[Federal Register Volume 78, Number 59 (Wednesday, March 27, 2013)]
[Proposed Rules]
[Pages 18726-18761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06521]



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Vol. 78

Wednesday,

No. 59

March 27, 2013

Part III





Department of Housing and Urban Development





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24 CFR Part 579





Homeless Emergency Assistance and Rapid Transition to Housing: Rural 
Housing Stability Assistance Program and Revisions to the Definition of 
``Chronically Homeless''; Proposed Rule

  Federal Register / Vol. 78 , No. 59 / Wednesday, March 27, 2013 / 
Proposed Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 579

[Docket No. 5573-P-01]
RIN 2506-AC33


Homeless Emergency Assistance and Rapid Transition to Housing: 
Rural Housing Stability Assistance Program and Revisions to the 
Definition of ``Chronically Homeless''

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

ACTION: Proposed rule.

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SUMMARY: The Homeless Emergency Assistance and Rapid Transition to 
Housing Act of 2009 (HEARTH Act), enacted into law on May 20, 2009, 
consolidates three of the separate homeless assistance programs 
administered by HUD under the McKinney-Vento Homeless Assistance Act 
into a single Continuum of Care program, revises the Emergency Shelter 
Grants program and renames this program the Emergency Solutions Grants 
program, and creates the Rural Housing Stability Assistance program to 
replace the Rural Homelessness Grant program.
    The HEARTH Act also directs HUD to promulgate regulations for these 
new programs and processes. This proposed rule would provide for the 
establishment of regulations to implement the new Rural Housing 
Stability Assistance program. In addition to proposing the regulatory 
framework for the new Rural Housing Stability Assistance program, this 
rule also proposes to establish a definition for ``chronically 
homeless'' that includes a definition of ``homeless occasion'' that 
better targets persons with the longest histories of homelessness and 
the highest level of need.

DATES: Comment Due Date. May 28, 2013.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 451 
7th Street SW., Room 10276, Department of Housing and Urban 
Development, Washington, DC 20410-0500. 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 
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 
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., eastern time, 
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 
Federal Relay Service at 800-877-8339 (this is a toll-free number). 
Copies of all comments submitted are available for inspection and 
downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Ann Marie Oliva, Director, Office of 
Special Needs Assistance Programs, Office of Community Planning and 
Development, Department of Housing and Urban Development, 451 7th 
Street SW., Washington, DC 20410-7000; telephone number 202-708-4300 
(this is not a toll-free number). Hearing- and speech-impaired persons 
may access this number through TTY by calling the Federal Relay Service 
at 800-877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION: 

Executive Summary

Purpose of and Legal Authority for This Proposed Rule

    This proposed rule would establish the regulations for the Rural 
Housing Stability Assistance program authorized by the Homeless 
Emergency Assistance and Rapid Transition to Housing Act of 2009 
(HEARTH Act). Section 1504 of the HEARTH Act directs HUD to establish 
regulations for this program. (See 42 U.S.C. 11301.) The purpose of the 
Rural Housing Stability Assistance program is to rehouse or improve the 
housing situations of individuals and families who are homeless or in 
the worst housing situations in the geographic area; stabilize the 
housing of individuals and families who are in imminent danger of 
losing housing; and improve the ability of the lowest-income residents 
of the community to afford stable housing.
    Section 491 of the McKinney-Vento Act (42 U.S.C. 11408) establishes 
the new Rural Housing Stability Assistance program which replaces the 
Rural Homelessness Grant program, a program that was authorized but 
never implemented, and which expands the types of eligible activities 
available to recipients under the predecessor program. This new program 
provides grants competitively for rural counties in lieu of grants 
under the Continuum of Care program (42 U.S.C. 11408(a). The Rural 
Housing Stability Assistance program focuses on the homeless issues 
that are unique to rural areas. Grants under the Rural Housing 
Stability Assistance program may be used for items such as rent, 
mortgage, utility assistance; relocation assistance; short-term 
emergency lodging; new construction; acquisition; rehabilitation; 
emergency food and clothing; employment assistance and job training; 
health related services; housing search and counseling services; 
referrals to legal services; mental health services; substance abuse 
treatment services; and transportation.

Summary of Major Provisions

    The major provisions of this proposed rule relate to how to 
establish and operate a Rural Housing Stability Assistance program, how 
to apply for funds under the program, and how to use the funds for 
projects approved by HUD. These provisions are summarized below.
    1. General Provisions (Subpart A): This section proposes the key 
definitions for the Rural Housing Stability Assistance program. Of 
particular note, the terms ``county'' and ``county equivalent'' would 
be defined

[[Page 18727]]

to mean organized local governments authorized in state constitutions 
and statutes and established to provide general government. This 
definition reflects the meaning of ``county'' used by the United States 
Census Bureau, and creates clear boundaries and coincides with existing 
programs that are generally defined by existing state and local 
government boundaries. In addition, ``rural area'' and ``rural 
community'' would be defined in terms of the geographical equivalent of 
a ``county.'' Although section 491(k)(2) of the McKinney-Vento Act 
provides a definition for the terms ``rural area'' and ``rural 
community,'' HUD determined that it is necessary to further define 
these terms in order to clarify the geographic areas eligible to 
receive assistance under this program, and to make the administration 
of the program more feasible. Under this program, the term ``worst 
housing situation'' would be defined to mean housing that has serious 
health and safety defects and at least one major system that has failed 
or is failing. HUD construes this category as meaning those individuals 
and families in housing situations who are in dire need of assistance 
due to the physical condition of their homes.
    In addition to defining these terms, in this proposed rule, HUD 
follows through on the commitment made in the Continuum of Care interim 
rule published on July 31, 2012, to submit for comment any proposed 
revision to the definition of ``chronically homeless,'' specifically 
defining in this definition what is meant by an ``occasion of 
homelessness.'' This proposed rule includes a further revised 
definition of chronically homeless.
    2. Application (Subpart B): The section proposes that in order to 
be eligible for funds under the Rural Housing Stability Assistance 
program, an eligible applicant must be either a county government or a 
designee of the county government that agrees to represent the county. 
Units of local governments and private nonprofit entities may be 
selected as the designee by the county, based upon a written 
designation, and would be required to support the needs of the county. 
Under this proposed rule, this subpart provides that only one applicant 
per county may apply for program funds because HUD intends to award one 
lump sum award to an approved county, or its designee, with one grant 
per county. Funds awarded under this program are in lieu of grants 
awarded under the Continuum of Care program, and funds awarded to a 
county shall only be awarded under either the Continuum of Care program 
or the Rural Housing Stability Assistance program. A county may apply 
for funds under either program, but not both. Any county must make a 
determination before it submits an application whether it will submit a 
Rural Housing Stability Assistance program application or a Continuum 
of Care application; counties cannot submit both applications 
simultaneously.
    3. Eligible Activities (Subpart C): Grant assistance under the 
Rural Housing Stability Assistance program is available for rent, 
mortgage, and utility assistance; relocation assistance; short-term 
emergency lodging; new construction; acquisition; rehabilitation; 
leasing; rental assistance; operating costs, rehabilitation, and 
repairs to make premises habitable; supportive services; use of Federal 
inventory property; capacity building; data collection costs; and 
administrative costs. HUD will issue notices and policy guidance to 
elaborate on specific activities that are eligible for funding.
    4. Grant Selection and Award Process (Subpart D): HUD proposes to 
award funds to recipients through a national competition based on seven 
selection criteria, such as the participation of potential program 
beneficiaries of the grant in assessing the need for and importance of 
the grant in the county; the degree to which the grant addresses the 
worst housing situations present in the county; and the performance of 
the organization in improving housing situations, taking account of the 
severity of barriers of individuals and families served by the 
organization. Under this program, not less than 50 percent of the total 
funds awarded shall be for recipients serving communities with 
populations of less than 10,000. Within this set-aside, priority must 
be given to recipients serving counties with populations of less than 
5,000. Priority will be given to eligible recipients serving 
communities not currently receiving significant Federal assistance 
under the McKinney-Vento Act.
    5. Program Requirements (Subpart E): Under this proposed rule, all 
recipients of funding under the Rural Housing Stability Assistance 
program must comply with the program regulations and the requirements 
of the Notice of Funding Availability (NOFA) that HUD will issue each 
year. The HEARTH Act requires a minimum of 25 percent cash or in-kind 
match on all eligible funding costs except leasing. Recipients of grant 
funds must also abide by other applicable requirements, such as housing 
quality standards and suitable dwelling size; limitations on 
transitional housing; limitations on use of funds; initiating and 
completing approved activities and projects within certain timelines; 
and providing a formal process for termination of assistance to 
participants who violate program requirements or conditions of 
occupancy.
    6. Grant Administration (Subpart F): Under this proposed rule, 
recipients of funding under the Rural Housing Stability Assistance 
program would be required to collect and report data using methods 
determined by HUD. These methods shall include, at a minimum, 
participation in a Homeless Management Information System (HMIS), a 
point-in-time count, and an annual housing inventory count. To 
effectively administer the grants, HUD will provide technical 
assistance through a variety of methods to assist recipients with 
complying with requirements under this program. After having been 
selected for funding, grant recipients must satisfy certain 
recordkeeping requirements so that HUD can assess compliance with the 
program requirements. For any amendments to grants after the funds have 
been awarded, HUD has established a separate amendment procedure. As 
appropriate, HUD has also established sanctions to strengthen its 
enforcement procedures.

