[Federal Register Volume 69, Number 53 (Thursday, March 18, 2004)]
[Proposed Rules]
[Pages 12950-12970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5827]



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Part VI





Department of Housing and Urban Development





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24 CFR Part 983



Project-Based Voucher Program; Proposed Rule

  Federal Register / Vol. 69, No. 53 / Thursday, March 18, 2004 / 
Proposed Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 983

[Docket No. FR-4636-P-01]
RIN 2577-AC25


Project-Based Voucher Program

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

ACTION: Proposed rule.

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SUMMARY: HUD proposes comprehensive regulations for the new project-
based voucher program. In this program, HUD pays rental assistance for 
eligible families who live in specific housing developments or units. A 
public housing agency (PHA) that runs the tenant-based housing choice 
voucher program may ``project-base'' up to 20 percent of voucher units 
funded by HUD. The project-based voucher program replaces the project-
based certificate program and these regulations would replace the 
current regulations for the project-based certificate program.

DATES: Comments Due Date: May 17, 2004.

ADDRESSES: Interested persons are invited to submit written comments 
regarding this rule to the Regulations Division, Office of General 
Counsel, Room 10276, Department of Housing and Urban Development, 451 
Seventh Street, SW., Washington, DC 20410-0500. Comments should refer 
to the above docket number and title. A copy of each comment submitted 
will be available for public inspection and copying between 8 a.m. and 
5 p.m., weekdays, at the above address. Facsimile (FAX) comments will 
not be accepted.

FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Office of Public and 
Indian Housing, Department of Housing and Urban Development, 451 
Seventh Street, SW., Room 4210, Washington, DC 20410; telephone (202) 
708-0477 (this is not a toll-free number). Persons with hearing or 
speech impairments may access these numbers through TTY by calling the 
toll-free Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    The new project-based voucher program was authorized by statute in 
1998, as part of the statutory merger of the certificate and voucher 
tenant-based assistance programs. (See Section 545 of the Quality 
Housing and Work Responsibility Act of 1998 (Pub. L. 105-276, approved 
October 21, 1998, amending 42 U.S.C. 1437f(o)).) The 1998 law provided 
PHAs with the option to use a portion of its available tenant-based 
voucher funds for project-based rental assistance. The 1998 law 
replaced a similar authority for project-based rental assistance in the 
former certificate program. In 2000, the Congress substantially revised 
the requirements of the project-based voucher program. (Section 
8(o)(13) of the United States Housing Act of 1937, 42 U.S.C. 
1473f(o)(13), as amended by section 232 of the Fiscal Year 2001 
Departments of Veterans Affairs and Housing and Urban Development, and 
Independent Agencies Appropriations Act (Pub. L. 106-377, approved 
October 27, 2000).)
    Significant features of the project-based voucher program as 
authorized in 1998, and amended in 2000 include:
     A PHA may project-base up to 20 percent of the 
PHA's voucher funding.
     A PHA may provide project-based assistance for 
existing housing that does not need rehabilitation, as well as for 
newly constructed or rehabilitated housing.
     Project-based assistance must be consistent with 
the ``PHA Plan.''
     Project-basing must be consistent with the 
statutory goals of ``deconcentrating poverty and expanding economic 
opportunities.''
     After one year of assistance, the family may 
move from a project-based voucher unit to the PHA's tenant-based 
voucher program or another comparable program, when a slot is 
available.
     Except for units designated for the elderly, 
disabled, or families receiving supportive services under a family 
self-sufficiency (FSS) program, no more than 25 percent of units in a 
building may have project-based voucher assistance.
     A PHA may commit to pay project-based assistance 
for a term of up to 10 years. However, the PHA's contractual commitment 
is subject to availability of appropriated funds.
     At the end of the contract term, the PHA may 
extend the housing assistance payment (HAP) contract with an owner for 
an additional term of up to one year, if appropriate, to continue 
providing affordable housing for low-income families. One-year 
extensions are subject to availability of appropriated funds.
     Generally, project-based voucher rents (rent to 
owner plus the allowance for tenant-paid utilities) must not exceed the 
lowest of the payment standard amount (minus any utility allowance), 
the reasonable rent, or the rent requested by the owner. This limit 
applies both to the initial rent and rent adjustments over the term of 
the HAP contract.
     There are special provisions for establishing 
the project-based voucher rent for a unit in a tax credit building 
located outside a ``qualified census tract.''
     Admission to project-based units is subject to 
the overall voucher ``income-targeting'' requirement. At least 75 
percent of the families admitted to the PHA tenant-based and project-
based voucher programs each year must be ``extremely low-income'' 
families with annual incomes below 30 percent of median income for the 
area.
     All units must be inspected for housing quality 
standards (HQS) compliance before the PHA enters a HAP contract with an 
owner. After the initial inspection, the PHA is not required to re-
inspect each unit annually. Instead, the PHA may inspect a 
representative sample of units at the annual inspection.
     If a family moves out, the PHA may continue 
payments to the owner for up to 60 days. The PHA has discretion whether 
to provide such vacancy payments.
    On January 16, 2001 (66 FR 3605), HUD published a Federal Register 
notice that provided guidance on implementation of the new project-
based program, as authorized in 1998 and amended in 2000. The HUD 
notice described the law and provided guidance on how to implement the 
law and existing program regulations before HUD issues new program 
regulations. This notice remains applicable until HUD issues a final 
rule following this proposed rule.
    Requirements of this proposed rule would be applicable to all 
project-based voucher units, except that this rule would not affect the 
contractual rights of owners under project-based voucher agreements and 
HAP contracts entered into by a PHA and owner (1) prior to the 
effective date of the final rule, and (2) in accordance with the law 
and HUD requirements and on the contractual forms prescribed by HUD. 
This rulemaking will not apply to project-based certificate units. 
Project-based certificate units will continue to be governed by the 
regulations of 24 CFR part 983, codified as of April 1, 2003, after 
this rule becomes effective.

II. This Proposed Rule

    An overview of the regulations that this rule proposed to govern 
the project-based voucher program follows.

[[Page 12951]]

A. A Project-Based Voucher Program Administered by PHAs Uses Tenant-
Based Voucher Funding. There Is No Separate Allocation of Project-Based 
Funds. It is the PHA's Option Whether To Implement a Project-Based 
Voucher Program

    The project-based voucher program is administered by a PHA that 
already administers the tenant-based voucher program under an annual 
contributions contract (ACC) with HUD. There is no additional funding 
for project-based vouchers.
    If a PHA decides to operate a project-based voucher program, the 
program is funded with a portion of the appropriated funding (budget 
authority) available under the PHA's voucher ACC. This pool of funding 
is used to pay rental assistance for both tenant-based and project-
based voucher units and to pay PHA administrative fees for 
administration of tenant-based and project-based voucher assistance.
    A PHA has discretion whether to implement a project-based voucher 
program. HUD approval is not required.

B. Maximum Number of Project-Based Voucher Units

    Prior to 1998, the law capped the number of project-based units at 
the number supported by 15 percent of the total funding available to 
the PHA under the PHA's ACC for tenant-based assistance. Under this 
rule, the PHA would be able to project-base up to 20 percent of the 
PHA's ``baseline'' number of units. This baseline number is established 
pursuant to Sec.  982.102 and is the number of voucher units used by 
HUD to determine the amount needed for renewal of the ACC. All 
outstanding commitments for project-based assistance--project-based 
certificate and project-based voucher units under agreement or HAP 
contract plus project-based units selected by the PHA but not yet under 
agreement or HAP contract--count against the 20 percent maximum.

C. Project-Based Vouchers May Be Used With Existing Housing.

    In the past (under the project-based certificate program), a PHA 
could only project-base newly constructed or rehabilitated units--using 
a portion of its available tenant-based funding. In the project-based 
voucher program, a PHA may also use tenant-based funding to attach 
assistance to existing units not needing rehabilitation.
    To qualify as ``existing housing'' as defined in the rule, the 
units must already exist and substantially comply with the housing 
quality standards (HQS) on the proposal selection date. This is the 
date the PHA gives written notice of proposal selection to the owner 
whose proposal is selected. The units must fully comply with the HQS 
before execution of the HAP contract.

D. Project-Based Vouchers May Be Used With Newly Constructed and 
Rehabilitated Housing

    Under this proposed rule, the requirements for ``newly constructed 
or rehabilitated housing'' would apply to any housing that does not 
qualify as ``existing housing.'' These requirements would apply to any 
housing that does not substantially comply with the HQS on the proposal 
selection date and that therefore requires a process of development to 
comply with the HQS.
    ``Development'' is defined as the construction or rehabilitation of 
project-based voucher housing after the proposal selection date. 
Construction includes any excavation or site preparation for the 
housing.
    In the construction or rehabilitation of the housing, the owner 
must comply with federal development requirements such as compliance 
with labor standards (including Davis-Bacon), environmental, and equal 
opportunity (e.g., Section 3 of the Housing and Urban Development Act 
of 1968, 12 U.S.C. 1701u, equal employment, and program accessibility) 
requirements. Owners must comply with the requirements of Section 504 
of the Rehabilitation Act of 1973 (29 U.S.C. 794) and regulations at 24 
CFR 8.22, 8.23(a), or 8.23(b), as applicable, and the design and 
construction requirements of the Fair Housing Act Amendments of 1988, 
42 U.S.C. 3604(f)(3)(C), and the regulations at 24 CFR 100.205, as 
appropriate.
    An agreement is executed for units to be constructed or 
rehabilitated before the beginning of construction or rehabilitation. 
In the agreement, the owner agrees to develop the contract units to 
comply with the HQS. The owner also agrees to comply with federal 
development requirements, such as compliance with federal Davis-Bacon 
prevailing wage requirements (40 U.S.C. 3141 et seq.) relative to the 
development of nine or more project-based voucher units. The PHA 
monitors compliance with labor standards (see HUD Handbook 1344.1, 
Federal Labor Standards Compliance in Housing and Community Development 
Programs).
    The PHA agrees that upon timely completion of such development in 
accordance with the terms of the agreement the PHA will enter into a 
HAP contract with the owner for the contract units.

E. PHAs May Select Only Sites Meeting Certain Requirements, Including 
Deconcentration Goals

    All site selection must be consistent with the project-based 
voucher statutory goals of deconcentrating poverty and expanding 
housing and economic opportunities.
    For the most part, there is no need to distinguish between ``newly 
constructed'' and ``rehabilitated'' housing since the project-based 
voucher program requirements are identical. As in the past, however, 
the new rule would substantially continue the existing distinction 
between the civil rights site selection standards for ``newly 
constructed'' and ``rehabilitated'' housing.
    At this time, HUD does not propose a substantive change in the 
existing site selection standards for newly constructed or 
rehabilitated housing. The site and neighborhood standards specified in 
this proposed rule are HUD's ``institutional standards'' for evaluating 
and considering the effect of site selection, in the light of HUD's 
responsibility to affirmatively promote fair housing in its programs.

F. PHAs Must Select Units for the Project-Based Voucher Program in 
Accordance With the PHA's Local Unit Selection Policies and Competitive 
Procedures

    Generally, HUD will require PHAs to select project-based voucher 
proposals based on some kind of public competition. In cases where a 
federal, state, or local housing assistance, community development, or 
supportive services program that requires a competitive selection of 
proposals has already competitively selected proposals, a second 
competition for project-based vouchers is not required. In all other 
cases, however, PHAs must select proposals based on public competition. 
The notice of competition must be published by means that actually 
operate to provide broad public notice, including publication in a 
newspaper of general circulation and other means. The selection of 
winning proposals shall also be made public. The PHA's unit selection 
policies must be specified in the PHA's administrative plan, and the 
PHA must select units in accordance with those policies.

G. Generally, No More Than 25 Percent of the Units in Each Multifamily 
Building May Be Assisted

    Generally, no more than 25 percent of the dwelling units in each 
building may have project-based voucher or any other federal project-
based housing assistance.

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The following types of housing units are exempt from the 25 percent per 
building cap: (1) Project-based dwelling units in single family (one-to 
four-unit) properties; (2) units in a multifamily building (5 or more 
units) set aside for elderly or disabled families; and (3) units in a 
multifamily building set aside for families participating in a voucher, 
project-based certificate, or public housing FSS program who are in 
compliance with or have completed their FSS contract of participation. 
In addition, PHAs may establish additional local requirements to 
promote income mixing.
    The restrictions concerning the number of subsidized units in each 
building apply to all types of housing selected for the project-based 
voucher program--existing, newly constructed, and rehabilitated 
housing.

H. Family Option To Move From Project-Based Voucher Unit After First 
Year and Receive Tenant-Based Assistance Elsewhere

    After living in the project-based unit one year, the tenant may 
move out and receive tenant-based voucher subsidy or other comparable 
tenant-based rental assistance. ``Comparable rental assistance'' is 
defined as a subsidy or other means to enable a family to obtain decent 
housing in the PHA jurisdiction renting at a gross rent that is not 
more than forty percent of the family's monthly adjusted income.
    The tenant must give the owner advance written notice of intent to 
vacate the project-based voucher unit in accordance with the lease. If 
a tenant-based voucher (or comparable assistance) is not immediately 
available when the project-based voucher unit lease is terminated, the 
PHA must give the family priority to receive the next available voucher 
or comparable assistance.
    Vouchers from funding allocations targeted by HUD for special 
purposes (e.g., family unification, mainstream disabled) are not 
available for this purpose.

I. Term of HAP Contract; Ten Year Maximum Initial HAP Contract Term

    In all cases, units must comply with the HQS before the HAP 
Contract is executed. For newly constructed or rehabilitated units, the 
HAP Contract is executed after the construction work ends, and the PHA 
accepts that the units have been completed in accordance with the 
agreement, including full compliance with the HQS.
    The HAP Contract term for each unit is between one year and ten 
years, as determined by the PHA. However, continuation to the full term 
is subject to the future availability of sufficient appropriated funds 
under the PHA's consolidated ACC with HUD.
    At the end of the term, the PHA may extend the initial HAP Contract 
term for additional terms of up to one year if the PHA determines that 
such extensions are appropriate to continue providing affordable 
housing for low-income families. Such extensions are subject to the 
continuing availability of appropriations.

J. Every Unit Must Comply With the Housing Quality Standards (HQS) 
Before the HAP Contract Is Executed. Annual PHA HQS Inspections May Be 
Limited to a Representative Sample of Units Under HAP Contract

    Project-based voucher units must comply with the HQS before the HAP 
contract is executed and during the term of the HAP contract. The PHA 
may establish additional quality, architecture, and design requirements 
for newly constructed or rehabilitated housing.
    Before and during the term of assistance, project-based voucher 
units are inspected for compliance with the HQS. Every project-based 
voucher contract unit must be inspected and pass the HQS inspection 
before housing assistance is provided under the HAP contract.
    However, a PHA is not required to inspect each project-based 
voucher unit in a project annually. Instead, at least annually during 
the term of the HAP contract, the PHA must initially inspect a random 
sample, consisting of at least 20 percent of the contract units in each 
building, to determine if the contract units and the premises are 
maintained in accordance with the HQS. If more than 20 percent of the 
initially inspected contract units in a building fail the initial 
annual inspection, the PHA must inspect 100 percent of the contract 
units in the building. In addition, the PHA must inspect every turnover 
unit before occupancy by a replacement assisted family.

