[Federal Register Volume 77, Number 144 (Thursday, July 26, 2012)]
[Notices]
[Pages 43850-43855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18307]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5630-N-03]


Rental Assistance Demonstration: Final Program Notice

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

ACTION: Notice.

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SUMMARY: On March 8, 2012, HUD announced through notice in the Federal 
Register the partial implementation and request for comments on the 
full implementation of the statutorily authorized Rental Assistance 
Demonstration (RAD), which has two conversion components. RAD provides 
the opportunity to test the conversion of public housing and other HUD-
assisted properties to long-term, project-based Section 8 rental 
assistance to achieve certain goals, including the preservation and 
improvement of these properties through access by public housing 
agencies (PHAs) and owners to private debt and equity to address 
immediate and long-term capital needs. RAD is also designed to test the 
extent to which residents have increased housing choices after the 
conversion, and the overall impact on the subject properties. The March 
8, 2012 notice solicited public comment specifically on HUD's proposal 
for full implementation of the demonstration, but also invited comment 
on the policy and procedures that would govern partial implementation 
of the demonstration under the second component. This Federal Register 
notice published today announces full implementation of RAD, and the 
posting of the Final Program Notice (Final Program Notice, PIH-2012-32) 
on HUD's RAD Web site. As provided by the RAD statute, this notice 
addresses the requirement that the demonstration may proceed after 
publication of notice of its terms in the Federal Register. HUD's Final 
Program Notice takes into consideration the public comments received in 
response to HUD's March 8, 2012 solicitation of comments. This Notice 
summarizes the key changes made to the Program Notice (PIH 2012-18) 
issued on March 8, 2012. This notice also meets the RAD statutory 
requirement to publish waivers and alternative requirements authorized 
by the statute at least 10 days before they may take effect, which does 
not prevent the demonstration from proceeding immediately.

DATES: Effective Dates: Sections I-IV of this notice, and section II of 
the appendix to this notice, are effective July 26, 2012. The Final 
Program Notice, PIH-2012-32, except for the statutory and regulatory 
waivers specified in section I of the appendix to this notice, is 
effective July 26, 2012. The statutory and regulatory waivers in 
section I of the appendix to this notice are effective August 6, 2012. 
The conversion of Rent Supp and RAP properties under Section III of the 
Program Notice, which is updated by PIH-2012-32, was effective on March 
8, 2012.

FOR FURTHER INFORMATION CONTACT: To assure a timely response, please 
electronically direct requests for further information to this email 
address: [email protected]. Written requests may also be directed to the 
following address: Office of Public and Indian Housing--RAD Program, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
2000, Washington, DC 20410.

SUPPLEMENTARY INFORMATION:

I. Background

    RAD, authorized by the Consolidated and Further Continuing 
Appropriations Act, 2012 (Pub. L. 112-55, signed November 18, 2011) 
(2012 Appropriations Act) allows for the conversion of assistance under 
the public housing, Rent Supplement (Rent Supp), Rental Assistance 
(RAP), and Moderate Rehabilitation (Mod Rehab) programs (collectively, 
``covered programs'') to long-term, renewable assistance under Section 
8. As provided in the Federal Register notice that HUD published on 
March 8, 2012, at 77 FR 14029, RAD has two separate components:
    First Component. The first or competitive component of RAD allows 
projects funded under the public housing and Mod Rehab programs to 
convert to long-term Section 8 rental assistance contracts. Under this 
component of RAD, which is covered under Sections I and II of the Final 
Program Notice, PHAs and Mod Rehab owners may apply to HUD to convert 
to one of two forms of Section 8 Housing Assistance Payment (HAP) 
contracts: Project-based vouchers (PBVs) or project-based rental 
assistance (PBRA). No additional or incremental funds were authorized 
for this component of RAD. Therefore, PHAs and Mod Rehab owners will be 
required to convert assistance for projects at current subsidy levels. 
The 2012 Appropriations Act authorizes up to 60,000 units to convert 
assistance under this component, to be selected competitively. The 2012 
Appropriations Act further specifies that HUD shall provide an 
opportunity for public comment on draft eligibility and selection 
criteria and on the procedures that will apply to the selection of 
properties that will participate in this component of the 
demonstration. This opportunity for comment was provided by the March 
8, 2012 notice.
    The First Component is effective July 26, 2012. The initial 
application period

