[Federal Register Volume 74, Number 232 (Friday, December 4, 2009)]
[Proposed Rules]
[Pages 63938-63942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-28984]



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Part IV





Department of Housing and Urban Development





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24 CFR Part 93



Housing Trust Fund; Allocation Formula; Proposed Rule

  Federal Register / Vol. 74, No. 232 / Friday, December 4, 2009 / 
Proposed Rules  

[[Page 63938]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 93

[Docket No. FR-5246-P-01]
RIN 2506-AC23


Housing Trust Fund; Allocation Formula

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, HUD.

ACTION: Proposed rule.

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SUMMARY: The Housing and Economic Recovery Act of 2008 establishes a 
Housing Trust Fund to be administered by HUD. The purpose of the fund 
is to provide grants to States to increase and preserve the supply of 
rental housing for extremely low- and very low-income families, 
including homeless families, and to increase homeownership for 
extremely low- and very low-income families. The Housing and Economic 
Recovery Act of 2008 charges HUD to establish through regulation the 
formula for the distribution of the Housing Trust Fund to States. The 
statute specifies that only certain factors are to be part of the 
formula, and assigns priority to certain factors. This proposed rule 
submits, for public comment, the proposed formula for allocating funds 
from the Housing Trust Fund.

DATES: Comment due date: February 2, 2010.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street, SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-708-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number through TTY by calling the toll-free Federal 
Information Relay Service at 800-877-8339. Copies of all comments 
submitted are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Marcia Sigal, Office of Community 
Planning and Development, Department of Housing and Urban Development, 
451 7th Street, SW., Room 7158, Washington, DC 20410; telephone number 
202-708-2684 (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

    The Housing and Economic Recovery Act of 2008, (Pub. L. 110-289, 
enacted July 30, 2008) (HERA) was major housing legislation enacted to 
reform and improve the regulation of Fannie Mae and Freddie Mac (the 
government-sponsored enterprises or GSEs), strengthen neighborhoods 
hardest hit by the foreclosure crisis, enhance mortgage protection and 
disclosures, and maintain the availability of affordable home loans. 
Section 1131 of HERA amended the Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) (Act) to add 
a new section 1337, entitled ``Affordable Housing Allocation'' and a 
new section 1338, entitled ``Housing Trust Fund.''
    Section 1338 of the Act directs HUD to establish and manage a 
Housing Trust Fund, which is to be funded with amounts allocated by the 
GSEs as well as any amounts that may be appropriated, transferred, or 
credited to the Housing Trust Fund under any other provision of law. 
The purpose of the Housing Trust Fund is to provide grants to States 
for use to: (1) Increase and preserve the supply of rental housing for 
extremely low- and very low-income families, including homeless 
families; and (2) increase homeownership for extremely low- and very 
low-income families. The primary focus of the Housing Trust Fund is 
rental housing for extremely low- and very low-income households, as 
the Act provides that no more than 10 percent of each formula 
allocation may be expended on homeownership.

II. This Proposed Rule--New 24 CFR Part 93

    HUD proposes to codify the regulations for the Housing Trust Fund 
in a new part 93 of title 24 of the Code of Federal Regulations. 
Further, HUD intends to implement the Housing Trust Fund through two 
separate rulemakings. Today's proposed rule would establish new 24 CFR 
part 93, and codify the formula for grant allocations under the Housing 
Trust Fund. A future rulemaking will propose the requirements and 
procedures governing operation of the Housing Trust Fund.
    This section of the preamble highlights some of the key provisions 
of today's proposed rule.

