[Federal Register Volume 69, Number 227 (Friday, November 26, 2004)]
[Rules and Regulations]
[Pages 68786-68791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-26114]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 960 and 966

[Docket No. FR-4824-F-02]
RIN 2577-AC42


PHA Discretion in Treatment of Over-Income Families

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

ACTION: Final rule.

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SUMMARY: This final rule gives public housing agencies (PHAs) the 
discretion, in accordance with federal law and regulations, to 
establish occupancy policies that include the eviction of public 
housing tenants who are over the income limit for eligibility to 
participate in public housing programs. PHAs may decide that such 
families should be able to find other housing and that public housing 
units should be made available for eligible low-income families with 
greater housing need. This final rule takes into consideration the 
public comments received on the proposed rule. After careful review of 
the comments, HUD has decided to adopt the proposed rule with minor 
revision.

DATES: Effective Date: December 27, 2004.

FOR FURTHER INFORMATION CONTACT: Patricia Arnaudo, Director, Public 
Housing Occupancy and Management Division, Office of Public and Indian 
Housing, Department of Housing and Urban Development, Room 4116, 451 
Seventh Street, SW., Washington, DC 20410-5000 telephone (202) 708-0744 
(this is not a toll-free number). Persons with hearing or speech 
impairments may access this number through TTY by calling the toll-free 
Federal Information Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On August 1, 2003 (68 FR 45734), HUD published a notice of proposed 
rulemaking (NPRM) that proposed to grant PHAs the discretion to evict a 
family that is over the eligible income limit, with exceptions for 
families entitled to EID (addressed at 42 U.S.C. 1437a(d)) or with 
valid contracts of participation under the Family Self Sufficiency 
(FSS) program (42 U.S.C. 1437u). In submitting this proposed rule for 
public comment, HUD stated its view that public housing should be 
available to eligible low-income families and that it is inappropriate 
to limit the ability of a PHA to move over-income families out of 
public housing to make room for low-income families on waiting lists.
    The current rule on eviction at 24 CFR 960.261 limits the ability 
of PHAs to evict over-income families unless (1) the PHA has determined 
that there is other decent, safe, and sanitary housing available to the 
tenant at a rent not exceeding the then-current tenant rent, or (2) the 
PHA is required to evict the family by local law.
    This final rule does not require PHAs to evict over-income 
residents, but rather gives PHAs the discretion to do so and thereby 
make units available for applicants who are income-eligible.

II. This Final Rule

    This final rule follows publication of the August 1, 2003, proposed 
rule. The public comment period for the proposed rule closed on 
September 30, 2003. Sixteen public comments were received from a 
variety of individuals and groups during the comment period. Commenters 
included tenant organizations, housing authority trade associations, 
public housing tenants, and PHAs. Three of the public comments were in 
the form of petitions signed by multiple public housing residents from 
one city, and gathered and submitted by a single organization. After 
consideration of these comments, HUD has decided to adopt a final rule 
that, like the proposed rule, provides an exception to eviction for 
over-income tenants who are receiving the earned income disallowance or 
have active contracts of participation in a family supportive services 
program. In addition, this rule makes a conforming technical change to 
24 CFR 966.4(l)(2)(ii).

III. Discussion of Public Comments

    Comment: The rule properly grants discretion to the PHAs regarding 
over-income residents. One PHA commenter agreed with the rule so long 
as implementation is voluntary and ``with no penalty for non-
participation.'' Similarly, another PHA did not oppose the concept of 
the proposed rule that will grant ``public housing agencies `` the 
discretion to evict over income families from public housing, as long 
as this rule remains a PHA option.'' ``In an effort to increase 
accountability and ensure that public housing participants are not 
being evicted prematurely before reaching self-sufficiency,'' this 
commenter would prefer PHAs be given discretion to regulate this 
policy, rather than being subject to a mandatory regulation.
    Observing that there may be widely divergent local strategies 
ranging from targeting only households most in need to retaining some 
over-income households as role models and to maintain the marketability 
of public housing, one commenter, also a PHA, agreed with the 
discretion the rule would grant to PHAs, and states that ``local 
communities deserve federal respect for the diverse implementation 
strategies they devise to accomplish broadly stated national policy 
goals.'' Another commenter stated, ``We appreciate and support the 
Department's recognition of the importance of local-level discretion in 
setting housing policies'' and ``LHAs [local housing agencies] must 
retain true discretion to establish policies that suit their 
communities.'' However, this commenter, a housing association, stated 
that ``a more useful formulation of the notice would be one that gives 
PHAs the discretion to formulate local policies with regard to families 
who have increased their incomes while residing in public housing.'' 
Another PHA stated that ``ultimate discretion'' on if, how and when it 
is applied should be left to the individual PHA. Local PHAs should be 
allowed to set the over-income ``target'' for triggering the eviction 
based on local market conditions.''
    Response: HUD agrees with these commenters in their desire for PHAs 
to act with discretion. This rule gives PHAs the discretion to make 
decisions concerning their local housing market needs. HUD will not 
penalize PHAs for not incorporating this rule into their admission and 
continued occupancy policies.
    Comment: The rule would have a negative effect on deconcentration 
of poverty and income-mixing goals. Several commenters specifically 
commented on the rule's effect on income-mixing and deconcentration of 
poverty. One PHA stated that having a range of incomes is preferable to 
having