Benefits and Costs

    These proposed regulations are intended to work toward the goal of 
eliminating homelessness in rural communities, by providing the 
requirements for the new Rural Housing Stability Assistance program, 
which focuses on improving homeless assistance and prevention in rural 
areas. This program would fund eligible activities for the purpose of 
rehousing and improving the housing situations of individuals and 
families who are homeless or in the worst housing situations in the 
geographic area, stabilizing the housing of individuals and families 
who are at risk of becoming homeless, and improving the ability of the 
lowest-income residents of the community to afford stable housing. In 
addition, this proposed rule establishes a definition of ``chronically 
homeless'' that aids HUD and local jurisdictions in being able to 
better estimate the number of chronically homeless, and will aid HUD 
and local jurisdictions in targeting resources to strategies designed 
to reduce the number of chronically homeless.
    Congress appropriated a total of $1,593,000,000 for the Continuum 
of Care and Rural Housing Stability Assistance programs. (See 
Consolidated and Further Continuing Appropriations Act, 2012, Public 
Law 112-55, approved

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November 18, 2011.) With the Continuum of Care program as an 
established program, established first administratively by HUD and then 
statutorily by the HEARTH Act, the overwhelming majority of 
appropriated funds have been allocated to the Continuum of Care 
program.

I. Background--HEARTH Act

    On May 20, 2009, the President signed into law legislation entitled 
``An Act to Prevent Mortgage Foreclosures and Enhance Mortgage Credit 
Availability,'' which became Public Law 111-22. This new law implements 
a variety of measures directed toward keeping individuals and families 
from losing their homes. Division B of this new law is the HEARTH Act, 
which consolidates and amends three separate homeless assistance 
programs carried out under title IV of the McKinney-Vento Homeless 
Assistance Act (42 U.S.C. 11371 et seq.) (McKinney-Vento Act) into a 
single Continuum of Care program that is designed to improve 
administrative efficiency and enhance response coordination and 
effectiveness in addressing the needs of homeless persons. The former 
Emergency Shelter Grants program is renamed the Emergency Solutions 
Grants program and revised to broaden the activities that are eligible 
for funding as emergency shelter and homelessness prevention activities 
and to add rapid rehousing activities as eligible activities. Section 
491 of the McKinney-Vento Act (42 U.S.C. 11408) establishes the new 
Rural Housing Stability Assistance program (or RHSP), which replaces 
the Rural Homelessness Grant program, a program that was authorized but 
never implemented, and expands the types of eligible activities, which 
could not have been funded under the predecessor Rural Homelessness 
Grant program. This new program provides grants competitively for rural 
counties, in lieu of grants under the Continuum of Care program (or CoC 
program). While the emphasis of the Continuum of Care program is on 
promoting communitywide planning to end homelessness, and that of the 
Emergency Solutions Grants program is on improving the quantity and 
quality of emergency or transitional shelters and homelessness 
prevention, the RHSP focuses largely on the homeless issues that are 
unique to rural areas, including stabilizing the housing of individuals 
in imminent danger of losing housing, through rehabilitation of 
existing housing or construction of new transitional or permanent 
housing.
    HUD commenced the process to implement the HEARTH Act with a 
proposed rule, which published on April 20, 2010 (75 FR 20541) and 
titled ``Defining Homeless.'' That proposed rule sought to clarify and 
elaborate upon the new McKinney-Vento Act definitions for ``homeless'' 
and ``homeless individual with a disability.'' In addition, the 
proposed rule included recordkeeping requirements related to the 
``homeless'' definition. The final rule, titled ``Defining Homeless,'' 
was published on December 5, 2011 (76 FR 75994). On December 5, 2011, 
HUD also published an interim rule, titled the ``Emergency Solutions 
Grants Rule.'' (See 76 FR 75954.) This interim rule established the 
program requirements for the Emergency Solutions Grants Program and 
contained corresponding amendments to the Consolidated Plan 
regulations. On December 9, 2011, at 76 FR 76917, HUD continued the 
process to implement the HEARTH Act with the publication of the 
proposed rule titled ``Homeless Management Information Systems 
Requirements,'' which proposed uniform technical requirements for HMIS 
to ensure proper data collection and maintenance of the database and 
protect the confidentiality of the information in the database. On July 
31, 2012, at 77 FR 45422, HUD published an interim rule for a second 
HEARTH Act program, the Continuum of Care program. The rulemaking for 
the Rural Housing Stability Assistance program, which commences with 
this proposed rule, will conclude the initial stage of HUD's 
implementation of the HEARTH Act programs.

II. Overview of Proposed RHSP Regulations

    This section of the preamble provides an overview of the proposed 
regulations for the RHSP that are proposed by this rule.

General Provisions (Subpart A)

    This subpart sets out the general provisions applicable to RHSP.
Purpose and Scope (Sec.  579.1)
    This section provides that the RHSP is designed to provide 
assistance for rural counties to rehouse or improve the housing 
situations of, individuals and families who are homeless or in the 
worst housing situations; stabilize the housing of individuals and 
families who are at risk of homelessness; and improve the ability of 
the lowest-income residents to afford stable housing. The language in 
the statute refers to stabilizing the housing of individuals and 
families who are ``in imminent danger of losing housing.'' Because HUD 
would define ``in imminent danger of losing housing'' the same way it 
defines ``at risk of homelessness,'' HUD has opted to use the term ``at 
risk of homelessness'' to maintain consistency with the CoC (77 FR 
45422) and ESG (76 FR 75954) regulations, as implemented per the HEARTH 
Act.
Definitions (Sec.  579.3)
    The definitions section of these proposed regulations also includes 
definitions for which public comment has already been solicited. The 
definitions of ``homeless,'' ``homeless individual,'' and ``homeless 
person'' were established by the December 5, 2011, Defining Homeless 
final rule (76 FR 75994). The December 5, 2011, final rule was preceded 
by an April 20, 2010, proposed rule (75 FR 20451), which sought public 
comment on these definitions. The final definitions of these terms took 
into consideration the public comment received on the proposed 
definitions as set out in the April 20, 2010, proposed rule. The 
definition of ``at risk of homelessness'' was established by the 
Emergency Solutions Grants program interim rule (76 FR 7954) published 
on December 5, 2011. The interim rule sought public comment on this 
definition and additional public comment is not sought through this 
proposed rule. HUD believes it is very important to have identical 
definitions of these terms across its programs addressing homelessness, 
to the extent feasible.
    The definitions section defines key terms used in this proposed 
rule. HUD solicits public comment on the following key terms.
    Abbreviated Consolidated Plan. An ``abbreviated consolidated plan'' 
is defined as an assessment of housing and homeless needs, resources, 
and planned activities that are appropriate for the type and amount of 
assistance sought from HUD. Community Development Block Grant (CDBG) 
entitlement communities, under 24 CFR part 570, subpart D, and 
participating jurisdictions in the HOME Investments Partnerships (HOME) 
program, under 24 CFR part 92, are required to submit consolidated 
plans to assess the housing needs of their areas. If a county does not 
have its own consolidated plan then it must create an abbreviated 
consolidated plan in order to perform the requisite need and resource 
assessment to qualify for funding under the RHSP. In almost all 
circumstances, an eligible applicant under RHSP is participating in a 
statewide consolidated plan and thus is not a CDBG or HOME entitlement 
community. Therefore, in most cases, eligible applicants under the RHSP 
program would be required to submit an abbreviated consolidated plan. 
In order

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to ensure that reasonable planning efforts specific to the county 
receiving funds are made, each county applying for funds, directly or 
through a designated applicant, will be required to prepare and submit 
an abbreviated consolidated plan, in accordance with 24 CFR 91.235, as 
part of the application process.
    Chronically homeless. As noted earlier in this preamble, HUD 
submits for public comment a further revised definition of 
``chronically homeless.'' The definition of ``chronically homeless'' 
was first introduced in the corresponding amendments to the 
Consolidated Plan interim rule, published on December 5, 2011, at 76 FR 
75954. The Consolidated Plan interim rule tracked the statutory 
definition of ``chronically homeless,'' but defined for the first time 
an ``occasion of homelessness'' or ``homeless occasion'' to mean a 
period of at least 15 days. Specifically, the definition of chronically 
homeless that includes the definition of homeless occasion, as provided 
in the Consolidated Plan interim rule, reads as follows: ``An 
individual who * * * has been homeless and living or residing in a 
place not meant for human habitation, a safe haven, or in an emergency 
shelter continuously for at least one year or on at least four separate 
occasions in the last 3 years, where each homeless occasion was at 
least 15 days.''
    In the preamble to the Consolidated Plan interim rule, HUD 
explained the inclusion of the 15-day period as follows: ``The 
regulatory definition of `chronically homeless' does not elaborate 
significantly on the statutory definition. However, HUD has determined 
that when an individual or family has not been continuously homeless 
for at least one year but has been homeless on at least four separate 
occasions in the last 3 years, each separate occasion must be at least 
15 days in duration to ensure consistency for counting and eligibility 
purposes. HUD has determined that the 15-day minimum is an appropriate 
measure to distinguish the chronically homeless from the homeless 
population in general, so as to recognize chronically homeless people 
who have spent a significant amount of time as homeless.''
    In the development of the Continuum of Care (CoC) program interim 
rule, published on July 31, 2012, at 77 FR 45422, HUD already had 
received and commenced review of the public comments received on the 
ESG's rule definition of ``chronically homeless,'' and decided to 
address this definition in the CoC program rule. In the preamble to the 
CoC program rule, HUD stated as follows:

    HUD received valuable public comment on the definition of 
``chronically homeless,'' through the public comment process on the 
Emergency Solutions Grants program interim rule. Based on public 
comment, this rule for the Continuum of Care program is not adopting 
the full definition of ``chronically homeless'' that was included in 
the conforming amendments to the Consolidated Plan that were 
published as a part of the Emergency Solutions Grants program rule. 
Commenters raised concerns with the meaning of the phrase ``where 
each homeless occasion was at least 15 days.'' The concerns raised 
about this phrase, used for the first time in a definition of 
``chronically homeless,'' has caused HUD to reconsider proceeding to 
apply a definition that includes this phrase, without further 
consideration and opportunity for comment. In this rule, HUD 
therefore amends the definition of ``chronically homeless'' in the 
Consolidated Plan regulations to strike this phrase. The removal of 
this phrase returns the definition to one with which service 
providers are familiar.