K. Initial Rent to Owner; Special Rent Rules for Tax Credit Units Not 
Located in a Qualified Census Tract; Rent Adjustments

    Generally, project-based voucher rents (rent to owner plus the 
allowance for tenant-paid utilities) must not exceed the lowest of the 
payment standard amount, the reasonable rent, or the rent requested by 
the owner for the PHA's tenant-based voucher program. This limit 
applies both to the initial rent and rent adjustments over the term of 
the HAP contract.
    There are special provisions for establishing the project-based 
voucher rent for a unit in a tax credit building which is located 
outside a qualified census tract with tax credit rents exceeding the 
PHA's payment standard, where there are comparable tax credit units of 
the same unit bedroom size as the contract unit, and the comparable tax 
credit units do not have any form of rental assistance other than the 
tax credit. These provisions are found at Sec.  983.301(c) of this 
proposed rule. A qualified census tract is any census tract (or 
equivalent geographic area defined by the Bureau of the Census) in 
which at least 50 percent of households have an income of less than 60 
percent of area median gross income or where the poverty rate is at 
least 25 percent and where the census tract is designated as a 
qualified census tract by HUD (see proposed 24 CFR 983.301(c)(4)). The 
provisions for special adjustments of contract rent pursuant to 42 
U.S.C. 1437f(b)(2)(B) do not apply to the project-based voucher 
program.

L. The Family Share of Rent Is Calculated Based on the ``Total Tenant 
Payment;'' Housing Assistance Payment Amount

    ``Total tenant payment'' and ``tenant rent'' are calculated in 
accordance with the regulations in 24 CFR part 5. Families pay as the 
total tenant payment the higher of 30 percent of adjusted monthly 
income, 10 percent of annual income, any welfare rent, or the PHA's 
minimum rent. The housing assistance payment is the difference between 
the rent to the owner and the tenant rent (total tenant payment minus 
any utility allowance).

M. Income Targeting Requirements for Tenant-Based and Project-Based 
Vouchers

    Admission to the project-based voucher program is subject to the 
same statutory income targeting requirement as the tenant-based program 
(42 U.S.C. 1437n(b)), instead of the individual project income 
targeting requirement that applies to other Section 8 project-based 
assistance (42 U.S.C. 1437n(c)(3)). During the PHA fiscal year, 75 
percent of the admissions to the voucher program (both tenant-based and 
project-based units) must be ``extremely low-income families''--defined 
as families with annual incomes not exceeding 30 percent of median 
income for the area, as determined by HUD.

N. Family Selection From PHA Waiting List

    The PHA refers waiting list applicants or current participants to 
the owner for

[[Page 12953]]

selection. The owner screens and selects tenants from families referred 
by the PHA.
    The PHA may elect to establish a separate waiting list for project-
based voucher assistance, or to use a single common list for admission 
to the PHA's tenant-based and project-based voucher programs. If a PHA 
chooses to establish a separate waiting list for project-based 
assistance, the PHA must give all applicants currently on its waiting 
list for tenant-based assistance the opportunity to also have their 
names placed on the waiting list for project-based assistance in 
accordance with the PHA's established selection policies. The PHA may 
use separate waiting lists for PBV units in individual projects or 
buildings (or for sets of such units) or may use a single waiting list 
for the PHA's whole PBV program. In either case, the waiting list may 
establish criteria or preferences for occupancy of particular units.
    The PHA may place on the PHA's waiting list applicants referred by 
owners in accordance with the PHA's local waiting list policies and 
admission preferences.

O. PHA Option To Provide Vacancy Payment to Owner

    A PHA may opt to include a provision in the HAP contract to make 
vacancy payments to the owner after an assisted family leaves the 
project-based voucher unit. A vacancy payment is only permitted if: (1) 
The owner gives prompt notice of the vacancy to the PHA; (2) the 
vacancy is not the owner's fault; and (3) the owner takes all 
reasonable actions to minimize the likelihood and length of the vacancy 
period.
    The maximum vacancy payment amount is 60 days rent to owner.

P. PHA-Owned Units

    A PHA-owned unit may only be assisted under the PBV program if the 
HUD field office or an independent entity approved by HUD reviews the 
selection process and determines that the PHA-owned units were 
appropriately selected based on the selection procedures specified in 
the PHA administrative plan.
    If PHA-owned housing is selected for the project-based voucher 
program, an independent entity approved by HUD will conduct HQS 
inspections. The independent entity will give copies of the inspection 
report to the PHA and the HUD field office. In addition, an independent 
entity approved by HUD will determine the initial and adjusted rent to 
owner.
    By law, public housing units may not be assisted in the project-
based voucher program.

Q. PHA Option To Amend HAP Contract To Add or Substitute Contract Units

    At the discretion of the PHA and subject to all PBV requirements, 
the HAP contract may be amended to substitute a different unit with the 
same number of bedrooms in the same building for a previously covered 
contract unit. Prior to such substitution, the PHA must inspect the 
proposed substitute unit and must determine the reasonable rent for 
such unit.
    In addition, at the discretion of the PHA, the HAP contract may be 
amended during the three-year period immediately following the 
execution date of the HAP contract to add additional PBV contract units 
in a building as long as the total number of project-based voucher and 
other assisted units stays at or below 25 percent of the total number 
of units, with or without assistance, in the building. Additional PBV 
contract units are subject to all PBV requirements (e.g., compliance 
with Davis-Bacon wage rates during construction and compliance with 
applicable environmental review requirements), except that a new PBV 
proposal competition is not required. The anniversary and expiration 
dates of the HAP contract for the additional units must be the same as 
the anniversary and expiration dates of the HAP contract term for the 
PBV units originally placed under HAP contract.

R. Termination of tenancy

    The regulations in 24 CFR part 247 (concerning evictions from 
certain subsidized and HUD-owned projects) do not apply to owner 
termination of tenancy and eviction of a family receiving PBV 
assistance.

III. Specific Issues for Comment

    HUD seeks comments on all of the PBV program policies contained in 
this proposed rule, and specifically seeks comments on the following 
two issues:
    (a) Competitive selection of owner proposals. HUD acknowledges that 
it is desirable to permit PHA flexibility to devise local selection 
policy strategies and invites recommendations on how best to regulate 
PHA selection of PBV units. At the same time, HUD recognizes that it is 
in the public interest to avoid any hint of the ``influence peddling'' 
scandals experienced under the Section 8 moderate rehabilitation 
program. This proposed rule would require public advertisement for and 
competitive selection of owner proposals unless the units previously 
were competitively awarded assistance under a federal, state, or local 
government housing assistance, community development, or supportive 
services program. This policy will permit PHAs to select HOME, HOPE VI, 
tax credit, and similar units for the PBV program without conducting a 
second PBV competition. HUD solicits comment on whether the owner 
selection policies proposed in Sec.  983.51 would be appropriate and 
would permit PHA flexibility to select desirable units, target 
desirable neighborhoods, and target key ``turning point'' buildings in 
revitalizing areas while avoiding any hint of owner favoritism or 
corrupt funding distribution practices.
    (b) Minimizing displacement. It has been longstanding HUD policy 
for both the project-based certificate and moderate rehabilitation 
programs to minimize displacement of current income-eligible tenants in 
buildings to be rehabilitated. If a unit in a building selected for one 
of these programs were occupied by an eligible low-income family, the 
family could remain in the unit and receive housing assistance. While 
preventing displacement of families and facilitating housing 
rehabilitation efforts, this policy results in eligible families in 
occupied units receiving a preference over families on the PHA's 
waiting list (at least in instances where a PHA does not already 
provide a waiting list selection preference for families about to be 
displaced). This rule applies the policy of minimizing displacement to 
existing housing, a category of housing that previously was not 
eligible to receive project-based vouchers. HUD requests comments on 
whether the policy described in Sec.  983.251(b) is appropriate public 
policy, or whether PHAs should be prohibited from selecting occupied 
units for the project-based voucher program.

IV. Findings and Certifications

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866 (entitled ``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 rule subsequent to its submission to OMB are identified in 
the docket file, which is available for public inspection in the office 
of the Rules Docket Clerk, Room

[[Page 12954]]

10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC, 20410-0500.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 601-605) (RFA), has reviewed and approved this rule, and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. The proposed rule is 
exclusively concerned with PHAs that administer tenant-based housing 
assistance under section 8 of the United States Housing Act of 1937. 
Specifically, the proposed rule would give PHAs the option of project-
basing up to 20 percent of their annual budget authority under the 
tenant-based program. Under the definition of ``small governmental 
jurisdiction'' in section 601(5) of the RFA, the provisions of the RFA 
are applicable only to those few PHAs that are part of a political 
jurisdiction with a population of under 50,000 persons. The number of 
entities potentially affected by this rule is therefore not 
substantial.
    Notwithstanding HUD's determination that this rule does not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comment regarding less burdensome alternatives 
to this rule that will meet HUD's objectives as described in the 
preamble.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of No Significant 
Impact is available for public inspection between the hours of 8 a.m. 
and 5 p.m. weekdays in the Office of the Rules Docket Clerk, Office of 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410-0500.

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.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments, and on the private sector. This proposed rule would 
not impose any federal mandate on any state, local, or tribal 
government, or on the private sector, within the meaning of the UMRA.

Catalog of Federal Domestic Assistance.

    The Catalog of Federal Domestic Assistance number applicable to the 
program affected by this rule is 14.871.

List of Subjects in 24 CFR Part 983

    Grant programs--housing and community development, Housing, Low- 
and moderate-income housing, Rent subsidies, Reporting and record 
keeping requirements.
    For the reasons stated in the preamble, HUD proposes to amend 24 
CFR part 983 as follows:
    1. Revise 24 CFR part 983 to read as follows:

PART 983--PROJECT-BASED VOUCHER (PBV) PROGRAM

Subpart A--General

Sec.
983.1 When PBV rule (this part 983) applies.
983.2 When tenant-based voucher rule (24 CFR part 982) applies.
983.3 PBV definitions.
983.4 Cross-reference to other Federal requirements.
983.5 Description of the project-based voucher program.
983.6 Maximum number of PBV units.
983.7 Uniform Relocation Act.
983.8 Equal opportunity requirements.
983.9 Special housing types.
983.10 Project-based certificate program.
Subpart B--Selection of PBV Owner Proposals
983.51 Owner proposal selection procedures.
983.52 Housing type.
983.53 Prohibition of assistance for ineligible units.
983.54 Prohibition of assistance for units in subsidized housing.
983.55 Prohibition of excess public assistance.
983.56 Cap on number of PBV units in each building.
983.57 Site selection standards.
983.58 Environmental review.
983.59 PHA-owned units.
Subpart C--Dwelling Units
983.101 Housing quality standards.
983.102 Housing accessibility for persons with disabilities.
983.103 Inspecting units.
Subpart D--Requirements for Rehabilitated and Newly Constructed Units
983.151 Applicability.
983.152 Purpose and content of the Agreement to enter into HAP 
contract.
983.153 When Agreement is executed.
983.154 Conduct of development work.
983.155 Completion of housing.
983.156 PHA acceptance of completed units.
Subpart E--Housing Assistance Payments Contract
983.201 Applicability.
983.202 Purpose of HAP contract.
983.203 HAP contract information.
983.204 When HAP contract is executed.
983.205 Term of HAP contract.
983.206 HAP contract amendments (to add or substitute contract 
units).
983.207 Condition of contract units.
983.208 Owner responsibilities.
983.209 Owner certification.
Subpart F--Occupancy
983.251 How participants are selected.
982.252 PHA information for accepted family.
983.253 Leasing of contract units.
983.254 Vacancies.
983.255 Tenant screening.
983.256 Lease.
983.257 Owner termination of tenancy and eviction for criminal 
activity or alcohol abuse.
983.258 Security deposit: amounts owed by tenant.
983.259 Overcrowded, under-occupied, and accessible units.
983.260 Family right to move.
983.261 When occupancy may exceed 25 percent cap on the number of 
PBV units in each building.
Subpart G--Rent to Owner
983.301 Determining the rent to owner.
983.302 Annual redetermination of rent to owner.
983.303 Reasonable rent.
983.304 Other subsidy: effect on rent to owner.
983.305 Rent to owner: effect of rent control and other rent limits.
Subpart H--Payment to Owner
983.351 PHA payment to owner for occupied unit.
983.352 Vacancy payment.
983.353 Tenant rent; payment to owner.
983.354 Other fees and charges.

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

Subpart A--General


Sec.  983.1  When PBV rule (this part 983) applies.

    Part 983 applies to the project-based voucher (PBV) program. The 
PBV program is authorized by section

[[Page 12955]]

8(o)(13) of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)).


Sec.  983.2  When tenant-based voucher rule (24 CFR part 982) applies.

    (a) 24 CFR part 982. Part 982 is the basic regulation for the 
tenant-based voucher program. Paragraphs (b) and (c) of this section 
describe the provisions of part 982 that do not apply to the PBV 
program. The rest of part 982 applies to the PBV program. For use and 
applicability of voucher program definitions at Sec.  982.4, see Sec.  
983.3 of this part.
    (b) Types of 24 CFR part 982 provisions that do not apply to PBV. 
The following types of provisions in 24 CFR part 982 do not apply to 
PBV assistance under part 983.
    (1) Provisions on issuance or use of a voucher;
    (2) Provisions on portability;
    (3) Provisions on the following special housing types: shared 
housing, cooperative housing, manufactured home space rental, and the 
homeownership option.
    (c) Specific 24 CFR part 982 provisions that do not apply to PBV 
assistance. Except as specified below, the following specific 
provisions in 24 CFR part 982 do not apply to PBV assistance under part 
983.
    (1) In subpart E of part 982: paragraph (b)(2) of Sec.  982.202, 
and paragraph (d) of Sec.  982.204;
    (2) Subpart G of part 982: subpart G does not apply, except that 
Sec.  982.310 (owner termination of tenancy) as modified by Sec.  
983.257, Sec.  982.312 (absence from unit) as modified by Sec.  
983.256(g), and Sec.  982.316 (live-in aide) apply to the PBV Program;
    (3) Subpart H of part 982;
    (4) In subpart I of part 982: Sec.  982.401(j); paragraphs (a)(3), 
(c), and (d) of Sec.  982.402; Sec.  982.403; Sec.  982.405(a); and 
Sec.  982.406;
    (5) In subpart J of part 982: Sec.  982.455;
    (6) Subpart K of part 982: subpart K does not apply, except that 
the following provisions of subpart K apply to the PBV Program:
    (i) Section 982.503 (for determination of the payment standard 
amount and schedule for a Fair Market Rent (FMR) area or for a 
designated part of an FMR area). However, provisions authorizing 
approval of a higher payment standard as a reasonable accommodation for 
a particular family that includes a person with disabilities do not 
apply (since the payment standard amount does not affect availability 
of a PBV unit for occupancy by a family or the amount paid by the 
family);
    (ii) Section 982.516 (family income and composition; regular and 
interim examinations);
    (iii) Section 982.517 (utility allowance schedule); and
    (iv) Sections 982.551 through 982.555.
    (7) In Subpart M of part 982:
    (i) Sections 982.603, 982.607, 982.611, 982.613(c)(2); and
    (ii) Provisions concerning shared housing (Sec. Sec.  982.615 
through 982.618), cooperative housing (Sec.  982.619), manufactured 
home space rental (Sec. Sec.  982.622 through 982.624), and the 
homeownership option (Sec. Sec.  982.625 through 982.641).