[[Page 68787]]

a concentration of low-income families, observing that the presence of 
higher-income families under the flat-rent system serves as role models 
and as the core homeownership clientele. Another PHA stated that this 
rule would conflict with the goals of deconcentrating poverty (24 CFR 
903.1), income targeting (24 CFR 960.202), and choice of income-based 
or flat rent (24 CFR 960.253). This commenter stated that the rule 
would ``negatively impact the ability of PHAs to move toward 
socioeconomic diversity in public housing'' and that due to the 
conflicts, the rule should not be implemented. A PHA-related trade 
association commented, ``The wisdom of evicting over income families or 
encouraging them to take advantage of other housing options is 
contingent on local policy preferences * * * retention [of some over-
income families] may also contribute to whatever mixed income character 
public housing apartments may retain.'' Another trade association 
stated that, ``Families with increasing incomes can also play a vital 
role in local strategies to create mixed-income communities and 
deconcentrate poverty in public housing. The presence of working 
families in public housing provides role models that contribute to a 
healthy, stable community. The presence of relatively higher-income 
families could help PHAs secure private funding for development 
purposes, helping both residents as well as the broader community.'' An 
individual petition signer made a similar point.
    Other commenters cited similar concerns. One individual commenter 
stated:

    In 1998, Congress passed the law stating that PHAs could admit 
higher-income tenants into low-income public housing project, 
because having a high concentrations of poor people had a negative 
effect on the neighborhoods. By adding higher-income tenants, 
Congress hoped to stabilize the neighborhoods.
    One of the problems the [HOPE VI] Revitalization grants may be 
used for, is demolition of drug-infested, severely distressed low-
income public housing. HUD's proposal perpetuates the problem by 
recreating high concentrations of poor people all over again.