    On May 30, 2012, HUD convened an informal gathering of nationally 
recognized experts involved in homelessness to seek individual views 
and suggestions on the definition of chronically homeless. The 
attendees at these meetings and a summary of the statements made are 
available at HUD's Web site at http://www.hudhre.info. In addition to 
the May 30, 2012, meeting, HUD reached out to the U.S. Interagency 
Council on Homelessness (USICH), and to several CoC leads for their 
views on a workable definition of chronically homeless. Based on this 
feedback, this proposed rule, submits for public comment a definition 
of ``chronically homeless'' that defines ``homeless occasion in 
paragraph (1)(ii) of the definition as ``has been homeless and living 
or residing in a place not meant for human habitation, a safe haven, or 
in an emergency shelter continuously for at least one year or on at 
least four separate occasions in the last 3 years, where the cumulative 
total of the four occasions is at least one year. Stays in institutions 
of 90 days or less will not constitute a break in homelessness, but 
rather such stays are included in the cumulative total; * * *'' (The 
additional language is highlighted in bold.)
    HUD believes that this definition of ``homeless occasion'' in 
paragraph (1)(ii) better targets persons with the longest histories of 
homelessness and therefore the highest level of need. The definition of 
``homeless occasion'' also allows for limited resources to be more 
effectively targeted and considers stays in institutions to be part of 
an episode of homelessness. HUD has chosen the duration of one year to 
be consistent with section 401(2)(A)(ii) of the HEARTH Act, which 
discusses a one year timeframe, and based on consensus from the 
participants in the expert convening on the ``chronically homeless'' 
definition. Additionally, HUD adopted the 90 day or less duration in 
institutions to be consistent with section 401(2)(B) of the HEARTH Act.
    Because the definition of ``chronically homeless'' applies to all 
of HUD's homeless assistance programs, at the conclusion of the public 
comment period of this proposed rule, HUD plans to review the public 
comments on the definition and incorporate a final definition of 
``chronically homeless'' into the final rules for the Continuum of Care 
program, Emergency Solutions Grants program, and the corresponding 
amendments to the Consolidated Plan.
    Specific solicitation of comment. HUD specifically solicits comment 
on the definition of ``homeless occasion'' in the definition of 
``chronically homeless.''
    County and county equivalent. The terms ``county'' and ``county 
equivalent'' are defined to mean organized local governments authorized 
in State constitutions and statutes and established to provide general 
government. This includes governments designated as boroughs in Alaska, 
as parishes in Louisiana, and as counties in other States. This 
definition reflects the meaning of ``county'' used by the United States 
Census Bureau (see http://www.census.gov/geo/www/geo_defn.html#County), and creates clear boundaries and coincides with 
existing programs that are generally defined by existing State and 
local government boundaries.
    Private nonprofit organization. A private nonprofit organization is 
defined as a secular or religious organization described in section 
501(c) of the Internal Revenue Code (IRC) of 1986 (26 U.S.C. 501(c)), 
that is exempt from taxation under subtitle A of the IRC, has an 
accounting system and a voluntary board, and practices 
nondiscrimination in the provision of assistance. A private nonprofit 
organization does not include a governmental organization, such as a 
public housing agency or housing finance agency.
    Program participant. The definition for ``program participant'' 
covers the three categories of beneficiaries eligible to receive 
assistance under this program. Those categories of beneficiaries are 
individuals and families who are: (1) homeless (as defined by the 
Emergency Solutions Grants rule at 76 FR 75954), (2) at risk

[[Page 18730]]

of homelessness (as defined by the Defining Homelessness rule at 76 FR 
75994), or (3) in the worst housing situations (as proposed below in 24 
CFR 579.3).
    Recipient. ``Recipient'' is defined as an applicant that signs a 
grant agreement with HUD. Unless otherwise stated, subrecipients are 
required to comply with all requirements that apply to recipients.
    Rural area and rural community. ``Rural area'' and ``rural 
community'' are defined in terms of the geographical equivalent of a 
``county.'' The HEARTH Act authorizes grants to eligible recipients 
under this program to carry out activities in ``rural areas.'' Section 
491(k)(2) of the McKinney-Vento Act defines the terms ``rural area'' 
and ``rural community,'' as: any area or community, respectively, no 
part of which is within an area designated as a standard metropolitan 
statistical area by the Office of Management and Budget; any area or 
community, respectively, that is (i) within an area designated as a 
metropolitan statistical area or considered as part of a metropolitan 
statistical area; and (ii) located in a county where at least 75 
percent of the population is rural; or any area or community, 
respectively, located in a State that has population density of less 
than 30 persons per square mile (as reported in the most recent 
decennial census), and of which at least 1.25 percent of the total 
acreage of such State is under Federal jurisdiction, provided that no 
metropolitan city (as such term is defined in section 5302 of this 
title) in such State is the sole beneficiary of the grant amounts 
awarded under this section.
    However, HUD determined that it is necessary to further define 
these terms in order to clarify the geographic areas eligible to 
receive assistance under this program, and to make the administration 
of the program more feasible.
    HUD concluded that defining the terms ``rural area'' and ``rural 
community'' as rural ``counties'' would achieve these goals. Using the 
definition in the McKinney-Vento Act and substituting ``county'' for 
``area'' and ``community'' allows HUD to more efficiently administer 
the program because HUD geographic codes are based on metropolitan 
cities, urban counties, and nonurban counties. The definition allows 
for a clear and consistent geographic area to be used, and eliminates 
ambiguities regarding what areas could qualify for assistance under the 
program. Further, HUD determined that this definition is consistent 
with Congressional intent in that it ensures the feasible 
administration of the program while also ensuring that assistance is 
provided to rural areas. More importantly, this approach would not 
unfairly limit participation in the program. Using this definition, 
HUD's Office of Policy Development and Research found that more than 
2,000 counties or county equivalents in the United States would qualify 
as ``rural.'' HUD's Office of Policy Development and Research will run 
a report of eligible counties each year, which HUD will use to 
establish the list of eligible applicants annually.
    Worst housing situation. The term ``worst housing situation'' is 
defined to mean housing that has serious health and safety defects and 
at least one major system that has failed or is failing. HUD construes 
this category as meaning those individuals and families in housing 
situations that are in dire need of assistance due to the physical 
condition of their homes. Individuals and families eligible for 
assistance because they are in the worst housing situations may be 
renting, or may be households that are residing in their own 
participant-owned housing, as further described in this rule.
Application (Subpart B)
    This subpart sets forth the requirements for applicants that are 
eligible to apply for assistance under the RHSP to serve rural counties 
and outlines the grant application process, including requirements 
related to the submission of an abbreviated consolidated plan.
Eligible Applicants (Sec.  579.100)
    Section 491(e) of the McKinney-Vento Act provides that 
organizations eligible to receive a RHSP grant are private nonprofit 
entities, and county and local governments. Because recipients under 
this program will be serving rural counties that meet the definition of 
a rural area, which HUD proposed to define as the same as a rural 
county, Sec.  579.100 would require that the eligible applicant must 
either be a county government or a designee of the county government 
that agrees to represent the county. Units of local governments and 
private nonprofit entities may be selected as the designee by the 
county, based upon a written designation, and would be required to 
support the needs of the county.
    Section 579.100 would provide that only one applicant per county 
may apply for program funds. HUD proposes to impose this limitation 
because HUD intends to award one lump sum award to an approved county, 
or its designee, with one grant per county. By awarding one grant per 
county, HUD will be able to impact a greater number of rural counties 
and more efficiently use its funds. This will impact a greater number 
of rural counties because each county will be limited to a certain 
dollar amount. Creating a ceiling for each county allows more counties 
to receive funding. Limiting a county to one application would ensure 
that HUD funds are used more efficiently because a county would be 
required to carefully determine its needs and articulate in the 
application how the funding will best serve those needs. The county, or 
its designee, may choose subrecipients to carry out the approved 
activities in the grant, once awarded.
    Every county government must submit an abbreviated consolidated 
plan that is applicable to the RHSP, in accordance with 24 CFR 91.235. 
However, a county government that is a CDBG entitlement community under 
24 CFR 570, subpart D, or that is expected to be a participating 
jurisdiction in the HOME program under 24 CFR part 92 and has 
established a consolidated plan for its county, may submit the 
consolidated plan instead of an abbreviated consolidated plan. An 
abbreviated consolidated plan includes information that would be 
required by a grant application; including an assessment of housing and 
homeless needs, obstacles to meeting underserved need, available 
resources, and planned activities. Other information that may be 
required in the plan are the funding priorities, how awarded funds will 
be used to address identified needs, and the goals and measurable 
objectives that will be initiated and completed within the time period 
covered by the plan. HUD is adopting this requirement as part of the 
application process in order to ensure that reasonable planning efforts 
specific to the county benefiting from grant funds have been made. The 
required elements would be further identified in a NOFA.
    Section 579.100 also addresses exclusions that apply to the 
application process for the RHSP. Sections 491(a) and 491(m) of the 
McKinney-Vento Act provide that funds awarded under the RHSP are in 
lieu of grants awarded under subtitle C, which is the Continuum of Care 
(CoC) program; funds awarded to a county shall only be awarded under 
either the CoC program or the RHSP. Section 579.100 would implement 
this requirement by establishing that a county may apply for funds 
under either the CoC program or the RHSP, but not both.
    To apply for funds, a rural county that has previously been claimed 
by a CoC must withdraw from that CoC and