A. General Provisions--Subpart A

    Subpart A of new part 93 would set forth the general provisions 
applicable to the Housing Trust Fund (HTF) program. This subpart 
includes a definition section (Sec.  93.52) that establishes the 
definitions applicable to the HTF program. In keeping with the scope of 
this rulemaking, the definitions that would be established by the 
proposed rule pertain to the allocation formula, including the 
statutory definitions of ``extremely low-income renter household,'' 
``shortage of standard rental units both affordable and available to 
extremely low-income renter households,'' and ``shortage of standard 
rental units both affordable and available to very low-income renter 
households,'' found in section 1338(f) of the Act. The list of defined 
terms will be expanded, as necessary, by HUD's forthcoming rule 
establishing the HTF programmatic requirements.

[[Page 63939]]

    The proposed rule utilizes the statutory definitions of the terms 
``extremely low-income renter household'' and ``very low-income renter 
household.'' Specifically, the proposed rule would define an extremely 
low-income renter household as a household whose income does not exceed 
30 percent of the area median income (AMI). A very low-income renter 
household would be defined as a household whose income does not exceed 
50 percent of AMI. Consistent with departmental practice for other of 
its programs, the proposed definitions of extremely low-income and very 
low-income renter households would provide for adjustment for family 
size as determined by the Secretary of HUD. The adjustments are 
standard factors that HUD applies to AMI before determining the 
extremely low-income and very low-income threshold. The adjustments for 
other family sizes are as follows: One person, 70 percent of AMI; two 
persons, 80 percent of AMI; three persons, 90 percent of AMI; four 
persons, base AMI; five persons, 108 percent of AMI; six persons, 116 
percent of AMI; seven persons, 124 percent of AMI; and eight persons, 
132 percent of AMI. The method is documented in the ``FY 2008 HUD 
Income Limits'' briefing materials available at http://www.huduser.org/datasets/il/il08/index.html.
    The proposed rule would also track the statutory definition of the 
term ``shortage of standard rental units both affordable and available 
to extremely low-income renter households.'' Consistent with the 
statutory language, the determination of whether such a shortage exists 
would be based on the gap between (1) the number of units with complete 
plumbing and kitchen facilities with a rent that does not exceed 30 
percent of the income of a household whose income is 30 percent of the 
AMI, that either are occupied by extremely low-income renter households 
or are vacant for rent; and (2) the number of extremely low-income 
renter households.
    The proposed rule uses the ``30 percent of 30 percent'' terminology 
for consistency with the statutory language and conformity to housing 
industry practice to approximate the annual gross rent affordable to 
extremely low-income renter households; however, HUD notes that ``30 
percent of 30 percent'' of the AMI equals nine percent of the AMI. In 
addition, the annual gross rent affordable to extremely low-income 
households is adjusted for the number of bedrooms. This is done to take 
into consideration that the number of bedrooms needed for a unit will 
vary with family size. This method will be documented and made 
available on the http://www.huduser.org Web site.

B. Allocation Formula--Subpart B

    The allocation formula for the HTF program would be codified in 
subpart B of new 24 CFR part 93. The factors which determine the 
allocation of the formula incorporate the statutory factors found in 
section 1338(c)(3)(B) of the Act. The statutory factors are as follows:

    (B)(i) The ratio of the shortage of standard rental units both 
affordable and available to extremely low-income renter households 
in the State to the aggregate shortage of standard rental units both 
affordable and available to extremely low-income renter households 
in all the States.
    (ii) The ratio of the shortage of standard rental units both 
affordable and available to very low-income renter households in the 
State to the aggregate shortage of standard rental units both 
affordable and available to very low-income renter households in all 
the States.
    (iii) The ratio of extremely low-income renter households in the 
State living with either (I) incomplete kitchen or plumbing 
facilities, (II) more than 1 person per room, or (III) paying more 
than 50 percent of income for housing costs, to the aggregate number 
of extremely low-income renter households living with either (IV) 
incomplete kitchen or plumbing facilities, (V) more than 1 person 
per room, or (VI) paying more than 50 percent of income for housing 
costs in all the States.
    (iv) The ratio of very low-income renter households in the State 
paying more than 50 percent of income on rent relative to the 
aggregate number of very low-income renter households paying more 
than 50 percent of income on rent in all the States.
    (v) The resulting sum calculated from the factors described in 
clauses (i) through (iv) shall be multiplied by the relative cost of 
construction in the State. For purposes of this subclause, the term 
`cost of construction'--
    (I) means the cost of construction or building rehabilitation in 
the State relative to the national cost of construction or building 
rehabilitation; and
    (II) shall be calculated such that values higher than 1.0 
indicate that the State's construction costs are higher than the 
national average, a value of 1.0 indicates that the State's 
construction costs are exactly the same as the national average, and 
values lower than 1.0 indicate that the State's cost of construction 
are lower than the national average.