    This commenter cited the example of the commenter's own 
development, which lost most of its moderate-income tenants in favor of 
lower-income tenants. Two commenters opposed to the rule stated that 
``the proposed rule works against deconcentration objectives.'' These 
commenters further stated, ``Under the 1998 Quality Housing and Work 
Responsibility Act [QHWRA], PHA's are required to plan for 
deconcentration, in order to promote a comparable mix of incomes in all 
developments'' and ``by evicting over-income households, PHAs may be 
promoting higher concentrations of low income residents in some 
developments, thereby defeating the purposes of deconcentration.''
    These commenters further stated that high turnover in a 
neighborhood can lessen the capacity of a community to address its 
needs and interests, and when the turnover occurs among higher-income 
households who demonstrate self-sufficiency and represent positive role 
models, the community can lose its strongest leaders and be 
significantly destabilized.
    Some individual petition signers also stated that the rule would 
contradict income-mixing and HOPE VI goals.
    Response: HUD believes that this rule does not contradict 
deconcentration or income-mixing policies, because those policies can 
be successfully achieved by a PHA while implementing this rule. 
Specifically, deconcentration can occur within tenant populations that 
are within 80 percent of area median income (AMI), since PHAs are 
required to target only 40 percent of extremely low-income families in 
the public housing program. Public housing is intended for low-income 
families (at or below 80 percent of AMI). Therefore, the resources of 
public housing should not be used by those who are not low-income while 
many who are low-income remain on the waiting list.
    Comment: PHA commenters raised issues regarding how much pre-
eviction notice to give.
    One commenter suggested ``a one-to two-year minimum time limit to 
allow families to prepare for their move into the private market'' as 
not all PHAs have the resources to help residents become independent of 
public housing assistance. One commenter suggested a 6-month 
``stabilization or grace period'' at the `` `top rent' level for people 
`exiting poverty,' '' with a mutually agreed termination of tenancy at 
the end of the six months. Another commenter suggested a 60-day advance 
notice to allow families time to enroll in a supportive services 
program. Another commenter, citing an example of a family that had 
borrowed heavily during a period of unemployment due to injury, 
questioned whether a PHA could establish a one-year post-employment 
grace period to allow families to ``get back on their feet and pay off 
some debt? '' One commenter observed that the length of notice is not 
covered in the rule.
    Response: This rule will provide PHAs the discretion to determine 
the time frame needed to execute an eviction notice, as long as the 
PHA's decision complies with HUD's regulations and state and local 
laws.
    Comment: Other issues regarding eviction. In a comment, a PHA 
stated that eviction might create a blemish on the family's record that 
could make it difficult for it to find other housing. This commenter 
stated that an eviction policy would require the support of local 
courts, cause the PHA to incur legal expenses, and should be a last 
resort. The commenter suggested that a better option might be to permit 
PHAs not to renew the lease, allowing the ``PHA to notify the over-
income family that this would be the last year they would be able to 
lease from the PHA and provide an interim step before eviction.'' One 
trade association commenter stated that it has generally supported 
initiatives that encourage public housing residents to increase their 
earned income and decrease their dependence on housing assistance. The 
commenter disagreed with ``the rule's encouragement of punishing 
assisted housing families who succeed.'' The commenter believed that 
the rule expresses a preference for eviction, and would prefer that 
PHAs make discretionary use of their existing tools to encourage over-
income families to seek to move, instead of the punitive measure of 
eviction. In another comment, a PHA stated that ``eviction is a rather 
serious step that cannot be taken lightly and should only occur when 
there is clear evidence that affordable rental opportunities are 
available in the open market to the household against which the action 
is being taken.'' An individual petition signer expressed fear of 
eviction if the rule becomes final. Another petition signer added a 
comment that the rule would ``penalize'' and ``dissuade people from 
moving up and out of poverty.''
    Response: This rule does not require PHAs to evict, but gives PHAs 
the flexibility to evict or terminate the tenancies of over-income 
families, where it deems it appropriate, so long as its policy complies 
with HUD's regulations and state and local law governing tenant and 
landlord relations. Therefore, a PHA could take into account mitigating 
factors such as the family's self-sufficiency efforts.
    Comment: Five commenters (three PHAs and two trade associations) 
disagree with, or suggest changes in, the proposed rule's exemptions 
for families participating in a Family Self-Sufficiency program under 
24 part 984 (FSS) and families entitled to the earned-income 
disallowance. One commenter stated that the exemptions

[[Page 68788]]