Sec.  983.3  PBV definitions.

    (a) Use of PBV definitions. (1) PBV terms (defined in this 
section). This section defines PBV terms that are used in 24 CFR part 
983. For PBV assistance, the definitions in this section apply to use 
of the defined terms in part 983 and in applicable provisions of part 
982. (Section 983.2 specifies which provisions in part 982 apply to PBV 
assistance under part 983.)
    (2) Other voucher terms (terms defined in 24 CFR 982.4). (i) The 
definitions in this section apply instead of definitions of the same 
terms in 24 CFR 982.4.
    (ii) Other voucher terms are defined in Sec.  982.4, but are not 
defined in this section. These Sec.  982.4 definitions apply to use of 
the defined terms in part 983 and in provisions of part 982 that apply 
to part 983.
    (b) PBV definitions.
    1937 Act. The United States Housing Act of 1937 (42 U.S.C. 1437 et 
seq.).
    Activities of daily living. Eating, bathing, grooming, dressing, 
and home management activities.
    Admission. The point when the family becomes a participant in the 
PHA's tenant-based or project-based voucher program (initial receipt of 
tenant-based or project-based assistance). After admission, and so long 
as the family is continuously assisted with tenant-based or project-
based voucher assistance from the PHA, a shift from tenant-based or 
project-based assistance to the other form of voucher assistance is not 
a new admission.
    Agreement to enter into HAP contract (Agreement). The Agreement is 
a written contract between the PHA and the owner in the form prescribed 
by HUD. The Agreement defines requirements for development of housing 
to be assisted under this section. When development is completed by the 
owner in accordance with the Agreement, the PHA enters into a HAP 
contract with the owner. The Agreement is not used for existing housing 
assisted under this section.
    Assisted living facility. A residence facility (including a 
facility located in a larger multifamily property) that meets all the 
following criteria:
    (1) The facility is licensed and regulated as an assisted living 
facility by the state, municipality, or other political subdivision;
    (2) The facility makes available supportive services to assist 
residents in carrying out activities of daily living; and
    (3) The facility provides separate dwelling units for residents and 
includes common rooms and other facilities appropriate and actually 
available to provide supportive services for the residents.
    Baseline units. The number of units reserved by HUD for the PHA's 
program as calculated under 24 CFR 982.102(d)(i) and as adjusted under 
24 CFR 982.102(d)(ii).
    Comparable rental assistance. A subsidy or other means to enable a 
family to obtain decent housing in the PHA jurisdiction renting at a 
gross rent that is not more than forty percent of the family's monthly 
adjusted income.
    Contract units. The housing units covered by a HAP contract.
    Development. Construction or rehabilitation of PBV housing after 
the proposal selection date.
    Excepted units (units in a multifamily building not counted against 
the 25 percent per-building cap). See Sec.  983.56(b)(2)(i).
    Existing housing. Housing units that already exist on the proposal 
selection date and that substantially comply with the HQS on that date. 
(The units must fully comply with the HQS before execution of the HAP 
contract.)
    Fair market rent (FMR). The rent, including the cost of utilities 
(except telephone), as established by HUD for units of varying sizes 
(by number of bedrooms), that must be paid in the housing market area 
to rent privately owned, existing, decent, safe, and sanitary rental 
housing of a modest (non-luxury) nature with suitable amenities. See 
periodic FMR publications in the Federal Register in accordance with 24 
CFR part 888.
    Family. The person or persons approved by the PHA to reside in a 
contract unit with assistance under the program.
    Gross rent. The sum of the rent to owner plus any utility 
allowance.
    Group home. A dwelling unit that is licensed by a state as a group 
home for the exclusive residential use of two to twelve persons who are 
elderly or persons with disabilities (including any live-in aide). 
Group home is a special housing type. See 24 CFR 982.610.
    HAP contract. The written housing assistance payments contract 
between

[[Page 12956]]

the PHA and the owner in the form prescribed by HUD.
    Household. The family and any PHA-approved live-in aide.
    Housing assistance payment. The monthly assistance payment for a 
PBV unit by a PHA, which includes:
    (1) A payment to the owner for rent to owner under the family's 
lease minus the tenant rent; and
    (2) An additional payment to or on behalf of the family, if the 
utility allowance exceeds the total tenant payment, in the amount of 
such excess.
    Housing quality standards (HQS). The HUD minimum quality standards 
for housing assisted under the program. See 24 CFR 982.401.
    HUD. The United States Department of Housing and Urban Development.
    Lease. A written agreement between an owner and a tenant for the 
leasing of a PBV dwelling unit by the owner to the tenant. The lease 
establishes the conditions for occupancy of the dwelling unit by a 
family with housing assistance payments under a HAP contract between 
the owner and the PHA.
    Multifamily building. A building with five or more dwelling units 
(assisted or unassisted).
    Newly constructed housing. Housing units that do not exist on the 
proposal selection date and are developed after the date of selection 
pursuant to an Agreement between the PHA and owner for use under the 
PBV program.
    Owner. A person or entity with the legal right to lease or sublease 
a unit to a participant.
    Partially-assisted building. A building where the number of 
contract units is less than the number of residential units in the 
building.
    Participant. A family that is receiving tenant-based or project-
based assistance in a PHA's voucher program.
    PHA-owned unit. A PHA-owned or controlled housing unit, as defined 
in 24 CFR 982.352(b).
    Premises. The building or complex in which the contract unit is 
located, including common areas and grounds.
    Program. The voucher program under section 8 of the 1937 Act, 
including tenant-based or project-based assistance.
    Proposal selection date. The date the PHA gives written notice of 
PBV proposal selection to an owner whose proposal is selected (in a 
competitive or non competitive selection).
    Qualifying families (for purpose of exception to 25 percent per-
building cap). See Sec.  983.56(b)(2)(ii).
    Reasonable rent. A rent determined pursuant to Sec.  983.303 that 
is not more than rent charged:
    (1) For comparable units in the private unassisted market; and
    (2) For comparable unassisted units in the premises.
    Rehabilitated housing. Housing units that exist on the proposal 
selection date, but do not substantially comply with the HQS at that 
date, and are developed, pursuant to an Agreement between the PHA and 
owner, for use under the PBV program.
    Rent to owner. The total monthly reasonable rent payable to the 
owner under the lease for a contract unit. Rent to owner includes 
payment for any housing services, including any maintenance and 
utilities to be provided by the owner in accordance with the lease. 
(Rent to owner must not include charges for non-housing services.) In 
the PBV program, the rent to owner is the sum of the tenant rent and 
the PHA housing assistance payment to the owner.
    Responsible entity (RE) (for environmental review). The unit of 
general local government within which the project is located that 
exercises land use responsibility or, if HUD determines this 
infeasible, the county or, if HUD determines that infeasible, the 
state.
    Single family building. A building with no more than four dwelling 
units (assisted or unassisted).
    Site. The grounds where the contract units are located, or will be 
located after development pursuant to the Agreement.
    Special housing type. Subpart M of 24 CFR part 982 states the 
special regulatory requirements for single room occupancy (SRO) 
housing, congregate housing, group home, and manufactured home. Subpart 
M provisions on shared housing, cooperative housing, manufactured home 
space rental, and the homeownership option do not apply to PBV 
assistance under this part.
    State-certified appraiser. Any individual who satisfies the 
requirements for certification as a certified general appraiser in a 
state that has adopted criteria that currently meet or exceed the 
minimum certification criteria issued by the Appraiser Qualifications 
Board of the Appraisal Foundation. The state's criteria must include a 
requirement that the individual has achieved a satisfactory grade upon 
a state-administered examination consistent with and equivalent to the 
Uniform State Certification Examination issued or endorsed by the 
Appraiser Qualifications Board of the Appraisal Foundation. 
Furthermore, if the Appraisal Foundation has issued a finding that the 
policies, practices, or procedures of the state are inconsistent with 
Title XI of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (12 U.S.C. 3331-3352), the individual must 
comply with any additional standards for state-certified appraisers 
imposed by HUD.
    Tenant. The person or persons (other than a live-in aide) who 
executes the lease as lessee of the dwelling unit.
    Tenant-paid utilities. Utility service that is not included in the 
tenant rent, and which is the responsibility of the assisted family.
    Tenant rent. The amount payable monthly by the tenant as rent to 
the owner. The amount of the tenant rent equals the total tenant 
payment minus the applicable utility allowance for tenant-paid 
utilities for the unit occupied by the family.
    Total tenant payment. The amount described in 24 CFR 5.628.
    Utility allowance. The PHA allowance for the cost of tenant-paid 
utilities (except telephone) for a unit. The utility allowance is the 
PHA's estimate of the monthly cost of a reasonable consumption of 
utilities by an energy-conservative household, consistent with the 
requirements of the HQS.
    Utility reimbursement. The amount, if any, by which the utility 
allowance for the cost of tenant-paid utilities exceeds the total 
tenant payment for the assisted family occupying the unit.
    Wrong-size unit. A contract unit that is:
    (1) Overcrowded because of an increase in the household size; or
    (2) Larger than appropriate (``under-occupied'') because of a 
change in the household size or composition. See Sec.  983.259.


Sec.  983.4  Cross-reference to other Federal requirements.

    The following provisions apply to assistance under the PBV program.
    Civil money penalty. Penalty for owner breach of HAP contract. See 
24 CFR 30.68.
    Debarment. Prohibition on use of debarred, suspended, or ineligible 
contractors. See 24 CFR 5.105(c) and 24 CFR part 24.
    Definitions. See 24 CFR part 5, subpart D.
    Disclosure and verification of income information. See 24 CFR part 
5, subpart B.
    Environmental review. See 24 CFR parts 50 and 58 (see also 
provisions on PBV environmental review at Sec.  983.58).
    Fair housing. Nondiscrimination and equal opportunity. See 24 CFR 
5.105(a).
    Fair market rents. See 24 CFR part 888, subpart A.
    Fraud. PHA retention of recovered funds. See 24 CFR part 792.
    Funds. HUD allocation of voucher funds. See 24 CFR part 791.

[[Page 12957]]

    Income and family payment. See 24 CFR part 5, subpart F (especially 
Sec.  5.603 (definitions), Sec.  5.609 (annual income), Sec.  5.611 
(adjusted income), Sec.  5.628 (total tenant payment), Sec.  5.630 
(minimum rent), Sec.  5.632 (utility reimbursements), Sec.  5.634(a) 
(tenant rent), and Sec.  5.661 (section 8 project-based assistance 
programs: approval for police or other security personnel to live in 
project)).
    Labor standards. Regulations implementing the Davis-Bacon Act, 
Contract Work Hours and Safety Standards Act (40 U.S.C. 3701-3708), 29 
CFR part 5, and other Federal laws and regulations pertaining to labor 
standards applicable to an Agreement covering nine or more assisted 
units.
    Lead-based paint. Regulations implementing the Lead-based Paint 
Poisoning Prevention Act (42 U.S.C. 4821-4846) and the Residential 
Lead-based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856). 
See 24 CFR part 35, subparts A, B, H, and R.
    Lobbying restriction. Restrictions on use of funds for lobbying. 
See 24 CFR 5.105(b).
    Noncitizens. Restrictions on assistance. See 24 CFR part 5, subpart 
E.
    Program accessibility. Regulations implementing Section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794). See 24 CFR parts 8 and 9.
    Relocation assistance. Regulations implementing the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970 (URA) (42 U.S.C. 4201-4655). See 49 CFR part 24.
    Section 3--Training, employment, and contracting opportunities in 
development. Regulations implementing Section 3 of the Housing and 
Urban Development Act of 1968 (12 U.S.C. 1701u). See 24 CFR part 135.
    Uniform financial reporting standards. See 24 CFR part 5, subpart 
H.
    Waiver of HUD rules. See 24 CFR 5.110.


Sec.  983.5  Description of the project-based voucher program.

    (a) How PBV works. (1) The PBV program is administered by a PHA 
that already administers the tenant-based voucher program under an 
annual contributions contract (ACC) with HUD. In the PBV program, the 
assistance is ``attached to the structure.'' (See description of the 
difference between ``project-based'' and ``tenant-based'' rental 
assistance at Sec.  982.1(b) of this chapter).
    (2) The PHA enters into a HAP contract with an owner for units in 
existing housing or in newly constructed or rehabilitated housing.
    (3) In the case of newly constructed or rehabilitated housing, the 
housing is developed under an Agreement between the owner and the PHA. 
In the Agreement, the PHA agrees to execute a HAP contract after the 
owner completes the construction or rehabilitation of the units.
    (4) During the term of the HAP contract, the PHA makes rental 
assistance payments to the owner for units leased and occupied by 
eligible families.
    (b) How PBV is funded. (1) If a PHA decides to operate a PBV 
program, the PHA's PBV program is funded with a portion of appropriated 
funding (budget authority) available under the PHA's voucher ACC. This 
pool of funding is used to pay rental assistance for both tenant-based 
and project-based voucher units and to pay PHA administrative fees for 
administration of tenant-based and project-based voucher assistance.
    (2) There is no special or additional funding for project-based 
vouchers. HUD does not reserve additional units for project-basing and 
does not provide any additional funding for this purpose.
    (c) PHA discretion to operate PBV program. A PHA has discretion 
whether to operate a project-based voucher program. HUD approval is not 
required.


Sec.  983.6  Maximum number of PBV units.

    (a) The PHA may select owner proposals to provide project-based 
assistance for up to 20 percent of the baseline units in the PHA 
voucher program. PHAs are not required to reduce the number of PBV 
units selected under an Agreement or HAP contract if the number of 
baseline units are subsequently reduced.
    (b) All project-based certificate and project-based voucher units 
for which the PHA has issued a notice of proposal selection or which 
are under an Agreement or HAP contract for project-based certificate or 
project-based voucher assistance count against the 20 percent maximum.
    (c) The PHA is responsible for determining the number of baseline 
units that are available for project-basing and for ensuring that the 
amount of assistance that is attached to units is within the amounts 
available under the ACC.


Sec.  983.7  Uniform Relocation Act.

    (a) Relocation assistance for displaced person. (1) A displaced 
person must be provided relocation assistance at the levels described 
in and in accordance with the requirements of the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 
U.S.C. 4201-4655) and implementing regulations at 49 CFR part 24.
    (2) The cost of required relocation assistance may be paid for with 
funds provided by the owner, or with local public funds, or with funds 
available from other sources. Relocation costs may not be paid from 
voucher program funds.
    (b) Real property acquisition requirements. The acquisition of real 
property for a PBV project is subject to the URA and 49 CFR part 24, 
subpart B.
    (c) Responsibility of PHA. The PHA must require the owner to comply 
with the URA and 49 CFR part 24.
    (d) Definition of initiation of negotiations. In computing a 
replacement housing payment to a residential tenant displaced as a 
direct result of privately undertaken rehabilitation or demolition of 
the real property, the term ``initiation of negotiations'' means the 
execution of the Agreement between the owner and the PHA.