    The statutory formula factors are incorporated in proposed Sec.  
93.70. Section 1338(c)(3)(C) of the Act requires the formula to give 
priority emphasis and consideration to the first factor in section 
1338(c)(3)(B)(i). The proposed rule reflects this priority 
consideration by weighting this factor higher than the other factors in 
the formula (see proposed Sec.  93.70(b)(2)). Section 1338(c)(10)(A) of 
the Act requires that no more than 10 percent of the funds may be spent 
on homeownership activities, Section 1338(c)(10)(D) states that no more 
than 10 percent may be spent on administration, and Section 
1338(c)(10)(A) states that a minimum of 75 percent of the funds for 
rental activities must be for the benefit only of extremely low-income 
families or families with incomes at or below the poverty line. 
Therefore, HUD proposes to ensure that the two factors in section 
1338(c)(3)(B)(i) that address extremely low-income renters, the first 
and third factors, receive a combined weight of 75 percent, with 
priority emphasis on the first factor.
    Section 1338(c)(4)(B) of the Act provides that in each fiscal year 
other than Fiscal Year 2009, the Secretary of HUD shall make a grant to 
each State in an amount that is equal to the amount determined for that 
State under the formula. Section 1303 of the Act defines the term 
``State'' to include the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the 
United States Virgin Islands, America Samoa and Trust Territory of the 
Pacific Islands, and any other territory or possession of the United 
States. There are no remaining entities or jurisdictions in the Trust 
Territory of the Pacific Islands or other territories or possessions of 
the United States. Accordingly, these jurisdictions are not included in 
the proposed regulatory definition of the term ``State''.
    Data for calculating the HTF program formula allocations must come 
from readily available standardized data sources. The U.S. Census, the 
American Community Survey, and the RSMeans cost survey, are the most 
readily available sources for the data necessary to calculate the 
formula allocations. However, the data available for insular areas 
(Guam, the Northern Mariana Islands, the United States Virgin Islands, 
and America Samoa) in the surveys differ from the data available from 
those sources for the 50 States, the Commonwealth of Puerto Rico, and 
the District of Columbia. To accommodate the differences in data, the 
proposed rule would establish a separate formula allocation process for 
the insular areas. The portion of the annual appropriation available 
for formula allocations for insular areas will be determined by 
establishing the ratio of renter households in the insular areas to the 
total number of renter households in the 50 States, the District of 
Columbia, the Commonwealth of Puerto Rico, and the insular areas. This 
is an appropriate way to establish the amount to be allocated to the 
insular areas, as these data (on

[[Page 63940]]