[[Page 18731]]

cannot be included in the CoC's application for funds. This also means 
that the county's preliminary pro rata need (PPRN) amount cannot be 
included in the CoC's Final Pro Rata Need, even if the PPRN was 
included in previous years. If at least one CoC-funded project is 
currently operating within the county, the county, either directly or 
through a designee such as a private nonprofit organization, would be 
ineligible to apply for funds under the RHSP program until that grant 
has expired, been reallocated, or transferred to a new recipient in a 
different jurisdiction within the CoC.
    Further, this exclusion would apply to the county as well as all 
metropolitan cities located within the county. For example, Clark 
County, Nevada, meets the qualifying criteria as a rural county because 
it is located in a State that has population density of less than 30 
persons per square mile and of which at least 1.25 percent of the total 
acreage of such State is under Federal jurisdiction. Las Vegas, North 
Las Vegas, and Henderson are all metropolitan cities located within 
Clark County that have unique geo codes and could be claimed as 
separate entities under the CoC. However, if Clark County chose to 
apply for funds through the RHSP in a given year, Clark County, Las 
Vegas, North Las Vegas, and Henderson would all be required to withdraw 
from the CoC. If a project is currently operating in any of those 
areas, Clark County would not be eligible to apply for RHSP funds in a 
given year.
    The purpose of awarding RSHP funds in lieu of CoC funds is not to 
encourage counties that are active within a CoC to disengage from a 
process that is working. Instead, the RHSP is intended to reach those 
counties that may or may not have been claimed by a CoC in the past, 
and the counties' needs have not been met through that program. Rural 
counties that withdraw from a CoC in order to apply for RHSP funds are 
encouraged to continue coordination and collaboration efforts when 
appropriate. However, recipients of funds under the RHSP are not 
eligible to receive funding under the CoC program nor can funds from 
the two programs be combined in any other way.
Application Process (Sec.  579.102)
    Funds awarded under RHSP will be awarded through an annual 
application process in response to issuance of a NOFA. HUD will issue a 
list of counties eligible to apply for funds in a particular fiscal 
year. HUD's NOFA will outline the selection criteria specified in 
section 491(g) of the McKinney-Vento Act, as well as other criteria 
that HUD may deem necessary in a given year.
    Formula calculation. One criterion for selection of applicants is 
the need for RHSP funds as determined by the formula established under 
section 427(b)(2) of the McKinney-Vento Act. The formula establishes 
PPRN amounts that reflect the needs of geographic areas.
    Section 579.102 defines PPRN as the dollar expression of the 
relative need assigned to metropolitan cities, urban counties, and all 
other counties, determined by HUD in accordance with HUD's regulations 
for the CoC program at 24 CFR 578.17.\1\ The formula uses nationally 
available data, including the following factors as used in the CDBG 
formula and Emergency Solutions Grant formula on poverty, housing 
overcrowding, population, age of housing, and growth lag.
---------------------------------------------------------------------------

    \1\ HUD has proposed to codify the regulations for the CoC 
program in a new part 578 in HUD's regulations in title 24 of the 
Code of Federal Regulations. Section 578.17 addresses the 
calculation of the PPRN.
---------------------------------------------------------------------------

    To determine a rural county's PPRN, HUD will calculate the sum of 
the PPRN amount for the rural county as well as any metropolitan cities 
therein. HUD will announce the PPRN amounts prior to issuance of the 
NOFA on its Web site. The cumulative PPRN amount for the rural county 
will be the basis for determining the maximum award amount for which 
the county may apply. The maximum award amount for which an eligible 
county may apply will be provided in the NOFA. Applicants are 
encouraged to use this information to determine whether to apply for 
funding under the RHSP.
Subsidy Layering (Sec.  579.104)
    Applicants must conform to the subsidy layering requirements, in 
section 102 of the Housing and Urban Development Reform Act of 1989 (42 
U.S.C. 3545), and the regulations in 24 CFR part 4, subpart A. Subsidy 
layering occurs when a project receives funds from more than one 
governmental jurisdiction. A subsidy layering analysis is required to 
assure that Federal resources are not duplicative or wasteful. In 
accordance with the statutory requirement, Sec.  579.104 provides for 
applicants to submit information regarding other governmental 
assistance to help HUD determine whether excessive public assistance is 
being provided to an interim project or activities by combining 
(layering) assistance under this program with other governmental 
housing assistance from Federal, State, or local agencies, including 
assistance such as tax concessions or tax credits.
Environmental Review (Sec.  579.106)
    HUD will perform an environmental review for each property as 
required under HUD's regulations in 24 CFR part 50. All recipients of 
RHSP funding must supply all available, relevant information necessary 
to HUD and carry out mitigating measures required by HUD. The 
recipient, its project partners, and their contractors may not perform 
any eligible activity for a project under the RHSP, or commit or expend 
HUD or local funds for such activities until HUD has performed an 
environmental review and the recipient has received HUD approval of the 
property.

Eligible Activities (Subpart C)

    Subpart C addresses the eligible activities under RHSP. Section 430 
of the McKinney-Vento imposes a requirement for a 25 percent match; 
however the requirement is applied to the project as a whole, rather 
than by individual activities.
Types of Assistance (Sec.  579.200)
    Grant assistance is available for rent, mortgage, and utility 
assistance; relocation assistance, short-term emergency lodging; new 
construction; acquisition; rehabilitation; leasing; rental assistance; 
operating costs, rehabilitation and repairs to make premises habitable; 
supportive services; use of Federal inventory property; capacity 
building; data collection costs, and administrative costs. Section 
579.200 provides the eligible uses of grant assistance under subpart C, 
but HUD will issue notices and policy guidance to elaborate, through 
examples and frequently asked questions on specific activities that are 
eligible for RHSP funding. Structures used to provide housing or 
supportive services may also be used for other purposes, but RHSP 
assistance will be available only in proportion to the use of the 
structure for supportive housing or supportive services.
Rent, Mortgage, and Utility Assistance (Sec.  579.202)
    The McKinney-Vento Act authorizes the provision of rent, mortgage, 
and utility assistance after 2 months of nonpayment, in order to 
prevent eviction, foreclosure, or loss of utility service as an 
eligible activity. The 2 months of nonpayment period required under 
Sec.  579.202 is established by section 491(b)(1)(A) of the McKinney-
Vento Act. Under Sec.  579.202, this assistance can be provided to a 
program participant for a period of up to 12

[[Page 18732]]

months, including payments for arrears. The 12-month period is separate 
for each activity, so a household could receive a cumulative amount of 
12 months of both rent and utility assistance. This 12-month time 
period was established as a reasonable period of time to stabilize 
individuals and families at risk of homelessness. Following the 12-
month period of assistance, program participants who still need 
assistance may qualify for rental assistance for transitional or 
permanent rental housing.
Relocation Assistance (Sec.  579.204)
    Section 579.204 provides that security deposits, rent for the first 
month at a new location, and relocation assistance are costs eligible 
for funding. Relocation assistance under Sec.  579.204 differs from 
moving services under Sec.  579.222(b)(12) because relocation 
assistance allows funds to be used to move a participant out of the 
county for employment, education, or family reunification purposes, 
whereas moving services are limited to moving costs of moves within the 
rural county.
    The intent of this activity is not to provide assistance to 
recipients to encourage persons to move out of a county. Instead, HUD 
recognizes that many of these communities lack job opportunities and 
other resources that would otherwise enable eligible program 
participants to improve their ability to afford stable housing. 
Accordingly, recipients must also ensure that, upon relocation, program 
participants have access to supportive services that may be necessary 
to continue the program participant's movement towards self-
sufficiency. Recipients may assist program participants with expenses 
associated with moving outside of the county when one of the following 
criteria applies: Employment has been secured, an educational 
opportunity has been offered, or the program participant would be able 
to reunite with family members, but the program participant lacks the 
resources to move on their own. Recipients may not provide relocation 
assistance unless employment, an educational opportunity, or family 
reunification can be verified.
Short-Term Emergency Lodging (Sec.  579.206)
    Section 579.206 provides that recipients may provide short-term 
emergency lodging to program participants in either hotels, motels, or 
an existing emergency shelter. HUD defines ``short-term'' for this 
activity as 3 months to maintain consistency with the other homeless 
assistance and homeless prevention programs under this title of the 
McKinney-Vento Act. However, recipients may extend this assistance on a 
month-to-month basis when, upon re-assessment at the end of the 3 month 
period, it is determined that additional assistance is required because 
there are no other housing resources available to the program 
participant, and the program participant is still considered either at 
risk of homelessness or in a worst housing situation. When a program 
participant is first assessed, if it is determined that more long-term 
housing would be necessary, a recipient must make all efforts to secure 
permanent housing before serving the program participant under this 
activity.
    HUD notes that under no circumstances should program funds be used 
to replace or substitute existing resources of a facility to pay for 
beds that are already in place. Instead, funds under this activity may 
be used only to increase the capacity of the shelter by adding new, 
temporary beds that will be removed once the household being served 
leaves. It should also be noted that program funds should only be used 
to increase the number of beds in an existing shelter when doing so 
does not violate any local codes or laws.
    Section 579.206 provides an exception to the limit on duration, and 
program participants may request that HUD apply the exception. 
Specifically, Sec.  579.206 provides that an exception to the limit on 
duration may be available when there are more than 25 percent of 
program participants receiving short-term emergency lodging beyond the 
3 month limit, but the recipient must submit a request to HUD apply the 
exception. The request must describe the conditions that justify an 
exception, including an assessment of alternative housing sources and 
the particular needs of the program participants.
New Construction (Sec.  579.208)
    Section 491(b)(1)(D) of the McKinney-Vento Act also authorizes the 
new construction of housing units to provide transitional or permanent 
housing as an eligible activity. New construction is available to 
assist participants that are either homeless or at risk of 
homelessness, but is not available to those in the worst housing 
situations. Under Sec.  579.208, recipients are required to demonstrate 
that costs of new construction of a building or structure are 
substantially less than the costs of rehabilitation of an existing 
building or structure or to demonstrate that there is a lack of 
available appropriate units that could be rehabilitated at a cost less 
than new construction. The intent of this requirement is to ensure that 
funds are used in an effective manner and are not expended on new 
construction unless the recipient demonstrates that doing so is 
financially feasible.
    Eligible new construction costs include the site improvement costs, 
staff and overhead costs, and related reasonable and necessary soft 
costs such as architectural, engineering, or professional services; 
permitting; and environmental review requirements under 24 CFR part 50. 
The eligible costs are intended to cover the costs for planning the new 
construction, as well as the actual costs of construction. However, new 
construction funds may not be used to fund leased property.
Acquisition (Sec.  579.210)
    Section 579.210 provides that funds may be used to pay up to 100 
percent of the costs of acquisition of real property to provide 
supportive services, or transitional or permanent rental housing, for 
program participants who are homeless or at risk of homelessness, but 
is not available to those in the worst housing situations. Eligible 
costs include staff and overhead costs and related reasonable and 
necessary soft costs, such as architectural, engineering, or 
professional services; permitting; and environmental review requirement 
costs under 24 CFR part 50.
Rehabilitation (Sec.  579.212)
    Section 579.212 provides that funds may be used to pay up to 100 
percent of the costs of rehabilitation of structures to provide 
supportive services or transitional or permanent rental housing for 
program participants who are homeless or at risk of homelessness, but 
is not available to those in the worst housing situations. Eligible 
costs include, cost-effective energy measure installation, State and 
local government health and safety standard compliance costs, staff and 
overhead costs, and related reasonable and necessary soft costs, but 
exclude rehabilitation costs on leased property.
Leasing (Sec.  579.214)
    Section 579.214 provides that funds may be used to pay for 100 
percent of the costs of leasing a property, or portions of a property, 
to provide individuals and families who are homeless or at risk of 
homelessness with transitional housing, permanent housing, or 
supportive services. While recipients generally may not use funds to 
lease units or structures owned by the recipient, subrecipients, parent 
organizations, related organizations, or partnerships in which the 
recipient is a