Sec.  983.8  Equal opportunity requirements.

    (a) The PBV program requires compliance with all equal opportunity 
requirements under federal law and regulation, including the 
authorities cited at 24 CFR 5.105(a).
    (b) The PHA must comply with PHA Plan civil rights certification 
submitted by the PHA in accordance with 24 CFR 903.70.


Sec.  983.9  Special housing types.

    (a) Applicability. (1) For applicability of rules on special 
housing types at 24 CFR part 982, subpart M, see Sec.  983.2.
    (2) In the PBV program, the PHA may not provide assistance for 
shared housing, cooperative housing, manufactured home space rental, or 
the homeownership option.
    (b) Group homes. A group home may include one or more group home 
units. A separate lease is executed for each elderly person or person 
with disabilities who resides in a group home.


Sec.  983.10  Project-based certificate program.

    (a) What is it? ``Project-based certificate program'' means 
project-based assistance attached to units pursuant to an Agreement 
executed by a PHA and owner before January 16, 2001, and in accordance 
with:
    (1) The regulations for the project-based certificate program at 24 
CFR part 983, codified as of May 1, 2001; and
    (2) Section 8(d)(2) of the 1937 Act, as in effect before October 
21, 1998 (the date of enactment of Title V of Public Law 105-276, the 
Quality Housing and Work Responsibility Act of 1998, codified at 42 
U.S.C. 1437 et seq.).
    (b) What rules apply? Units under the project-based certificate 
program are

[[Page 12958]]

subject to the provisions of 24 CFR part 983 codified as of May 1, 2001 
(notwithstanding repeal of such provisions).

Subpart B--Selection of PBV Owner Proposals


Sec.  983.51  Owner proposal selection procedures.

    (a) Procedures for selecting PBV proposals. The PHA administrative 
plan must describe the procedures for owner submission of PBV proposals 
and for PHA selection of PBV proposals. Before selecting a PBV 
proposal, the PHA must determine that the PBV proposal complies with 
HUD program regulations and requirements, including a determination 
that the property is eligible housing (Sec. Sec.  983.53 and 983.54), 
complies with the cap on the number of PBV units per building (Sec.  
983.56), and meets the site selection standards (Sec.  983.57).
    (b) Selection of PBV proposals. The PHA must select PBV proposals 
in accordance with the selection procedures in the PHA administrative 
plan. The PHA must select PBV proposals by either of the following two 
methods.
    (1) Competitive selection of a proposal. The PHA may not limit 
proposals to a single site or impose restrictions that explicitly or 
practically preclude competition between or among owner proposals for 
PBV housing on different sites.
    (2) Selection of a proposal for housing assisted under a federal, 
state, or local government housing assistance, community development, 
or supportive services program that requires competitive selection of 
proposals (e.g., HOPE VI, HOME, and tax credit units), where the 
proposal has been selected in accordance with such program's 
competitive selection requirements.
    (c) Public notice of PBV competition. If the PHA will be selecting 
proposals by competitive selection under paragraph (b)(1) of this 
section, PHA procedures for selecting PBV proposals must be designed 
and actually operated to provide broad public notice of the opportunity 
to offer PBV proposals for competitive selection. The public notice 
procedures may include publication of the public notice in a local 
newspaper of general circulation and other means designed and actually 
operated to provide broad public notice. The public notice of the 
competitive selection must specify the submission deadline. Detailed 
application and selection information must be provided at the request 
of interested parties.
    (d) PHA notice of owner selection. The PHA must give prompt written 
notice to the party that submitted a selected proposal and must also 
give prompt public notice of such selection. Public notice procedures 
may include publication of public notice in a local newspaper of 
general circulation and other means designed and actually operated to 
provide broad public notice.
    (e) PHA-owned units. A PHA-owned unit may only be assisted under 
the PBV program if the HUD field office or an independent entity 
approved by HUD reviews the selection process and determines that the 
PHA-owned units were appropriately selected based on the selection 
procedures specified in the PHA administrative plan. Under no 
circumstances may PBV assistance be used with a public housing unit.
    (f) Public review of PHA selection decision documentation. The PHA 
must make available for public inspection documentation regarding the 
basis for the PHA selection of a PBV proposal.


Sec.  983.52  Housing type.

    The PHA may attach PBV assistance for units in existing housing or 
for newly constructed or rehabilitated housing developed under and in 
accordance with an Agreement.


Sec.  983.53  Prohibition of assistance for ineligible units

    (a) Ineligible unit. The PHA may not attach or pay PBV assistance 
for units in the following types of housing:
    (1) Shared housing;
    (2) Units on the grounds of a medical, mental, or similar 
institution;
    (3) Nursing homes or facilities providing continuous psychiatric, 
medical, nursing services, board and care, or intermediate care. 
However, the PHA may attach PBV assistance for a dwelling unit in an 
assisted living facility that provides home health care services such 
as nursing and therapy for residents of the housing;
    (4) Units on the grounds of a penal, reformatory, or similar 
institution;
    (5) Units that are owned or controlled by an educational 
institution or its affiliate and are designated for occupancy by 
students of the institution;
    (6) Manufactured homes;
    (7) Cooperative housing.
    (b) High rise elevator project for families with children. The PHA 
may not attach or pay PBV assistance to a high rise elevator project 
that may be occupied by families with children unless HUD determines 
there is no practical alternative. HUD may make this determination for 
a PHA's project-based voucher program, in whole or in part, and need 
not review each project on a case-by-case basis.
    (c) Prohibition against assistance for owner-occupied unit. The PHA 
may not attach or pay PBV assistance for a unit occupied by an owner of 
the housing.
    (d) Prohibition against selecting unit occupied by an ineligible 
family. Before a PHA selects a specific unit to which assistance is to 
be attached, the PHA must determine whether the unit is occupied, and 
if occupied, whether the unit's occupants are eligible for assistance. 
The PHA must not select or enter into an Agreement or HAP contract for 
a unit occupied by a family ineligible for participation in the PBV 
program.


Sec.  983.54  Prohibition of assistance for units in subsidized 
housing.

    A PHA may not attach or pay PBV assistance to units in any of the 
following types of subsidized housing:
    (a) Public housing;
    (b) A unit subsidized with any other form of Section 8 assistance 
(tenant-based or project-based);
    (c) A unit subsidized with any governmental rent subsidy (a subsidy 
that pays all or any part of the rent);
    (d) A unit subsidized with any governmental subsidy that covers all 
or any part of the operating costs of the housing;
    (e) A unit subsidized with Section 236 rental assistance payments 
(12 U.S.C. 1715z-1). However, the PHA may attach assistance to a unit 
subsidized with Section 236 interest reduction payments;
    (f) A unit subsidized with rental assistance payments under Section 
521 of the Housing Act of 1949, 42 U.S.C. 1490a (a Rural Housing 
Service Program). However, the PHA may attach assistance for a unit 
subsidized with Section 515 interest reduction payments (42 U.S.C. 
1485);
    (g) A Section 202 project for non-elderly persons with disabilities 
(assistance under Section 162 of the Housing and Community Development 
Act of 1987, 12 U.S.C. 1701q note);
    (h) Section 811 project-based supportive housing for persons with 
disabilities (42 U.S.C. 8013);
    (i) Section 202 supportive housing for the elderly (12 U.S.C. 
1701q);
    (j) A Section 101 rent supplement project (12 U.S.C. 1701s);
    (k) A unit subsidized with any form of tenant-based rental 
assistance (as defined at Sec.  982.1(b)(2)) (e.g., a unit subsidized 
with tenant-based rental assistance under the HOME program, 42 U.S.C. 
12701 et seq.);
    (l) A unit with any other duplicative Federal, state, or local 
housing subsidy,

[[Page 12959]]

as determined by HUD or by the PHA in accordance with HUD requirements. 
For this purpose, ``housing subsidy'' does not include the housing 
component of a welfare payment; a social security payment; a Federal, 
state, or local tax concession (such as relief from local real property 
taxes); or a tax credit.


Sec.  983.55  Prohibition of excess public assistance.

    (a) Subsidy layering requirements. The PHA may only provide PBV 
assistance in accordance with HUD subsidy layering regulations (24 CFR 
part 4.13) and other requirements. The subsidy layering review is 
intended to prevent excessive public assistance for the housing by 
combining (layering) housing assistance payment subsidy under the PBV 
program with other governmental housing assistance from Federal, state, 
or local agencies, including assistance such as tax concessions or tax 
credits.
    (b) When subsidy layering review is conducted. The PHA may not 
enter an Agreement or HAP contract until HUD or an independent entity 
approved by HUD has conducted any required subsidy layering review and 
determined that the PBV assistance is in accordance with HUD subsidy 
layering requirements.
    (c) Owner certification. The HAP contract must contain the owner's 
certification that the project has not received and will not receive 
(before or during the term of the HAP contract) any public assistance 
for acquisition, development, or operation of the housing other than 
assistance disclosed in the subsidy layering review in accordance with 
HUD requirements.


Sec.  983.56  Cap on number of PBV units in each building.

    (a) 25 percent per building cap. (1) Except as provided in 
paragraph (b) of this section, the PHA may not select a proposal to 
provide PBV assistance for units in a building or enter into an 
Agreement or HAP contract to provide PBV assistance for units in a 
building, if the total number of dwelling units in the building that 
will receive PBV assistance or other federal project-based housing 
assistance during the term of the PBV HAP is more than 25 percent of 
the number of dwelling units (assisted or unassisted) in the building.
    (2) In calculating application of this cap, any units in the 
building receiving federal project-based assistance count against the 
cap--including units assisted or to be assisted under other HAP 
contracts or project-based assistance programs (e.g., section 8 loan 
management or property disposition units or other PBV units).
    (b) Exception to 25 percent per building cap. (1) When PBV units 
are not counted against cap. In the following cases, PBV units are not 
counted against the 25 percent per building cap:
    (i) Units in a single family building;
    (ii) Excepted units in a multifamily building.
    (2) Terms. (i) ``Excepted units'' means units in a multifamily 
building set aside for occupancy and occupied by qualifying families.
    (ii) ``Qualifying families'' means:
    (A) Elderly or disabled families; or
    (B) Families receiving supportive services under a voucher, 
project-based certificate, or public housing family self-sufficiency 
(FSS) program or families who are in compliance with their FSS contract 
of participation at the beginning of the assisted unit lease term. If a 
family has received FSS supportive services as a resident of an 
excepted unit and then completes its FSS contract of participation, the 
unit continues to count as an excepted unit for as long as the family 
resides in the unit.
    (3) Set-aside for qualifying families. (i) In rental of units in a 
multifamily building pursuant to the PBV HAP, the owner must set aside 
the number of excepted units for occupancy by qualifying families.
    (ii) The PHA may refer only qualifying families for occupancy of 
excepted units.
    (c) Additional, local requirements promoting partially assisted 
buildings. A PHA may establish local requirements designed to promote 
PBV assistance in partially assisted buildings. For example, a PHA may:
    (1) Establish a per-building cap on the number of units that will 
receive PBV assistance or other project-based assistance in a 
multifamily building containing excepted units or in a single family 
building,
    (2) Determine not to provide PBV assistance for excepted units, or
    (3) Establish a per building cap of less than 25 percent.


Sec.  983.57  Site selection standards.

    (a) Applicability. The site selection requirements in paragraph (d) 
of this section only apply to site selection for existing housing and 
rehabilitated PBV housing. The site selection requirements in paragraph 
(e) of this section only apply to site selection for newly constructed 
PBV housing. Other provisions of this section apply to selection of a 
site for any form of PBV housing, including existing housing, newly 
constructed housing, and rehabilitated housing.
    (b) Compliance with PBV goals, civil rights requirements, and HQS. 
The PHA may not select a proposal for existing, newly constructed, or 
rehabilitated PBV housing on a site or enter into an Agreement or HAP 
contract for units on the site, unless the PHA has determined that:
    (1) Project-based assistance for housing at the selected site is 
consistent with the goal of deconcentrating poverty and expanding 
housing and economic opportunities.
    (2) The site is suitable from the standpoint of facilitating and 
furthering full compliance with the applicable provisions of Title VI 
of the Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d(4)) and HUD's 
implementing regulations at 24 CFR part 1; Title VIII of the Civil 
Rights Act of 1968 (42 U.S.C. 3601-3629) and HUD's implementing 
regulations at 24 CFR part 100 et seq.; Executive Order 11063 (27 FR 
11527; 3 CFR, 1959-1963 Comp., p. 652) and HUD's implementing 
regulations at 24 CFR part 107.
    (3) The site meets the HQS site standards at 24 CFR 982.401(l).
    (c) PHA PBV site selection policy. (1) The PHA administrative plan 
must establish the PHA's policy for selection of PBV sites in 
accordance with this section.
    (2) The site selection policy must explain how the PHA's site 
selection procedures promote the PBV goals.
    (3) The PHA must select PBV sites in accordance with the PHA's site 
selection policy in the PHA administrative plan.
    (d) Existing and rehabilitated housing site and neighborhood 
standards. A site for existing or rehabilitated housing must meet the 
following site and neighborhood standards. The site must:
    (1) Be adequate in size, exposure, and contour to accommodate the 
number and type of units proposed; adequate utilities and streets must 
be available to service the site. (The existence of a private disposal 
system and private sanitary water supply for the site, approved in 
accordance with law, may be considered adequate utilities.)
    (2) Promote greater choice of housing opportunities and avoid undue 
concentration of assisted persons in areas containing a high proportion 
of low-income persons.
    (3) Be accessible to social, recreational, educational, commercial, 
and health facilities and services and other municipal facilities and 
services that are at least equivalent to those typically found in 
neighborhoods consisting largely of unassisted,