renter households) are readily available from the U.S. Census Bureau 
for all of the jurisdictions in the potential pool of grantees for this 
program; and the primary focus of the HTF is to produce or preserve 
housing to serve renter households. Note that because of the limited 
data available for insular areas, HUD's other formula programs similar 
to the HTF program also treat insular areas in a different way than 
other program grantees. For example, the HOME and Community Development 
Block Grants programs set aside specific percentage or dollar amounts 
for the insular areas. Proposed Sec.  93.60(b) describes this 
allocation process.
    As noted above, section 1338(c)(3)(B)(v) of the Act requires that 
the formula contain a multiplication factor reflecting the relative 
cost of construction in the State. The construction cost factor would 
be implemented at Sec.  93.70(c)(5). HUD will use RSMeans construction 
cost data in making this calculation. The factor will be constructed by 
calculating a population weighted average of the construction costs in 
sampled metropolitan areas of each State as a proportion of the 
national average of such State averages. For example, if a State's 
weighted average RSMeans location adjustment factor is 0.818 and the 
national average of the State averages is 0.939, that State's base 
calculation, based on its share of housing need, would be multiplied 
times a ratio of 0.818/0.939. That is, the base calculation would be 
multiplied times 0.871. In contrast, a State with an average location 
adjustment factor of 1.145 would have its grant multiplied times a 
ratio of 1.145/0.939, thus its base calculation would be multiplied 
times 1.220.
    Section 1338(c)(4)(C) of the Act establishes minimum allocations 
for the 50 States and the District of Columbia and provides that if the 
formula would allocate less than $3,000,000 to any of the 50 States or 
the District of Columbia in a fiscal year, the allocation for such 
State or the District of Columbia shall be $3,000,000, and the portion 
of State calculated allocations above $3,000,000 would be pro rata 
adjusted to match the amount available to be allocated. The minimum 
allocation established by the Act is found in proposed Sec.  93.70(d).

III. 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''). 
This rule was determined to be economically significant under the 
Executive Order. The docket file is available for public inspection 
between the hours of 8 a.m. and 5 p.m. weekdays in the Regulations 
Division, Office of General Counsel, Room 10276, Department of Housing 
and Urban Development, 451 7th Street, SW., Washington, DC 20410-0500. 
Due to security measures at the HUD Headquarters building, please 
schedule an appointment to review the docket file by calling the 
Regulations Division at 202-708-3055 (this is not a toll-free number). 
Persons with hearing or speech impairments may access the above 
telephone number via TTY by calling the toll-free Federal Information 
Relay Service at 800-877-8339.
    The Economic Analysis prepared for this rule also is available for 
public inspection and on HUD's Web site at http://www.hud.gov. A 
summary of the findings contained in the Economic Analysis follows.

A. Assessing Effects of HUD's Discretionary Choices in Defining the 
Allocation Formula

    In developing the allocation formula, HUD tested several 
alternatives to determine to what extent the resulting economic 
outcomes are sensitive to modest discretionary choices.
    To address the statutory requirement that Factor 1 (shortage of 
extremely low-income (ELI) rental units) be given ``priority emphasis 
and consideration'' HUD proposes to assign to the factor 50 percent of 
the total weight. By further giving a 25 percent weight to Factor 3 
(housing problems of ELI renters), the weights will correspond with the 
statute's 75 percent requirement for targeting rental housing funds 
toward ELI households. HUD proposes equal weights of 12.5 percent for 
Factor 2 (shortage of very low-income units) and Factor 4 (severe cost 
burdens of very low-income renters). The Department's proposed 
allocation formula can be considered to use a 50-12.5-25-12.5 weighting 
approach for the four factors.
    To examine the importance of this weighting for allocation 
outcomes, HUD also ran the allocation formula with alternative weight 
structures. The first alternative was to retain the 50 percent priority 
weight for Factor 1 but remove the overweighting of Factor 3 so that it 
equals Factors 2 and 4, resulting in a 50-16.7-16.7-16.7 structure. HUD 
also tested two additional levels of preference for Factor 1, one 
applying a weight 10 percentage points below and the other 10 points 
above the proposed 50 percent value. Both of these alternatives provide 
equal weights for the other factors.

B. Selection of Alternative for Proposed Rule

    HUD concluded that the allocation formula weights in the proposed 
rule accommodate States for which ELI needs take different forms, while 
responding as closely as feasible to the statutory requirement that 75 
percent of rental assistance funds provided by the Housing Trust Fund 
should serve ELI households. HUD's analysis of the sensitivity of State 
allocations to various prioritizations of the needs of ELI renters 
under Factor 1 and Factor 3 revealed that about half of the States are 
not affected greatly by any of the weighting alternatives, as 23 to 30 
States experiencing changes of less than 1 percent. For larger States, 
effects tend to be more pronounced, yet only rarely exceeding 3 percent 
relative to HUD's proposed formula.