[[Page 43851]]

for this component opens on September 24, 2012.
    Second Component. The second component of RAD, which is covered 
under Sections II and III of the Final Program Notice, allows owners of 
projects funded under the Rent Supp, RAP and Mod Rehab programs with a 
contract expiration or termination due to prepayment occurring after 
October 1, 2006, and no later than September 30, 2013, to convert 
tenant protection vouchers (TPVs) to PBVs. There is no cap on the 
number of units that may be converted under this component of RAD and 
no requirement for competitive selection. While these conversions are 
not necessarily subject to current funding levels for each project or a 
unit cap similar to public housing conversions, the rents will be 
subject to rent reasonableness under the PBV program and are subject to 
the availability of overall appropriated amounts for TPVs.
    The Second Component was effective on March 8, 2012, in Program 
Notice PIH 2012-18 published on the RAD Web site (www.hud.gov/rad), and 
is amended in part by the Final Program Notice, PIH-2012-32, also 
published on the RAD Web site. Applications for conversion of 
assistance may be submitted immediately.
    Waivers and Alternative Requirements. The RAD statute provides that 
waivers and alternative requirements authorized under the first 
component shall be published by notice in the Federal Register no later 
than 10 days before the effective date of such notice. This notice 
carries out that statutory requirement. Under the second component of 
RAD, HUD is authorized to waive or alter the provisions of 
subparagraphs (C) and (D) of section 8(o)(13) of the United States 
Housing Act of 1937. Although waivers under the second component are 
not subject to a Federal Register publication requirement, the second 
component waivers are included in this notice as a matter of 
convenience. This list of these waivers and alternative requirements 
are in the appendix of this notice.
    Because the provisions covered by these waivers and alternative 
requirements do not affect the application process, the later effective 
date of the first component waivers and alternative requirements does 
not have any impact on the initial application period, which, as noted 
above, opens on September 24, 2012.

II. Key Changes Made to HUD's Proposed RAD Demonstration

    The following highlights key changes made to the Program Notice, 
PIH 2012-18, issued on March 8, 2012:

First Component

    1. Project-Based Vouchers: Applicable to both public housing and 
Mod Rehab properties converting assistance to PBVs:
     Provides new language prohibiting any involuntary 
displacement in properties using PBVs for income-mixing purposes.
     Clarifies that in excess of 50% of the units in a project 
can be project-based if the units qualify for exemption as elderly, 
disabled, scattered site, or receiving supportive services. Further 
clarifies that services do not have to be provided directly by the PHA 
or owner.
     Grandfathers current residents from any requirement to 
receive supportive services in a property converting assistance to 
PBVs.
     Removes the proposed requirement that PBVs be subject to 
Uniform Physical Inspections Standards; rather such properties will 
continue to be subject to Housing Quality Standards (HQS).
     Provides a waiver of deconcentration requirements for all 
conversions to PBVs.
    2. Choice-Mobility Option: For residents of both public housing and 
Mod Rehab properties for which assistance will be converted to Project 
Based Rental Assistance (PBRA):
     Provides new incentives to voucher agencies to encourage 
the provision of Choice-Mobility turnover vouchers to agencies without 
access to vouchers.
     Reduces the Choice-Mobility turnover cap from 20% to 15% 
at a particular project (i.e., PHAs or owners of Mod Rehab properties 
converting assistance could limit the percentage of households 
indicating a desire to move with the assistance of a Choice-Mobility 
voucher to no more than 15% of the total number of units in a project 
on an annual basis).
     Prioritizes the award of Choice-Mobility ``good-cause'' 
exemptions as needed to PHAs so that the first priority is given to 
small public housing-only PHAs, the second priority to other public 
housing-only PHAs, and the third priority to combined agencies that 
dedicate more than one-third of their total annual voucher turnover to 
homeless or veterans.
     Allows PHAs to apply for and potentially be awarded more 
than one project with a good-cause exemption from the Choice-Mobility 
requirement.
    2. Allows small PHAs (defined as owning/managing a portfolio of 
public housing that is less than 250 units) to claim all projects as 
priority projects in the competition.
    3. Expands the descriptions of required resident notifications, 
protections, rights, self-sufficiency services, and waiting list 
procedures.
    4. Modifies the required Financing Plan benchmarks and processing 
requirements to be more compatible with a wide variety of sources of 
financing, including FHA insurance and Low Income Housing Tax Credits.
    5. Eliminates the need to seek HUD approval of a change in project 
configuration prior to submission of a RAD application.
    6. Increases the amount of pre-development funds that can be spent 
on a proposed public housing conversion from $50,000 to $100,000.
    7. Provides a cap of 1,200 on the number of public housing mixed-
finance units that could convert assistance under RAD; current and 
future Choice Neighborhoods Implementation Grant awardees seeking to 
convert assistance under RAD would not be subject to this cap. 
Specifies the eligibility for projects developed with HOPE VI grants is 
limited to those with a Date of Full Availability (DOFA) prior to 
October 1, 2002.
    8. Modifies the application ranking factor for capital needs so 
that the point scale accounts for a broader range of capital needs that 
are proposed to be undertaken.
    9. Allows Mod Rehab owners to designate a priority project 
application.
    10. Provides expanded detail on the transfer of HAP contracts to 
other projects.

Second Component

    1. Allows, for prospective conversions of assistance for Rent Supp 
and RAP, an owner to secure another agency to administer the PBVs in 
the event that that the local agency does not consent to administering 
such assistance.
    2. Provides additional instruction on the inclusion of unassisted 
units in the event of a preservation-eligible mortgage prepayment that 
triggers provision of Enhanced Vouchers.
    3. Clarifies that Rent Supp or RAP contract units occupied during 
the 24 months prior to contract termination may be included in a RAD 
conversion of assistance.
    4. Creates a process for allocating limited TPV resources to 
projects with Rent Supp or RAP contracts with expiration dates after 
September 30, 2013 when an owner requests to prepay the mortgage.