[[Page 12960]]

standard housing of similar market rents.
    (4) Be so located that travel time and cost via public 
transportation or private automobile from the neighborhood to places of 
employment providing a range of jobs for lower-income workers is not 
excessive. While it is important that housing for the elderly not be 
totally isolated from employment opportunities, this requirement need 
not be adhered to rigidly for such projects.
    (e) New construction site and neighborhood standards. A site for 
newly constructed housing must meet the following site and neighborhood 
standards:
    (1) The site must be adequate in size, exposure, and contour to 
accommodate the number and type of units proposed, and adequate 
utilities (water, sewer, gas, and electricity) and streets must be 
available to service the site.
    (2) The site must not be located in an area of minority 
concentration, except as permitted under paragraph (e)(3) of this 
section, and must not be located in a racially mixed area if the 
project will cause a significant increase in the proportion of minority 
to non-minority residents in the area.
    (3) A project may be located in an area of minority concentration 
only if:
    (A) Sufficient, comparable opportunities exist for housing for 
minority families in the income range to be served by the proposed 
project outside areas of minority concentration (see paragraph 
(e)(3)(C), (D), and (E) of this section for further guidance on this 
criterion); or
    (B) The project is necessary to meet overriding housing needs that 
cannot be met in that housing market area (see paragraph (e) (3)(F) of 
this section for further guidance on this criterion).
    (C) ``Sufficient'' does not require that in every locality there be 
an equal number of assisted units within and outside of areas of 
minority concentration. Rather, application of this standard should 
produce a reasonable distribution of assisted units each year, that, 
over a period of several years, will approach an appropriate balance of 
housing choices within and outside areas of minority concentration. An 
appropriate balance in any jurisdiction must be determined in light of 
local conditions affecting the range of housing choices available for 
low-income minority families and in relation to the racial mix of the 
locality's population.
    (D) Units may be considered ``comparable opportunities'' if they 
have the same household type (elderly, disabled, family, large family) 
and tenure type (owner/renter); require approximately the same tenant 
contribution towards rent; serve the same income group; are located in 
the same housing market; and are in standard condition.
    (E) Application of this sufficient, comparable opportunities 
standard involves assessing the overall impact of HUD-assisted housing 
on the availability of housing choices for low-income minority families 
in and outside areas of minority concentration, and must take into 
account the extent to which the following factors are present, along 
with other factors relevant to housing choice:
    (i) A significant number of assisted housing units are available 
outside areas of minority concentration.
    (ii) There is significant integration of assisted housing projects 
constructed or rehabilitated in the past 10 years, relative to the 
racial mix of the eligible population.
    (iii) There are racially integrated neighborhoods in the locality.
    (iv) Programs are operated by the locality to assist minority 
families that wish to find housing outside areas of minority 
concentration.
    (v) Minority families have benefited from local activities (e.g., 
acquisition and write-down of sites, tax relief programs for 
homeowners, acquisitions of units for use as assisted housing units) 
undertaken to expand choice for minority families outside of areas of 
minority concentration.
    (vi) A significant proportion of minority households has been 
successful in finding units in non-minority areas under the tenant-
based assistance programs.
    (vii) Comparable housing opportunities have been made available 
outside areas of minority concentration through other programs.
    (F) Application of the ``overriding housing needs'' criterion, for 
example, permits approval of sites that are an integral part of an 
overall local strategy for the preservation or restoration of the 
immediate neighborhood and of sites in a neighborhood experiencing 
significant private investment that is demonstrably improving the 
economic character of the area (a ``revitalizing area''). An 
``overriding housing need,'' however, may not serve as the basis for 
determining that a site is acceptable, if the only reason the need 
cannot otherwise be feasibly met is that discrimination on the basis of 
race, color, religion, sex, national origin, age, familial status, or 
disability renders sites outside areas of minority concentration 
unavailable or if the use of this standard in recent years has had the 
effect of circumventing the obligation to provide housing choice.
    (4) The site must promote greater choice of housing opportunities 
and avoid undue concentration of assisted persons in areas containing a 
high proportion of low-income persons.
    (5) The neighborhood must not be one which is seriously detrimental 
to family life or in which substandard dwellings or other undesirable 
conditions predominate, unless there is actively in progress a 
concerted program to remedy the undesirable conditions.
    (6) The housing must be accessible to social, recreational, 
educational, commercial, and health facilities and services and other 
municipal facilities and services that are at least equivalent to those 
typically found in neighborhoods consisting largely of unassisted, 
standard housing of similar market rents.
    (7) Except for new construction housing designed for elderly 
persons, travel time and cost via public transportation or private 
automobile, from the neighborhood to places of employment providing a 
range of jobs for lower-income workers, must not be excessive.


Sec.  983.58  Environmental review.

    (a) HUD environmental regulations. Activities under the PBV program 
are subject to HUD environmental regulations in 24 CFR parts 50 and 58.
    (b) Who performs the environmental review? (1) Under 24 CFR part 
58, a unit of general local government, a county or a state (the 
``responsible entity'' or ``RE'') is responsible for the federal 
environmental review under the National Environmental Policy Act of 
1969 (42 U.S.C. 4321 et seq.) and related applicable Federal laws and 
authorities in accordance with 24 CFR 58.5 and 58.6.
    (2) If a PHA objects in writing to the RE's performing the federal 
environmental review, or if the RE declines to perform the review, 
then, HUD may perform the environmental review itself (24 CFR 58.11). 
24 CFR part 50 governs HUD performance of the environmental review.
    (c) Limitations on actions before completion of the environmental 
review. (1) The PHA may not enter an Agreement or HAP contract with an 
owner, and the PHA, the owner, and its contractors may not acquire, 
rehabilitate, convert, lease, repair, dispose of, demolish, or 
construct real property for a project under this part or commit or 
expend program or local funds for PBV activities under this part, until 
one of the following occurs:

[[Page 12961]]

    (i) The responsible entity has completed the environmental review 
procedures required by 24 CFR part 58, and HUD has approved the 
environmental certification and request for release of funds; or
    (ii) HUD has performed an environmental review under 24 CFR part 50 
and has notified the PHA in writing of environmental approval of the 
site.
    (2) HUD will not release funds for PBV assistance under this part 
if the PHA, the owner, or any other party commits funds under this part 
(i.e., enters an Agreement or HAP contract or otherwise incurs any 
costs or expenditures to be paid or reimbursed with such funds) before 
the PHA submits and HUD approves its request for release of funds 
(where such submission is required).
    (d) PHA duty to supply information. The PHA must supply all 
available, relevant information necessary for the RE (or HUD, if 
applicable) to perform any required environmental review for any site.
    (e) Mitigating measures. The PHA must require the owner to carry 
out mitigating measures required by the RE (or HUD, if applicable) as a 
result of the environmental review.


Sec.  983.59  PHA-owned units.

    (a) Selection of PHA-owned units. The selection of PHA-owned units 
must be done in accordance with Sec.  983.51(e).
    (b) Inspection and determination of reasonable rent by independent 
entity. In the case of PHA-owned units, the following program services 
may not be performed by the PHA, but must be performed instead by an 
independent entity approved by HUD.
    (1) Determination of rent to owner for the PHA-owned units. Rent to 
owner for PHA-owned units is determined pursuant to Sec. Sec.  983.301 
through 983.305 in accordance with the same requirements as for other 
units, except that the independent entity approved by HUD must 
establish the initial contract rents based on an appraisal by a 
licensed, state-certified appraiser; and
    (2) Inspection of PHA-owned units as required by Sec.  983.103(f).
    (c) Nature of independent entity. The independent entity that 
performs these program services may be the unit of general local 
government for the PHA jurisdiction (unless the PHA is itself the unit 
of general local government or an agency of such government) or another 
HUD-approved public or private independent entity.
    (d) Payment to independent entity and appraiser. (1) The PHA may 
only compensate the independent entity and appraiser from PHA ongoing 
administrative fee income (including amounts credited to the 
administrative fee reserve). The PHA may not use other program receipts 
to compensate the independent entity and appraiser for their services.
    (2) The PHA, independent entity, and appraiser may not charge the 
family any fee for the appraisal or the services provided by the 
independent entity.

Subpart C--Dwelling Units


Sec.  983.101  Housing quality standards.

    (a) HQS applicability. Except as otherwise provided in this 
section, 24 CFR 982.401 (housing quality standards) applies to the PBV 
program. 24 CFR 5.703 (physical condition standards) does not apply to 
the PBV program.
    (b) HQS for special housing types. For special housing types 
assisted under the PBV program, housing quality standards in 24 CFR 
part 982, subpart M, apply to the PBV program. (Shared housing, 
cooperative housing, manufactured home space rental and the 
homeownership option are not assisted under the PBV program.)
    (c) Lead-based paint requirements. (1) The lead-based paint 
requirements at Sec.  982.401(j) of this chapter do not apply to the 
PBV program.
    (2) The Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821-
4846), the Residential Lead-based Paint Hazard Reduction Act of 1992 
(42 U.S.C. 4851-4856), and implementing regulations at 24 CFR part 35, 
subparts A, B, H, and R, apply to the PBV program.
    (d) HQS enforcement. Parts 982 and 983 of this chapter, do not 
create any right of the family or any party, other than HUD or the PHA, 
to require enforcement of the HQS requirements or to assert any claim 
against HUD or the PHA for damages, injunction, or other relief for 
alleged failure to enforce the HQS.
    (e) Additional PHA quality and design requirements. This section 
establishes the minimum federal housing quality standards for PBV 
housing. However, the PHA may elect to establish additional 
requirements for quality, architecture, or design of PBV housing, and 
any such additional requirements must be specified in the Agreement.


Sec.  983.102  Housing accessibility for persons with disabilities.

    (a) Program accessibility. The housing must comply with program 
accessibility requirements of section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8. The 
PHA shall ensure that the percentage of accessible dwelling units 
complies with the requirements of section 504 of the Rehabilitation Act 
of 1973 (29 U.S.C. 794), as implemented by HUD's regulations at 24 CFR 
part 8, subpart C.
    (b) Design and construction. Housing first occupied after March 13, 
1991, must comply with design and construction requirements of the Fair 
Housing Amendments Act of 1988 and implementing regulations at 24 CFR 
100.205, as applicable.


Sec.  983.103  Inspecting units.

    (a) Pre-selection inspection. (1) Inspection of site. The PHA must 
examine the proposed site before the proposal selection date.
    (2) Inspection of existing units. If the units to be assisted 
already exist, the PHA must inspect all the units before the proposal 
selection date, and must determine whether the units substantially 
comply with the HQS. To qualify as existing housing, units must 
substantially comply with the HQS on the proposal selection date. 
However, the PHA may not execute the HAP contract until the units fully 
comply with the HQS.
    (b) Pre-HAP contract inspections. The PHA must inspect each 
contract unit before execution of the HAP contract. The PHA may not 
enter into a HAP contract covering a unit until the unit fully complies 
with the HQS.
    (c) Turnover inspections. Before providing assistance to a new 
family in a contract unit, the PHA must inspect the unit. The PHA may 
not provide assistance on behalf of the family until the unit fully 
complies with the HQS.
    (d) Annual inspections. (1) At least annually during the term of 
the HAP contract, the PHA must initially inspect a random sample, 
consisting of at least 20 percent of the contract units in each 
building to determine if the contract units and the premises are 
maintained in accordance with the HQS. Turnover inspections pursuant to 
paragraph (c) of this section are not counted towards meeting this 
annual inspection requirement.
    (2) If more than 20 percent of the initially inspected contract 
units in a building fail the initial annual inspection, the PHA must 
reinspect 100 percent of the contract units in the building.
    (e) Other inspections. (1) The PHA must inspect contract units 
whenever needed to determine that the contract units comply with the 
HQS and that the owner is providing maintenance, utilities, and other 
services in accordance with the HAP contract. The PHA must take into 
account complaints

[[Page 12962]]

and any other information coming to its attention in scheduling 
inspections.
    (2) The PHA must conduct follow-up inspections needed to determine 
if the owner (or, if applicable, the family) has corrected an HQS 
violation and must conduct inspections to determine the basis for 
exercise of contractual and other remedies for owner or family 
violation of the HQS. (Family HQS obligations are specified in Sec.  
982.404(b) of this chapter.)
    (3) The PHA supervisory quality control HQS inspections pursuant to 
Sec.  982.405(b) of this chapter must include a representative sample 
of both tenant-based and project-based units.
    (f) Inspecting PHA-owned units. (1) In the case of PHA-owned units, 
the inspections required under this section must be performed by an 
independent agency designated in accordance with Sec.  983.59, rather 
than by the PHA.
    (2) The independent entity must furnish a copy of each inspection 
report to the PHA, and to the HUD field office where the project is 
located.
    (3) The PHA must take all necessary actions in response to 
inspection reports from the independent agency, including exercise of 
contractual remedies for violation of the HAP contract by the PHA-
owner.

Subpart D--Requirements for Rehabilitated and Newly Constructed 
Units


Sec.  983.151  Applicability.

    This subpart D applies to PBV assistance for newly constructed or 
rehabilitated housing. This subpart D does not apply to PBV assistance 
for existing housing.


Sec.  983.152  Purpose and content of the Agreement to enter into HAP 
contract.

    (a) Requirement. The PHA must enter into an Agreement with the 
owner. The Agreement must be in the form required by HUD headquarters 
(see Sec.  982.162 of this chapter).
    (b) Purpose of Agreement. In the Agreement the owner agrees to 
develop the contract units to comply with the HQS, and the PHA agrees 
that, upon timely completion of such development in accordance with the 
terms of the Agreement, the PHA will enter into a HAP contract with the 
owner for the contract units.
    (c) Description of housing. (1) At a minimum, the Agreement must 
describe the following features of the housing to be developed (newly 
constructed or rehabilitated) and assisted under the PBV program:
    (i) Site;
    (ii) Location of contract units on site;
    (iii) Number of contract units by area (size) and number of 
bedrooms and bathrooms;
    (iv) Services, maintenance, or equipment to be supplied by the 
owner without charges in addition to the rent to owner;
    (v) Utilities available to the contract units, including a 
specification of utility services to be paid by owner (without charges 
in addition to rent) and utility services to be paid by the tenant;
    (vi) Indication of whether or not the design and construction 
requirements of the Fair Housing Act and implementing regulations at 24 
CFR 100.205 and the accessibility requirements of section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations 
at 24 CFR 8.22 and 8.23 apply to units under the Agreement. If these 
requirements are applicable, any required work item resulting from 
these requirements must be included in the description of work to be 
performed under the Agreement, as specified in paragraph (c)(1)(viii) 
of this section.
    (vii) Estimated initial rents to owner for the contract units;
    (viii) Description of the work to be performed under the Agreement. 
If the Agreement is for rehabilitation of units, the work description 
must include the rehabilitation work write up and, where determined 
necessary by the PHA, specifications and plans. If the Agreement is for 
new construction, the work description must include the working 
drawings and specifications.
    (2) At a minimum, the housing must comply with the HQS. The PHA may 
elect to establish additional requirements for quality, architecture, 
or design of PBV housing, over and above the HQS, and any such 
additional requirement must be specified in the Agreement.


Sec.  983.153  When Agreement is executed.

    (a) Prohibition of excess subsidy. The PHA may not enter the 
Agreement with the owner until the subsidy layering review is completed 
(see Sec.  983.55).
    (b) Environmental approval. The PHA may not enter the Agreement 
with the owner until the environmental review is completed and the PHA 
has received the environmental approval (see Sec.  983.58).
    (c) Prompt execution of Agreement. The Agreement must be executed 
promptly after PHA notice of proposal selection to the selected owner.


Sec.  983.154  Conduct of development work.

    (a) Development requirements. The owner must carry out development 
work in accordance with the Agreement, and the requirements of this 
section.
    (b) Labor standards. (1) In the case of an Agreement for 
development of nine or more contract units (whether or not completed in 
stages), the owner and the owner's contractors and subcontractors must 
pay Davis-Bacon wages to laborers and mechanics employed in development 
of the housing.
    (2) The HUD prescribed form of Agreement shall include the labor 
standards clauses required by HUD.
    (3) The owner and the owner's contractors and subcontractors must 
comply with the Contract Work Hours and Safety Standards Act, 
Department of Labor regulations in 29 CFR part 5, and other applicable 
federal labor relations laws and regulations. The PHA must monitor 
compliance with labor standards.
    (c) Equal opportunity. (1) Section 3--Training, employment, and 
contracting opportunities. The owner must comply with Section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and the 
implementing regulations at 24 CFR part 135.
    (2) Equal employment opportunity. The owner must comply with 
Federal equal employment opportunity requirements of Executive Orders 
11246 as amended (3 CFR, 1964-1965 Comp., p. 339), 11625 (3 CFR, 1971-
1975 Comp., p. 616), 12432 (3 CFR, 1983 Comp., p. 198) and 12138 (3 CFR 
1977 Comp., p. 393).
    (d) Eligibility to participate in Federal programs and activities. 
The Agreement and HAP contract shall include a certification by the 
owner that the owner and other project principals (including the 
officers and principal members, shareholders, investors, and other 
parties having a substantial interest in the project) are not on the 
U.S. General Services Administration list of parties excluded from 
federal procurement and nonprocurement programs.
    (e) Disclosure of conflict of interest. The owner must disclose any 
possible conflict of interest that would be a violation of the 
Agreement, the HAP contract, or HUD regulations.


