furthers 
the locally determined goals of the PHA's Annual and Five Year Plans; 
or
    (3) The PHA incorporates in its admissions policy, specific 
strategies the PHA will take that can be expected to promote 
deconcentration of poverty and income mixing in developments with 
average incomes outside of the Established Income Range and implements 
this admissions policy.
Fair Housing Regional Approaches and Voucher Housing Search Assistance
    The final rule does not contain any changes from the proposed rule 
with respect to fair housing requirements. HUD, nevertheless, is taking 
this opportunity to emphasize the potential importance of regional 
approaches as PHAs pursue their responsibilities to affirmatively 
further fair housing, pursue deconcentration of poverty and attempt to 
offer their families maximum housing choices. In many urban areas, the 
limited jurisdictions of individual PHAs and these PHAs' individual 
waiting lists, forms and rules may limit to the extent to which 
families move across PHA lines even when there are work or school-
related reasons to do so. PHAs can and should address these issues 
through measures such as providing lists of other public housing 
agencies and federally assisted housing in the metropolitan area and 
participating in regional counseling and

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mobility efforts to assist voucher holders.
    With respect to voucher holders, housing counseling and 
transportation assistance may help accomplish these goals and 
contribute to voucher holders' success. Such expenses are eligible 
voucher administrative fee expenses. In addition, HUD may allow PHAs to 
convert voucher program funds to administrative fees for this purpose 
where the PHA shows that these expenditures will not reduce the number 
of families that otherwise would receive and successfully use vouchers 
in that fiscal year. HUD will issue further guidance on this matter by 
January 15, 2001.

III. Implementation of Amended Deconcentration and Income Mixing 
Requirements

    The amendments made by this final rule concerning the 
deconcentration component of a PHA's admission policy are applicable to 
PHAs with fiscal years commencing on and after July 1, 2001.

IV. Public Comments on the April 17, 2000 Proposed Rule

    The public comment period for the April 17, 2000 proposed rule, 
closed on June 1, 2000, and at the end of the comment period, HUD 
received 193 public comments. In this section of the preamble, HUD 
provides a summary of the public comments and HUD's responses to issues 
or questions raised by the commenters. The heading ``Comment'' states 
the comment made by a commenter or commenters and the heading 
``Response'' presents HUD's response to the issue or issues raised by 
the commenter or commenters.
    Comment: The final rule should provide an exemption for high 
performing PHAs and certain standard performing PHAs. By exempting high 
performing and certain standard performing PHAs, HUD will be following 
the statutory and regulatory scheme of rewarding high performing and 
standard performing PHAs for managing all aspects of their programs, 
including deconcentration goals, in an effective manner.
    Response. HUD's Public Housing Assessment System, the system by 
which PHAs are determined to be high performing, standard or troubled 
agencies, does not assess the concentration of poverty in PHA 
developments. Since this factor is not assessed as part of a PHA's 
management of a development, an exemption on this basis would not be 
appropriate.
    Comment: The rule should focus on neighborhoods not just 
developments. HUD should concentrate on assisting localities to improve 
their housing stock (housing production and neighborhood improvement) 
in entire neighborhoods, as incentives to attract higher-income people. 
The rule should not just focus on developments within a neighborhood.
    Response. The Public Housing Reform Act, in amending the U.S. 
Housing Act of 1937, requires HUD to focus on income concentration in 
buildings and developments. Paragraph (3)(B)(i) of section 16 of the 
U.S. Housing Act of 1937, captioned ``Prohibition of Concentration of 
Low-Income Families'' provides in relevant part as follows:

    A public housing agency shall submit with its annual public 
housing agency plan under section 5A an admissions policy designed 
to provide for deconcentration of poverty and income -mixing by 
bringing higher income tenants into lower income projects and lower 
income tenants into higher income projects. Although the Public 
Housing Reform Act requires a focus on income

concentration in public housing developments, HUD recognizes that 
efforts directed solely to the income makeup of a housing development 
may not succeed in achieving deconcentration. Under its HOPE VI 
Program, HUD has been successful in transforming entire neighborhoods, 
including the physical structures of public housing. Under HUD's mixed-
finance programs, PHAs can leverage private capital with HUD funding 
and create mixed-income communities. Recently, HUD published its 
interim rule implementing a new Fair Market Rents policy that HUD 
anticipates will also assist in promoting deconcentration of poverty. 
HUD is working with its PHA partners to confront the problem of 
concentration of poverty through several approaches.
    Comment: The goal of deconcentration is best achieved by 
emphasizing economic development activities. Rather than the approach 
advocated by the proposed rule, deconcentration is best achieved by 
emphasizing such approaches as mobility counseling, incentives for the 
development of regional strategies and the general support of economic 
development activities. Promoting integration regionally can help 
alleviate economic disparities among cities and their suburban 
counterparts.
    Response: As noted in the response to the earlier comment, HUD 
agrees that concentration of poverty should be addressed through 
several approaches. With respect to the approaches recommended by the 
commenter, HUD has been working with its PHA partners to provide 
mobility counseling to applicants, landlord outreach and other steps to 
increase housing choice in the voucher program and promote racial and 
economic deconcentration.
    Comment: HUD's proposed rule contradicts the intent of the Public 
Housing Reform Act which is to deregulate public housing and give PHAs 
more flexibility. The intent of the Public Housing Reform Act is to 
give PHAs the flexibility to fashion independent and localized economic 
development strategies. HUD's April 17, 2000 proposed rule is in direct 
conflict with statutory intent by mandating a certain approach to 
deconcentration of poverty. Congress gave PHAs, not HUD, the discretion 
to adopt deconcentration strategies.
    HUD Response. HUD has provided increased flexibility for PHAs to 
develop more localized strategies to deconcentrate poverty.
    Comment: A deconcentration of poverty approach that focuses on 
buildings, not developments, conflicts with the statute, causes 
significant administrative difficulties, and adversely affects use of 
site-based waiting lists. The proposed rule conflicts with the statute 
because the proposed rule requires deconcentration on a building-by-
building basis, while the statute requires deconcentration on a 
``project'' basis. A building-by-building approach creates significant 
administrative difficulties. Managing individual waiting lists for each 
building will require PHAs to hire additional staff to track income 
information by building.
    Response. HUD believes that in including an income analysis of 
buildings, HUD's April 17, 2000 proposed rule was not in conflict with 
the statute. The statute speaks in terms of buildings and developments. 
However, as discussed in Section II of this preamble, the rule was 
revised at the final rule stage to address only developments.
    Comment: The deconcentration of income requirement appears to be in 
conflict with the income targeting requirement. There will most likely 
be conflicts in some situations between the income targeting 
requirement and the deconcentration requirement because income 
targeting dictates that a PHA target 40 percent of new admissions at 
the 30 percent or less area median income level, and the 
deconcentration policy may dictate that a higher income household be 
placed in a vacant unit. At the final rule stage, HUD must clarify how 
a PHA is to comply with both the deconcentration of income requirement 
and the income targeting requirement.
    HUD Response. These two requirements were established to work

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in support of one another. Congress established the deconcentration 
requirement to assure that the extremely low-income families targeted 
by PHAs under the income targeting requirement or otherwise admitted to 
public housing are not concentrated in one or more developments.
    Comment: Skipping over lower income families to offer units to 
higher income families is unfair and would harm those persons that 
badly need affordable housing. Skipping may adversely affect applicants 
who have been on the waiting list a long time and desperately need 
affordable housing. Skipping will either have the effect of denying 
these longterm applicants housing or significantly delaying their 
admission to housing. Skipping may also have the effect of denying very 
low-income applicants the opportunities to participate in self-
sufficiency programs offered by PHAs. Skipping should only be used 
where there is a significant difference in incomes among residents, 
which is not the case in the majority of public housing developments.
    HUD Response. HUD understands the concerns about skipping but also 
recognizes that skipping may be needed by a PHA to achieve the 
objectives of deconcentration without adversely affecting the family or 
families skipped. Any local preference system involves skipping from 
the order otherwise required by a waiting list organized by date of 
application. In that respect, skipping to achieve deconcentration goals 
is the same.
    Comment: HUD's proposed rule exceeds statutory authority by using 
race and income as measures of compliance with the deconcentration 
requirement. The provisions in the proposed rule regarding 
deconcentration of income are the only provisions derived from the 
Public Housing Reform Act. References in HUD's proposed rule to racial 
concentrations in public housing are subject to the provisions of the 
Fair Housing Act and various civil rights laws, not the Public Housing 
Reform Act. In view of the statute's permissive language regarding the 
measures a PHA may utilize to achieve deconcentration, as well as the 
specific statutory prohibition against income or racial quotas in the 
implementation of deconcentration policies, HUD's proposed rule, by 
including provisions to address racial concentration, is not consistent 
with the clear intent of the Public Housing Reform Act.
    HUD Response. The provisions in the rule that address compliance 
with the deconcentration of poverty requirement of the Public Housing 
Reform Act are limited to a discussion of income deconcentration. There 
is no discussion of racial concentration in these provisions. However, 
in the proposed rule and this final rule, HUD does remind PHAs of their 
responsibilities under the Fair Housing Act, and their responsibilities 
to affirmatively further fair housing, and provides guidance on how 
this obligation to affirmatively further fair housing may be carried 
out.
    Implementation of the deconcentration of poverty requirement of the 
Public Housing Reform Act does not preclude HUD from including in this 
rule provisions or references to requirements imposed on PHAs by other 
statutes or regulations. Further, section 511(d)(15) of the Public 
Housing Reform Act (section 5A(d)(15) of the U.S. Housing Act), which 
establishes the PHA Plan, requires a PHA to certify that it will carry 
out its PHA Plan in conformity with the Fair Housing Act and other 
nondiscrimination statutes and that it will affirmatively further fair 
housing. This is the first time the PHAs have been required explicitly 
by statute to comply with the affirmatively further fair housing 
requirement. Part of the PHA's Annual Plan is the PHA's admissions 
policy. HUD's rule properly addresses compliance with the statutory 
deconcentration requirement and the statutory nondiscrimination 
requirements.
    Comment: HUD should clarify that the provisions in the rule 
concerning affirmatively further fair housing are applicable to 
admissions. In the preamble to the proposed rule, HUD clearly states 
that the rule is issued to fully reflect the importance of 
deconcentration by income as well as the importance of affirmatively 
furthering fair housing in a PHA's admission policy. The ``purpose'' 
section of the rule, Sec. 903.1, however, inadvertently omits reference 
to affirmatively furthering fair housing ``in admissions.'' This 
section simply refers to a PHA's responsibility to affirmatively 
further fair housing. Because this section is directed towards a PHA's 
admissions policy, which includes a deconcentration policy, the phrase 
``in admissions'' must follow the phrase ``to affirmatively further 
fair housing'' for clarity purposes.
    HUD Response. HUD agrees with the commenter and has added this 
language to Sec. 903.1.
    Comment: The final rule should require specific deconcentration 
steps to affirmatively further fair housing. A PHA should be required 
to certify that it will use deconcentration steps that the PHA has 
specifically identified and other actions as appropriate in order to 
meet its obligation to affirmatively further fair housing. The final 
rule should include specific performance criteria that will measure a 
PHA's progress toward achieving deconcentration and desegregation 
goals.
    HUD Response. HUD believes that its provisions in the rule, which 
are unchanged from the proposed rule stage, strike the appropriate 
balance of clarifying a PHA's obligation to affirmatively further fair 
housing and providing guidance on how such obligation may be carried 
out by PHAs.
    Comment: HUD oversteps its authority with the affirmatively 
furthering fair housing requirement imposed on PHAs in this rule. HUD's 
affirmatively furthering fair housing requirement seeks to create a new 
fair housing enforcement mechanism whereby HUD may challenge a PHA's 
civil rights certification if HUD believes that the PHA is not 
achieving the desired outcomes of its deconcentration policy. PHAs are 
committed to ensuring against discrimination in housing and 
guaranteeing equal opportunity and meaningful choice in carrying out 
their mission. PHAs have no legal duty to take undefined steps to 
affirmatively furthering fair housing.
    HUD Response. As noted in an earlier response, the Public Housing 
Reform Act requires a PHA to include with its Annual Plan a 
certification that the PHA will carry out its PHA plan in conformity 
with certain nondiscrimination statutes, including the Fair Housing 
Act, and will affirmatively further fair housing. In view of this 
certification, which can be challenged, HUD has an obligation to 
provide PHAs with guidance on the types of actions that will be 
recognized as actions to affirmatively further fair housing.
    Comment: PHAs should not be penalized if racial concentration in 
their developments mirror that of the surrounding community. PHAs 
should not be found to have discriminated on the basis of race if the 
racial and ethnic characteristics of the PHA's development mirror that 
of the surrounding community. Before HUD challenges a civil rights 
certification, HUD should have documented evidence that a PHA is not in 
compliance with its certification and representations to HUD.
    HUD Response. To determine if PHAs are complying with their 
obligation to affirmatively further fair housing, HUD does not assess a 
PHA on the racial makeup of its developments. A PHA is assessed by the 
actions taken to offer housing choice or incentives that make