[[Page 18733]]

member, HUD may grant an exception if the recipient demonstrates that 
doing so is in the best interest of the program, that leasing charges 
to be paid by grant funds are reasonable, and that it has written 
policies and procedures in place governing recusals and disputes 
between landlords and tenants.
    Funds used for leasing may be used to pay rent reasonable in 
relation to rent being charged for comparable space in the area, not to 
exceed HUD-determined fair market rents; utilities such as gas, 
electricity, and water; security deposits; and an advance of first and 
last months' rents.
    In addition, recipients and subrecipients are not required to make 
program participants pay an occupancy charge. If occupancy charges are 
imposed, the amounts charged may not exceed the highest of 30 percent 
of a family's monthly adjusted income, 10 percent of a family's monthly 
income, or the portion of welfare assistance from a public agency 
specifically designated for housing costs. Consistent with the 
Continuum of Care program, this proposed rule provides that income must 
be calculated in accordance with HUD's regulations in 24 CFR 5.609, 
which address annual income, and 24 CFR 5.611(a), which address 
adjusted income. Section 579.214 specifies that recipients and 
subrecipients may not charge program fees for housing or supportive 
services in excess of the income limitations set forth in the 
aforementioned regulations. Further, recipients must avoid leasing 
buildings that do not comply with Federal physical accessibility 
requirements.
Rental Assistance (Sec.  579.216)
    Section 579.216 provides that rental assistance is an eligible cost 
for permanent and transitional housing, and this rule clarifies that 
short-term, medium-term, and long-term rental assistance are eligible 
costs under the RHSP. Short-term includes rental assistance up to 3 
months; medium-term includes rental assistance for 3 to 24 months; and 
long-term includes rental assistance for longer than 24 months of rent. 
The durations for short-term, medium-term, and long-term rental 
assistance were established to maintain consistency with the other 
homeless assistance and homeless prevention programs under this title 
of the McKinney-Vento Act. This section also provides that rental 
assistance may include tenant-based or project-based rental assistance. 
Eligible rental assistance costs also include security deposits, in an 
amount not to exceed 2 months of rent, and rental application fees.
    Tenant-based rental assistance allows the program participant 
(individuals or families) to choose rental housing of an appropriate 
size in which to reside. Section 579.216 would limit this retention to 
within the county boundaries. Under Sec.  579.216, the only exception 
to the limitation for retention of tenant-based rental assistance is 
for program participants who are victims of domestic violence, dating 
violence, sexual assault, or stalking. These participants must have 
complied with all other obligations of the program and reasonably 
believe that he or she is imminently threatened by harm from further 
violence if he or she remains in the assisted dwelling unit.
    In Sec.  579.216, HUD clarifies that the imminent threat of harm 
must be from further domestic violence, dating violence, sexual 
assault, or stalking, which would include threats from a third party, 
such as a friend or family member of the perpetrator of the violence. 
HUD would require that the program participant provide appropriate 
documentation of the original incident of domestic violence, dating 
violence, sexual assault, or stalking, and any evidence of the current 
imminent threat of harm. Examples of appropriate documentation of the 
original incident of domestic violence, dating violence, sexual 
assault, or stalking include written observation by the housing or 
service provider; a letter or other documentation from a victim 
services provider, social worker, legal assistance provider, pastoral 
counselor, mental health provider, or other professional from whom the 
victim has sought assistance; medical or dental records; court records; 
or law enforcement records.
    Documentation of reasonable belief of further domestic violence, 
dating violence, sexual assault, or stalking may be done by written 
observation by the housing or service provider; a letter or other 
documentation from a victim service provider, social worker, legal 
assistance provider, pastoral counselor, mental health provider, or 
other professional from whom the victim has requested assistance; 
medical or dental records; current restraining order, recent court 
order or other court records; or law enforcement reports or records. 
The housing or service provider may also consider other documentation 
such as emails, voicemails, text messages, social media posts, and 
other communication from the perpetrator. Because of the particular 
safety concerns surrounding victims of domestic violence, the proposed 
rule would provide that acceptable evidence for both the original 
violence and the reasonable belief include an oral statement. This oral 
statement does not need to be verified, but it must be documented by a 
written certification by the individual or head of household.
    This provision is specific to victims of domestic violence, dating 
violence, sexual assault, and stalking who are receiving tenant-based 
rental assistance in permanent housing. This proposed rule contains 
other policies for moving program participants receiving any type of 
assistance under this rule, including tenant-based rental assistance, 
within the rural county required by the provider to coordinate service 
delivery. Moving program participants outside of the geographic area 
where providers can coordinate service delivery is administratively 
difficult for providers and makes it difficult to monitor that program 
participants have access to, and are receiving, appropriate supportive 
services; therefore, moves outside of the geographic area where the 
provider can effectively deliver and monitor service coordination are 
allowed only in exceptional circumstances. HUD has established these 
provisions to provide an exception and to address the challenges that 
are associated with such a move.
    Project-based rental assistance provides grants for rental 
assistance to recipients who will make payments to the owner of an 
existing structure, where the owner agrees to lease subsidized units to 
program participants.
    Under the proposed RHSP regulations, HUD would only provide rental 
assistance for a unit if the rent is reasonable in relation to rents 
being charged for comparable unassisted units, considering the 
location, size, type, quality, amenities, facilities, management, and 
maintenance of each unit, and not exceeding rents currently charged by 
the same owner for comparable unassisted units.
    Section 579.216 specifies that if a unit that is assisted under 
this program is vacated prior to the expiration of a lease, assistance 
for the unit may continue for a maximum period of 30 days from the end 
of the month in which the unit is vacated unless the unit is occupied 
by another person in the meantime. Assistance may resume once the unit 
is occupied by an eligible program participant. To be consistent with 
the Continuum of Care program rule and longstanding policy with the 
Shelter Plus Care program, in particular, periods of stay in 
institutions that are less than a period of 90 days for each occurrence 
are not considered vacancies for purposes of this section of the rule. 
This section retains available rental

[[Page 18734]]