Sec.  983.155  Completion of housing.

    (a) Completion deadline. The owner must develop and complete the 
housing in accordance with the Agreement. The Agreement must specify 
the deadlines for completion of the housing, and for the owner to 
submit required evidence of completion.
    (b) Required evidence of completion. (1) Minimum submission. At a 
minimum, the owner must submit the following evidence of completion to 
the PHA in the form and manner required by the PHA and HUD:

[[Page 12963]]

    (i) Owner certification that the work has been completed in 
accordance with the HQS and all requirements of the Agreement; and
    (ii) Owner certification that the owner has complied with labor 
standards and equal opportunity requirements in development of the 
housing.
    (2) Additional documentation. At the discretion of the PHA or as 
required by HUD, the Agreement may specify additional documentation 
that must be submitted by the owner to evidence completion of the 
housing. For example, such documentation may include:
    (i) A certificate of occupancy or other evidence that the units 
comply with local requirements (such as code and zoning requirements); 
and
    (ii) An architect's certification that the housing complies with:
    (A) HUD housing quality standards;
    (B) State, local, or other building codes;
    (C) Zoning;
    (D) The rehabilitation work write-up (for rehabilitated housing) or 
the work description (for newly constructed housing); or
    (E) Any additional design or quality requirements pursuant to the 
Agreement.


Sec.  983.156  PHA acceptance of completed units.

    (a) PHA determination of completion. When the PHA has received 
owner notice that the housing is completed:
    (1) The PHA must inspect to determine if the housing has been 
completed in accordance with the Agreement, including compliance with 
the HQS and any additional requirement imposed by the PHA under the 
Agreement.
    (2) The PHA must determine if the owner has submitted all required 
evidence of completion.
    (3) If the work has not been completed in accordance with the 
Agreement, the PHA must not enter into the HAP contract.
    (b) Execution of HAP contract. If the PHA determines that the 
housing has been completed in accordance with the Agreement and that 
the owner has submitted all required evidence of completion, the PHA 
must submit the HAP contract for execution by the owner, and must then 
execute the HAP contract.

Subpart E--Housing Assistance Payments Contract


Sec.  983.201  Applicability.

    Subpart E applies to all PBV assistance under this part 983 
(including assistance for existing, newly constructed, or rehabilitated 
housing).


Sec.  983.202  Purpose of HAP contract.

    (a) Requirement. The PHA must enter into a HAP contract with the 
owner. The HAP contract must be in the form required by HUD 
headquarters (see Sec.  982.162 of this chapter).
    (b) Purpose of HAP contract. (1) The purpose of the HAP contract is 
to provide housing assistance payments for eligible families.
    (2) The PHA makes housing assistance payments to the owner in 
accordance with the HAP contract. Housing assistance is paid for 
contract units leased and occupied by eligible families during the HAP 
contract term. HUD provides funds to the PHA to make housing assistance 
payments to owners for eligible families.


Sec.  983.203  HAP contract information.

    The HAP contract must specify:
    (a) The total number of contract units by number of bedrooms;
    (b) Information needed to identify the site and the building or 
buildings where the contract units are located. The information must 
include the project's name, street address, city or county, state and 
zip code, block and lot number (if known), and any other information 
necessary to clearly identify the site and the building;
    (c) Information needed to identify the specific contract units in 
each building. The information must include the number of contract 
units in the building, the location of each contract unit, the area of 
each contract unit, and the number of bedrooms and bathrooms in each 
contract unit;
    (d) Services, maintenance, and equipment to be supplied by the 
owner without charges in addition to the rent to owner;
    (e) Utilities available to the contract units, including a 
specification of utility services to be paid by the owner (without 
charges in addition to rent) and utility services to be paid by the 
tenant;
    (f) Features provided to comply with program accessibility 
requirements of Section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794) and implementing regulations at 24 CFR part 8;
    (g) The HAP contract term;
    (h) The number of units in any building that will exceed the 25 
percent per building cap (as described in Sec.  983.56), which will be 
set-aside for occupancy by qualifying families (elderly or disabled 
families and FSS families); and
    (i) The initial rent to owner (for the first 12 months of the HAP 
contract term).


Sec.  983.204  When HAP contract is executed.

    (a) PHA inspection of housing. (1) Before execution of the HAP 
contract, the PHA must inspect each contract unit in accordance with 
Sec.  983.103(b).
    (2) The PHA may not enter into a HAP contract for any contract unit 
until the PHA has determined that the unit complies with the HQS.
    (b) Existing housing. In the case of existing housing, the HAP 
contract must be executed promptly after PHA selection of the owner 
proposal and PHA inspection of the housing.
    (c) Newly constructed or rehabilitated housing. (1) In the case of 
newly constructed or rehabilitated housing the HAP contract must be 
executed after the PHA has inspected the completed units and has 
determined that the units have been completed in accordance with the 
Agreement and the owner has furnished all required evidence of 
completion (see Sec. Sec.  983.155 and 983.156).
    (2) In the HAP contract, the owner certifies that the units have 
been completed in accordance with the Agreement. Completion of the 
units by the owner, and acceptance of units by the PHA is subject to 
the provisions of the Agreement.


Sec.  983.205  Term of HAP contract.

    (a) Ten year initial term. The PHA may enter into a HAP contract 
with an owner for an initial term of up to ten years for each contract 
unit. The length of the term of the HAP contract for any contract unit 
may not be less than one year, nor more than ten years.
    (b) Extension of term. Within one year before expiration, the PHA 
may agree to extend the term of the HAP contract for an additional term 
of up to one year if the PHA determines an extension is appropriate to 
continue providing affordable housing for low-income families. 
Subsequent extensions are subject to the same limitations. Any 
extension of the term must be on the form and subject to the conditions 
prescribed by HUD at the time of the extension.
    (c) Termination by PHA--insufficient funding. (1) The HAP contract 
must provide that the term of the PHA's contractual commitment is 
subject to the availability of sufficient appropriated funding (budget 
authority) as determined by HUD or by the PHA in accordance with HUD 
instructions. For purposes of this section, ``sufficient funding'' 
means the availability of appropriations, and of funding under the ACC 
from such appropriations, to make full payment of housing assistance 
payments payable to the owner for any contract year in accordance with 
the terms of the HAP contract.
    (2) The availability of sufficient funding must be determined by 
HUD or by the PHA in accordance with HUD

[[Page 12964]]

instructions. If it is determined that there may not be sufficient 
funding to continue housing assistance payments for all contract units 
and for the full term of the HAP contract, the PHA has the right to 
terminate the HAP contract by notice to the owner for all or any of the 
contract units. Such action by the PHA shall be implemented in 
accordance with HUD instructions.
    (d) Termination by owner--reduction below initial rent. The owner 
may terminate the HAP contract, upon notice to the PHA, if the amount 
of the rent to owner for any contract unit, as adjusted on any 
anniversary date in accordance with Sec.  983.302, is reduced below the 
amount of the initial rent to owner (rent to owner at the beginning of 
the HAP contract term). In this case, the assisted families residing in 
the contract units will be offered tenant-based voucher assistance.


Sec.  983.206  HAP contract amendments (to add or substitute contract 
units).

    (a) Amendment to substitute contract units. At the discretion of 
the PHA and subject to all PBV requirements, the HAP contract may be 
amended to substitute a different unit with the same number of bedrooms 
in the same building for a previously covered contract unit. Prior to 
such substitution, the PHA must inspect the proposed substitute unit, 
and must determine the reasonable rent for such unit.
    (b) Amendment to add contract units. At the discretion of the PHA, 
and provided that the total number of units in a building that will 
receive PBV assistance or other project-based assistance will not 
exceed 25 percent of the number of dwelling units (assisted or 
unassisted) in the building or the 20 percent of baseline units as 
provided in 24 CFR 983.6, a HAP contract may be amended during the 
three year period immediately following the execution date of the HAP 
contract to add additional PBV contract units in the same building. An 
amendment to the HAP contract is subject to all PBV requirements (e.g., 
compliance with Davis-Bacon wage rates during construction), except 
that a new PBV proposal competition is not required. The anniversary 
and expiration dates of the HAP contract for the additional units must 
be the same as the anniversary and expiration dates of the HAP contract 
term for the PBV units originally placed under HAP contract.
    (c) Staged completion of contract units. Even if contract units are 
placed under the HAP contract in stages commencing on different dates, 
there is a single annual anniversary for all contract units under the 
HAP contract. The annual anniversary for all contract units is the 
annual anniversary date for the first contract units placed under the 
HAP contract. The expiration of the HAP contract for all the contract 
units completed in stages must be concurrent with the end of the HAP 
contract term for the units originally placed under HAP contract.


Sec.  983.207  Condition of contract units.

    (a) Owner maintenance and operation. (1) The owner must maintain 
and operate the contract units and premises in accordance with the HQS, 
including performance of ordinary and extraordinary maintenance.
    (2) The owner must provide all the services, maintenance, 
equipment, and utilities specified in the HAP contract with the PHA and 
in the lease with each assisted family.
    (3) At the discretion of the PHA, the HAP contract may also require 
continuing owner compliance during the HAP term with additional housing 
quality requirements specified by the PHA (in addition to, but not in 
place of, compliance with the HUD-prescribed HQS). Such additional 
requirements may be designed to assure continued compliance with any 
design, architecture, or quality requirement specified in the 
Agreement.
    (b) Remedies for HQS violation. (1) The PHA must vigorously enforce 
the owner's obligation to maintain contract units in accordance with 
the HQS. The PHA may not make any HAP payment to the owner for a 
contract unit covering any period during which the contract unit does 
not comply with the HQS.
    (2) If the PHA determines that a contract unit is not in accordance 
with the housing quality standards (or other HAP contract requirement), 
the PHA may exercise any of its remedies under the HAP contract for all 
or any contract units. Such remedies include termination of housing 
assistance payments, abatement or reduction of housing assistance 
payments, reduction of contract units, and termination of the HAP 
contract.
    (c) Maintenance and replacement--Owner's standard practice. 
Maintenance and replacement (including redecoration) must be in 
accordance with the standard practice for the building concerned as 
established by the owner.


Sec.  983.208  Owner responsibilities.

    The owner is responsible for performing all of the owner 
responsibilities under the Agreement and the HAP contract. Section 
982.452 of this chapter (Owner responsibilities) applies.


Sec.  983.209  Owner certification.

    By execution of the HAP contract, the owner certifies that at such 
execution and at all times during the term of the HAP contract:
    (a) All contract units are in good and tenantable condition. The 
owner is maintaining the premises and all contract units in accordance 
with the HQS.
    (b) The owner is providing all the services, maintenance, 
equipment, and utilities as agreed to under the HAP contract and the 
leases with assisted families.
    (c) Each contract unit for which the owner is receiving housing 
assistance payments is leased to an eligible family referred by the 
PHA, and the lease is in accordance with the HAP contract and HUD 
requirements.
    (d) To the best of the owner's knowledge, the members of the family 
reside in each contract unit for which the owner is receiving housing 
assistance payments, and the unit is the family's only residence.
    (e) The owner (including a principal or other interested party) is 
not the parent, child, grandparent, grandchild, sister, or brother of 
any member of a family residing in a contract unit.
    (f) The amount of the housing assistance payment is the correct 
amount due under the HAP contract.
    (g) The rent to owner for each contract unit does not exceed rents 
charged by the owner for other comparable unassisted units.
    (h) Except for the housing assistance payment and the tenant rent 
as provided under the HAP contract, the owner has not received and will 
not receive any payment or other consideration (from the family, the 
PHA, HUD, or any other public or private source) for rental of the 
contract unit.
    (i) The family does not own or have any interest in the contract 
unit.

Subpart F--Occupancy


Sec.  983.251  How participants are selected.

    (a) Who may receive PBV assistance? (1) The PHA may select families 
who are participants in the PHA's tenant-based voucher program and 
families who have applied for admission to the voucher program.
    (2) Except for voucher participants (determined eligible at 
original admission to the voucher program), the PHA may only select 
families determined eligible for admission at commencement of PBV 
assistance.
    (b) Protection of in-place families. (1) The term ``in-place 
family'' means an eligible family residing in a proposed contract unit 
on the proposal selection date.

[[Page 12965]]

    (2) In order to minimize displacement of in-place families, if a 
unit to be placed under contract that is either an existing unit or one 
requiring rehabilitation is occupied by an eligible family on the 
proposal selection date, the in-place family must be offered the 
opportunity to lease an appropriately sized project-based assisted unit 
in the project. (However, the PHA may deny assistance for the grounds 
specified in Sec. Sec.  982.552 and 982.553 of this chapter.) Admission 
of such families is not subject to income-targeting under Sec.  
982.201(b)(2)(i). The PHA shall give such families priority for 
admission to the PBV program.
    (c) Selection from PHA waiting list. (1) Applicants who will occupy 
PBV units must be selected by the PHA from the PHA waiting list. The 
PHA must select applicants from the waiting list in accordance with the 
policies in the PHA administrative plan.
    (2) The PHA may use a separate waiting list for admission to PBV 
units or may use the same waiting list for both tenant-based assistance 
and PBV assistance. If the PHA chooses to use a separate waiting list 
for admission to PBV units, the PHA must offer to place applicants who 
are listed on the waiting list for tenant-based assistance on the 
waiting list for PBV assistance.
    (3) The PHA may use separate waiting lists for PBV units in 
individual projects or buildings (or for sets of such units) or may use 
a single waiting list for the PHA's whole PBV program. In either case, 
the waiting list may establish criteria or preferences for occupancy of 
particular units.
    (4) The PHA may merge the waiting list for PBV assistance with the 
PHA waiting list for admission to another assisted housing program.
    (5) The PHA may place families referred by the PBV owner on its PBV 
waiting list.
    (6) Not less than 75 percent of the families admitted to a PHA's 
tenant-based and project-based voucher programs during the PHA fiscal 
year from the PHA waiting list shall be extremely low-income families. 
The income-targeting requirements at Sec.  982.201(b)(2) of this 
chapter apply to the total of admissions to the PHA's project-based 
voucher program and tenant-based voucher program during the PHA fiscal 
year from the PHA waiting list for such programs.
    (7) In selecting families to occupy PBV units with special 
accessibility features for persons with disabilities, the PHA must 
first refer families who require such accessibility features to the 
owner (see 24 CFR 8.26 and 100.202).
    (d) Offer of PBV assistance. (1) If a family refuses the PHA's 
offer of PBV assistance, such refusal does not affect the family's 
position on the PHA waiting list for tenant-based assistance.
    (2) If a PBV owner rejects a family for admission to the owner's 
PBV units, such rejection by the owner does not affect the family's 
position on the PHA waiting list for tenant-based assistance.
    (3) The PHA may not take any of the following actions because an 
applicant has applied for, received or refused an offer of PBV 
assistance:
    (i) Refuse to list the applicant on the PHA waiting list for 
tenant-based assistance;
    (ii) Deny any admission preference for which the applicant is 
currently qualified;
    (iii) Change the applicant's place on the waiting list based on 
preference, date and time of application, or other factors affecting 
selection under the PHA selection policy; or
    (iv) Remove the applicant from the waiting list for tenant-based 
voucher assistance.