C. Summary of Impacts

    As noted, HERA is very specific about the factors to be used in the 
allocation formula and different weighting schemes have only modest 
impact on allocation grants. The largest impact on allocation grants is 
the amount made available for the program. The direct Federal cost of 
the program will be the amount eventually provided by Congress.
    The proposed allocation formula is intended to target funds 
primarily to States with a shortage of rental housing affordable to 
extremely low-income households. Specifically, this program provides 
funding to add supply to market places where there is strong evidence 
of inadequate supply. This program represents a strong complement to 
the demand side program, the Housing Choice Voucher program, which 
provides a tenant based subsidy for primarily extremely low-income 
households to afford existing privately owned rental housing. The 
primary benefits of the HTF program are expected to be similar to the 
Housing Choice Voucher program. An evaluation of the impact of 
receiving a housing voucher versus not receiving a housing voucher has 
shown that the primary benefit of housing assistance programs is to 
reduce homelessness and housing cost burdens. Thus, the primary benefit 
of the HTF program will be to reduce the number of homeless families 
and individuals, as well as reducing the number of families paying a 
disproportionate share of their income for housing in relatively tight 
housing markets.

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Regulatory Flexibility Act

    The Regulatory Flexibility Act (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.
    Under the HTF program, HUD makes grants to the relatively large 
entities, States and their designated housing entities, for the 
purposes of increasing and preserving the supply of rental housing and 
homeownership for eligible families. The focus of this proposed rule is 
the proposed formula for the HTF program. The formula allocations in 
this program are statutorily restricted to States and their designated 
entities. Therefore, the primary focus of this proposed rule is on 
these large entities. The States and State designated housing entities 
may, in turn, make funding available to recipients, which may include 
smaller entities (such as nonprofit or for-profit organizations). 
However, HUD does not anticipate that this proposed rule will place an 
undue burden on these smaller entities. The proposed rule, to a great 
extent, tracks the language of the authorizing statute. Accordingly, 
the proposed regulatory text reflects statutorily mandated requirements 
that HUD does not have the discretion to modify.
    HUD has attempted to minimize the regulatory burden imposed for all 
entities participating in the HTF program. However, HUD also is 
cognizant that, as with all new programs, changes to these regulations 
may be necessary as the Department and participating entities gain 
experience with the HTF program. HUD will take into consideration the 
special needs and concerns of small entities in crafting any such 
future amendments, as it has done in developing this proposed rule. 
Notwithstanding HUD's determination that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implements section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is 
available for public inspection between the hours of 8 a.m. and 5 p.m. 
weekdays in the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street, SW., Room 
10276, Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
FONSI by calling the Regulations Division at 202-708-3055 (this is not 
a toll-free number). Individuals with speech or hearing impairments may 
access this number via TTY by calling the toll-free Federal Information 
Relay Service at 800-877-8339.

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 (UMRA) (2 
U.S.C. 1531-1538) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on State, local, and 
Tribal governments and the private sector. This rule does not impose 
any Federal mandate on any State, local, or Tribal government or the 
private sector within the meaning of UMRA.

List of Subjects in 24 CFR Part 93

    Administrative practice and procedure, Grant programs--housing and 
community development, Low and moderate income housing, Manufactured 
homes, Rent subsidies, Reporting and recordkeeping requirements.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend title 24 of the Code of Federal Regulations as 
follows:
    1. Add new part 93 to read as follows:

PART 93--HOUSING TRUST FUND

Sec.
Subpart A--General Provisions
93.50 Purpose.
93.52 Definitions.
Subpart B--Allocation Formula
93.55 Formula allocation.
93.60 Allocations for the insular areas.
93.70 Allocations for the 50 States, the Commonwealth of Puerto Rico 
and the District of Columbia.
93.75 Federal Register notice of formula allocations.