[[Page 43852]]

    5. Reserves the right for HUD to review and apply deconcentration 
requirements when a proposed conversion of assistance under RAD would 
result in an increase in the number of units that could-potentially 
receive project-based rental assistance than would be the case in a 
standard (non-RAD) project-basing of assistance.
    6. Enhances tenant consultation requirements by including a 
requirement for notification of legitimate tenant organizations.
    7. Clarifies requirements for 12-month notification of opt-out for 
Mod Rehab projects.
    8. Establishes a new centralized submission processing system to 
allow for ease of administration.

Other Significant Changes

    1. Updates various deadlines and implementation schedules, 
including the deadline for receipt of applications under the Initial 
Application Period under the first or competitive component of RAD.
    2. Clarifies that the related contractual documents, including the 
Use Agreement and Housing Assistance Payments (HAP) contracts will be 
posted for comment following publication of the Final Notice.

III. The Final Program Notice and Reponses to Public Comments

    The Final Program Notice for RAD, PIH-2012-32, can be found at 
www.hud.gov/rad. Also posted on HUD's RAD Web site is a summary of the 
public comments received in response to the March 8, 2012 notice and 
HUD's responses to the comments.

IV. Environmental Review

    A Finding of No Significant Impact with respect to the environment 
was made in connection with the Program Notice issued on March 8, 2012, 
and in accordance with HUD regulations in 24 CFR part 50 that implement 
section 102(2)(C) of the National Environmental Policy Act of 1969 (42 
U.S.C. 4332(2)(C)). The Finding remains applicable to the Final Program 
Notice and is available for public inspection during regular business 
hours 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 
Finding by calling the Regulations Division at 202-402-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Relay Service at 
800-877-8339.

    Dated: July 16, 2012.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.

Appendix--RAD Waivers and Alternative Requirements

    The RAD statute provides that waivers and alternative 
requirements authorized under the first component shall be published 
by notice in the Federal Register no later than 10 days before the 
effective date of such notice. This appendix carries out that 
statutory requirement. Under the second component of RAD, HUD is 
authorized to waive or alter the provisions of subparagraphs (C) and 
(D) of section 8(o)(13) of the United States Housing Act of 1937. 
Although waivers under the second component are not subject to a 
Federal Register publication requirement, the second component 
waivers are included in this appendix as a matter of convenience. 
Additionally, the RAD statute imposes certain requirements that must 
be followed under the demonstration, such as requiring long-term 
renewable use and affordability restrictions for assisted units in 
properties that convert from assistance under section 9. The RAD 
statute also authorizes HUD to establish requirements for converted 
assistance under the demonstration. HUD has used this authority, for 
example, by establishing in the Final Notice the requirements of 24 
CFR part 880, with modifications appropriate for the converted 
assistance under the demonstration. These types of requirements are 
not subject to the publication requirement applicable to the waiver 
and alternative requirements listed in this appendix.
    The list of waivers and alternative requirements, as described 
above, follows:

I. Public Housing Conversions

A. Changes to Requirements for Public Housing

    Use of Public Housing Funds. Provision affected: Section 9 of 
the United States Housing Act of 1937 (42 U.S.C. 1437g). Alternative 
requirements: PHAs are permitted under the Demonstration to use 
available public housing funding, including Operating Reserves, 
Capital Funds, and Replacement Housing Factor (RHF) funds as an 
additional source of capital to support conversion, whether for 
rehabilitation or new construction. Eligible conversion-related uses 
for these funds include pre-development, development, or 
rehabilitation costs and establishment of a capital replacement 
reserve or operating reserve. These funds must be identified in the 
Financing Plan submitted to HUD for review. A PHA may not use public 
housing program funds, or any other funds, to augment the contract 
rent on a project following conversion.
    A PHA may expend up to $100,000 in public housing program funds 
in related pre-development conversion costs per project. A PHA may 
utilize other non-federal funds to support predevelopment costs. 
Predevelopment assistance may be used to pay for materials and 
services related to proposed development and may also be used for 
preliminary development work. Public housing program funds spent 
prior to the effective date of the HAP are subject to public housing 
procurement rules.
    In the case of a PHA that is converting all units under ACC, 
there is no restriction on the amount of public housing funds that 
may be contributed to the converting project(s) at the point of 
conversion, i.e., the PHA may convey all program funds to the 
project undergoing conversion. In the case where the PHA will 
continue to maintain other units in its inventory under public 
housing ACC, a contribution to the converting project of Operating 
Funds that exceeds the average amount the project has held in 
Operating Reserves over the past three years will trigger a subsidy 
layering review under 24 CFR 4.13. Similarly, any contribution of 
Capital Funds, including RHF funds, will trigger a subsidy layering 
review.
    Following execution of the HAP, a PHA may not contribute public 
housing program funds to the covered project unless such funding has 
been identified in the approved Financing Plan.
    Additional Fees. Provisions affected: 24 CFR 909.190(h) and 
905.10(i). Alternative Requirements: PHAs may not apply for Asset 
Repositioning Fees and will be ineligible to receive Capital Fund 
RHF grants for units or projects with converted assistance.
    Faircloth Limit. Provision affected: Section 9(g)(3) of the 
United States Housing Act of 1937 (42 U.S.C. 1437g(g)(3)). 
Alternative Requirements: Conversion of assistance will reduce a 
PHA's Faircloth Limit number.
    Significant Amendments to PHA Plans. Provision affected: 24 CFR 
part 903. Alternative Requirements: In addition to the information 
already required by 24 CFR part 903 for PHA Plan amendments, all 
PHAs must include the following information in their significant 
amendment:
    1. A description of the units to be converted, including the 
number of units, the bedroom distribution of units, and the type of 
units (e.g., family, elderly/disabled, or elderly-only);
    2. Any change in the number of units that is proposed as part of 
the conversion, including de minimis unit reductions and unit 
reductions that are exempt from the de minimis cap;
    3. Any change in the bedroom distribution of units that is 
proposed as part of the conversion;
    4. Any changes in the policies that govern eligibility, 
admission, selection, and occupancy of units at the project after it 
has been converted. This includes any waiting list preferences that 
will be adopted for the converted project; and
    5. If there will be a transfer of assistance at the time of 
conversion, the significant amendment must include the location 
(including census tract) of any converted units that will be 
transferred off-site, as well as the information described above for 
the units that will be transferred. In addition, if