assistance for program participants who enter institutions for short 
periods of time.
Operating Costs (Sec.  579.218)
    Under Sec.  579.218, recipients may use grant funds to pay the 
costs of day-to-day operation of transitional and permanent rental 
housing. Recipients may not use grant funds to pay for the operating 
costs of a project that is receiving funds under this program for 
rental assistance at the same time. Grant funds may not be used for 
operating costs of emergency shelters and of supportive service-only 
facilities because operating costs for such facilities are not 
authorized for this program under the McKinney-Vento Act, as amended by 
the HEARTH Act.
Rehabilitation and Repairs of Participant-Owned Housing (Sec.  579.220)
    Section 491(b)(1)(I) of the McKinney-Vento Act provides that funds 
may be used for rehabilitation and repairs to make premises habitable. 
As rehabilitation and operating costs for rental housing are already 
eligible under other activities, Sec.  579.220 clarifies that this 
activity is intended to assist those eligible individuals and families 
who are in the worst housing situations, which is defined as housing 
that has serious health and safety defects and has at least one major 
system that has failed or is failing, including: structural support, 
roofing, cladding, weatherproofing, plumbing, electrical, heating, 
ventilation, and air conditioning. Eligible costs include costs of 
repairing, rehabilitating, or replacing major systems that have failed 
or are failing, and such repairs must meet all applicable laws, 
ordinances, and codes for the county.
    HUD recognizes the importance of preserving existing housing stock 
as well as increasing new permanent housing opportunities. In many 
rural counties, the existing housing stock is old and often 
uninhabitable. To ensure that this activity is only used to assist 
households living in the worst housing situations, as defined, Sec.  
579.220 further clarifies that in order to receive assistance through 
this activity, a household must have a total household income at 50 
percent area median income (AMI) or below. A household must also own 
the housing and must reside in it as their primary place of residence.
    Section 579.220 also specifies that a program participant that 
receives assistance under this activity would be required to enter into 
a written repayment agreement with the recipients or subrecipient that 
requires the program participant to remain in the residence for a 
period of no less than 3 years. Should the program participants move 
prior to the 3-year period, they may be required to repay the amount of 
grant funds used for the improvements, in accordance with the repayment 
agreement. The purpose of this requirement is to ensure that grant 
funds are not misused and that funds used for this activity will 
benefit program participants for a period of at least 3 years.
Supportive Services (Sec.  579.222)
    Section 491(b)(1)(J) of the McKinney-Vento Act allows for funds to 
be used to pay for the development and delivery of comprehensive and 
coordinated supportive services that use and supplement, as needed, 
community networks of services. Under Sec.  579.222, the supportive 
service activities listed in the statute are clarified, defined, and in 
some cases, consolidated where appropriate. All eligible costs are 
eligible to the same extent for program participants who are 
unaccompanied homeless youth, persons living with Human 
Immunodeficiency Virus (HIV)/Acquired Immune Deficiency Syndrome (AIDS) 
(HIV/AIDS), and victims of domestic violence, dating violence, sexual 
assault, or stalking, as they are for other program participants. The 
supportive service activities named as eligible costs in the proposed 
rule are budgeting, case management, child care, education services, 
emergency food and clothing, employment assistance and job training, 
health related services, housing search and counseling services, 
referrals to legal services, life skills training, mental health 
services, moving services, outreach services, substance abuse treatment 
services, and transportation. Specifically, the following supportive 
service activities do not appear in the proposed RHSP regulations in 
the supportive services section: victim services, entitlement 
assistance, and referrals to veterans' services. Each of these 
activities is covered under the case management activity and therefore 
does not need to be listed separately. It should also be noted, that 
the eligible costs of each supportive service activity are not all-
inclusive. Instead, under Sec.  579.222, the activities are intended to 
be examples of the types of services that will be eligible. Further 
guidance on these costs will be issued in notices or guidance 
materials.
Use of Federal Inventory Property (Sec.  579.224)
    Section 579.224 addresses using former Federally-owned property, 
obtained through two property disposition programs, in connection with 
this program. Title V of the McKinney-Vento Act makes excess and 
surplus Federal real property available to State and local governments 
and private nonprofit organizations at no cost for use to assist the 
homeless. The Single Family Property Disposition Program (section 
204(g) of the National Housing Act, 12 U.S.C. 1710(g)) makes properties 
acquired by the Federal Housing Administration (FHA) through 
foreclosure of an insured or Secretary-held mortgage or loan under the 
National Housing Act available to government entities and nonprofit 
organizations at a discount through a lottery system. Section 579.224 
would make eligible costs that HUD has determined are not covered in 
other sections of subpart C and are unique to using property formerly 
owned by the Federal Government and made available through one of the 
two programs listed in the McKinney-Vento Act.
    Specific Solicitation of Comment. HUD is especially interested in 
receiving comments from entities with experience developing property 
obtained through these disposition programs as to other unique costs 
encountered when using this former Federally owned property to assist 
homeless persons.
Capacity Building (Sec.  579.226)
    Section 491(b)(2) of the McKinney-Vento Act allows for up to 20 
percent of grant funds to be used to pay for capacity building 
activities. Under Sec.  579.226, capacity building activities are 
defined as those activities that assist recipient personnel to maintain 
or improve the skills necessary to strengthen the capability of 
recipients to deliver housing and supportive services to program 
participants and to administer grants under this program. Eligible 
capacity building activities may include costs such as salaries, wages, 
other employee compensation and benefits, employee education, training, 
travel, and staff retention.
Data Collection Costs (Sec.  579.228)
    Section 579.228 proposes the data collection requirements of the 
RHSP. The data collection system can be through an existing Homeless 
Management Information System (HMIS) or a comparable data collection 
system. The data collection system, whether an HMIS or a comparable 
data collection system, must still conform with HUD's data collection 
requirements as established by notice. Data collection costs of 
participating in a HMIS are eligible, but a recipient is not required 
to create and implement a

[[Page 18735]]

new HMIS. However, recipients will be required to choose an existing 
HMIS, in a CoC in the recipient's State that voluntarily accepts the 
recipient's participation in which to participate and contribute data. 
Where a recipient or subrecipient cannot obtain approval from a CoC to 
contribute data to an existing HMIS, a recipient or subrecipient may 
use program funds to pay the cost of establishing their own comparable 
data collection system that meets minimum standards established by HUD 
in Notice. Eligible costs of contributing data to an HMIS include 
purchasing or leasing computer hardware, purchasing software, 
purchasing equipment, obtaining technical support, leasing office 
space, and paying other costs of operating HMIS, including salaries, 
travel, and participation fees. If a recipient or subrecipient elects 
to use HMIS, victim service providers will not enter their data into 
the HMIS but must still collect data in a comparable database and be 
able to provide the aggregated data to the recipient for the purpose of 
reporting.
    In addition, under Sec.  579.228, during the grant period, all 
recipients must participate in or plan for and conduct a point-in-time 
count of sheltered and unsheltered homeless persons within the county 
within the last 10 days of January, or as otherwise determined by HUD. 
Recipients may choose to participate with an adjacent Continuum of Care 
for their point-in-time process in order to take advantage of an 
adjacent Continuum of Care's planning and evaluation process. 
Recipients must also conduct an annual housing inventory survey and 
report their data in accordance with a manner prescribed by HUD, during 
the grant period. Actual costs of conducting the count and the survey 
are allowable administrative costs. Recipients may also choose to 
participate with an adjacent Continuum of Care for their housing 
inventory count process in order to take advantage of an adjacent 
Continuum of Care's planning and evaluation process. If recipients are 
participating in an adjacent Continuum of Care's point-in-time count 
and the recipient wants to participate with a Continuum of Care to 
conduct its housing inventory count, it must participate with the same 
Continuum of Care for both the point-in-time and the housing inventory 
count.
Administrative Costs (Sec.  579.230)
    Section 579.230 authorizes the use of funds for administrative 
costs. Recipients will be permitted to use up to 7.5 percent of funds 
awarded for administrative costs. If the recipient is using a 
subrecipient to operate a project, the recipient must provide at least 
50 percent of administrative funds to the subrecipient(s). It is HUD's 
experience that subrecipients historically incur costs at the same rate 
as recipients and therefore should receive funds. Administrative costs 
are costs that are associated with carrying out the grant, such as 
accounting for the use of funds, preparing an abbreviated consolidated 
plan, and preparing reports related to the grant. These are not 
capacity building activities as these costs are specific to 
administering the grant. HUD has determined that the 7.5 percent cap is 
reasonable because it ensures that recipients have some flexibility to 
use grant funds to pay for costs incurred as a result of administering 
a grant under this program.
Indirect Costs (Sec.  579.232)
    Section 579.232 provides that program funds may be used to pay 
indirect costs in accordance with Office of Management and Budget (OMB) 
Circulars A-87 or A-122, as applicable. These circulars are referred to 
as grant management circulars. Circular A-87 is entitled ``Cost 
Principles for States, Local, and Indian Tribal Governments.'' Circular 
A-122 is entitled ``Cost Principles for Non-Profit Organizations.'' The 
provisions of these cost principle circulars are codified in the 
government wide regulations found at 2 CFR part 225, and 2 CFR part 
230, respectively.

Grant Selection and Award Process (Subpart D)

    Subpart D sets forth the selection criteria that HUD will use to 
make awards under this program. It also outlines the funding priorities 
that HUD will give when making awards, and describes the grant award 
process.
Selection Criteria (Sec.  579.300)
    Section 579.300 provides that HUD will award funds to recipients 
through a national competition based on seven selection criteria, 
including the participation of potential program beneficiaries of the 
grant in assessing the need for, and importance of, the grant in the 
county; the degree to which the grant addresses the worst housing 
situations present in the county; the degree of collaboration with 
others in the county to meet the goals described in Sec.  579.1; the 
performance of the applicant in improving housing situations, taking 
account of the severity of the barriers of individuals and families 
served by the applicant; for applicants that have previously received 
funding under this part, the extent in which the county has 
successfully demonstrated high levels of performance since such funding 
began, as determined by HUD; the need for such funds, as determined by 
the formula established under section 427(b)(2) of the McKinney-Vento 
Act; and any other relevant criteria as determined by HUD.
Selection Priorities (Sec.  579.302)
    HUD will make selection of awards according to section 491(c) of 
the McKinney-Vento Act. The McKinney-Vento Act sets forth that not less 
than 50 percent of the total funds awarded shall be for recipients 
serving communities with populations of less than 10,000. As discussed 
earlier in this preamble, the RHSP regulations define ``rural area'' 
and ``rural community'' as a ``county.'' Therefore, the total 
population of an eligible county would have to be less than 10,000 in 
order to benefit from this funding priority. Further, within this set-
aside, priority must be given to recipients serving counties with 
populations of less than 5,000. An eligible county would need to have a 
total population of less than 5,000 in order to benefit from this 
funding priority.
    The McKinney-Vento Act also requires that priority be given to 
eligible recipients serving communities not currently receiving 
significant Federal assistance under the McKinney-Vento Act. Section 
579.302 interprets this as giving priority to eligible counties that 
are not currently receiving any grants under 24 CFR part 576 (the 
regulations for the Emergency Solutions Grant program) and part 578 
(the regulations for the Continuum of Care program). This is consistent 
with HUD's desire to use this program to reach those rural counties 
that may not be receiving assistance under the Emergency Solutions 
Grants program and the Continuum of Care program.
    Finally, the McKinney-Vento Act limits the total percentage of 
program funds awarded in a fiscal year to recipients within a single 
State to 10 percent of the total funds awarded under this program.
Grant Award Process (Sec.  579.304)
    Section 579.304 provides that a recipient of a conditionally 
awarded grant must satisfy all requirements for obligation of funds or 
HUD will withdraw its offer of the award. However, HUD may execute a 
grant agreement before the recipient meets all conditions precedent but 
the funds may only be spent on capacity building, supportive services 
to sites not operated