    Authority: 12 U.S.C. 4567; 42 U.S.C. 3535(d).

Subpart A--General Provisions


Sec.  93.50  Purpose.

    This part implements the Housing Trust Fund (HTF) program 
established under section 1338 of the Federal Housing Enterprises 
Financial Safety and Soundness Act, as amended by the Federal Housing 
Finance Regulatory Reform Act of 2008 (12 U.S.C. 4568) (Act). In 
general, under the HTF program, HUD allocates funds by formula to 
eligible States to increase and preserve the supply of decent, safe, 
sanitary, and affordable housing, with primary attention to rental 
housing for extremely low-income and very low-income households, 
including homeless families.


Sec.  93.52  Definitions.

    As used in this part:
    Act means the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992, as amended (12 U.S.C. 4501 et seq).
    Extremely low-income renter households means a household whose 
income is not in excess of 30 percent of the area median income, with 
adjustments for smaller and larger families, as determined by the 
Secretary.
    Household means one or more persons occupying a housing unit.
    Insular areas means Guam, the Northern Mariana Islands, the United 
States Virgin Islands, and American Samoa.
    Poverty line is defined in section 673 of the Omnibus Budget 
Reconciliation Act of 1981 (42 U.S.C. 9902).
    Secretary means the Secretary of Housing and Urban Development.
    Shortage of standard rental units both affordable and available to 
extremely low-income renter households (1) Means for any State or other 
geographical area the gap between:
    (i) The number of units with complete plumbing and kitchen 
facilities with a rent that does not exceed 30 percent of 30 percent of 
the adjusted area median income (AMI) as determined by the Secretary 
that either are occupied by extremely low-income renter households or 
are vacant for rent; and
    (ii) The number of extremely low-income renter households.

[[Page 63942]]

    (2) If the number of units described in paragraph (1)(i) of this 
definition exceeds the number of extremely low-income households 
described in paragraph (1)(ii) of this definition, there is no 
shortage.
    Shortage of standard rental units both affordable and available to 
very low-income renter households (1) Means for any State or other 
geographical area the gap between:
    (i) The number of units with complete plumbing and kitchen 
facilities with a rent that is greater than 30 percent of the income of 
a household whose income is 30 percent of the AMI, but does not exceed 
30 percent of 50 percent of the AMI as determined by the Secretary that 
either are occupied by very low-income renter households (net of units 
occupied by extremely low-income households) or are vacant for rent; 
and
    (ii) The number of very low-income renter households (net of 
extremely low-income households).
    (2) If the number of units described in paragraph (1)(i) of this 
definition exceeds the number of very low-income households as 
described in subparagraph (1)(ii) of this definition, there is no 
shortage.
    State means any State of the United States, the Commonwealth of 
Puerto Rico, the District of Columbia, and the insular areas.
    Very low-income renter households means a household whose income is 
in excess of 30 percent but not greater than 50 percent of the AMI, 
with adjustments for smaller and larger families, as determined by the 
Secretary.

Subpart B--Allocation Formula


Sec.  93.55  Formula allocation.

    (a) HUD will provide to the States allocations of funds in amounts 
determined by the formula described in this subpart.
    (b) The amount of funds available for allocation by the formula is 
the balance remaining after providing for other purposes authorized by 
Congress, in accordance with the Act and appropriations.


Sec.  93.60  Allocations for the insular areas.

    The allocation amount for each insular area is determined by 
multiplying the funds available times the ratio of renter households in 
each insular area to the total number of renter households in the 50 
States, the District of Columbia, the Commonwealth of Puerto Rico, and 
the insular areas. This allocation is not subject to adjustment 
pursuant to Sec.  93.70(d).