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some, but not all of the assisted units will be transferred to 
another site at the time of the conversion, the significant 
amendment must also include a description of how the waiting list 
will be transferred and how households will be selected for the 
transfer.
    Section 4 Debt. Provision affected: Section 4 of the United 
States Housing Act of 1937 (42 U.S.C. 1437b). Alternative 
Requirements: For any outstanding principal balance and interest due 
on loans held by HUD issued to finance original development or 
modernization of the covered project, HUD will exercise its waiver 
authority under Section 4 of the Act to forgive the loan upon 
conversion.
    ROSS-SC. Provisions affected: Section 34(a) of the United States 
Housing Act of 1937 (42 U.S.C. 1437z-6(a)). Alternative 
Requirements: The provision is waived to permit current ROSS-SC 
grantees to finish out their current ROSS-SC grants once their 
housing is converted under RAD.

B. Changes to PBV Requirements for Public Housing Conversions

    Maximum Amount of PBV Assistance. Provisions affected: Section 
8(o)(13)(B) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(13)(B)); 24 CFR 983.6. Alternative Requirements: None. The 
provisions are waived.
    Cap on PBV Units per Project and Supportive Services 
Requirement. Provisions affected: Section 8(o)(13)(D) of the United 
States Housing Act of 1937 (42 U.S.C. 1437f(13)(D)); 24 CFR 983.56, 
983.257(c), and 983.261(a) and (d). Alternative Requirements: The 25 
percent limitation on the number of units that may receive PBV 
assistance in a project without the provision of supportive services 
is increased to 50 percent. An owner may still project-base 100 
percent of the units provided at least 50 percent of the units at 
the project qualify for the exceptions for elderly, disabled, or 
families receiving supportive services, or are within single-family 
buildings.
    Families living in units subject to a proposed RAD conversion 
must be given the option to receive supportive services. If 
supportive services are declined by the household, the unit shall 
remain under the HAP contract, the household shall not be terminated 
from the PBV program, and the decision to decline an offer to 
receive supportive services shall not represent a ground for lease 
termination. Once the initial household residing in the excepted 
unit under RAD vacates such unit, all PBV program requirements 
related to the required receipt of supportive services shall apply.
    Selection Procedures. Provision affected: 24 CFR 983.51. 
Alternative Requirements: Selections shall be made in accordance 
with program requirements detailed in the Program Notice.
    Site Selection. Provisions affected: Section 8(o)(13)(C)(ii) of 
the United States Housing Act of 1937 (42 U.S.C. 1437f(13)(C)); 24 
CFR 983.57(b)(1) and (c). Alternative Requirements: None. The 
provisions are waived. However, standards in 24 CFR 983.57 will 
apply to all off-site replacement projects and transfers of 
assistance.
    Length of PBV Contract Term. Provisions affected: Section 
8(o)(13)(F) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(13)(F)); 24 CFR 983.205(a). Alternative Requirements: The 
initial HAP term shall have an initial term of 15 years, up to 20 
years upon request of the PHA and with approval of the agency 
administering the vouchers.
    Initial Contract Rent Setting. Provisions affected: 24 CFR 
983.301. Alternative Requirements: Initial contract rents generally 
cannot exceed the lower of: (a) Current funding (adjusted for 
bedroom size); (b) the reasonable rent (as defined under 24 CFR 
983.303); (c) up to 110 percent of the applicable FMR (or applicable 
Exception Rent Payment Standard), minus any utility allowance; or 
(d) the rent requested by the owner.
    Adjustment of Contract Rents. Provisions affected: Section 
8(o)(13)(I) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(13)(I)); 24 CFR 983.301 and 983.302. Alternative Requirements: 
Contract rents will be adjusted annually by HUD's Operating Cost 
Adjustment Factor (OCAF) at each anniversary of the HAP contract, 
subject to the availability of appropriations for each year of the 
contract term. The rent to owner may at no time exceed the 
reasonable rent charged for comparable unassisted units in private 
market, as determined by the Contract Administrator in accordance 24 
CFR 983.303. However, the rent to owner shall not be reduced below 
the initial rent to owner for dwelling units under the initial HAP 
contract except in limited circumstances.
    Renewal of Lease. Provisions affected: 24 CFR 983.257(b)(3). 
Alternative Requirements: The PHA must renew all leases upon lease 
expiration, unless cause exists.
    Phase-in of Tenant Rent Increases. Provisions affected: Section 
3(a)(1) of the United States Housing Act of 1937 (42 U.S.C. 
1437a(a)(1)); 24 CFR 983.3 and 983.353(b)(1). Alternative 
Requirements: Monthly rent increases more than the greater of 10 
percent or $25 that result solely from conversion of assistance 
shall be phased in over 3 years, which a PHA may extend to 5 years.
    Termination Notification for Tenants. Provision affected: 24 CFR 