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a particular development more attractive, or to engage in marketing 
efforts that are designed to reduce racial concentration, to name a few 
examples from the rule. A HUD challenge to a civil rights certification 
will be based on documented evidence that a PHA is not affirmatively 
furthering fair housing or the PHA is not in compliance with civil 
rights statutes, contrary to what the PHA has certified.
    Comment: HUD should not implement any deconcentration requirement 
until the Multifamily Tenants Characteristics System (MTCS) can provide 
accurate information on average tenant income for each family 
development. Using MTCS data to compare each PHA development with the 
corresponding authority-wide average would assist in the determination 
of a standard income deviation from the overall norm. Developments 
within the standard deviation would not be subject to deconcentration 
efforts. However, using current MTCS data to determine poverty 
concentrations would not work because MTCS does not separate data when 
a PHA has, for instance, an elderly high-rise and a townhouse 
development under the same HUD project number. MTCS does not aggregate 
data if, for instance, townhouses have three different HUD project 
numbers because they were built under three different development 
budgets. There is also a problem with MTCS in that income amounts shown 
on MTCS reports reflect only income used in rent calculations, 
exclusive of income disregard as new earned income, non-reportable 
income or earnings excluded under Jobs-Plus.
    HUD Response. The analysis to be done by PHAs to be in compliance 
with the statutory requirement to deconcentrate poverty is not 
dependent upon the MTCS data system, but HUD recognizes that this 
system would facilitate the PHA's analysis. HUD has worked to correct 
problems with MTCS and is continuing to work with PHAs to increase the 
level of reporting.
    Comment: HUD's proposal to deconcentrate poverty without 
modifications will not achieve the desired result. There are other 
approaches to deconcentration that can be implemented more simply and 
successfully than HUD's approach. The comments that HUD received on its 
proposal to deconcentrate poverty ranged from a request to withdraw the 
entire proposal to proceeding with the proposal as is. The majority of 
the comments, however, stated that HUD's proposal was complicated and 
would not achieve deconcentration of poverty in concentrated areas. 
Many commenters offered suggestions on how HUD's proposal could be 
improved and recommended certain modifications to the proposal. Other 
commenters suggested alternative methods to deconcentrate poverty. All 
the suggestions and recommendations were carefully considered and 
Section II of this preamble reflects the recommendations that were 
adopted at this final rule stage.
    In this preamble, HUD does not provide the details of all 
recommendations for changes to its own proposal or the details of all 
the alternative deconcentration methods that were suggested, but the 
following provides an overview of the comments and critiques of HUD's 
proposal to deconcentrate poverty, as provided in the April 17, 2000 
proposed rule, as well as an overview of alternative deconcentration 
approaches (HUD recognizes that there is overlap in these two 
categories).
    Overview of comments on HUD's proposal to deconcentrate poverty. 
The deconcentration of poverty approach proposed by HUD is complex and 
will be difficult to administer. HUD's proposal does not include self-
sufficiency strategies which are crucial to improving the income of 
residents and thereby helping to promote deconcentration. HUD's 
proposal is too vague and imprecise to achieve the objectives of 
deconcentration, and may in fact cause a higher concentration of 
poverty. HUD's proposal will result in longer waiting lists for 
housing. HUD's proposal does not take into account that some housing 
authorities do not have large waiting lists from which to select 
tenants. HUD's proposal does not focus sufficiently on incentives; the 
statute encourages incentives to achieve deconcentration. HUD's 
proposal prevents PHAs from fully implementing local preferences as 
provided by the Public Housing Reform Act. HUD's proposal has the 
effect of reinstituting Federal preferences that were eliminated by the 
Public Housing Reform Act. HUD's proposal exceeds statutory authority 
by requiring PHAs to use ``skipping'' for the purpose of 
deconcentration while the Public Housing Reform Act allows, but does 
not require, PHAs to use skipping. HUD's proposal will have the effect 
of creating income and racial quotas, which is prohibited by the Public 
Housing Reform Act. HUD's proposal will adversely affect PHAs' Family 
Self-Sufficiency programs where certain developments have been 
designated for occupancy by FSS families only. HUD's proposal will 
undermine HOPE VI programs because most of all the HOPE VI buildings 
would be classified as above income and therefore target only below-
average income families. HUD's proposal will only result in the 
labeling of developments and income steering that HUD has worked so 
hard in the past to eliminate. HUD's proposal provides no guidance 
concerning the length of time that deconcentration procedures must be 
followed; in other words, the proposal does not specify how many offers 
to higher income families must be made before a unit can be offered to 
a lower income family. Without clear direction in the rule, units could 
remain vacant for months. Additionally, the delays in filling units 
could negatively affect a PHA's PHAS score. HUD's deconcentration 
approach does not address the issue of the proximity of buildings in 
public housing developments; deconcentration will not be achieved if 
the buildings are in close proximity to one another. HUD's 
deconcentration approach does not address the issue of buildings that 
are located in concentrated poverty neighborhoods. HUD's definition of 
``building'' as one or more contiguous structures containing at least 8 
public housing units is not clear and requires further elaboration 
(e.g., what is meant by contiguous; does building mean 8 units in total 
or 8 units in each structure). HUD's deconcentration approach does not 
take into consideration the impact on elderly persons or persons with 
disabilities. HUD's definition of building presents too small a 
structure for deconcentration and would create an administrative burden 
for PHAs. How does a PHA address deconcentration in the context of a 
situation where the majority of the PHA's residents are low income 
elderly persons or persons with disabilities. Generally, elderly 
persons, as a result of social security income, are higher income 
tenants, buildings occupied predominately by the elderly will be 
classified as higher income, and elderly persons on the waiting list 
may be skipped over for units in an elderly building. HUD's 
deconcentration approach is costly. The delay in filling vacancies 
which will result if this approach is implemented will adversely affect 
a PHA's revenues. HUD needs to clarify what it means by higher income 
families. HUD's proposal will have a detrimental impact on PHA's 
voluntary transfer policies. HUD's proposal does not take into account 
the source of a family's income. The rule should distinguish between 
earned income and assistance. HUD's proposal conflicts with the policy 
goals of HOPE VI and mixed finance developments.

[[Page 81219]]