Sec.  93.70  Allocations for the 50 States, the Commonwealth of Puerto 
Rico, and the District of Columbia.

    (a) Amounts available for allocations. The amount of funds that is 
available for allocation by the formula to the 50 States, the 
Commonwealth of Puerto Rico, and the District of Columbia is determined 
using the most current data available from the U.S. Census Bureau that 
is available for the same year for all these geographic areas. The 
amount is equal to the balance of funds remaining after determining 
formula allocations for the insular areas under Sec.  93.60. For 
purposes of subsections (b) and (c) of this section, the term ``State'' 
means any of the 50 United States, the Commonwealth of Puerto Rico, and 
the District of Columbia.
    (b) Allocations. (1) Allocations to the States are determined using 
the four needs factors described in paragraphs (c)(1) through (c)(4) of 
this section, multiplying each factor by the amount available under 
paragraph (a) of this section by its priority weight, and summing the 
four factors for each State.
    (2) The factor described in paragraph (c)(1) of this section is 
weighted 0.5. The factors described in paragraphs (c)(2) and (c)(4) of 
this section are weighted at 0.125 and the factor described in 
paragraph (c)(3) of this section is weighted at 0.25.
    (3) The sum of the four needs factors for each State is then 
multiplied by the construction cost factor described in paragraph 
(c)(5) of this section and by the total amount of funds available for 
State allocations.
    (c) Formula factors--(1) Need factor one. The ratio of the shortage 
of standard rental units both affordable and available to extremely 
low-income renter households in the State to the aggregate shortage of 
standard rental units both affordable and available to extremely low-
income renter households in all the States.
    (2) Need factor two. The ratio of the shortage of standard rental 
units both affordable and available to very low-income renter 
households in the State to the aggregate shortage of standard rental 
units both affordable and available to very low-income renter 
households in all the States.
    (3) Need factor three. The ratio of:
    (i) Extremely low-income renter households in the State living with 
either incomplete kitchen or plumbing facilities, more than one person 
per room, or paying more than 50 percent of income for housing costs, 
to:
    (ii) The aggregate number of extremely low-income renter households 
living with either incomplete kitchen or plumbing facilities, more than 
one person per room, or paying more than 50 percent of income for 
housing costs in all the States.
    (4) Need factor four. The ratio of very low-income renter 
households in the State paying more than 50 percent of income on rent 
relative to the aggregate number of very low-income renter households 
paying more than 50 percent of income on rent in all the States.
    (5) Construction cost factor. The resulting sum calculated from the 
factors described in paragraphs (c)(1) through (c)(4) of this section 
shall be multiplied by the relative cost of construction in the State. 
For purposes of calculating this factor, the term ``cost of 
construction'':
    (i) Means the cost of construction or building rehabilitation in 
the State relative to the national cost of construction or building 
rehabilitation; and
    (ii) Is calculated so that values higher than 1.0 indicate that the 
State's construction costs are higher than the national average, a 
value of 1.0 indicates that the State's construction costs are exactly 
the same as the national average, and values lower than 1.0 indicate 
that the State's cost of construction are lower than the national 
average.
    (d) Minimum allocations. If the formula amount determined for a 
fiscal year is less than $3,000,000 to any of the 50 States or the 
District of Columbia, then the allocation to that State or the District 
of Columbia is increased to the $3,000,000, and allocations to States, 
the Commonwealth of Puerto Rico, and the District of Columbia above 
$3,000,000 are adjusted by an equal amount on a pro rata basis.


Sec.  93.75  Federal Register notice of formula allocations.

    Not later than 60 days after the date that HUD determines the 
formula amounts under this subpart, HUD will publish a notice in the 
Federal Register announcing the availability of the allocations to 
States.

    Dated: November 4, 2009.
Mercedes M. M[aacute]rquez,
Assistant Secretary for Community Planning and Development.
[FR Doc. E9-28984 Filed 12-3-09; 8:45 am]
BILLING CODE 4210-67-P