are invitations to ``play the system,'' and suggested that the rule 
should require FSS families also to be eligible for the earned-income 
disallowance ``to ensure reversion of funds to PHA's by those who do 
not meet their commitment.'' After the 24-month period for the 
disallowance ends, there should be a mutual termination of tenancy with 
an option for eviction.
    One commenter believed that working families and FSS recipients 
will be negatively affected if forced to leave after the end of the 
moratorium on the rent increase, and that the rule will be a 
disincentive to work if the residents' income results in the 
possibility of an eviction.
    A trade association commenter disagreed as a matter of law that 
either the FSS program or the earned-income disallowance under 42 
U.S.C. 1437a(d) protects over-income families from eviction. The 
earned-income disallowance speaks only to rent increases, not to 
continued tenancy, and FSS families have no right to remain in the 
program once their income exceeds the eligibility limits. This 
commenter stated that some of its members see the Quality Housing and 
Work Responsibility Act's favorable treatment of these classes of over-
income tenants over other working families in public housing as 
troubling, and complained that the rule would ``aggravate this 
disparate statutory treatment'' by placing certain working families at 
risk of eviction while protecting others. This commenter would prefer 
HUD to grant PHAs broad discretion in connection with the retention or 
eviction of all classes of over-income households, or at least remain 
silent as to the proposed excluded classes, and leave their treatment 
up to PHAs as well.
    Another trade association commenter similarly stated that the 
proposed rule's exemptions would exclude ``working families who have 
increasing incomes but have not participated in FSS or met the limited 
EID qualification criteria.'' The commenter described this different 
treatment of working families as a ``potential incongruity.'' This 
commenter also agreed that the exemptions are not required by statute. 
This commenter stated that ``PHAs should establish exemption categories 
as part of their local strategies.''
    An individual housing authority commenter stated that ``FSS 
participants should be exempted from this rule as long as they are 
enrolled in the program and are actively pursuing the goals included in 
their contract. Over-income families should also be notified of the 
availability of the program and given the opportunity to enroll in the 
FSS program with reasonable notice before eviction proceedings are 
commenced.''
    Response: The purpose of the Earned Income Disallowance in 42 
U.S.C. 1437a(d), implemented at 24 CFR 960.255, is to encourage 
families to increase their annual income through participation in self-
sufficiency and job training programs and employment by allowing the 
PHA to exclude the resulting increase in income for one 12-month period 
and exclude 50 percent of the increase in the second 12-month period. 
The total lifetime availability of any individual is limited to 48 
months. To evict families properly qualified for and receiving the 
disallowance would clearly be contrary to the statutory purpose and to 
the regulation providing for the exclusion of such income. Since the 
earned income disallowance is available only for a limited time, and 
since it applies upon the commencement of employment of a qualifying 
family member, HUD does not believe there would be wide latitude to use 
the exemption improperly to avoid eviction. Therefore, HUD is including 
the exception to eviction for families receiving EID in this final 
rule.
    FSS is a contractual agreement between the participant and the PHA. 
Because FSS involves contractual agreements, it is HUD's policy and 
rule to exempt participants in FSS programs until their contract of 
participation has ended. Otherwise, PHAs may continue to apply their 
admissions and continued occupancy policies except as they are modified 
by this rule.
    Comment: One commenter states that this rule would increase program 
complexity. This commenter, a trade association, stated that this rule 
would ``make program implementation more complex rather than less 
complex.'' PHAs would have to identify FSS families and families 
entitled to the earned income disregard. Additionally, a PHA's 
determination of household eligibility for FSS or an earned income 
disregard ``may affect the amount of rent a family pays or the 
availability of support services to the family. If a PHA elects to 
implement a local discretionary policy to evict over-income households, 
these determinations of eligibility may come to affect a household's 
eligibility for continued occupancy in public housing. * * * .''
    Response: PHAs are currently required to monitor FSS families and 
to apply the earned income disallowance in appropriate cases; 
therefore, this rule will not add additional complexity to the program.
    Comment: HUD should support PHAs in enforcing a time limit for 
over-income families. This commenter agreed that a family making above 
80 percent of the median ``should be evicted if that family is not 
making an effort to obtain housing in the private sector,'' and that 
PHAs should receive support from HUD to enforce a time limit not 
exceeding one year of housing for over-income families.
    Response: HUD supports a PHA's discretion, as provided by this 
rule, to determine the appropriate time limit, if allowed to remain in 
public housing at all, for families that have reached the 80 percent 
AMI threshold.
    Comment: Two PHA commenters support exemptions for elderly and 
disabled residents. One commenter, citing a particular case of an 
elderly resident whose income suddenly rose, asked whether a PHA could 
allow for an exemption for elderly or disabled persons. Another 
commenter stated that the only exceptions to eviction should be for 
elderly and disabled families who remain in public housing for a 
variety of reasons. ``If PHAs'' must evict an elderly or disable 
family, it should be for failure to comply with state laws and housing 
laws, not for being over income; otherwise, elderly/disable families 
will suffer.'' Also, ``More elderly families may become houseless or 
choose to rent from the private market. PHAs cannot compete with 
private market budgets.''
    Response: This rule will provide PHAs the flexibility to exempt 
from eviction specific classes of families, including elderly and 
persons with disabilities, as long as the exemption is implemented 
fairly, does not violate civil rights laws, and is included in the 
PHA's admission and continued occupancy policies.
    Comment: The type of increased income should be considered. One 
commenter, in addition to concerns about elderly and disabled 
residents, asked whether PHAs would be permitted to ``incorporate this 
proposal based on increased employment income only? ''
    Response: PHAs will have the flexibility to set and enforce over-
income policy, including distinguishing employment income, so long as 
the distinction does not violate any other law.
    Comment: Two commenters questioned whether perceived ``loopholes'' 
could be closed. One commenter, a PHA, stated that it is interested in 
implementing such a rule, while asking whether the final rule will 
include language to assure that PHAs have the authority to proceed with 
termination despite intentional or after-the-fact reductions in income 
in order to divert the termination process and, if not, what discretion 
PHAs would have