    Overview of comments proposing alternative approaches to 
deconcentrate poverty. HUD should adhere to the deconcentration 
approach that was in the final PHA Plan rule published on October 21, 
1999. The October 21, 1999 final rule provided a reasonable approach 
and adequate guidance concerning deconcentration and income mixing by 
PHAs. The appropriate deconcentration approach is a PHA specific 
approach where each PHA establishes its own goals and specific plans to 
reach those goals. It is virtually impossible for HUD to develop a 
deconcentration policy that will address all of the variables found in 
all PHAs' jurisdictions. A deconcentration policy must be left to the 
PHAs to develop locally. Deconcentration methods should include 
incentives such as flat rents and ceiling rents, lowering the 
percentage of adjusted income that goes for rent from 30 percent to 25 
percent and income deductions (e.g., for transportation, uniforms, 
etc.) for working families. A suitable deconcentration approach would 
be one that provides for PHAs to set separate goals for three 
categories of developments: (1) developments in poverty areas; (2) 
developments well outside of poverty areas, and (3) developments that 
fall in between. The deconcentration approach that HUD noted in its 
April 17, 2000 proposed rule was an approach that HUD considered but 
did not adopt, is preferable to the approach that HUD proposed in the 
April 17, 2000 rule. The second approach (not adopted) allows PHAs to 
concentrate limited resources on areas with the greatest need of 
deconcentration. The final rule should offer an option of 
deconcentration methods from which PHAs may choose and also allow PHAs 
to design their own method. Any deconcentration approach should exempt 
tenant assignment and selection plans that are required by court order. 
Deconcentration should be implemented through a ``metropolitan'' 
directive issued to PHAs and that focuses on creating affordable rental 
housing opportunities in entire metropolitan areas. Properties located 
in high poverty neighborhoods that have yet to undergo revitalization 
should be exempted from the requirement to deconcentrate pending a site 
or neighborhood redevelopment plan. Deconcentration methods should 
focus on strategies to improve the incomes of current tenants, such as 
targeted workforce development programs or more vigorous implementation 
of section 3.\1\ Any deconcentration approach should exempt 
developments that are occupied by elderly persons or persons with 
disabilities. To include special populations as part of a 
deconcentration strategy will negatively affect the ability of a PHA to 
implement a designated housing plan. An effective deconcentration 
approach is one that encourages and promotes the development of public 
housing in non-concentrated areas. Small and medium-sized developments 
should be exempt from the deconcentration requirement. Small PHAs (PHAs 
with less than 250 units) should be exempt from the deconcentration 
requirement; the purpose of deconcentration is to address the poverty 
concentration problems of large urban housing authorities. PHAs with 
small scattered sites (less than 50 units per development) should be 
exempt from the deconcentration requirement. All scattered site 
developments should be exempt from the deconcentration requirement 
because the very nature of a scattered site program is to achieve 
deconcentration. PHAs with one development and one building should be 
exempt from the deconcentration requirement. For developments located 
in Empowerment Zones or in census tracts that qualify for Empowerment 
Zone status, a PHA should be allowed to skip over lower income 
applicants to reach higher income applicants at any and all complexes 
located in these areas. Moving to Work and the Jobs Plus demonstration 
programs should be exempt from the requirement to deconcentrate poverty 
because these programs are already designed to promote increased 
diversity of income among residents. The term ``general occupancy 
public housing development'' and ``general occupancy development 
building'' when used in reference to the determination of average 
income, should be defined to include buildings or developments with 
family units and should exclude buildings or developments that are 
serving exclusively the elderly, persons with disabilities or a 
combination of the elderly and persons with disabilities. An effective 
deconcentration approach should address adjustments in average income 
by family size and number of bedrooms. Families residing in 
developments approved for demolition or conversion for tenant-based 
assistance should be excluded from the average-income calculation. A 
deconcentration approach should not be dependent solely upon an 
analysis of average incomes, but rather PHAs should be allowed to use 
median incomes, census tract incomes, average incomes with standard 
deviations or other income analyses. An effective deconcentration 
approach should be based on thresholds that are a certain percentage of 
median income and significantly different from a PHA's average income 
(e.g., 25 percent or 50 percent) so that income mixing can actually be 
achieved. Average income should be determined by site, not by 
development or building. There needs to be a middle tier of buildings 
that are neither higher nor lower income to which a deconcentration 
policy would not apply. A PHA's deconcentration policy should consist 
of a certification by the PHA that it has complied with the 40 percent/
30 percent income targeting requirement.
---------------------------------------------------------------------------

    \1\ Section 3 refers to section 3 of the Housing and Urban 
Development Act of 1968 which requires, among other things, 
recipients of certain HUD assistance, including public housing 
assistance, to ensure that, to the greatest extent feasible, 
training, employment and other economic opportunities will be 
directed to low- and very low-income persons, particularly those who 
are recipients of government assistance for housing.
---------------------------------------------------------------------------

    HUD Response. Again, HUD appreciates all the suggestions and 
recommendations on how deconcentration of poverty may be achieved in 
public housing. Section II of this preamble, which describes the 
changes made at the final rule stage reflects the suggestions and 
recommendations offered by the commenters that HUD has adopted.
    HUD is retaining the requirement that the PHAs determine the 
average incomes of all families residing the public housing 
developments that are not exempt and subject to the deconcentration of 
poverty requirement (the covered developments). To design a policy, as 
required by the Public Housing Reform Act, that requires bringing 
higher income tenants in to lower income developments and lower income 
tenants into higher income developments, necessitates an analysis by 
the PHAs of the income characteristics of their developments. The final 
rule, however, provides for exempted middle tiers of developments and 
for various other exceptions. The final rule also allows PHAs more 
flexibility in developing specific actions for covered developments 
that the PHA believes will achieve deconcentration of poverty for those 
developments.
    Comment: Skipping over families on the waiting list appears to 
violate Fair Housing Act requirements. Because of the correlation 
between income and race in most of the country's developments, the 
impact of this rule would be felt disproportionately by minority 
households which will be denied

[[Page 81220]]

housing for no other reason than that the available units are in lower 
income buildings.
    HUD Response. Skipping is permitted by both the Public Housing 
Reform Act and this rule; skipping is not in violation of Fair Housing 
Act requirements provided it is uniformly applied by the PHA. If 
skipping is not applied in an objective and uniform manner by a PHA, 
then the PHA may be vulnerable to a charge of violation of Fair Housing 
Act requirements. The circumstances under which a PHA will skip a 
family to achieve deconcentration of poverty should be specified in the 
PHA's deconcentration policy. Skipping is permitted but not required 
and will occur less frequently because of the additional flexibility in 
the final rule.
    Comment: Deconcentration can be achieved by HUD identifying problem 
developments and requiring corrective action. MTCS data contains all 
relevant information for HUD to comply with the statutory requirement 
that the Secretary review the income and occupancy characteristics of 
public housing developments. Once it is determined that there are 
violations then the Secretary has the authority to require appropriate 
corrective action. This is the best strategy to address the perceived 
income concentration problem.
    HUD Response. The statutory requirement to deconcentrate poverty 
does not impose an obligation only on HUD to review the income and 
occupancy characteristics of public housing developments. The statute 
requires a PHA to include as part of the PHA's Annual Plan submission 
an admissions policy designed to provide for deconcentration of poverty 
and income-mixing by bringing higher income tenants into lower income 
developments and vice versa. The statute envisions a preventive 
approach, not simply a corrective approach. The purpose of HUD's rule 
is to help PHAs achieve a successful preventive approach to poverty 
concentration. Moreover, under this final rule only those general 
occupancy developments with average incomes significantly above or 
below the PHA average must be addressed.
    Comment: HUD's final rule should clarify that it does not apply to 
State Housing Finance Agencies (HFAs) and other similar state housing 
agencies. The rule is ambiguous as to whether it applies to state HFAs. 
The rule should be rewritten to provide a clear exemption for statewide 
agencies, such as state HFAs.
    HUD Response. The deconcentration provisions do not apply to 
statewide agencies except to the extent that they are operating public 
housing; they apply to all public housing except for those developments 
exempted by the deconcentration provisions. In all the rulemaking 
stages of the PHA Plan rule, this is the first time this question has 
been raised. HUD believes that this is clear, and no additional 
statement is needed in the rule.
    Comment: Is deconcentration applicable to a public housing 
development undergoing modernization? HUD needs to clarify at the final 
rule stage whether the requirement to deconcentrate is applicable to a 
development undergoing modernization which requires the residents to be 
relocated to other developments.
    HUD Response. A PHA's deconcentration policy is not applicable to 
involuntary transfers among developments as this final rule makes 
clear.
    Comment: HUD should clarify that a PHA's deconcentration policy 
applies to all mixed-finance developments/buildings that receive HUD 
operating subsidy. HUD should provide at the final rule stage that the 
deconcentration requirement does not apply to existing mixed-finance 
where investors, developers and PHAs have already entered into HUD-
approved contracts which require the income mix in the developments, 
and should not apply to future developments. The following highlights 
the differences among commenters on the applicability of the 
deconcentration requirement to mixed-finance developments:
    The final rule should make clear that it applies to any mixed 
finance development or building or unit that receives HUD operating 
subsidy. It should not matter that the development is owned or managed 
by an entity other than the PHA. These developments should not be 
exempt from the requirement to deconcentrate poverty.
    The final rule must exempt, at a minimum, existing mixed-finance 
developments. PHAs and developers contractually obligate themselves to 
maintain specified income tiers and follow a prescribed admissions and 
occupancy policy in operating these properties. HOPE VI/mixed finance 
transactions (both closed and future transactions) should be 
specifically excluded from the deconcentration rule. HUD is already 
successful in achieving in income mixing in HOPE VI and mixed finance 
units, and application of the deconcentration requirement will reduce 
not increase the success rates of these types of units in achieving 
income mixing.
    HUD Response. The final rule exempts public housing units operated 
in accordance with a HUD-approved mixed finance plan using HOPE VI or 
public housing funds awarded before the effective date of this final 
rule, provided that the PHA certifies (and includes reasons for the 
certification) as part of its PHA Plan (which may be accomplished 
either in the annual Plan submission or as a significant amendment to 
its PHA Plan) that exemption from the regulation is necessary to honor 
an existing contractual agreement or be consistent with a mixed finance 
plan, including provisions regarding the incomes of public housing 
residents to be admitted to that development, which has been developed 
in consultation with residents with rights to live at the affected 
development and other interested persons. HUD recognizes that for many 
of these developments, as commenters have indicated, PHAs are 
contractually obligated to maintain specified income tiers, or their 
HOPE VI funding proposal assumed such tiers.
    HUD, however, is not granting a blanket exemption for all mixed-
finance or HOPE VI developments. As noted in the October 21, 1999 final 
rule, in response to a similar comment received under that rulemaking, 
the Public Housing Reform Act does not limit applicability of the 
deconcentration requirement to traditional public housing. (See 64 FR 
56854, middle column.)
    Comment: Data by development and building should be collected on an 
annual basis to determine effectiveness of income growth policies. 
HUD's rule should require yearly collection of data by development and 
by building even for developments or buildings that may be exempt from 
the deconcentration requirement.
    HUD Response. The PHA's deconcentration policy must be included 
each year in the PHA's Annual Plan submission. The required steps for 
deconcentrating poverty, as provided in the rule, include a 
determination of the average income of all families residing in covered 
developments and an assessment of which developments fall outside the 
Established Income Range. At the final rule stage, HUD has limited the 
PHA's average income determination to developments, and not buildings. 
After consideration of comments, HUD acknowledges the concerns that an 
analysis of income by building may result in increased administrative 
burden for PHAs without a corresponding increased benefit in promoting 
deconcentration of poverty. HUD declines the commenter's