Sec.  983.252  PHA information for accepted family.

    (a) Oral briefing. When a family accepts an offer of PBV 
assistance, the PHA must give the family an oral briefing. The briefing 
must include information on the following subjects:
    (1) A description of how the program works; and
    (2) Family and owner responsibilities.
    (b) Information packet. The PHA must give the family a packet that 
includes information on the following subjects:
    (1) How the PHA determines the total tenant payment for a family; 
and
    (2) Family obligations under the program.
    (c) Providing information for persons with disabilities. (1) If the 
family head or spouse is a disabled person, the PHA must take 
appropriate steps to assure effective communication, in accordance with 
24 CFR 8.6, in conducting the oral briefing.
    (2) The PHA shall have some mechanism for referring to accessible 
PBV units a family that includes a person with mobility impairment.


Sec.  983.253  Leasing of contract units.

    (a) Owner selection of tenants. (1) During the term of the HAP 
contract, the owner must lease contract units only to eligible families 
selected and referred by the PHA from the PHA waiting list.
    (2) The owner may apply its own admission standards in determining 
whether to lease a unit to a family referred by the PHA.
    (b) Size of unit. The contract unit leased to each family must be 
appropriate for the size of the family under the PHA's subsidy 
standards.


Sec.  983.254  Vacancies.

    (a) Filling vacant units. (1) The owner must promptly notify the 
PHA of any vacancy or anticipated vacancy in a contract unit. After 
receiving the owner notice, the PHA must make every reasonable effort 
to refer promptly a sufficient number of families for the owner to fill 
such vacancies.
    (2) The owner must lease vacant contract units only to eligible 
families on the PHA waiting list referred by the PHA.
    (3) The PHA and the owner must make reasonable good faith efforts 
to minimize the likelihood and length of any vacancy.
    (b) Reducing number of contract units. If any contract units have 
been vacant for a period of 120 or more days since owner notice of 
vacancy (and notwithstanding the reasonable good faith efforts of the 
PHA to fill such vacancies), the PHA may give notice to the owner 
amending the HAP contract to reduce the number of contract units by 
subtracting the number of contract units (by number of bedrooms) that 
that have been vacant for such period.


Sec.  983.255  Tenant screening.

    (a) PHA option. (1) The PHA has no responsibility or liability to 
the owner or any other person for the family's behavior or suitability 
for tenancy. However, the PHA may opt to screen applicants for family 
behavior or suitability for tenancy.
    (2) The PHA must conduct any such screening of applicants in 
accordance with policies stated in the PHA administrative plan.
    (b) Owner responsibility. (1) The owner is responsible for 
screening and selection of the family to occupy the owner's unit.
    (2) The owner is responsible for screening of families on the basis 
of their tenancy histories. An owner may consider a family's background 
with respect to such factors as:
    (i) Payment of rent and utility bills;
    (ii) Caring for a unit and premises;
    (iii) Respecting the rights of other residents to the peaceful 
enjoyment of their housing;
    (iv) Drug-related criminal activity or other criminal activity that 
is a threat to the health, safety, or property of others;
    (v) Compliance with other essential conditions of tenancy; and
    (vi) Other factors determined by the owner.
    (c) Providing tenant information to owner. (1) The PHA must give 
the owner:

[[Page 12966]]

    (i) The family's current and prior address (as shown in the PHA 
records); and
    (ii) The name and address (if known to the PHA) of the landlord at 
the family's current and any immediately prior address.
    (2) When a family wants to lease a dwelling unit, the PHA may offer 
the owner other information in the PHA possession about the family, 
including information about the tenancy history of family members or 
about criminal activity by family members.
    (3) The PHA must give the family a statement of the PHA policy on 
providing information to owners. The statement must be included in the 
information package that is given to a family that is selected to 
received PBV assistance.
    (4) The PHA policy must provide that the PHA will give the same 
types of information to all PBV families and owners.


Sec.  983.256  Lease.

    (a) Tenant's legal capacity. The tenant must have legal capacity to 
enter a lease under state and local law. ``Legal capacity'' means that 
the tenant is bound by the terms of the lease and may enforce the terms 
of the lease against the owner.
    (b) Form of lease. (1) The tenant and the owner must enter a 
written lease for the unit. The lease must be executed by the owner and 
the tenant.
    (2) If the owner uses a standard lease form for rental to 
unassisted tenants in the locality or the premises, the lease must be 
in such standard form, except as provided in paragraph (b)(4) of this 
section. If the owner does not use a standard lease form for rental to 
unassisted tenants, the owner may use another form of lease, such as a 
PHA model lease.
    (3) In all cases, the lease must include a HUD-required tenancy 
addendum. The tenancy addendum must include word-for-word all 
provisions required by HUD.
    (4) The PHA may review the owner's lease form to determine if the 
lease complies with state and local law, and if not, may require the 
owner to revise the form to comply with state and local law.
    (c) Required information. The lease must specify all of the 
following:
    (1) The names of the owner and the tenant;
    (2) The unit rented (address, apartment number, if any, and any 
other information needed to identify the leased unit);
    (3) The term of the lease (initial term and any provision for 
renewal);
    (4) The amount of the tenant rent. The tenant rent is subject to 
change during the term of the lease in accordance with HUD 
requirements.
    (5) A specification of what services, maintenance, equipment, and 
utilities are to be provided by the owner.
    (d) Tenancy addendum. (1) The tenancy addendum in the lease shall 
state:
    (i) The program tenancy requirements (as specified in this part);
    (ii) The composition of the household as approved by the PHA (names 
of family members and any PHA-approved live-in aide).
    (2) All provisions in the HUD-required tenancy addendum must be 
included in the lease. The terms of the tenancy addendum shall prevail 
over other provisions of the lease.
    (e) Changes in lease. (1) If the tenant and the owner agree to any 
change in the lease, such change must be in writing, and the owner must 
immediately give the PHA a copy of such change.
    (2) The owner must notify the PHA in advance of any proposed change 
in lease requirements governing the allocation of tenant and owner 
responsibilities for utilities. Such change may only be made if 
approved by the PHA and in accordance with the terms of the lease 
relating to its amendment. The PHA must redetermine reasonable rent 
based on any change in the allocation of responsibility for utilities 
between the owner and the tenant, and the redetermined reasonable rent 
shall be used in calculation of rent to owner from the effective date 
of the change.
    (f) Initial term of lease. (1) Except as provided in paragraph 
(f)(2) of this section, the initial lease term must be for at least one 
year.
    (2) The PHA may approve a shorter initial lease term if the PHA 
determines that:
    (i) Such shorter term would improve housing opportunities for the 
tenant: and
    (ii) Such shorter term is the prevailing local market practice.
    (g) Lease provisions governing tenant absence from the unit. The 
lease may specify a maximum period of tenant absence from the unit that 
may be shorter than the maximum period permitted by PHA policy. (PHA 
termination of assistance actions due to family absence from the unit 
is subject to Sec.  982.312 of this chapter, except that the HAP 
contract is not terminated if the family is absent for longer than the 
maximum period permitted.)


Sec.  983.257  Owner termination of tenancy and eviction for criminal 
activity or alcohol abuse.

    Section 982.310 of this chapter applies with the exception that 
Sec.  982.310(d)(1)(iii) and (iv) does not apply to the PBV program. 
(In the PBV program, ``good cause'' does not include a business or 
economic reason or desire to use the unit for personal, family, or a 
non-residential rental purpose.)


Sec.  983.258  Security deposit: amounts owed by tenant.

    (a) The owner may collect a security deposit from the tenant.
    (b) The PHA may prohibit security deposits in excess of private 
market practice, or in excess of amounts charged by the owner to 
unassisted tenants.
    (c) When the tenant moves out of the contract unit, the owner, 
subject to state and local law, may use the security deposit, including 
any interest on the deposit, in accordance with the lease, as payment 
or reimbursement for any unpaid tenant rent, damages to the unit or 
other amounts which the tenant owes under the lease.
    (d) The owner must give the tenant a written list of all items 
charged against the security deposit and the amount of each item. After 
deducting the amount used as payment or reimbursement to the owner, the 
owner must promptly refund the full amount of the balance to the 
tenant.
    (e) If the security deposit is not sufficient to cover amounts the 
tenant owes under the lease, the owner may seek to collect the balance 
from the tenant. However, the PHA has no liability or responsibility 
for payment of any amount owed by the family to the owner.


Sec.  983.259  Overcrowded, under-occupied, and accessible units.

    (a) Family occupancy of wrong-size or accessible unit. The PHA 
subsidy standards determine the appropriate unit size for the family 
size and composition. If the PHA determines that a family is occupying 
a:
    (1) Wrong-size unit, or
    (2) Unit with accessibility features that the family does not 
require, and the unit is needed by a family that requires the 
accessibility features, the PHA must promptly notify the family and the 
owner of this determination, and of the PHA's offer of continued 
assistance in another unit pursuant to paragraph (b) of this section.
    (b) PHA offer of continued assistance. (1) If a family is occupying 
a:
    (i) Wrong-size unit, or
    (ii) Unit with accessibility features that the family does not 
require, and the

[[Page 12967]]

unit is needed by a family that requires the accessibility features, 
the PHA must offer the family the opportunity to receive continued 
housing assistance in another unit.
    (2) Such continued housing assistance may be in the form of:
    (i) Project-based voucher assistance in an appropriate-size unit 
(in the same building or in another building);
    (ii) Other project-based housing assistance (e.g., by occupancy of 
a public housing unit),
    (iii) Tenant-based rental assistance under the voucher program; or
    (iv) Other comparable public or private tenant-based assistance 
(e.g., under the HOME program).
    (c) PHA termination of housing assistance payments. (1) If the PHA 
offers the family the opportunity to receive tenant-based rental 
assistance under the voucher program, the PHA must terminate the 
housing assistance payments for a wrong-sized or accessible unit at 
expiration of the term of the family's voucher (including any extension 
granted by the PHA).
    (2) If the PHA offers the family the opportunity for another form 
of continued housing assistance in accordance with paragraph (b)(2) of 
this section (not in the tenant based voucher program), the PHA must 
terminate the housing assistance payments for a wrong-sized or 
accessible unit at the expiration of a reasonable period as determined 
by the PHA.


Sec.  983.260  Family right to move.

    (a) The family may terminate the assisted lease at any time after 
the first year of occupancy. If the family terminates the assisted 
lease before the end of one year, the family relinquishes the 
opportunity for continued tenant-based assistance. The family must give 
the owner advance written notice of intent to vacate (with a copy to 
the PHA) in accordance with the lease.
    (b) If the family has elected to terminate the lease in this 
manner, the PHA must offer the family the opportunity for continued 
tenant-based rental assistance, in the form of either assistance under 
the voucher program or other comparable tenant-based rental assistance.
    (c) Before providing notice to terminate the lease, the family must 
contact the PHA to request comparable tenant-based rental assistance if 
the family wishes to move with continued assistance. If voucher or 
comparable tenant-based rental assistance is not immediately available 
upon termination of the family's lease of a PBV unit, the PHA must give 
the family priority to receive the next available opportunity for 
continued tenant-based rental assistance.


Sec.  983.261  When occupancy may exceed 25 percent cap on the number 
of PBV units in each building.

    (a) Except as provided in Sec.  983.56(b), the PHA may not pay 
housing assistance under the HAP contract for contract units in excess 
of the 25 percent cap pursuant to Sec.  983.56(a).
    (b) In referring families to the owner for admission to excepted 
units, the PHA must give preference to elderly or disabled families; or 
to families receiving supportive services under a voucher, project-
based certificate, or public housing family self-sufficiency (FSS) 
program; or to families who are in compliance with their FSS contract 
of participation at the beginning of the assisted unit lease term, for 
occupancy of the number of contract units set aside for occupancy by 
such families.
    (c) A family (or the remaining members of the family) residing in 
an excepted unit that no longer meets the criteria for a ``qualifying 
family'' in connection with the 25 percent per building cap exception 
(e.g., a family violating its contract of participation or the 
remaining members of a family that no longer qualifies for elderly or 
disabled family status) must vacate the unit within a reasonable period 
of time established by the PHA. A family otherwise in compliance with 
its family obligations will be provided a tenant-based voucher or 
comparable rental assistance in accordance with Sec.  983.260 to move 
from the excepted unit. Alternatively, if the project is partially 
assisted, the family need not move if it is possible for the HAP 
contract to be amended to substitute a different unit in the building 
in accordance with Sec.  983.206(a). The assistance for a family 
residing in an excepted unit that is not in compliance with its family 
obligations (e.g., a family violating its FSS contract of 
participation) may be terminated by the PHA.

Subpart G--Rent to Owner


Sec.  983.301  Determining the rent to owner.