[[Page 68789]]

to ``close this easily-manipulated loophole.''
    Another commenter stated that to be successful, this program would 
require that ``interim recertifications should be performed and rents 
adjusted accordingly (when the cumulative increase passes some baseline 
amount such as $100 per month to avoid the inefficient expense of 
[recertifications] for a few dollars)'' and that ``any six months 
(cumulative, not necessarily continuous) require the cessation of 
housing subsidy benefits.'' HUD needs to ``continually close the 
loopholes'' or ``creative tenant workarounds'' that divert resources 
from assisting the truly needy.
    Response: This rule will allow PHAs to have the flexibility, within 
the parameters of state and local law, to set interim rent policies and 
other ways to ensure that the policies operate effectively.
    Comment: The rule would result in hardship or homelessness. One 
commenter stated, ``I do not feel a family especially with children 
should be punished and put out just because their parents are 
working.'' The commenter stated that rents in her locality are ``out of 
control,'' and that families evicted under this rule would likely 
become homeless.
    Two commenters stated that ``in localities with low vacancy rates 
and high rents, the proposed rule, if applied, will result in 
displacement and severe hardship for evicted families.'' These comments 
stated that the rule does not distinguish between localities with tight 
rental markets, such as New York and San Francisco, and those where 
vacancies are more plentiful. In tight rental markets, eviction under 
the rule may result in displacement of families with children, 
disruption of their social and community networks, access to work and 
other opportunities, and cause stress and hardship.
    A number of individual petition signers also stated that the rule 
would cause displacement or homelessness among families that cannot 
afford the private rental market.
    Response: Public housing is intended for low-income families. This 
rule is being implemented so that PHAs may, if it deems appropriate, 
require families with incomes higher than 80 percent AMI to find 
housing in the unassisted market so that the PHA may tend to its 
mission of serving truly low-income families on the waiting list.
    Comment: Relationship with PHA plan. A commenter asked whether, 
should this rule become final, PHAs would have to wait until approval 
of their next agency plan to incorporate it into their policies and 
practices. Two commenters stated that PHAs intending to use the 
discretion granted by this rule should so state in their annual plan so 
that the PHA would be open to public comment under the annual public 
hearing required by QHWRA. These commenters stated that ``use of this 
discretion should not bypass the accountability requirements under the 
law.''
    Response: PHAs that implement this rule must state their policy in 
an attachment to their annual plan required under section 5A of the 
U.S. Housing Act of 1937 (42 U.S.C. 1437c-1), or submit a plan 
amendment if necessary under local guidelines. A PHA may proceed with 
eviction actions up to presentation to the court pending the 
certification of the plan.
    Comment: One commenter, a public interest group, submitted 
petitions signed by public housing residents.
    One petition text submitted stated the following:

    Mi entendimiento es que esta propuesta/regla le dara el derecho 
a la Autoridad de Viviendas Publicas de Boston de desalojar 
residentes de viviendas publicas que estan sobre el limite de 
ingreso para hacer eligible para participar en programas de 
viviendas publicas. BHA puede hacer la decision que familias sobre 
ingresos pueden encontrar viviendas alternativa y viviendas publicas 
solamente deben hacer disponible para familias que tengan una gran 
necesidad para viviendas publicas.
    Sinceramente le pido a HUD que mantega sus restricciones en el 
desalojamiento de familias que estan sobre el limite de ingreso y la 
Autoridad de vivienda publica no pueda desalojar esas familias que 
estan sobre el limite de ingreso o terminar su contrato de 
arrendimiento.

    31 persons signed this petition.
    This commenter also submitted a similar petition in English, which 
reads as follows:

    My understanding is that this proposed rule would give the 
Boston Housing Authority the right to evict public housing tenants 
who are over the income limit for eligibility to participate in 
public housing programs. BHA may decide that such families should be 
able to find other housing and that public housing units should be 
made available for families with greater housing need.