[[Page 81221]]

suggestion to require an income determination for developments that are 
not subject to deconcentration.
    Comment: The incomes of public housing residents constantly 
fluctuate which makes annual determinations of average income 
unreliable. PHAs may experience significant differences in income 
levels from year to year because residents initiate and terminate 
employment fairly frequently. PHAs should have the option of 
recalculating the average development incomes more often than once a 
year if they so choose. Because income fluctuates constantly, does 
compliance with the deconcentration requirement mean that families 
would have to move if the ``higher income building'' in which they 
reside decreases (i.e., becomes a low income building) or vice-versa?
    HUD Response. HUD believes that the additional flexibility provided 
by this final rule addresses this concern.
    Comment: A family's return to a development should not be limited 
to a right of return to the same site. Some HOPE VI proposals include 
scattered sites which may include the original site that is being 
revitalized along with other sites or may include entirely new sites. 
The deconcentration policy should not interfere with any PHA commitment 
to families who have the right of return to this type of HOPE VI 
development or other development.
    HUD Response. Neither the statutory requirement to deconcentrate 
poverty nor the requirements of this rule interfere with any 
commitments made by a PHA to a family with respect to a family's right 
to return to a site, including new sites, following revitalization.
    Comment: The rule needs to address more fully unit refusal by a 
family and whether removing a family from a waiting list for refusal to 
accept a unit constitutes an adverse action against the family. 
Removing a family from the waiting list for reasons due entirely or in 
part to the family's refusal to accept a deconcentration offer of a 
unit constitutes an adverse action against the family. The rule needs 
to clearly provide that a family cannot be removed for refusing a 
deconcentration offer of a unit.
    HUD Response. Removing a family from the waiting list for the 
family's refusal to accept a unit offered as part of the PHA's strategy 
to deconcentrate poverty is an adverse action prohibited by the 
statute. A family cannot be removed from the waiting list for this 
reason. However, a PHA may uniformly limit the number of offers to each 
applicant.
    Comment: The proposed rule violates the statutory requirement that 
HUD finalize the agency plan rule only after considering comments 
presented through an enhanced rulemaking process. Congress mandated 
that the final rule implement the PHA Agency Plans be subject to an 
enhanced rulemaking process that would allow for more public input into 
the process. HUD was required to convene two public forums at which 
those making recommendations could respond to concerns regarding the 
proposed agency plan rule prior to implementation. While HUD conducted 
such forums, the deconcentration provisions in the April 17, 2000 
proposed rule were not included in the prior rule and were not the 
subject of discussion at these forums.
    HUD Response. HUD complied with the statutory mandate to undertake 
enhanced rulemaking before implementation of the PHA Plan final rule, 
which was issued on October 21, 1999. This enhanced rulemaking covered 
all aspects of the PHA Plan. Moreover, the statute does not require HUD 
to undertake enhanced rulemaking for every amendment or change HUD 
subsequently makes to the PHA Plan rule. The April 17, 2000 proposed 
rule was limited to clarifying a PHA's requirements to deconcentrate by 
income and affirmatively furthering fair housing, and adding language 
that allowed for HUD to further simplify the PHA Plan submission for 
PHAs permitted to submit a streamlined plan. (HUD already has 
implemented the streamlining amendment through a final rule published 
on August 14, 2000 (65 FR 49484).) Although HUD republished the entire 
PHA Plan rule on April 17, 2000, with the exception of these two areas, 
no substantive changes were made to the rule. The rule was republished 
for the convenience of the reader, and to make plain language changes.
    Comment: The rule is not in compliance with the Regulatory 
Flexibility Act, Unfunded Mandates Reform Act and the Executive Order 
on Federalism. HUD's proposed rule would have a significant economic 
impact on a substantial number of small entities and would impose an 
unfunded federal mandate and substantial direct compliance costs on 
local jurisdictions. Compliance with the deconcentration requirement 
will require software modifications and additional data entry on a 
building-by-building analysis, and the creation and implementation of 
new procedure manuals and these actions will have a significant 
economic impact on housing authorities.
    HUD Response. HUD disagrees with the commenters that the proposed 
rule would have imposed a significant economic impact on a substantial 
number of small entities. HUD, however, appreciates these comments, and 
specifically solicited comments about the impact on small entities 
under its Regulatory Flexibility Act statement on whether PHAs believed 
the proposed rule would have a significant economic impact on small 
entities. HUD believes that the changes made in the rule at the final 
rule stage minimize concerns raised by the commenters. The rule is not 
in violation of the Executive Order on Federalism or Unfunded Mandates. 
Public housing is federally funded and the deconcentration requirement 
established by Congress is to ensure that every effort is made to 
address concentration of poverty in federally funded housing.

V. Findings and Certifications

Paperwork Reduction Act Statement

    The information collection requirements contained in the PHA Plan 
were previously approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520), at the time of publication of the PHA Plan final rule on October 
21, 1999, and assigned OMB control number 2577-0226. This final rule 
published today only makes changes to the deconcentration component of 
the PHA Annual Plan's statement of the PHA's deconcentration and other 
policies that govern eligibility, selection and admissions. A 
modification to HUD's existing and approved information collection 
requirements for this rule has been submitted to OMB for review and 
approval under the Paperwork Reduction Act. The modification, when 
approved, will be announced through separate notice. 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.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this rule, and in so doing 
certifies that this rule does not have a significant economic impact on 
a substantial number of small entities. This rule amends HUD's Public 
Housing Agency Plan regulations to fully reflect the importance of 
deconcentration by income in public housing and the importance of 
affirmatively furthering

[[Page 81222]]

fair housing. This rule does not create an undue burden on small PHAs. 
This rule exempts several types of developments, including developments 
with fewer than 100 units, from the requirement to deconcentrate 
poverty in public housing.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on State and local governments and 
is not required by statute, or preempts State law, unless the relevant 
requirements of section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on State and local governments or preempt State 
law within the meaning of the Executive Order.

Environmental Impact

    The Finding of No Significant Impact with respect to the 
environment was prepared during the interim rulemaking stage of the 
Public Housing Agency Plan regulations 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). That 
Finding remains applicable to this rule, and is available for public 
inspection between 7:30 a.m. and 5:30 p.m. weekdays in the Office of 
the Rules Docket Clerk, Office of General Counsel, Room 10276, 
Department of Housing and Urban Development, 451 7th Street, SW, 
Washington, DC 20410.

Regulatory Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, Regulatory Planning and Review. OMB determined 
that this 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 after its submission to OMB are identified in the docket 
file, which is available for public inspection in the office of the 
Department's Office of General Counsel, Regulations Division, Room 
10276, 451 Seventh Street, SW, Washington, DC 20410-0500.

Unfunded Mandates Reform Act

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

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers applicable to 
the programs affected by this rule are 14.850 and 14.855.

List of Subjects in 24 CFR Part 903

    Administrative practice and procedure, Public housing, Reporting 
and recordkeeping requirements

    For the reasons stated in the preamble, HUD revises part 903 of 
title 24 of the Code of Federal Regulations to read as follows:

PART 903--PUBLIC HOUSING AGENCY PLANS

Sec.
Subpart A--Deconcentration of Poverty and Fair Housing in Program 
Admissions
903.1   What is the purpose of this subpart?
903.2   With respect to admissions, what must a PHA do to 
deconcentrate poverty in its developments and comply with fair 
housing requirements?
Subpart B--PHA Plans
903.3  What is the purpose of this subpart?
903.4  What are the public housing agency plans?
903.5  When must a PHA submit the plans to HUD?
903.6  What information must a PHA provide in the 5-Year Plan?
903.7  What information must a PHA provide in the Annual Plan?
903.9  May HUD request additional information in the Annual Plan of 
a troubled PHA?
903.11  Are certain PHAs eligible to submit a streamlined Annual 
Plan?
903.13  What is a Resident Advisory Board and what is its role in 
development of the Annual Plan?
903.15  What is the relationship of the public housing agency plans 
to the Consolidated Plan?
903.17  What is the process for obtaining public comment on the 
plans?
903.19  When is the 5-Year Plan or Annual Plan ready for submission 
to HUD?
903.21  May the PHA amend or modify a plan?
903.23  What is the process by which HUD reviews, approves, or 
disapproves an Annual Plan?
903.25  How does HUD ensure PHA compliance with its plans?

    Authority. 42 U.S.C. 1437c; 42 U.S.C. 3535(d).

Subpart A--Deconcentration of Poverty and Fair Housing in Program 
Admissions


Sec. 903.1  What is the purpose of this subpart?

    The purpose of this subpart is to specify the process which a 
Public Housing Agency, as part of its annual planning process and 
development of an admissions policy, must follow in order to develop 
and apply a policy that provides for deconcentration of poverty and 
income mixing in certain public housing developments and to 
affirmatively further fair housing in admissions.
    References to the ``1937 Act'' in this part refer to the U.S. 
Housing Act of 1937 (42 U.S.C. 1437 et seq.)


Sec. 903.2  With respect to admissions, what must a PHA do to 
deconcentrate poverty in its developments and comply with fair housing 
requirements?

    (a) General. The PHA's admission policy includes the PHA's policy 
designed to promote deconcentration of poverty and income mixing in 
accordance with section 16(a)(3)(B) of the 1937 Act (42 U.S.C. 1437n), 
which is submitted to HUD as part of the PHA Annual Plan process. 
Deconcentration of poverty and income mixing is promoted by a policy 
that provides for bringing higher income tenants into lower income 
developments and lower income tenants into higher income developments.
    (1) The provisions of this section apply to applicants to and 
residents seeking voluntary transfers within covered public housing 
developments (``covered developments'' as specified in paragraph (b) of 
this section).
    (2) The statutory requirement to design a policy to provide for 
deconcentration and income mixing is not to be construed to impose or 
require any specific income or racial quotas for any development or 
developments.
    (b) Applicability of deconcentration of poverty and income mixing 
requirements.
    (1) Developments subject to deconcentration of poverty and income 
mixing requirements. The deconcentration requirements of this subpart 
apply to general occupancy, family public housing developments, 
excluding those developments listed in paragraph (b)(2) of this 
section. Developments to which this subpart is applicable are referred 
to as ``covered developments''.
    (2) Developments not subject to deconcentration of poverty and 
income mixing requirements. This subpart does not apply to the 
following public housing developments:

[[Page 81223]]