[[Page 18736]]

by the recipient or subrecipient, or HMIS eligible costs, until the 
conditions are met. If an applicant expends funds for capacity 
building, supportive services to sites not operated by the recipient or 
subrecipient, or HMIS and fails to subsequently meet the conditions 
precedent for the other activities, HUD may recapture the applicant's 
grant funds. The recipient's requirements for obligation of funds are 
satisfied through the initial provision of housing and services to 
eligible program participants and/or executing a contract with a 
subrecipient to provide housing and services under the grant.
    Consistent with section 491(l) of the McKinney-Vento Act, 
recipients will have 2 years to obligate the grant funds. A recipient's 
grant funds awarded in a recipient's fiscal year that remain 
unobligated at the end of the recipient's fiscal year shall remain 
available to the recipient, for the purposes for which the funds were 
awarded, for the recipient's next fiscal year. All grant funds must be 
obligated by the recipient by the end of the recipient's second fiscal 
year. Any funds that remain unobligated after the recipient's second 
fiscal year will be recaptured by HUD. All funds must be spent by 
recipients by the end of the grant term. A conditional grant must 
document match requirements, comply with environmental review under 
Sec.  579.106, document financial feasibility, and correct any and all 
issues and conditions that may have been attached to the grant award. 
Recipients of grant funds must comply with the timeliness standards 
established in Sec.  579.414.
    HUD would require the recipient to enter into the agreement 
described in Sec.  579.304. Under this agreement, the grant recipient 
must agree to ensure that the operation of the project will be in 
accordance with the McKinney-Vento Act and the requirements of this 
program. In addition, the grant recipient must monitor and report the 
progress of the grant to HUD. The grant recipient must comply with 
requirements of section 491(d)(6) of the McKinney-Vento Act, maintain 
confidentiality of program participants, monitor compliance, and submit 
performance reports to HUD annually.

Program Requirements (Subpart E)

    Subpart E sets forth the program requirements applicable to RHSP. 
All recipients of RHSP funding must comply with the program regulations 
under this subpart and the requirements of the NOFA issued annually by 
HUD.
Assessment of Program Participant Eligibility and Needs (Sec.  579.400)
    Section 579.400 would require recipients and subrecipients to 
conduct an initial evaluation to determine a program participant's 
eligibility for participation in the program, and to determine the 
amount and types of assistance available to the participant. HUD 
proposes to adopt this requirement to ensure that recipients and 
subrecipients only provide assistance to eligible families. In order to 
ensure fair and consistent standards for determining the amount and 
types of assistance made available to program participants, Sec.  
579.400 would also require recipients to have written standards for the 
provision of assistance, which must address any limits on the amount of 
assistance that may be received by a program participant, in addition 
to standards for determining and prioritizing assistance to eligible 
individuals and families.
    To assess the annual income of the program participants, HUD 
proposes that recipients follow the standards outlined in 24 CFR 5.609, 
with one exception. HUD will not include in its annual income 
determination the value of a program participant's principal residence 
when providing rehabilitation or repair for that housing. This 
exception would allow HUD to afford maximum flexibility for rural 
communities in addressing homelessness and worst case housing needs in 
underserved communities. The RHSP is unique because it allows funds to 
be used to repair homes. It would not be logical to count assets, 
including housing, when that is the very reason the participant is 
requesting the funding.
Matching (Sec.  579.402)
    Section 430 of the McKinney-Vento Act imposes a minimum of 25 
percent cash or in-kind match on all eligible funding costs except 
leasing. Section 579.402 would also exclude data collection and 
administrative costs from this requirement. For in-kind match, the 
government-wide grant requirements of HUD's regulations in 24 CFR 84.23 
(for nonprofit organizations) and 85.24 (for governments) apply. The 25 
percent match requirement is calculated on the total grant amount. All 
match funds must be spent on eligible activities under this program. 
Match funds from cash resources must be provided to the project by the 
recipient, the Federal government, State and local government, or 
private resources. A recipient may use funds from any source, including 
any other Federal sources (excluding RHSP funding), as well as State, 
local, and private sources, provided that funds from the source are not 
statutorily prohibited to be used as a match. For match funds from in-
kind contributions, before grant execution, services to be provided by 
a third party must be documented by a memorandum of understanding (MOU) 
or a memorandum of agreement (MOA) between the recipient or 
subrecipient and the third party who will provide the services.
General Operation (Sec.  579.404)
    Section 579.404 would provide that recipients of grant funds must 
provide housing or services that comply with all applicable State and 
local housing codes, Federal physical accessibility requirements, 
licensing requirements, and any other requirements in the project's 
jurisdiction. For leasing, rental assistance, and operating costs, if a 
unit fails the housing quality standards (HQS) inspection, the owner 
must correct all failed items within 30 days from the date of the lease 
agreement to receive assistance under this part. In addition, Sec.  
579.404 would clarify that recipients must abide by housing quality 
standards and suitable dwelling standards. Recipients must also assess 
supportive services on an ongoing basis and abide by confidentiality 
standards.
Calculating Occupancy Charges and Rent (Sec.  579.406)
    Section 579.406 would provide that occupancy charges collected from 
program participants are considered program income under the RHSP 
regulations and must be retained by the recipient and added to funds 
committed by HUD to fulfill project and program objectives under this 
part. Additionally, the amount of rental assistance awarded will be 
based on the number and size of units proposed by the applicant to be 
assisted over the grant period.
Limitation on Transitional Housing (Sec.  579.408)
    Section 579.408 specifies that program participants may remain in 
transitional housing for a period longer than 24 months if permanent 
housing cannot be located, or if the participant requires additional 
time to prepare for independent living. This would allow program 
participants in these circumstances to continue to receive assistance 
while they seek permanent housing. HUD reserves the authority to 
discontinue assistance to transitional housing projects where more than 
half of program participants remain in a project for a period longer 
than 24 months.

[[Page 18737]]

Term of Commitment; Repayment of Grants; Prevention of Undue Benefits 
(Sec.  579.410)
    Section 579.410 would require that recipients and subrecipients 
receiving grant funds for acquisition, rehabilitation, or new 
construction for rental housing or a facility must operate the housing, 
or provide supportive services in accordance with programmatic 
requirements, for a term of at least 15 years. When applying for funds, 
applicants seeking funding for acquisition, rehabilitation, or new 
construction of permanent housing must also provide a sustainability 
plan that outlines how a proposed project will continue to operate 
after the expiration of the grant term. Section 579.410 would also 
establish repayment requirements when recipients fail to comply with 
these requirements.
    While grant terms under this program will expire, HUD has 
determined that it is in the best interest of the program to ensure 
that recipients develop a plan to continue to operate an assisted 
project in accordance with the requirements of this part for a period 
of time beyond the expiration of a grant period. Where funds are used 
for acquisition, rehabilitation, or new construction, HUD expects 
recipients to ensure the continued operation or support of projects, 
for the benefit of program participants, beyond the grant period.
Displacement, Relocation, and Acquisition (Sec.  579.412)
    Section 579.412 would provide that recipients and subrecipients 
must assure that they have taken all reasonable steps to minimize the 
displacement of persons as a result of housing assisted under this 
part. This section provides a definition of ``displaced person'' and 
provides that a displaced person must be provided relocation assistance 
in accordance with the requirements of the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 
U.S.C. 4601-4655) and implementing regulations at 49 CFR part 24. This 
section further provides that a displaced person must be advised of his 
or her rights under the Fair Housing Act and, if the comparable 
replacement dwelling used to establish the amount of replacement 
housing payment to be provided to a minority person is located in an 
area of minority concentration, the minority person must be given, if 
possible, referrals to decent, safe, and sanitary replacement dwellings 
not located in such areas that are within their financial means. (See 
49 CFR 24.205(c)(2)(ii)(D)). This section also addresses the process of 
initiating negotiations where the displacement is a result of privately 
undertaken rehabilitation, demolition, or acquisition of real property. 
This section also provides that a person may appeal a determination by 
the recipient or subrecipient regarding whether a person qualifies as a 
displaced person.
Timeliness Standards (Sec.  579.414)
    Under Sec.  579.414, recipients would be required to adhere to all 
timeliness standards pertaining to obligation of funds. All funds must 
be obligated by the end of a recipient's second fiscal year. HUD 
reserves the authority to withdraw grant awards if an applicant fails 
to correct all issues, or comply with conditions attached to an award, 
within a certain period of time.
Limitations on Use of Funds (Sec.  579.416)
    Section 579.416 would provide that no assistance provided under the 
RHSP or by any State or local government funds used to supplement this 
assistance will be awarded for, or may be used to replace State or 
local funds previously used, or designated for use, to assist persons 
who are homeless, at risk of homelessness, or in the worst housing 
situations. This limitation is consistent with the Continuum of Care 
program and prevents RHSP funds from supplanting existing funds. 
Additionally, this regulatory section would provide that recipients and 
subrecipients may not charge fees to program participants.
    The limitation on the use of funds also addresses limitation on 
uses where religious activities may be concerned. It is HUD's position 
that faith-based organizations are able to compete for HUD funds and 
participate in HUD programs on an equal footing with other 
organizations; that no group of applicants completing for HUD funds 
should be subject, as a matter of discretion, to greater or fewer 
requirements than other organizations solely because of their religious 
character or affiliation, or, alternatively, the absence of religious 
character or affiliation. HUD's general principles regarding the equal 
participation of such organizations in its programs are codified at 24 
CFR 5.109. Program specific requirements governing faith-based 
activities are codified in the regulations for the individual HUD 
programs. (See, for example, 24 CFR 574.300(c), 24 CFR 582.115(c), 24 
CFR 583.150(b).)
    HUD's equal participation regulations were prompted by Executive 
Order 13279, Equal Protection of the Laws for Faith-Based and Community 
Organizations, issued by President Bush on December 12, 2002, and 
published in the Federal Register on December 16, 2002 (67 FR 77141). 
Executive Order 13279 set forth principles and policymaking criteria to 
guide Federal agencies in ensuring the equal protection of the laws for 
faith-based and community organizations. Executive Order 13279 was 
amended by Executive Order 13559 (Fundamental Principles and 
Policymaking Criteria for Partnerships With Faith-Based and Other 
Neighborhood Organizations), issued by President Obama on November 17, 
2010, and published in the Federal Register on November 22, 2010 (75 FR 
71319).
    Executive Order 13559 expands on the equal participation principles 
provided in Executive Order 13279 to strengthen the capacity of faith-
based and other neighborhood organizations to deliver services 
effectively and ensure the equal treatment of program beneficiaries. 
Executive Order 13559 reiterates a key principle underlying 
participation of faith-based organizations in federally funded 
activities and that is that faith-based organizations be eligible to 
compete for Federal financial assistance used to support social service 
programs and to participate fully in social service programs supported 
with Federal financial assistance without impairing their independence, 
autonomy, expression outside the programs in question, or religious 
character.
    With respect to program beneficiaries, the Executive Order states 
that organizations, in providing services supported in whole or in part 
with Federal financial assistance, and in their outreach activities 
related to such services, should not be allowed to discriminate against 
current or prospective program beneficiaries on the basis of religion, 
a religious belief, a refusal to hold a religious belief, or a refusal 
to attend or participate in a religious practice. The Executive Order 
directs that organizations that engage in explicitly religious 
activities (including activities that involve overt religious content 
such as worship, religious instruction, or proselytization) must 
perform such activities and offer such services outside of programs 
that are supported with direct Federal financial assistance (including 
through prime awards or subawards), separately in time or location from 
any such programs or services supported with direct Federal financial 
assistance, and participation in any such explicitly religious 
activities must be voluntary for the beneficiaries of the social 
service program supported with such Federal