    One hundred fifty-four persons signed this petition. Some of these 
signers appended substantive individual comments. The issues raised in 
those comments are noted elsewhere in this preamble.
    The same commenter also submitted a petition with a different text, 
which reads as follows:

    I am a resident of Massachusetts where the cost of rental 
housing is the highest in the nation, a studio apartment averages 
$900 per month and a four bedroom can run $2400 in my neighborhood 
(A copy of the Boston Globe classified is attached for your review.) 
Public housing residents are America's working poor. It takes two, 
three and even four combined incomes to just live decently. Over 
income is based on adult children who will some day leave, spouses 
who may leave, get laid off or even die. Every month we read about 
another company closing down or leaving the state; employment is not 
stable here. Left alone we would shortly return to homelessness if 
evicted for over income during our stable times. I want decent, 
safe, and sanitary housing. I respectfully ask HUD to maintain its 
restriction on eviction of families based on income which state that 
a PHA may not evict or terminate the tenancy of a family solely 
because the family is over income.

    Sixty-three persons signed this petition. Some of these signers 
appended substantive individual comments. The issues raised in those 
comments are noted elsewhere in this preamble.
    Response: It is HUD's position that PHAs should have the discretion 
to implement this rule. Local discretionary policies can address 
variances in rental markets as well as potential displacement of over-
income families. As long as a PHA complies with state and local law, it 
will have the right to determine all housing requirements.
    Comment: Fluctuations in earned income need to be taken into 
account. 
    The proposed rule should take into account fluctuations in income. 
An over-income family may be evicted under the rule, then suffer a 
reversal that makes it impossible to afford decent housing in the open 
rental market. The result will be to ``lock out'' these families until 
their turn comes up again in the waiting list. These commenters, public 
interest groups, propose that an ``over-income family'' be defined as 
one that is over-income for five consecutive years, and has little risk 
of suffering a significant income reversal in the next five years. 
Several of the individual petition signers make a similar point, that 
employment income is not necessarily stable and that the rule could 
result in eviction followed by a decrease in income.
    Response: This rule provides PHAs with the flexibility to deal with 
the changes in a family's earned income status in terms of eviction.
    Comment: Self-sufficiency planning should begin early. One PHA 
commented that ``With the exception of seniors and truly disabled 
persons, the day someone begins to receive assistance is the day self-
sufficiency planning needs to begin.'' HUD assistance should be 
temporary.

[[Page 68790]]

    Response: HUD agrees with the commenter's views. In fact, residents 
are made aware as they enter public housing of the availability of 
self-sufficiency programs that will allow them to become self-
sufficient and make the transition out of public housing and possibly 
to homeownership. One of HUD's strategic goals is to increase 
homeownership opportunities and help residents make the transition out 
of public housing and possibly on to homeownership. HUD's homeownership 
programs are intended to assist in this process.
    Comment: Asset limitations for seniors should be considered. With 
regard to senior citizens, a reasonable asset limitation in addition to 
income should be considered.
    Response: PHAs have the discretion to consider asset limitations in 
their policies, as long as the limitations meet state and local legal 
requirements.
    Comment: Government should increase available resources for low-
income housing. A public interest group commented that HUD increase the 
funding of the public housing capital fund and support a national 
housing trust fund to finance expanded development of affordable low-
income housing. This commenter also stated that HUD should increase the 
minimum income targeting requirement of PHAs from 40 percent of 
admissions to 60 percent of admissions for extremely low-income 
families.
    Another public interest group similarly stated that HUD should 
increase federal commitments to adequate funding of public housing, 
including enabling high-performing housing authorities in tight rental 
markets to expand the inventory of public housing, and that HUD should 
recommend that the provision of prohibiting expansion of public housing 
stock be repealed. This commenter also agreed with the prior commenter 
that HUD should increase the admissions of extremely low income 
families from 40 to 60 percent, and added that HUD should propose an 
amendment to QHWRA to accomplish this.
    Response: This rule addresses the public housing program only, not 
other available low-income housing funding sources, which are outside 
the scope of this rulemaking.
    Comment: Concerns about flat rents and overall high rents. A number 
of signers of the petition submitted as comments disagree with 
increases in, or express concerns with, the flat rent. Other petition 
signers stated generally that rents are too high in relation to their 
income and other expenses. Others also stated that rents are too high 
in relation to the condition of public housing units.
    Response: HUD regulations at 24 CFR 960.253(2)(b) set the standard 
for flat rents. Flat rents are statutorily required and must be set by 
comparable market rents. Any concern about the level of flat rents 
should be raised to either the PHA or local HUD office.
    Comment: Petition signers suggest giving a homeownership option to 
over-income public housing residents who cannot afford rent in the 
private market. One commenter stated that ``if someone's income is to 
high place them in their own home build by the state so they would only 
need to pay a mortgage [sic].'' Another asked why the government does 
not allow PHAs to build or buy and refurbish old housing for over-
income residents, and give them an option to buy after a certain length 
of time with no down-payment. This would free up an overly saturated 
market and help alleviate homelessness.
    Response: HUD programs are intended for eligible families--those 
with incomes below 80 percent of AMI. Various homeownership options are 
available to those above this level.
    Comment: Length of time for upper-income families to remain. One 
petition signer asked: If over-income residents are moved out, will a 
new standard be established as to how long upper income families 
replacing them can remain in the development?
    Response: This rule provides the PHA flexibility to determine if 
over-income families should remain in public housing.