    (i) Public housing developments operated by a PHA with fewer than 
100 public housing units;
    (ii) Public housing developments operated by a PHA which house only 
elderly persons or persons with disabilities, or both;
    (iii) Public housing developments operated by a PHA which consist 
of only one general occupancy, family public housing development;
    (iv) Public housing developments approved for demolition or for 
conversion to tenant-based assistance; and
    (v) Public housing developments which include public housing units 
operated in accordance with a HUD-approved mixed-finance plan using 
HOPE VI or public housing funds awarded before the effective date of 
this rule, provided that the PHA certifies (and includes reasons for 
the certification) as part of its PHA Plan (which may be accomplished 
either in the annual Plan submission or as a significant amendment to 
its PHA Plan) that exemption from the regulation is necessary to honor 
an existing contractual agreement or be consistent with a mixed finance 
plan, including provisions regarding the incomes of public housing 
residents to be admitted to that development, which has been developed 
in consultation with residents with rights to live at the affected 
development and other interested persons.
    (c) Deconcentration of poverty and income mixing.
    (1) Steps for implementation. To implement the statutory 
requirement to deconcentrate poverty and provide for income mixing in 
covered public housing developments, a PHA must comply with the 
following steps:
    (i) Step 1. A PHA shall determine the average income of all 
families residing in all the PHA's covered developments. A PHA may use 
median income, instead of average income, provided that the PHA 
includes a written explanation in its PHA Annual Plan justifying use of 
median income in the PHA's Annual Plan.
    (ii) Step 2. A PHA shall determine the average income of all 
families residing in each covered development. In determining average 
income for each development, a PHA has the option of adjusting its 
income analysis for unit size in accordance with procedures prescribed 
by HUD.
    (iii) Step 3. A PHA shall determine whether each of its covered 
developments falls above, within or below the Established Income Range. 
The Established Income Range is 85 percent to 115 percent (inclusive of 
85 percent and 115 percent) of the PHA-wide average income for covered 
developments as defined in Step 1.
    (iv) Step 4. A PHA with covered developments having average incomes 
outside the Established Income Range may explain or justify the income 
profile for these developments as being consistent with and furthering 
two sets of goals: the goals of deconcentration of poverty and income 
mixing as specified by the statute (bringing higher income tenants into 
lower income developments and vice versa); and the local goals and 
strategies contained in the PHA Annual Plan. Elements of explanations 
or justifications that may satisfy these requirements may include, but 
shall not be limited to the following:
    (A) The covered development or developments are subject to consent 
decrees or other resident selection and admission plans mandated by 
court action;
    (B) The covered development or developments are part of PHA's 
programs, strategies or activities specifically authorized by statute, 
such as mixed-income or mixed-finance developments, homeownership 
programs, self-sufficiency strategies, or other strategies designed to 
deconcentrate poverty, promote income mixing in public housing, 
increase the incomes of public housing residents, or the income mix is 
otherwise subject to individual review and approval by HUD;
    (C) The covered development's or developments' size, location, and/
or configuration promote income deconcentration, such as scattered site 
or small developments;
    (D) The income characteristics of the covered development or 
developments are sufficiently explained by other circumstances.
    (v) Step 5. Where the income profile for a covered development is 
not explained or justified in the PHA Annual Plan submission, the PHA 
shall include in its admission policy its specific policy to provide 
for deconcentration of poverty and income mixing in applicable covered 
developments. Depending on local circumstances, a PHA's deconcentration 
policy (which may be undertaken in conjunction with other efforts such 
as efforts to increase self-sufficiency or current residents) may 
include but is not limited to providing for one or more of the 
following actions:
    (A) Providing incentives designed to encourage families with 
incomes below the Established Income Range to accept units in 
developments with incomes above the Established Income Range, or vice 
versa, including rent incentives, affirmative marketing plans, or added 
amenities;
    (B) Targeting investment and capital improvements toward 
developments with an average income below the Established Income Range 
to encourage applicant families whose income is above the Established 
Income Range to accept units in those developments;
    (C) Establishing a preference for admission of working families in 
developments below the Established Income Range;
    (D) Skipping a family on the waiting list to reach another family 
in an effort to further the goals of the PHA's deconcentration policy;
    (E) Providing such other strategies as permitted by statute and 
determined by the PHA in consultation with the residents and the 
community, through the PHA Annual Plan process, to be responsive to the 
local context and the PHA's strategic objectives.
    (2) Determination of compliance with deconcentration requirement. 
HUD shall consider a PHA to be in compliance with this subpart if:
    (i) The PHA's income analysis shows that the PHA has no general 
occupancy family developments to which the deconcentration requirements 
apply; that is, the average incomes of all covered developments are 
within the Established Income Range;
    (ii) The PHA has covered developments with average incomes above or 
below the Established Income Range and the PHA provides a sufficient 
explanation in its Annual Plan that supports that the income mix of 
such development or developments is consistent with and furthers the 
goal of deconcentration of poverty and income mixing and also the 
locally determined goals of the PHA's Annual and Five Year Plans, and 
the PHA therefore need not take further action to deconcentrate poverty 
and mix incomes; or
    (iii) The PHA's deconcentration policy provides specific strategies 
the PHA will take that can be expected to promote deconcentration of 
poverty and income mixing in developments with average incomes outside 
of the Established Income Range.
    (3) Right of return. If a PHA has provided that a family that 
resided in a covered public housing development has a right to 
admission to a public housing unit in that development after 
revitalization, the requirements of paragraph (c) of this section do 
not preclude fulfilling that commitment or a PHA's commitment to return 
a family to another development after revitalization.
    (4) Family's discretion to refuse a unit. A family has the sole 
discretion

[[Page 81224]]

whether to accept an offer of a unit made under a PHA's deconcentration 
policy. The PHA may not take any adverse action toward any eligible 
family for choosing not to accept an offer of a unit under the PHA's 
deconcentration policy. In accordance with the PHA's established 
policies, the PHA may uniformly limit the number of offers received by 
applicants.
    (5) Relationship to income targeting requirement. Nothing in this 
section relieves a PHA of the obligation to meet the requirement to 
admit annually at least 40 percent families whose incomes are below 30 
percent of area median income as provided by section 16(a)(2) of the 
1937 Act, 42 U.S.C. 1437n(a)(2).
    (d) Fair housing requirements. All admission and occupancy policies 
for public housing and Section 8 tenant-based housing programs must 
comply with Fair Housing Act requirements and with regulations to 
affirmatively further fair housing. The PHA may not impose any specific 
income or racial quotas for any development or developments.
    (1) Nondiscrimination. A PHA must carry out its PHA Plan in 
conformity with the nondiscrimination requirements in Federal civil 
rights laws, including title VI of the Civil Rights Act of 1964 and the 
Fair Housing Act. A PHA cannot assign persons to a particular section 
of a community or to a development or building based on race, color, 
religion, sex, disability, familial status or national origin for 
purposes of segregating populations (Sec. 1.4(b)(1)(ii) of this title).
    (2) Affirmatively Furthering Fair Housing. PHA policies that govern 
eligibility, selection and admissions under its PHA Plan should be 
designed to reduce racial and national origin concentrations. Any 
affirmative steps or incentives a PHA plans to take must be stated in 
the admission policy.
    (i) HUD regulations provide that PHAs should take affirmative steps 
to overcome the effects of conditions which resulted in limiting 
participation of persons because of their race, national origin or 
other prohibited basis (Sec. 1.4(b)(1)(iii) and (6)(ii) of this title).
    (ii) Such affirmative steps may include but are not limited to, 
appropriate affirmative marketing efforts; additional applicant 
consultation and information; and provision of additional supportive 
services and amenities to a development.
    (3) Validity of certification. (i) HUD will take action to 
challenge the PHA's certification under Sec. 903.7(o) where it appears 
that a PHA Plan or its implementation:
    (A) Does not reduce racial and national origin concentration in 
developments or buildings and is perpetuating segregated housing; or
    (B) Is creating new segregation in housing.
    (ii) If HUD challenges the validity of a PHA's certification, the 
PHA must establish that it is providing a full range of housing 
opportunities to applicants and tenants or that it is implementing 
actions described in paragraph (d)(2)(ii) of this section.
    (e) Relationship between poverty deconcentration and fair housing. 
The requirements for poverty deconcentration in paragraph (c) of this 
section and for fair housing in paragraph (d) of this section arise 
under separate statutory authorities and are independent.

Subpart B--PHA Plans


Sec. 903.3  What is the purpose of this subpart?

    (a) This subpart specifies the requirements for PHA plans, required 
by section 5A of the United States Housing Act of 1937 (42 U.S.C. 
1437c-1).
    (b) The purpose of the plans is to provide a framework for:
    (1) Local accountability; and
    (2) An easily identifiable source by which public housing 
residents, participants in the tenant-based assistance program, and 
other members of the public may locate basic PHA policies, rules and 
requirements concerning the PHA's operations, programs and services.


Sec. 903.4  What are the public housing agency plans?

    (a) Types of plans. There are two public housing agency plans. They 
are:
    (1) The 5-Year Plan (the 5-Year Plan) that a public housing agency 
(PHA) must submit to HUD once every five PHA fiscal years. The 5-Year 
Plan covers the five PHA fiscal years immediately following the date on 
which the 5-Year Plan is due to HUD; and
    (2) The Annual Plan (Annual Plan) that the PHA must submit to HUD 
for each fiscal year immediately following the date on which the Annual 
Plan is due to HUD and for which the PHA receives:
    (i) Section 8 tenant-based assistance (under section 8(o) of the 
U.S. Housing Act of 1937, 42 U.S.C. 1437f(o)) (tenant-based 
assistance); or
    (ii) Amounts from the public housing operating fund or capital fund 
(under section 9 of the U.S. Housing Act of 1937 (42 U.S.C. 1437g) 
(public housing)).
    (b) Format. HUD may prescribe the format of submission (including 
electronic format submission) of the plans. HUD also may prescribe the 
format of attachments to the plans and documents related to the plan 
that the PHA does not submit but may be required to make available 
locally. PHAs will receive appropriate notice of any prescribed format.
    (c) Applicability. The requirements of this subpart only apply to a 
PHA that receives the type of assistance described in paragraph (a) of 
this section.
    (d) Authority for waivers. In addition to the waiver authority 
provided in Sec. 5.110 of this title, the Secretary may, subject to 
statutory limitations, waive any provision of this title on a program-
wide basis, and delegate this authority in accordance with section 106 
of the Department of Housing and Urban Development Reform Act of 1989 
(42 U.S.C. 3535(q)) where the Secretary determines that such waiver is 
necessary for the effective implementation of this part.


Sec. 903.5  When must a PHA submit the plans to HUD?