983.257. Alternative Requirements: In addition to the current 
requirements, the termination procedure for RAD conversions to PBV 
will require that PHAs provide adequate written notice of 
termination of the lease which shall not be less than:
    i. A reasonable period of time, but not to exceed 30 days:
     If the health or safety of other tenants, PHA 
employees, or persons residing in the immediate vicinity of the 
premises is threatened; or
     In the event of any drug-related or violent criminal 
activity or any felony conviction;
    ii. 14 days in the case of nonpayment of rent; and
    iii. 30 days in any other case, except that if a State or local 
law provides for a shorter period of time, such shorter period shall 
apply.
    Grievance Process. Provision affected: Section 6 of the United 
States Housing Act of 1937 (42 U.S.C. 1437d); 24 CFR 982.555. 
Alternative Requirements: In addition to current program rules 
regarding informal hearings, the following additional rules apply:
    i. In addition to reasons that require an opportunity for an 
informal hearing given in 24 CFR 982.555(a)(1)(i)-(vi), an 
opportunity for an informal hearing must be given to residents for 
any dispute that a resident may have with respect to contract 
administrator or owner action in accordance with the individual's 
lease or RAD PBV requirements that adversely affect the resident's 
rights, obligations, welfare, or status.
     For any hearing required under 24 CFR 982.555(a)(1)(i)-
(vi), the contract administrator will perform the hearing, as is the 
current standard in the program.
     For any additional hearings required under RAD, the PHA 
(as owner) will perform the hearing.
    ii. An informal hearing will not be required for class 
grievances or to disputes between residents not involving the owner 
or contract administrator. This hearing requirement shall not apply 
to and is not intended as a forum for initiating or negotiating 
policy changes between a group or groups of residents and the PHA 
(as owner) or contract administrator.
    iii. The PHA (as owner) give residents notice of their ability 
to request an informal hearing as outlined in 24 CFR 982.555(c)(1) 
for informal hearings that will address circumstances that fall 
outside of the scope of 24 CFR 982.555(a)(1)(i)-(vi).
    iv. The PHA (as owner) provide opportunity for an informal 
hearing before an eviction.
    Davis-Bacon, Section 3. Provisions affected: Section 3 of the 
Housing and Urban Development Act of 1968(12 U.S.C. 1701u); 24 CFR 
983.52(a); 24 CFR part 135. Alternative Requirements: The Davis-
Bacon Act and section 3 shall apply to all initial repairs that are 
identified in the Financing Plan to the extent that such repairs 
qualify as construction or rehabilitation, regardless of whether the 
project qualifies as ``existing housing.'' Developmental 
requirements under 24 CFR 983.154 and fair housing provisions under 
24 CFR 983.152(c)(vi) continue to apply.
    Waiting Lists. Provision affected: 24 CFR 982.251(c)(2). 
Alternative Requirements: If a project-specific waiting list for the 
project does not exist, the PHA shall establish a waiting list in 
accordance 24 CFR 903.7(b)(2)(ii)-(iv) to ensure that applicants on 
the PHA's public housing community-wide waiting list have been 
offered placement on the converted project's initial waiting list. 
For the purpose of establishing the initial waiting list, PHAs have 
the discretion to determine the most appropriate means of informing 
applicants on the public housing waiting list given the number of 
applicants, PHA resources, and community characteristics of the 
proposed conversion under RAD. Such activities should be pursuant to 
the PHA's policies for waiting list management, including the 
obligation to affirmatively further fair housing.
    A PHA may consider contacting every applicant on the public 
housing waiting list via direct mailing; advertising the 
availability of housing to the population that is less

[[Page 43854]]

likely to apply, both minority and non-minority groups, through 
various forms of media (i.e., radio stations, posters, newspapers) 
within the marketing area, informing local non-profit entities and 
advocacy groups (i.e., disability rights groups); and conducting 
other outreach as appropriate. Applicants on the agency's 
centralized public housing waiting list who wish to be placed onto 
the newly-established waiting list are done so in accordance with 
the date and time of their original application to the centralized 
public housing waiting list. Any activities to contact applicants on 
the public housing waiting list must be conducted accordance with 
the requirements for effective communication with persons with 
disabilities at 24 CFR 8.6 and the obligation to provide meaningful 
access for persons with limited English proficiency (LEP).
    After the initial waiting list has been established, the PHA 
shall administer its waiting list for the converted project in 
accordance with 24 CFR 983.251(c).
    AHAP. Provision affected: 24 CFR part 983 subpart D. Alternative 
Requirements: None. There will be no AHAP contract, so all 
references to an AHAP are waived.