    (a) Initial and redetermined rent. (1) The amount of the initial 
and redetermined rent to owner is determined in accordance with this 
section and Sec.  983.302.
    (2) The amount of the initial rent to owner is established at the 
beginning of the HAP contract term. For rehabilitated or newly 
constructed housing, the Agreement states the estimated amount of the 
initial rent to owner, but the actual amount of the initial rent to 
owner is established at the beginning of the HAP contract term.
    (3) The rent to owner is redetermined annually on each contract 
anniversary in accordance with this section and Sec.  983.302.
    (b) Amount of rent to owner. Except for certain tax credit units as 
provided in paragraph (c) of this section, the rent to owner must not 
exceed the lowest of:
    (1) The payment standard amount for the unit bedroom size minus any 
utility allowance;
    (2) The reasonable rent; or
    (3) The rent requested by the owner.
    (c) Rent to owner for certain tax credit units. (1) This paragraph 
(c) applies if:
    (i) A contract unit receives a low-income housing tax credit under 
the Internal Revenue Code of 1968 (see 26 U.S.C. 42); and
    (ii) The contract unit is not located in a qualified census tract; 
and
    (iii) In the same building, there are comparable tax credit units 
of the same unit bedroom size as the contract unit and the comparable 
tax credit units do not have any form of rental assistance other than 
the tax credit; and
    (iv) The tax credit rent exceeds the payment standard amount for 
the unit bedroom size (as specified in the payment standard schedule 
for the PHA's tenant-based voucher program.);
    (2) In the case of a contract unit described in paragraph (c)(1) of 
this section, the rent to owner must not exceed the lowest of:
    (i) The tax credit rent minus any utility allowance;
    (ii) The reasonable rent; or
    (iii) The rent requested by the owner.
    (3) The ``tax credit rent'' is the rent charged for comparable 
units of the same bedroom size in the building that also receive the 
low-income housing tax credit but do not have any additional rental 
assistance (e.g., additional assistance such as tenant-based voucher 
assistance).
    (4) A ``qualified census tract'' is any census tract (or equivalent 
geographic area defined by the Bureau of the Census) in which:
    (i) At least 50 percent of households have an income of less than 
60 percent of Area Median Gross Income (AMGI); or
    (ii) Where the poverty rate is at least 25 percent and where the 
census tract is designated as a qualified census tract by HUD.
    (d) Rent to owner for other tax credit units. Except in the case of 
a tax credit unit described in paragraph (c)(1) of this section, the 
rent to owner for all other tax credit units is determined pursuant to 
paragraph (b) of this section.
    (e) Reasonable rent. The PHA shall determine reasonable rent in 
accordance with Sec.  983.303. The rent to owner for

[[Page 12968]]

each contract unit may at no time exceed the reasonable rent.
    (f) Use of payment standard amount and utility allowance schedule 
in determining amount of rent to owner. (1) Amounts used. (i) 
Determination of initial rent (at beginning of HAP contract term). When 
determining the initial rent to owner, the PHA shall use the payment 
standard amount on the PHA payment standard schedule and the utility 
allowance schedule in effect at execution of the HAP contract. At its 
discretion, the PHA may use the amounts in effect at any time during 
the 30 day period immediately before the beginning date of the HAP 
contract.
    (ii) Redetermination of rent to owner (at annual anniversary). When 
redetermining the rent to owner at the annual anniversary date of the 
HAP contract, the PHA shall use the payment standard amount on the PHA 
payment standard schedule and the utility allowance schedule in effect 
at the annual anniversary date of the HAP contract. At its discretion, 
the PHA may use the amounts in effect at any time during the 30 day 
period immediately before the annual anniversary date of the HAP 
contract.
    (2) Payment standard schedule and PHA utility allowance schedule. 
(i) The PHA may not establish or apply different payment standard 
amounts for the project-based voucher program. The same PHA payment 
standard schedule applies to both the tenant-based and project-based 
voucher programs. Any HUD-approved exception payment standard amount 
under Sec.  982.503(c) of this chapter applies to both the tenant-based 
and project-based voucher programs. HUD will not approve a different 
exception payment standard amount for use in the project-based voucher 
program.
    (ii) The PHA may not establish or apply different utility allowance 
amounts for the project-based voucher program. The same PHA utility 
allowance schedule applies to both the tenant-based and project-based 
voucher programs.
    (g) PHA-owned units. For PHA-owned PBV units, the initial rent to 
owner and the annual redeterminations at the annual anniversary of the 
HAP contract are determined by the independent entity approved by HUD 
in accordance with Sec.  983.59. The PHA must use the rent to owner 
determined by the independent entity.


Sec.  983.302  Annual redetermination of rent to owner.

    (a) Review prior to annual anniversary. The PHA must redetermine 
the rent to owner at the annual anniversary of the HAP contract in 
accordance with Sec.  983.301. The PHA must review the rent to owner 
before the annual anniversary of the HAP contract to determine whether 
the rent to owner must be increased, decreased, or left unchanged on 
the annual anniversary.
    (b) Rent increase. (1) The PHA may not make any rent increase other 
than an increase in the rent to owner as determined at the annual 
redetermination pursuant to Sec.  983.301. (Provisions for special 
adjustments of contract rent pursuant to 42 U.S.C. 1437f(b)(2)(B) do 
not apply to the voucher program.)
    (2) The owner must request any increase in the rent to owner at the 
annual anniversary of the HAP contract by written notice to the PHA. 
The length of the required notice period of the owner request for a 
rent increase at the annual anniversary may be established by the PHA. 
The request must be submitted in the form and manner required by the 
PHA.
    (3) The PHA may not approve and the owner may not receive any 
increase of rent to owner until and unless the owner has complied with 
all requirements of the HAP contract, including compliance with the 
HQS. The owner may not receive any retroactive increase of rent for any 
period of noncompliance.
    (c) Rent decrease. If there is a decrease in the rent to owner, as 
established at the annual anniversary in accordance with Sec.  983.301, 
the rent to owner must be decreased, regardless of whether the owner 
requested a rent adjustment.
    (d) Notice of annual rent redetermination. Rent to owner is 
redetermined by written notice by the PHA to the owner specifying the 
amount of the redetermined rent (as determined in accordance with 
Sec. Sec.  983.301 and 983.302). The PHA notice of the annual 
adjustment constitutes an amendment of the rent to owner specified in 
the HAP contract.
    (e) Contract year and annual anniversary of the HAP contract. (1) 
The contract year is the period of twelve calendar months preceding 
each annual anniversary of the HAP contract during the HAP contract 
term. The initial contract year is calculated from the first day of the 
first calendar month of the HAP contract term.
    (2) The annual anniversary of the HAP contract is the first day of 
the first calendar month after the end of the preceding contract year. 
The adjusted rent to owner amount applies for the period of twelve 
calendar months from the annual anniversary of the HAP contract.
    (3) See Sec.  983.206(c) for information on the annual anniversary 
of the HAP contract for contract units completed in stages.


Sec.  983.303  Reasonable rent.

    (a) Comparability requirement. At all times during the term of the 
HAP contract, the rent to owner for a contract unit may not exceed the 
reasonable rent as determined by the PHA.
    (b) Redetermination. The PHA must redetermine the reasonable rent:
    (1) At least annually;
    (2) Whenever there is a five percent decrease in the published FMR 
in effect 60 days before the contract anniversary (for the unit sizes 
specified in the HAP contract) as compared with the FMR in effect one 
year before the contract anniversary;
    (3) Whenever the PHA approves a change in the allocation of 
responsibility for utilities between the owner and the tenant;
    (4) Whenever the HAP contract is amended to substitute a different 
contract unit in the same building; and
    (5) Whenever there is any other change that may substantially 
affect the reasonable rent.
    (c) How to determine reasonable rent. (1) The reasonable rent of a 
contract unit must be determined by comparison to rent for other 
comparable unassisted units.
    (2) In determining the reasonable rent, the PHA must consider 
factors that affect market rent, such as:
    (i) The location, quality, size, unit type, and age of the contract 
unit; and
    (ii) Amenities, housing services, maintenance, and utilities to be 
provided by the owner.
    (d) Comparability analysis. (1) For each unit type, the PHA 
comparability analysis must use at least three comparable units in the 
private unassisted market, which may include comparable unassisted 
units in the premises or project.
    (2) The PHA must retain a comparability analysis that shows how the 
reasonable rent was determined, including major differences between the 
contract units and comparable unassisted units.
    (3) The comparability analysis may be performed by PHA staff or by 
another qualified person or entity. A person or entity that conducts 
the comparability analysis and any PHA staff or contractor engaged in 
determining the housing assistance payment based on the comparability 
analysis may not have any direct or indirect interest in the property.
    (e) Owner certification of comparability. By accepting each

[[Page 12969]]

monthly housing assistance payment from the PHA, the owner certifies 
that the rent to owner is not more than rent charged by the owner for 
comparable unassisted units in the premises. The owner must give the 
PHA information requested by the PHA on rents charged by the owner for 
other units in the premises or elsewhere.
    (f) Determining reasonable rent for PHA-owned units. (1) For PHA-
owned units, the amount of the reasonable rent must be determined by an 
independent agency approved by HUD in accordance with Sec.  983.58, 
rather than by the PHA. Reasonable rent must be determined in 
accordance with this section.
    (2) The independent entity must furnish a copy of the independent 
entity determination of reasonable rent for PHA-owned units to the PHA 
and to the HUD field office where the project is located.


Sec.  983.304  Other subsidy: effect on rent to owner.

    In addition to the rent limits established in accordance with Sec.  
983.301 and Sec.  982.302 of this chapter, the following restrictions 
apply to certain units.
    (a) HOME. For units assisted under the HOME program, rents may not 
exceed rent limits as required by the HOME program (24 CFR 92.252).
    (b) Subsidized projects. (1) This subsection applies to any 
contract units in any of the following types of federally subsidized 
project:
    (i) An insured or non-insured Section 236 project;
    (ii) A formerly insured or non-insured Section 236 project that 
continues to receive Interest Reduction Payment following a decoupling 
action;
    (iii) A Section 221(d)(3) below market interest rate (BMIR) 
project;
    (iv) A Section 515 project of the Rural Housing Service;
    (v) Any other type of federally subsidized project specified by 
HUD.
    (2) The rent to owner may not exceed the subsidized rent (basic 
rent) as determined in accordance with requirements for the applicable 
federal program listed in paragraph (b)(1) of this section.
    (c) Combining subsidy. Rent to owner may not exceed any limitation 
required to comply with HUD subsidy layering requirements. See Sec.  
983.55.
    (d) Other subsidy: PHA discretion to reduce rent. At its 
discretion, a PHA may reduce the initial rent to owner because of other 
governmental subsidies, including tax credit or tax exemption, grants, 
or other subsidized financing.
    (e) Prohibition of other subsidy. For provisions that prohibit PBV 
assistance to units in certain types of subsidized housing, see Sec.  
983.54.


Sec.  983.305  Rent to owner: effect of rent control and other rent 
limits.

    In addition to the rent reasonableness limit and other rent limits 
under this rule, the amount of rent to owner also may be subject to 
rent control or other limits under local, State, or Federal law.

Subpart H--Payment to Owner


Sec.  983.351  PHA payment to owner for occupied unit.

    (a) When payments are made. (1) During the term of the HAP 
contract, the PHA shall make housing assistance payments to the owner 
in accordance with the terms of the HAP contract. The payments shall be 
made for the months during which a contract unit is leased to and 
actually occupied by an eligible family.
    (2) Except for discretionary vacancy payments in accordance with 
Sec.  983.352, the PHA may not make any housing assistance payment to 
the owner for any month after the month when the family moves out of 
the unit (even if household goods or property are left in the unit).
    (b) Monthly payment. Each month, the PHA shall make a housing 
assistance payment to the owner for each contract unit that complies 
with the HQS and is leased to and occupied by an eligible family in 
accordance with the HAP contract.
    (c) Calculating amount of payment. The monthly housing assistance 
payment by the PHA to the owner for a contract unit leased to a family 
is the rent to owner minus the tenant rent (total tenant payment minus 
the utility allowance).
    (d) Prompt payment. The housing assistance payment by the PHA to 
the owner under the HAP contract must be paid to the owner on or about 
the first day of the month for which payment is due, unless the owner 
and the PHA agree on a later date.
    (e) Owner compliance with contract. To receive housing assistance 
payments in accordance with the HAP contract, the owner must comply 
with all the provisions of the HAP contract. Unless the owner complies 
with all the provision of the HAP contract, the owner does not have a 
right to receive housing assistance payments.


Sec.  983.352  Vacancy payment.

    (a) Payment for move-out month. If an assisted family moves out of 
the unit, the owner may keep the housing assistance payment payable for 
the calendar month when the family moves out (``move-out month''). 
However, the owner may not keep the payment if the PHA determines that 
the vacancy is the owner's fault.
    (b) Vacancy payment at PHA discretion. (1) At the discretion of the 
PHA, the HAP contract may provide for vacancy payments to the owner (in 
the amounts determined in accordance with paragraph (b)(2) of this 
section) for a PHA-determined period of vacancy extending from the 
beginning of the first calendar month after the move-out month for a 
period not exceeding two full months following the move-out month.
    (2) The vacancy payment to the owner for each month of the maximum 
two month period will be determined by the PHA, and cannot exceed the 
monthly rent to owner under the assisted lease, minus any portion of 
the rental payment received by the owner (including amounts available 
from the tenant's security deposit). Any vacancy payment may only cover 
the period the unit remains vacant.
    (3) The PHA may only make vacancy payments to the owner if:
    (i) The owner gives the PHA prompt, written notice certifying that 
the family has vacated the unit and the date when the family moved out 
(to the best of the owner's knowledge and belief);
    (ii) The owner certifies that the vacancy is not the fault of the 
owner and that the unit was vacant during the period for which payment 
is claimed;
    (iii) The owner certifies that it has taken every reasonable action 
to minimize the likelihood and length of vacancy; and
    (iv) The owner provides any additional information required and 
requested by the PHA to verify that the owner is entitled to the 
vacancy payment.
    (4) The owner must submit a request for vacancy payments in the 
form and manner required by the PHA and must provide any information or 
substantiation required by the PHA to determine the amount of any 
vacancy payment.


Sec.  983.353  Tenant rent; payment to owner.

    (a) PHA determination. (1) The tenant rent is the portion of the 
rent to owner paid by the family. The PHA determines the tenant rent in 
accordance with HUD requirements.
    (2) Any changes in the amount of the tenant rent will be effective 
on the date stated in a notice by the PHA to the family and the owner.
    (b) Tenant payment to owner. (1) The family is responsible for 
paying the tenant rent (total tenant payment minus the utility 
allowance).
    (2) The amount of the tenant rent as determined by the PHA is the 
maximum

[[Page 12970]]

amount the owner may charge the family for rent of a contract unit. The 
tenant rent is payment for all housing services, maintenance, 
equipment, and utilities to be provided by the owner without charge to 
the tenant, in accordance with the HAP contract and lease.
    (3) The owner may not demand or accept any rent payment from the 
tenant in excess of the tenant rent as determined by the PHA. The owner 
must immediately return any excess payment to the tenant.
    (4) The family is not responsible for payment of the portion of the 
rent to owner covered by the housing assistance payment under the HAP 
contract. The owner may not terminate the tenancy of an assisted family 
for nonpayment of the PHA housing assistance payment.
    (c) Limit of PHA responsibility. (1) The PHA is only responsible 
for making housing assistance payments to the owner on behalf of a 
family in accordance with the HAP contract. The PHA is not responsible 
for paying the tenant rent, or for paying any other claim by the owner.
    (2) The PHA may not use housing assistance payments or other 
program funds (including any administrative fee reserve) to pay any 
part of the tenant rent or to pay any other claim by the owner. The PHA 
may not make any payment to the owner for any damage to the unit, or 
for any other amount owed by a family under the family's lease or 
otherwise.
    (d) Utility reimbursement. (1) If the amount of the utility 
allowance exceeds the total tenant payment, the PHA shall pay the 
amount of such excess as a reimbursement for tenant-paid utilities 
(``utility reimbursement'') and the tenant rent to the owner shall be 
zero.
    (2) The PHA either may pay the utility reimbursement to the family 
or may pay the utility bill directly to the utility supplier on behalf 
of the family.
    (3) If the PHA chooses to pay the utility supplier directly, the 
PHA must notify the family of the amount paid to the utility supplier.


Sec.  983.354  Other fees and charges.

    (a) Meals and supportive services. (1) Charges for meals or 
supportive services may not be included in the rent to owner. The value 
of meals and supportive services may not be included in the calculation 
of reasonable rent.
    (2) Except for assisted living, the owner may not require the 
tenant or family members to pay charges for meals or supportive 
services. Non-payment of such charges is not grounds for termination of 
tenancy.
    (b) Other charges by owner. The owner may not charge the tenant or 
family members extra amounts for items customarily included in rent in 
the locality or provided at no additional cost to unsubsidized tenants 
in the premises.

    Dated: February 17, 2004.
Michael M. Liu,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 04-5827 Filed 3-17-04; 8:45 am]
BILLING CODE 4210-33-P