    (a) 5-Year Plan. (1) The first PHA fiscal year that is covered by 
the requirements of this part as amended on December 22, 2000, is the 
PHA fiscal year that begins July 2001. This 5-Year Plan submitted by a 
PHA must be submitted for the 5-year period beginning July 1, 2001.
    (2) For all PHAs, the first 5-Year Plans are due 75 days before the 
commencement of their fiscal year.
    (3) For all PHAs, after submission of their first 5-Year Plan, all 
subsequent 5-Year Plans must be submitted once every 5 PHA fiscal 
years, no later than 75 days before the commencement of the PHA's 
fiscal year.
    (4) PHAs may choose to update their 5-Year Plans every year as good 
management practice and must update their 5-Year Plans that were 
submitted for PHA fiscal years beginning before July 1, 2001, to comply 
with the requirements of this part as amended on December 22, 2000, at 
the time they submit their next Annual Plan for fiscal years beginning 
on or after July 1, 2001. PHAs must explain any substantial deviation 
from their 5-Year Plans in their Annual Plans. (Substantial deviation 
is determined by the PHA in accordance with criteria provided by the 
PHA in its Annual Plan in accordance with Sec. 903.7(r).)
    (b) The Annual Plan. (1) The first PHA fiscal year that is covered 
by the requirements of this part as amended on December 22, 2000, is 
the PHA fiscal year that begins July 1, 2001.

[[Page 81225]]

    (2) For all PHAs, the first Annual Plans are due 75 days before the 
commencement of their fiscal year.
    (3) For all PHAs, after submission of the first Annual Plan, all 
subsequent Annual Plans will be due no later than 75 days before the 
commencement of their fiscal year.


Sec. 903.6  What information must a PHA provide in the 5-Year Plan?

    (a) A PHA must include in its 5-Year Plan a statement of:
    (1) The PHA's mission for serving the needs of low-income, very 
low-income and extremely low-income families in the PHA's jurisdiction; 
and
    (2) The PHA's goals and objectives that enable the PHA to serve the 
needs of the families identified in the PHA's Annual Plan. For HUD, the 
PHA and the public to better measure the success of the PHA in meeting 
its goals and objectives, the PHA must adopt quantifiable goals and 
objectives for serving those needs wherever possible.
    (b) After submitting its first 5-Year Plan, a PHA in its succeeding 
5-Year Plans, must address:
    (1) The PHA's mission, goals and objectives for the next 5 years; 
and
    (2) The progress the PHA has made in meeting the goals and 
objectives described in the PHA's previous 5-Year Plan.


Sec. 903.7  What information must a PHA provide in the Annual Plan?

    With the exception of the first Annual Plan submitted by a PHA, the 
Annual Plan must include the information provided in this section. HUD 
will advise PHAs by separate notice, sufficiently in advance of the 
first Annual Plan due date, of the information, described in this 
section that must be part of the first Annual Plan submission, and any 
additional instructions or directions that may be necessary to prepare 
and submit the first Annual Plan. The information described in this 
section applies to both public housing and tenant-based assistance, 
except where specifically stated otherwise. The information that the 
PHA must submit for HUD approval under the Annual Plan includes the 
discretionary policies of the various plan components or elements (for 
example, rent policies) and not the statutory or regulatory 
requirements that govern these plan components and that provide no 
discretion on the part of the PHA in implementation of the 
requirements. The PHA's Annual Plan must be consistent with the goals 
and objectives of the PHA's 5-Year Plan.
    (a) A statement of housing needs. (1) This statement must address 
the housing needs of the low-income and very low-income families who 
reside in the jurisdiction served by the PHA, and other families who 
are on the public housing and Section 8 tenant-based assistance waiting 
lists, including:
    (i) Families with incomes below 30 percent of area median 
(extremely low-income families);
    (ii) Elderly families and families with disabilities;
    (iii) Households of various races and ethnic groups residing in the 
jurisdiction or on the waiting list.
    (2) A PHA must make reasonable efforts to identify the housing 
needs of each of the groups listed in paragraph (a)(1) of this section 
based on information provided by the applicable Consolidated Plan, 
information provided by HUD, and other generally available data.
    (i) The identification of housing needs must address issues of 
affordability, supply, quality, accessibility, size of units and 
location.
    (ii) The statement of housing needs also must describe the ways in 
which the PHA intends, to the maximum extent practicable, to address 
those needs, and the PHA's reasons for choosing its strategy.
    (b) A statement of the PHA's deconcentration and other policies 
that govern eligibility, selection, and admissions. This statement must 
describe the PHA's policies that govern resident or tenant eligibility, 
selection and admission. This statement also must describe any PHA 
admission preferences, and any occupancy policies that pertain to 
public housing units and housing units assisted under section 8(o) of 
the 1937 Act, as well as any unit assignment policies for public 
housing. This statement must include the following information:
    (1) Deconcentration Policy. The PHA's deconcentration policy 
applicable to public housing, as described in Sec. 903.2(a).
    (2) Waiting List Procedures. The PHA's procedures for maintaining 
waiting lists for admission to the PHA's public housing developments. 
The statement must address any site-based waiting lists, as authorized 
by section 6(s) of the 1937 Act (42 U.S.C. 1437d(s)), for public 
housing. Section 6(s) of the 1937 Act permits PHAs to establish a 
system of site-based waiting lists for public housing that is 
consistent with all applicable civil rights and fair housing laws and 
regulations. Notwithstanding any other regulations, a PHA may adopt 
site-based waiting lists where:
    (i) The PHA regularly submits required occupancy data to HUD's 
Multifamily Tenant Characteristics Systems (MTCS) in an accurate, 
complete and timely manner;
    (ii) The system of site-based waiting lists provides for full 
disclosure to each applicant of any option available to the applicant 
in the selection of the development in which to reside, including basic 
information about available sites (location, occupancy, number and size 
of accessible units, amenities such as day care, security, 
transportation and training programs) and an estimate of the period of 
time the applicant would likely have to wait to be admitted to units of 
different sizes and types (e.g., regular or accessible) at each site;
    (iii) Adoption of site-based waiting lists would not violate any 
court order or settlement agreement, or be inconsistent with a pending 
complaint brought by HUD;
    (iv) The PHA includes reasonable measures to assure that adoption 
of site-based waiting lists is consistent with affirmatively furthering 
fair housing, such as reasonable marketing activities to attract 
applicants regardless of race or ethnicity;
    (v) The PHA provides for review of its site-based waiting list 
policy to determine if the policy is consistent with civil rights laws 
and certifications through the following steps:
    (A) As part of the submission of the Annual Plan, the PHA shall 
assess changes in racial, ethnic or disability-related tenant 
composition at each PHA site that may have occurred during the 
implementation of the site-based waiting list, based upon MTCS 
occupancy data that has been confirmed to be complete and accurate by 
an independent audit (which may be the annual independent audit) or is 
otherwise satisfactory to HUD;
    (B) At least every three years the PHA uses independent testers or 
other means satisfactory to HUD, to assure that the site-based waiting 
list is not being implemented in a discriminatory manner, and that no 
patterns or practices of discrimination exist, and providing the 
results to HUD;
    (C) Taking any steps necessary to remedy the problems surfaced 
during the review; and
    (D) Taking the steps necessary to affirmatively further fair 
housing.
    (3) Other admissions policies. The PHA's admission policies that 
include any other PHA policies that govern eligibility, selection and 
admissions for the public housing (see part 960 of this title) and 
tenant-based assistance programs (see part 982, subpart E of this 
title). (The information requested on site-based waiting lists and

[[Page 81226]]

deconcentration is applicable only to public housing.)
    (c) A statement of financial resources. This statement must address 
the financial resources that are available to the PHA for the support 
of Federal public housing and tenant-based assistance programs 
administered by the PHA during the plan year. The statement must 
include a listing, by general categories, of the PHA's anticipated 
resources, such as PHA operating, capital and other anticipated Federal 
resources available to the PHA, as well as tenant rents and other 
income available to support public housing or tenant-based assistance. 
The statement also should include the non-Federal sources of funds 
supporting each Federal program, and state the planned uses for the 
resources.
    (d) A statement of the PHA's rent determination policies. This 
statement must describe the PHA's basic discretionary policies that 
govern rents charged for public housing units, applicable flat rents, 
and the rental contributions of families receiving tenant-based 
assistance. For tenant-based assistance, this statement also shall 
cover any discretionary minimum tenant rents and payment standard 
policies.
    (e) A statement of the PHA's operation and management. (1) This 
statement must list the PHA's rules, standards, and policies that 
govern maintenance and management of housing owned, assisted, or 
operated by the PHA.
    (2) The policies listed in this statement must include a 
description of any measures necessary for the prevention or eradication 
of pest infestation. Pest infestation includes cockroach infestation.
    (3) This statement must include a description of PHA management 
organization, and a listing of the programs administered by the PHA.
    (4) The information requested on a PHA's rules, standards and 
policies regarding management and maintenance of housing applies only 
to public housing. The information requested on PHA program management 
and listing of administered programs applies to public housing and 
tenant-based assistance.
    (f) A statement of the PHA grievance procedures. This statement 
describes the grievance and informal hearing and review procedures that 
the PHA makes available to its residents and applicants. These 
procedures include public housing grievance procedures and tenant-based 
assistance informal review procedures for applicants and hearing 
procedures for participants.
    (g) A statement of capital improvements needed. With respect to 
public housing only, this statement describes the capital improvements 
necessary to ensure long-term physical and social viability of the 
PHA's public housing developments, including the capital improvements 
to be undertaken in the year in question and their estimated costs, and 
any other information required for participation in the Capital Fund. 
PHAs also are required to include 5-Year Plans covering large capital 
items.
    (h) A statement of any demolition and/or disposition. (1) Plan for 
Demolition/Disposition. With respect to public housing only, a 
description of any public housing development, or portion of a public 
housing development, owned by the PHA for which the PHA has applied or 
will apply for demolition and/or disposition approval under section 18 
of the 1937 Act (42 U.S.C. 1437p), and the timetable for demolition 
and/or disposition. The application and approval process for demolition 
and/or disposition is a separate process. Approval of the PHA Plan does 
not constitute approval of these activities.
    (2) Interim Plan for Demolition/Disposition. (i) Before submission 
of the first Annual Plan, a PHA may submit an interim PHA Annual Plan 
solely for demolition/disposition. The interim plan must provide:
    (A) The required description of the action to be taken;
    (B) A certification of consistency with the Consolidated Plan;
    (C) A description of how the plan is consistent with the 
Consolidated Plan;
    (D) A relocation plan that includes the availability of units in 
the area and adequate funding; and
    (E) Confirmation that a public hearing was held on the proposed 
action and that the resident advisory board was consulted.
    (ii) Interim plans for demolition/disposition are subject to PHA 
Plan procedural requirements in this part (see Secs. 903.13, 903.15, 
903.17, 903.19, 903.21, 903.23, 903.25), with the following exception. 
If a resident advisory board has not yet been formed, the PHA may seek 
a waiver of the requirement to consult with the resident advisory board 
on the grounds that organizations that adequately represent residents 
for this purpose were consulted.
    (iii) The actual application for demolition or disposition may be 
submitted at the same time as submission of the interim plan or at a 
later date.
    (i) A statement of the public housing developments designated as 
housing for elderly families or families with disabilities or elderly 
families and families with disabilities.
    (1) With respect to public housing only, this statement identifies 
any public housing developments owned, assisted, or operated by the 
PHA, or any portion of these developments, that:
    (i) The PHA has designated for occupancy by:
    (A) Only elderly families;
    (B) Only families with disabilities; or
    (C) Elderly families and families with disabilities; and
    (ii) The PHA will apply for designation for occupancy by:
    (A) Only elderly families;
    (B) Only families with disabilities; or
    (C) Elderly families and families with disabilities as provided by 
section 7 of the 1937 Act (42 U.S.C. 1437e).
    (2) The designated housing application and approval process is a 
separate process. Approval of the PHA Plan does not constitute approval 
of these activities.
    (j) A statement of the conversion of public housing to tenant-based 
assistance. (1) This statement describes:
    (i) Any building or buildings that the PHA is required to convert 
to tenant-based assistance under section 33 of the 1937 Act (42 U.S.C. 
1437z-5);
    (ii) The status of any building or buildings that the PHA may be 
required to convert to tenant-based assistance under section 202 of the 
Fiscal Year 1996 HUD Appropriations Act (42 U.S.C. 14371 note); or
    (iii) The PHA's plans to voluntarily convert under section 22 of 
the 1937 Act (42 U.S.C. 1437t).
    (2) The statement also must include an analysis of the developments 
or buildings required to be converted under section 33.
    (3) For both voluntary and required conversions, the statement must 
include the amount of assistance received commencing in Federal Fiscal 
Year 1999 to be used for rental assistance or other housing assistance 
in connection with such conversion.
    (4) The application and approval processes for required or 
voluntary conversions are separate approval processes. Approval of the 
PHA Plan does not constitute approval of these activities.
    (5) The information required under this paragraph (j) of this 
section is applicable to public housing and only that tenant-based 
assistance which is to be included in the conversion plan.
    (k) A statement of homeownership programs administered by the PHA.
    (1) This statement describes:

[[Page 81227]]

    (i) Any homeownership programs administered by the PHA under 
section 8(y) of the 1937 Act (42 U.S.C. 1437f(y));
    (ii) Any homeownership programs administered by the PHA under an 
approved section 5(h) homeownership program (42 U.S.C. 1437c(h));
    (iii) An approved HOPE I program (42 U.S.C. 1437aaa); or
    (iv) Any homeownership programs for which the PHA has applied to 
administer or will apply to administer under section 5(h), the HOPE I 
program, or section 32 of the 1937 Act (42 U.S.C. 1437z-4).
    (2) The application and approval process for homeownership under 
the programs described in paragraph (k) of this section, with the 
exception of the section 8(y) homeownership program, are separate 
processes. Approval of the PHA Plan does not constitute approval of 
these activities.
    (l) A statement of the PHA's community service and self-sufficiency 
programs. (1) This statement describes:
    (i) Any PHA programs relating to services and amenities 
coordinated, promoted or provided by the PHA for assisted families, 
including programs provided or offered as a result of the PHA's 
partnership with other entities;
    (ii) Any PHA programs coordinated, promoted or provided by the PHA 
for the enhancement of the economic and social self-sufficiency of 
assisted families, including programs provided or offered as a result 
of the PHA's partnerships with other entities, and activities under 
section 3 of the Housing and Community Development Act of 1968 and 
under requirements for the Family Self-Sufficiency Program and others. 
The description of programs offered shall include the program's size 
(including required and actual size of the Family Self-Sufficiency 
program) and means of allocating assistance to households.
    (iii) How the PHA will comply with the requirements of section 
12(c) and (d) of the 1937 Act (42 U.S.C. 1437j(c) and (d)). These 
statutory provisions relate to community service by public housing 
residents and treatment of income changes in public housing and tenant-
based assistance recipients resulting from welfare program 
requirements. PHAs must address any cooperation agreements, as 
described in section 12(d)(7) of the 1937 Act (42 U.S.C. 1437j(d)(7)), 
that the PHA has entered into or plans to enter into.
    (2) The information required by paragraph (l) of this section is 
applicable to both public housing and tenant-based assistance, except 
that the information regarding the PHA's compliance with the community 
service requirement applies only to public housing.
    (m) A statement of the PHA's safety and crime prevention measures.
    (1) With respect to public housing only, this statement describes 
the PHA's plan for safety and crime prevention to ensure the safety of 
the public housing residents that it serves. The plan for safety and 
crime prevention must be established in consultation with the police 
officer or officers in command of the appropriate precinct or police 
departments. The plan also must provide, on a development-by-
development or jurisdiction wide-basis, the measures necessary to 
ensure the safety of public housing residents.
    (2) The statement regarding the PHA's safety and crime prevention 
plan must include the following information:
    (i) A description of the need for measures to ensure the safety of 
public housing residents;
    (ii) A description of any crime prevention activities conducted or 
to be conducted by the PHA; and
    (iii) A description of the coordination between the PHA and the 
appropriate police precincts for carrying out crime prevention measures 
and activities.
    (3) If the PHA expects to receive drug elimination program grant 
funds, the PHA must submit, in addition to the information required by 
paragraph (m)(1) of this section, the plan required by HUD's Public 
Housing Drug Elimination Program regulations (see part 761 of this 
title).
    (4) If HUD determines at any time that the security needs of a 
public housing development are not being adequately addressed by the 
PHA's plan, or that the local police precinct is not assisting the PHA 
with compliance with its crime prevention measures as described in the 
Annual Plan, HUD may mediate between the PHA and the local precinct to 
resolve any issues of conflict.
    (n) A statement of the PHA's policies and rules regarding ownership 
of pets in public housing. This statement describes the PHA's policies 
and requirements pertaining to the ownership of pets in public housing. 
The policies must be in accordance with section 31 of the 1937 Act (42 
U.S.C. 1437a-3).
    (o) Civil rights certification. (1) The PHA must certify that it 
will carry out its plan in conformity with title VI of the Civil Rights 
Act of 1964 (42 U.S.C. 2000d-2000d-4), the Fair Housing Act (42 U.S.C. 
3601-19), section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 
794), and title II of the Americans with Disabilities Act of 1990 (42 
U.S.C. 12101 et seq.). The PHA also must certify that it will 
affirmatively further fair housing.
    (2) The certification is applicable to both the 5-Year Plan and the 
Annual Plan.
    (3) A PHA shall be considered in compliance with the certification 
requirement to affirmatively further fair housing if the PHA fulfills 
the requirements of Sec. 903.2(b) and:
    (i) Examines its programs or proposed programs;
    (ii) Identifies any impediments to fair housing choice within those 
programs;
    (iii) Addresses those impediments in a reasonable fashion in view 
of the resources available;
    (iv) Works with local jurisdictions to implement any of the 
jurisdiction's initiatives to affirmatively further fair housing that 
require the PHA's involvement; and
    (v) Maintains records reflecting these analyses and actions.
    (p) Recent results of PHA's fiscal year audit. This statement 
provides the results of the most recent fiscal year audit of the PHA 
conducted under section 5(h)(2) of the 1937 Act (42 U.S.C. 1437c(h)).
    (q) A statement of asset management. To the extent not covered by 
other components of the PHA Annual Plan, this statement describes how 
the PHA will carry out its asset management functions with respect to 
the PHA's public housing inventory, including how the PHA will plan for 
long-term operating, capital investment, rehabilitation, modernization, 
disposition, and other needs for such inventory.
    (r) Additional information to be provided. (1) For all Annual Plans 
following submission of the first Annual Plan, a PHA must include a 
brief statement of the PHA's progress in meeting the mission and goals 
described in the 5-Year Plan;
    (2) A PHA must identify the basic criteria the PHA will use for 
determining:
    (i) A substantial deviation from its 5-Year Plan; and
    (ii) A significant amendment or modification to its 5-Year Plan and 
Annual Plan.
    (3) A PHA must include such other information as HUD may request of 
PHAs, either on an individual or across-the-board basis. HUD will 
advise the PHA or PHAs of this additional information through advance 
notice.


Sec. 903.9  May HUD request additional information in the Annual Plan 
of a troubled PHA?

    HUD may request that a PHA that is at risk of being designated as 
troubled or is designated as troubled in accordance with section 
6(j)(2) of the

[[Page 81228]]

1937 Act (42 U.S.C. 1437d(j)(2)), the Public Housing Management 
Assessment Program (part 901 of this title) or the Public Housing 
Assessment System (part 902 of this chapter) include its operating 
budget. The PHA also must include or reference any applicable 
memorandum of agreement with HUD or any plan to improve performance, 
and such other material as HUD may prescribe.


Sec. 903.11  Are certain PHAs eligible to submit a streamlined Annual 
Plan?