C. Changes to PBRA Requirements for Public Housing Conversions

    Length of PBRA Contract Term. Provision affected: Section 
8(d)(2)(A) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(d)(2)(A)). Alternative Requirements: Covered projects shall 
have an initial HAP term of 20 years.
    Initial Contract Rent Setting. Provisions affected: Sections 
8(c)(1), 8(c)(5) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(c)(1) and (c)(5)). Alternative Requirements: At the time that 
assistance will be converted, initial contract rents will be 
established based on the funding for which a project is currently 
eligible, including pro-rated Operating Subsidy eligibility, the 
portion of the PHA's Capital Fund Formula Grant attributable to the 
project, and tenant rents. Initial contract rents will be capped at 
the lesser of (a) current funding; or (b) 120 percent of the Section 
8 FMR, adjusted by the number of bedrooms, and after subtracting any 
applicable utility allowance. However, when current funding exceeds 
120 percent of the FMR but where the PHA believes that such rents 
are below the comparable market rent, the PHA may request an 
exception under which the project may receive rents in excess of 120 
percent of the FMR but not in excess of the lower of comparable 
market rents or 150 percent of FMR. HUD will grant such a request 
only when HUD determines that a Rent Comparability Study (RCS), 
which the PHA must procure and pay for, establishes that current 
rents are below comparable market rents. Any such determination will 
be made by HUD in its sole and absolute discretion. Where contract 
rents are at or below 120 percent of the FMR, no RCS is required.
    Adjustment of Contract Rents. Provision affected: Section 
8(c)(2) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(c)(2)). Alternative Requirements: Contract rents will be 
adjusted annually by HUD's OCAF at each anniversary of the HAP 
contract, subject to the availability of appropriations for each 
year of the contract term.
    Phase-in of Tenant Rent Increases. Provision affected: Section 
3(a)(1) of the United States Housing Act of 1937 (42 U.S.C. 
1437a(a)(1)). Alternative Requirements: Monthly rent increases more 
than the greater of 10 percent or $25 that result solely from 
conversion of assistance shall be phased in over 3 years, which a 
PHA may extend to 5 years.
    Grievance Process. Provision affected: 24 CFR part 245. 
Alternative Requirements: In addition to current program rules, the 
following additional rules apply:
    i. Residents be provided with notice of the specific grounds of 
the proposed owner adverse action, as well as their right to an 
informal hearing with the PHA (as owner);
    ii. Residents will have an opportunity for an informal hearing 
with an impartial member of PHA's staff within a reasonable period 
of time;
    iii. Residents will have the opportunity to be represented by 
another person of their choice, to ask questions of witnesses, have 
others make statements at the hearing, and to examine any 
regulations and any evidence relied upon by the owner as the basis 
for the adverse action. With reasonable notice to the owner, prior 
to hearing and at the residents' own cost, resident may copy any 
documents or records related to the proposed adverse action; and
    iv. PHAs (as owners) provide the resident with a written 
decision within a reasonable period of time stating the grounds for 
the adverse action, and the evidence the owner relied on as the 
basis for the adverse action.
    The PHA will be bound by decisions from these hearings, except 
if the:
    i. Hearing concerns a matter that exceeds the authority of the 
impartial party conducting the hearing.
    ii. Decision is contrary to HUD regulations or requirements, or 
otherwise contrary to federal, State, or local law.
    If the PHA (as owner) determines that it is not bound by a 
hearing decision, the PHA must promptly notify the resident of this 
determination, and of the reasons for the determination.
    Davis-Bacon, Section 3. Provisions affected: Section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1707u); 24 CFR 
983.52(a); part 135. Alternative Requirements: The Davis-Bacon Act 
and Section 3 shall apply to all initial repairs that are identified 
in the Financing Plan to the extent that such repairs qualify as 
construction or rehabilitation. Davis-Bacon only applies for 
projects with nine or more units.
    Choice-Mobility. Provision affected: 24 CFR 985.3(h). 
Alternative Requirements: HUD's goal is to have 100 percent of 
residents in the Demonstration offered a Choice-Mobility option 
within a reasonable time after conversion. However, as HUD 
recognizes that not all PHAs will have vouchers sufficient to 
support this effort, HUD will provide ranking factor points where a 
voucher agency has committed to provide vouchers to the covered PBRA 
project of a PHA without a voucher program. Additionally, voucher 
agencies that make such a commitment will receive:
     Priority points for new HCV FSS coordinator positions 
in an upcoming FSS competition and
     The bonus points provided under the Section Eight 
Management Assessment Program (SEMAP) for deconcentration.