IV. Findings and Certifications

Environmental Impact

    This rule concerns a statutorily required or discretionary 
establishment and review of income limits and exclusions with regard to 
eligibility for or calculation of HUD housing assistance or rental 
assistance. As such, this rule is categorically excluded from the 
provisions of the National Environmental Policy Act (42 U.S.C. 4332 et 
seq.), under 24 CFR 50.19(c)(6) of HUD's regulations.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA)(5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    This rule is concerned only with granting PHAs the discretion to 
evict over-income families. It does not mandate that any PHA take such 
action. Furthermore, the rule preserves the ability that small PHAs 
have to admit over-income families in cases where there is no demand 
for a unit by an eligible family, thus preventing such small PHAs from 
having to support vacant units.
    Therefore, the undersigned certifies that this proposed rule will 
not have a significant economic impact on a substantial number of small 
entities, and an initial regulatory flexibility analysis is not 
required.

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 final rule does not 
impose any federal mandate on any state, local, or tribal government, 
or on the private sector, within the meaning of UMRA.

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.

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 
Regulations Division, Office of the General Counsel, Room 10276, 451 
Seventh Street, SW., Washington, DC 20410-0500.

[[Page 68791]]

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number applicable to the 
program affected by this rule is 14.850.

List of Subjects

24 CFR 960

    Aged, Grant programs--housing and community development, 
Individuals with disabilities, Pets, Public housing.

24 CFR 966

    Grant programs--housing and community development, Public housing.

0
Accordingly, HUD amends 24 CFR parts 960 and 966 to read as follows:

PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING

0
1. The authority citation for part 960 continues to read as follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, 1437z-3, and 
3535(d).

Subpart C--Rent and Reexamination

0
2. Revise Sec.  960.261 to read as follows:


Sec.  960.261  Restriction on eviction of families based on income.

    (a) PHAs may evict or terminate the tenancies of families who are 
over income, subject to paragraph (b) of this section.
    (b) Unless it is required to do so by local law, a PHA may not 
evict or terminate the tenancy of a family solely because the family is 
over the income limit for public housing, if the family has a valid 
contract for participation in an FSS program under 24 part 984. A PHA 
may not evict a family for being over the income limit for public 
housing if the family currently receives the earned income disallowance 
provided by 42 U.S.C. 1437a(d) and 24 CFR 960.255.

PART 966--PUBLIC HOUSING LEASE AND GRIEVANCE PROCEDURE

0
3. The authority citation for part 966 continues to read as follows:

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

Subpart A--Dwelling Leases, Procedures and Requirements

0
4. Amend Sec.  966.4 by redesignating paragraph (l)(2)(ii) as 
(l)(2)(iii) and adding a new paragraph (l)(2)(ii) to read as follows:


Sec.  966.4  Lease requirements.

* * * * *
    (l) * * *
    (2) * * *
    (ii) Being over the income limit for the program, as provided in 24 
CFR 960.261.
* * * * *

    Dated: November 19, 2004.
Michael Liu,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 04-26114 Filed 11-24-04; 8:45 am]
BILLING CODE 4210-27-U