    (a) Yes, the following PHAs may submit a streamlined Annual Plan, 
as described in paragraph (b) of this section:
    (1) PHAs that are determined to be high performing PHAs as of the 
last annual or interim assessment of the PHA before the submission of 
the 5-Year or Annual Plan;
    (2) PHAs with less than 250 public housing units (small PHAs) and 
that have not been designated as troubled in accordance with section 
6(j)(2) of the 1937 Act; and
    (3) PHAs that only administer tenant-based assistance and do not 
own or operate public housing.
    (b) All streamlined plans must provide information on how the 
public may reasonably obtain additional information on the PHA policies 
contained in the standard Annual Plan, but excluded from their 
streamlined submissions.
    (c) A streamlined plan must include the information provided in 
this paragraph (c). The Secretary may reduce the information 
requirements of streamlined Plans further, with adequate notice.
    (1) For high performing PHAs, the streamlined Annual Plan must 
include the information required by Sec. 903.7(a), (b), (c), (d), (g), 
(h), (k), (m), (n), (o), (p) and (r). The information required by 
Sec. 903.7(m) must be included only to the extent this information is 
required for PHA's participation in the public housing drug elimination 
program and the PHA anticipates participating in this program in the 
upcoming year. The information required by Sec. 903.7(k) must be 
included only to the extent that the PHA participates in homeownership 
programs under section 8(y).
    (2) For small PHAs that are not designated as troubled or that are 
not at risk of being designated as troubled under section 6(j)(2) of 
the 1937 Act the streamlined Annual Plan must include the information 
required by Sec. 903.7(a), (b), (c), (d), (g), (h), (k), (m), (n), (o), 
(p) and (r). The information required by Sec. 903.7(k) must be included 
only to the extent that the PHA participates in homeownership programs 
under section 8(y). The information required by Sec. 903.7(m) must be 
included only to the extent this information is required for the PHA's 
participation in the public housing drug elimination program and the 
PHA anticipates participating in this program in the upcoming year.
    (3) For PHAs that administer only tenant-based assistance, the 
streamlined Annual Plan must include the information required by 
Sec. 903.7(a), (b), (c), (d), (e), (f), (k), (l), (o), (p) and (r).


Sec. 903.13  What is a Resident Advisory Board and what is its role in 
development of the Annual Plan?

    (a) A Resident Advisory Board refers to a board or boards, as 
provided in paragraph (b) of this section, whose membership consists of 
individuals who adequately reflect and represent the residents assisted 
by the PHA.
    (1) The role of the Resident Advisory Board (or Resident Advisory 
Boards) is to assist and make recommendations regarding the development 
of the PHA plan, and any significant amendment or modification to the 
PHA plan.
    (2) The PHA shall allocate reasonable resources to assure the 
effective functioning of Resident Advisory Boards. Reasonable resources 
for the Resident Advisory Boards must provide reasonable means for them 
to become informed on programs covered by the PHA Plan, to communicate 
in writing and by telephone with assisted families and hold meetings 
with those families, and to access information regarding covered 
programs on the internet, taking into account the size and resources of 
the PHA.
    (b) Each PHA must establish one or more Resident Advisory Boards, 
as provided in paragraph (b) of this section.
    (1) If a jurisdiction-wide resident council exists that complies 
with the tenant participation regulations in part 964 of this title, 
the PHA shall appoint the jurisdiction-wide resident council or the 
council's representatives as the Resident Advisory Board. If the PHA 
makes such appointment, the members of the jurisdiction-wide resident 
council or the council's representatives shall be added or another 
Resident Advisory Board formed to provide for reasonable representation 
of families receiving tenant-based assistance where such representation 
is required under paragraph (b)(2) of this section.
    (2) If a jurisdiction-wide resident council does not exist but 
resident councils exist that comply with the tenant participation 
regulations, the PHA shall appoint such resident councils or their 
representatives to serve on one or more Resident Advisory Boards. If 
the PHA makes such appointment, the PHA may require that the resident 
councils choose a limited number of representatives.
    (3) Where the PHA has a tenant-based assistance program of 
significant size (where tenant-based assistance is 20% or more of 
assisted households), the PHA shall assure that the Resident Advisory 
Board (or Boards) has reasonable representation of families receiving 
tenant-based assistance and that a reasonable process is undertaken to 
choose this representation.
    (4) Where or to the extent that resident councils that comply with 
the tenant participation regulations do not exist, the PHA shall 
appoint Resident Advisory Boards or Board members as needed to 
adequately reflect and represent the interests of residents of such 
developments; provided that the PHA shall provide reasonable notice to 
such residents and urge that they form resident councils with the 
tenant participation regulations.
    (c) The PHA must consider the recommendations of the Resident 
Advisory Board or Boards in preparing the final Annual Plan, and any 
significant amendment or modification to the Annual Plan, as provided 
in Sec. 903.21 of this title.
    (1) In submitting the final plan to HUD for approval, or any 
significant amendment or modification to the plan to HUD for approval, 
the PHA must include a copy of the recommendations made by the Resident 
Advisory Board or Boards and a description of the manner in which the 
PHA addressed these recommendations.
    (2) Notwithstanding the 75-day limitation on HUD review, in 
response to a written request from a Resident Advisory Board claiming 
that the PHA failed to provide adequate notice and opportunity for 
comment, HUD may make a finding of good cause during the required time 
period and require the PHA to remedy the failure before final approval 
of the plan.


Sec. 903.15  What is the relationship of the public housing agency 
plans to the Consolidated Plan?

    (a) The PHA must ensure that the Annual Plan is consistent with any 
applicable Consolidated Plan for the jurisdiction in which the PHA is 
located. The Consolidated Plan includes a certification that requires 
the preparation of an Analysis of Impediments to Fair Housing Choice.
    (1) The PHA must submit a certification by the appropriate State or 
local officials that the Annual Plan is consistent with the 
Consolidated Plan

[[Page 81229]]

and include a description of the manner in which the applicable plan 
contents are consistent with the Consolidated Plans.
    (2) For State agencies that are PHAs, the applicable Consolidated 
Plan is the State Consolidated Plan.
    (b) A PHA may request to change its fiscal year to better 
coordinate its planning with the planning done under the Consolidated 
Plan process, by the State or local officials, as applicable.


Sec. 903.17  What is the process for obtaining public comment on the 
plans?

    (a) The PHA's board of directors or similar governing body must 
conduct a public hearing to discuss the PHA plan (either the 5-Year 
Plan and/or Annual Plan, as applicable) and invite public comment on 
the plan(s). The hearing must be conducted at a location that is 
convenient to the residents served by the PHA.
    (b) Not later than 45 days before the public hearing is to take 
place, the PHA must:
    (1) Make the proposed PHA plan(s), the required attachments and 
documents related to the plans, and all information relevant to the 
public hearing to be conducted, available for inspection by the public 
at the principal office of the PHA during normal business hours; and
    (2) Publish a notice informing the public that the information is 
available for review and inspection, and that a public hearing will 
take place on the plan, and the date, time and location of the hearing.
    (c) PHAs shall conduct reasonable outreach activities to encourage 
broad public participation in the PHA plans.


Sec. 903.19  When is the 5-Year Plan or Annual Plan ready for 
submission to HUD?

    A PHA may adopt its 5-Year Plan or its Annual Plan and submit the 
plan to HUD for approval only after:
    (a) The PHA has conducted the public hearing;
    (b) The PHA has considered all public comments received on the 
plan;
    (c) The PHA has made any changes to the plan, based on comments, 
after consultation with the Resident Advisory Board or other resident 
organization.


Sec. 903.21  May the PHA amend or modify a plan?

    (a) A PHA, after submitting its 5-Year Plan or Annual Plan to HUD, 
may amend or modify any PHA policy, rule, regulation or other aspect of 
the plan. If the amendment or modification is a significant amendment 
or modification, as defined in Sec. 903.7(r)(2), the PHA:
    (1) May not adopt the amendment or modification until the PHA has 
duly called a meeting of its board of directors (or similar governing 
body) and the meeting, at which the amendment or modification is 
adopted, is open to the public; and
    (2) May not implement the amendment or modification, until 
notification of the amendment or modification is provided to HUD and 
approved by HUD in accordance with HUD's plan review procedures, as 
provided in Sec. 903.23.
    (b) Each significant amendment or modification to a plan submitted 
to HUD is subject to the requirements of Secs. 903.13, 903.15, and 
903.17.


Sec. 903.23  What is the process by which HUD reviews, approves, or 
disapproves an Annual Plan?

    (a) Review of the plan. When the PHA submits its Annual Plan to 
HUD, including any significant amendment or modification to the plan, 
HUD reviews the plan to determine whether:
    (1) The plan provides all the information that is required to be 
included in the plan;
    (2) The plan is consistent with the information and data available 
to HUD;
    (3) The plan is consistent with any applicable Consolidated Plan 
for the jurisdiction in which the PHA is located; and
    (4) The plan is not prohibited or inconsistent with the 1937 Act or 
any other applicable Federal law.
    (b) Disapproval of the plan. (1) HUD may disapprove a PHA plan, in 
its entirety or with respect to any part, or disapprove any significant 
amendment or modification to the plan, only if HUD determines that the 
plan, or one of its components or elements, or any significant 
amendment or modification to the plan:
    (i) Does not provide all the information that is required to be 
included in the plan;
    (ii) Is not consistent with the information and data available to 
HUD;
    (iii) Is not consistent with any applicable Consolidated Plan for 
the jurisdiction in which the PHA is located; or
    (iv) Is not consistent with applicable Federal laws and 
regulations.
    (2) Not later than 75 days after the date on which the PHA submits 
its plan or significant amendment or modification to the plan, HUD will 
issue written notice to the PHA if the plan or a significant amendment 
or modification has been disapproved. The notice that HUD issues to the 
PHA must state with specificity the reasons for the disapproval. HUD 
may not state as a reason for disapproval the lack of time to review 
the plan.
    (3) If HUD fails to issue the notice of disapproval on or before 
the 75th day after the date on which the PHA submits its plan or 
significant amendment or modification to the plan, HUD shall be 
considered to have determined that all elements or components of the 
plan required to be submitted and that were submitted, and to be 
reviewed by HUD were in compliance with applicable requirements and the 
plan has been approved.
    (4) The provisions of paragraph (b)(3) of this section do not apply 
to troubled PHAs. The plan of a troubled PHA must be approved or 
disapproved by HUD through written notice.
    (c) Designation of due date as submission date for first plan 
submissions. For purposes of the 75-day period described in paragraph 
(b) of this section, the first 5-year and Annual Plans submitted by a 
PHA will be considered to have been submitted no earlier than the due 
date as provided in Sec. 903.5.
    (d) Public availability of the approved plan. Once a PHA's plan has 
been approved, a PHA must make the approved plan and the required 
attachments and documents related to the plan, available for review and 
inspection, at the principal office of the PHA during normal business 
hours.


Sec. 903.25  How does HUD ensure PHA compliance with its plan?

    A PHA must comply with the rules, standards and policies 
established in the plans. To ensure that a PHA is in compliance with 
all policies, rules, and standards adopted in the plan approved by HUD, 
HUD shall, as it deems appropriate, respond to any complaint concerning 
PHA noncompliance with its plan. If HUD should determine that a PHA is 
not in compliance with its plan, HUD will take whatever action it deems 
necessary and appropriate.

    Dated: December 14, 2000.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 00-32550 Filed 12-21-00; 8:45 am]
BILLING CODE 4210-33-P