II. Mod Rehab Conversions

A. Changes to PBV Requirements for Mod Rehab Conversions 
(Competitive)

    Maximum Amount of PBV Assistance. Provisions affected: Section 
8(o)(13)(B) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(13)(B)); 24 CFR 983.6. Alternative Requirements: None. The 
provisions are waived.
    Cap on PBV Units per Project and Supportive Services 
Requirement. Provisions affected: Section 8(o)(13)(D) of the United 
States Housing Act of 1937 (42 U.S.C. 1437f(13)(D)); 24 CFR 983.56, 
983.257(c), and 983.261(a) and (d). Alternative Requirements: The 25 
percent limitation on the number of units that may receive PBV 
assistance in a project without the provision of supportive services 
is increased to 50 percent. An owner may still project-base 100 
percent of the units provided at least 50 percent of the units at 
the project qualify for the exceptions for elderly, disabled, or 
families receiving supportive services, or are within single-family 
buildings.
    Households living in units subject to a proposed RAD conversion 
must be given the option to receive supportive services. If 
supportive services are declined by the household, the unit shall 
remain under the HAP contract, the household shall not be terminated 
from the PBV program, and the decision to decline an offer to 
receive supportive services shall not represent a ground for lease 
termination. Once the initial household residing in the excepted 
unit under RAD vacates such unit, all PBV program requirements 
related to the required receipt of supportive services shall apply.
    Selection Procedures. Provision affected: 24 CFR 983.51. 
Alternative Requirements: Selections shall be made in accordance 
with program requirements detailed in the Program Notice.
    Site Selection. Provisions affected: Section 8(o)(13)(C)(ii) of 
the United States Housing Act of 1937 (42 U.S.C. 1437f(13)(C)); 24 
CFR 983.57(b)(1) and (c). Alternative Requirements: None. The 
provisions are waived. However, standards in 24 CFR 983.57 will 
apply to all off-site replacement projects and transfers of 
assistance.
    Length of PBV Contract Term. Provisions affected: Section 
8(o)(13)(F) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(13)(F)); 24 CFR 983.205(a). Alternative Requirements: The 
initial HAP term shall have an initial term of 15 years, up to 20 
years upon request of the PHA and with approval of the agency 
administering the vouchers.
    Initial Contract Rent Setting. Provisions affected: 24 CFR 
983.301. Alternative Requirements: Initial contract rents generally 
cannot exceed the lower of: (a) Current

[[Page 43855]]

funding (adjusted for bedroom size); (b) the reasonable rent (as 
defined under 24 CFR 983.303); (c) up to 110 percent of the 
applicable FMR (or applicable Exception Rent Payment Standard), 
minus any utility allowance; or (d) the rent requested by the owner.
    Adjustment of Contract Rents. Provisions affected: Section 
8(o)(13)(I) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(13)(I)); 24 CFR 983.301 and 983.302. Alternative Requirements: 
Contract rents will be adjusted annually by HUD's Operating Cost 
Adjustment Factor (OCAF) at each anniversary of the HAP contract, 
subject to the availability of appropriations for each year of the 
contract term. The rent to owner may at no time exceed the 
reasonable rent charged for comparable unassisted units in private 
market, as determined by the Contract Administrator in accordance 24 
CFR 983.303. However, the rent to owner shall not be reduced below 
the initial rent to owner for dwelling units under the initial HAP 
contract except in limited circumstances.

B. Changes to PBRA Requirements for Mod Rehab Conversions

    Length of PBRA Contract Term. Provision affected: Section 
8(d)(2)(A) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(d)(2)(A)). Alternative Requirements: Covered projects shall 
have an initial HAP term of 20 years.
    Initial Contract Rent Setting. Provisions affected: Sections 
8(c)(1), 8(c)(5) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(c)(1) and (c)(5)). Alternative Requirements: At the time that 
assistance will be converted, initial contract rents will be 
established based on the funding for which a project is currently 
eligible, including pro-rated Operating Subsidy eligibility, the 
portion of the PHA's Capital Fund Formula Grant attributable to the 
project, and tenant rents. Initial contract rents will be capped at 
the lesser of (a) current funding; or (b) 120 percent of the Section 
8 FMR, adjusted by the number of bedrooms, and after subtracting any 
applicable utility allowance. However, when current funding exceeds 
120 percent of the FMR but where the PHA believes that such rents 
are below the comparable market rent, the PHA may request an 
exception under which the project may receive rents in excess of 120 
percent of the FMR but not in excess of the lower of comparable 
market rents or 150 percent of FMR. HUD will grant such a request 
only when HUD determines that a Rent Comparability Study (RCS), 
which the PHA must procure and pay for, establishes that current 
rents are below comparable market rents. Any such determination will 
be made by HUD in its sole and absolute discretion. Where contract 
rents are at or below 120 percent of the FMR, no RCS is required.
    Adjustment of Contract Rents. Provision affected: Section 
8(c)(2) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(c)(2)). Alternative Requirements: Contract rents will be 
adjusted annually by HUD's OCAF at each anniversary of the HAP 
contract, subject to the availability of appropriations for each 
year of the contract term.
    Choice-Mobility. Provision affected: 24 CFR 985.3(h). 
Alternative Requirements: HUD's goal is to have 100 percent of 
residents in the Demonstration offered a Choice-Mobility option 
within a reasonable time after conversion. However, as HUD 
recognizes that not all PHAs will have vouchers sufficient to 
support this effort, HUD will provide ranking factor points where a 
voucher agency has committed to provide vouchers to the covered PBRA 
project of a PHA without a voucher program. Additionally, voucher 
agencies that make such a commitment will receive:
     Priority points for new HCV FSS coordinator positions 
in an upcoming FSS competition and
     The bonus points provided under the Section Eight 
Management Assessment Program (SEMAP) for deconcentration.

C. Changes to PBV Requirements for Mod Rehab Conversions 
(Noncompetitive)

    Portfolio Limit on PBVs. Provision affected: Section 8(o)(13)(B) 
of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(13)(B); 
24 CFR 983.6. Alternative Requirements: None. The statutory 
requirement does not apply, so HUD waives the corresponding 
regulation.
    Cap on PBV Units per Project and Supportive Services 
Requirement. Provisions affected: Section 8(o)(13)(D) of the United 
States Housing Act of 1937 (42 U.S.C. 1437f(13)(D)); 24 CFR 983.56, 
983.257(c), and 983.261(a) and (d). Alternative Requirements: The 25 
percent limitation on the number of units that may receive PBV 
assistance in a project without the provision of supportive services 
is increased to 50 percent. An owner may still project-base 100 
percent of the units provided at least 50 percent of the units at 
the project qualify for the exceptions for elderly, disabled, 
scattered sites, or families receiving supportive services, or are 
within single-family buildings.
    Households living in units subject to a proposed RAD conversion 
must be given the option to receive supportive services. If 
supportive services are declined by the household, the unit shall 
remain under the HAP contract, the household shall not be terminated 
from the PBV program, and the decision to decline an offer to 
receive supportive services shall not represent a ground for lease 
termination. Once the initial household residing in the excepted 
unit under RAD vacates such unit, all PBV program requirements 
related to the required receipt of supportive services shall apply.
    Site Selection. Provisions affected: Section 8(o)(13)(C)(ii) of 
the United States Housing Act of 1937 (42 U.S.C. 1437f(13)(C)); 24 
CFR 983.57(b)(1) and (c). Alternative Requirements: None. The 
provisions are waived. However, standards in 24 CFR 983.57 will 
apply to all off-site replacement projects and transfers of 
assistance. Further, HUD reserves the right to assess and consider 
as part of the selection process the impact of the proposed RAD 
conversion on deconcentration of poverty in properties where the RAD 
conversion would result in an increase in the number of units 
receiving project-based rental assistance.
    Selection Procedures. Provision affected: 24 CFR 983.51. 
Alternative Requirements: Selections shall be made in accordance 
with program requirements detailed in the Program Notice.

III. Rent Supplement and Rental Assistance Payment Project Conversions

    Portfolio Limit on PBVs. Provision affected: Section 8(o)(13)(B) 
of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(13)(B); 
24 CFR 983.6. Alternative Requirements: None. The statutory 
requirement does not apply, so HUD waives the corresponding 
regulation.
    Cap on PBV Units per Project and Supportive Services 
Requirement. Provisions affected: Section 8(o)(13)(D) of the United 
States Housing Act of 1937 (42 U.S.C. 1437f(13)(D)); 24 CFR 983.56, 
983.257(c), and 983.261(a) and (d). Alternative Requirements: The 25 
percent limitation on the number of units that may receive PBV 
assistance in a project without the provision of supportive services 
is increased to 50 percent. Households living in units subject to a 
proposed RAD conversion must be given the option to receive 
supportive services. Once the initial household residing in the 
excepted unit under RAD vacates such unit, all PBV program 
requirements related to the required receipt of supportive services 
shall apply.
    Site Selection. Provisions affected: Section 8(o)(13)(C)(ii) of 
the United States Housing Act of 1937 (42 U.S.C. 1437f(13)(C)); 24 
CFR 983.57(b)(1) and (c). Alternative Requirements: None. The 
provisions are waived. However, standards in 24 CFR 983.57 will 
apply to all off-site replacement projects and transfers of 
assistance. Further, HUD reserves the right to assess and consider 
as part of the selection process the impact of the proposed RAD 
conversion on deconcentration of poverty in properties where the RAD 
conversion would result in an increase in the number of units 
receiving project-based rental assistance.
    Selection Procedures. Provision affected: 24 CFR 983.51. 
Alternative Requirements: Selections shall be made in accordance 
with program requirements detailed in the Program Notice.

[FR Doc. 2012-18307 Filed 7-25-12; 8:45 am]
BILLING CODE 4210-67-P