[[Page 18738]]

financial assistance. For purposes of greater clarity and 
comprehensibility, the Executive Order uses the term ``explicitly 
religious'' in lieu of ``inherently religious.'' The Executive Order 
further directs that if a beneficiary or prospective beneficiary of a 
social service program supported by Federal financial assistance 
objects to the religious character of an organization that provides 
services under the program, that organization, within a reasonable time 
after the date of the objection, shall refer the beneficiary to an 
alternative provider.
    Executive Order 13559 provides for the establishment of an 
Interagency Working Group on Faith-Based and Other Neighborhood 
Partnerships (Working Group) to review and evaluate existing 
regulations, guidance documents, and policies, and directs the OMB to 
issue guidance to agencies on uniform implementation following receipt 
of the Working Group's report. On April 27, 2012, the Working Group 
issued its report, recommending a model set of regulations and guidance 
for agencies to adopt.
    HUD intends to wait for OMB guidance before initiating any 
rulemaking directed to broader changes to HUD's existing faith-based 
regulations to ensure consistency with faith-based regulations of other 
Federal agencies. However, in this rule, HUD has proposed revisions to 
its regulatory provisions governing faith-based activities to 
incorporate the principles of Executive Order 13559 pertaining to equal 
treatment of program beneficiaries and to adopt terminology, such as 
``explicitly religious'' and ``overt religious content,'' that offers 
greater clarity to the limitations placed on faith-based organizations 
when using Federal funds for their supportive services.
    Executive Order 13559 also provides that if a beneficiary or 
prospective beneficiary of a social service program supported by 
Federal financial assistance objects to the religious character of an 
organization that provides services under the program, that 
organization, shall, within a reasonable time after the date of the 
objection, refer the beneficiary to an alternative provider. HUD has 
proposed language in the rule to reflect the option of referral to an 
alternative provider. As to how this option specifically will be 
implemented in rural America, HUD anticipates that based on public 
comment, as well as forthcoming OMB guidance and the recommendations of 
the Working Group, HUD will be able to fully address and implement this 
provision at the final rule stage.
Termination of Assistance to Participants (Sec.  579.418)
    Section 579.418 would provide that a recipient may terminate 
assistance to a program participant who violates program requirements 
or conditions of occupancy. The recipient must provide a formal process 
that affords program participants due process of law. As recipients 
develop their formal due process policies they should consider the 
specific conditions and needs of the project's target subpopulation and 
develop policies and procedures accordingly. Recipients may resume 
assistance to a participant whose assistance has been terminated.
    For example, recipients that target persons fleeing or attempting 
to flee domestic violence, dating violence, sexual assault, or stalking 
should consider the unique needs of this subpopulation, including 
safety risks that might arise as a result of terminating assistance and 
what violations are serious enough to warrant such risks. Additionally, 
recipients should consider including in the formal due process policies 
a requirement that recipients make the appropriate referrals or take 
other measures to ensure the safety of the program participants who are 
being terminated from the program.
    Recipients that are providing permanent housing for hard-to-house 
populations of homeless persons (e.g., persons with multiple disabling 
conditions) must exercise judgment and examine all circumstances in 
determining whether termination is appropriate. Under Sec.  579.418, 
HUD has determined that a participant's assistance should be terminated 
only in the most severe cases.
Conflicts of Interest (Sec.  579.420)
    Section 579.420 addresses organizational and individual conflicts 
of interest. With respect to organizational conflicts of interest, this 
section would provide that the provision of any type or amount of 
assistance under the RHSP may not be conditioned on an individual's or 
family's acceptance or occupancy of housing owned by the recipient, 
subrecipient, or a parent or subsidiary of the subrecipient. This 
section further provides that no subrecipient, or parent or subsidiary 
of a subrecipient, may, with respect to individuals or families 
occupying housing that the subrecipient, or any parent or subsidiary of 
the subrecipient, owns, carry out the intake assessment. With respect 
to individual conflicts of interest, this section provides that for the 
procurement of goods and services, the recipient and its subrecipients 
must comply with the codes of conduct and conflict of interest 
requirements under 24 CFR 85.36 (for governments) and 24 CFR 84.42 (for 
private nonprofit organizations), and sets out the requirements for all 
other transactions and activities.
Program Income (Sec.  579.422)
    Section 579.422 defines program income as income received by the 
recipient or subrecipient directly from a grant-supported activity or 
earned as a result of the grant agreement. Program income would be 
allowable to further eligible project and RHSP activities.
Applicability of Other Federal Requirements (Sec.  579.424)
    Section 579.424 would provide the cross-cutting Federal 
requirements to which recipients and subrecipients of RHSP funding must 
comply. These requirements would include compliance with such Federal 
requirements as the Coastal Barriers Resources Act, applicable OMB 
Circulars, Lead-Based Paint regulations, audit requirements, and 
nondiscrimination and civil rights requirements. This section also 
would provide that all recipients of RHSP funds must abide by the 
limitation of use of the funds, such as use of funds for required 
religious activities.

Grant Administration (Subpart F)

Data Collection Requirements (Sec.  579.500)
    Section 579.500 would provide that recipients of RHSP funding must 
collect and report data using methods used by HUD. These methods shall 
include, at a minimum, participation in an HMIS, a point-in-time count, 
and an annual housing inventory count. These data collection methods 
are not required by the McKinney-Vento Act, however they have proven 
successful in HUD's other homeless assistance programs. Although RHSP 
is not exclusively targeting homeless persons, these tools can be used 
to count all program participants. HUD will issue guidance for 
recipients on how to implement these methods in their counties.
Technical Assistance (Sec.  579.502)
    The purpose of technical assistance provided under the RHSP is to 
increase the effectiveness with which eligible recipients develop 
projects that effectively assist program participants; improve their 
capacity to prepare funding applications; and gain access to other 
Federal resources that may be used to assist individuals and families 
who are homeless, at risk of homelessness, or are in the worst

[[Page 18739]]

housing situations in rural areas. As appropriate, HUD will provide 
technical assistance through a variety of methods to assist recipients 
with complying with requirements under this program.
Recordkeeping Requirements (Sec.  579.504)
    Section 579.504 would require each recipient receiving RHSP funds 
to provide timely reports to HUD. Each recipient would be required to 
adhere to recordkeeping requirements outlined under Sec.  579.504. 
These requirements include maintaining financial records, documenting 
eligibility status, and maintaining records concerning other Federal 
requirements.
Grant Changes (Sec.  579.506)
    Section 579.506 would provide that recipients of RHSP funds may not 
make any significant changes to the use of the funds without prior HUD 
approval, evidenced by a grant amendment signed by HUD and the 
recipient. Significant changes would include a shift in a single year 
of more than ten percent of the total amount awarded under the grant 
for one approved eligible activity to another activity. Approval of 
shifting funds between activities and changing subpopulations must be 
necessary to better serve eligible persons within the geographic area 
and ensure that the priorities established under the NOFA in which the 
grant was originally awarded continue to be met. In addition, to be 
approved, a change to the grant agreement must also be consistent with 
the recipient's HUD-approved consolidated plan or abbreviated 
consolidated plan. If an amendment would adversely impact the score the 
application received on any selection criterion used in the year in 
which the grant was awarded, HUD will disapprove the amendment. Any 
other changes to an approved grant must be fully documented in the 
recipient's or subrecipient's records.
Enforcement (Sec.  579.508)
    Through Sec.  579.50, HUD proposes to adopt enforcement procedures 
and an array of remedial actions and sanctions that draw from the 
requirements at 24 CFR 85.43 (Enforcement) and other HUD program 
regulations. HUD believes that these procedures afford recipients and 
subrecipients due process while also protecting against the misuse of 
Federal funds.
Closeout (Sec.  579.510)
    Section 579.510 would provide that grants must be closed out at the 
end of their grant term. This regulatory section specifies the actions 
that must be taken after the closeout, including recipient submission 
of financial, final performance, or other reports required by HUD 
within 90 days of the end of the grant term. HUD will prepare a 
closeout agreement in consultation with the recipient that will govern 
the terms of the closeout. Any unused funds must be deobligated and 
returned to HUD.

III. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the OMB in accordance with the 
requirements of the order. This rule was determined to be a 
``significant regulatory action'' as defined in section 3(f) of the 
Executive Order (although not an economically significant regulatory 
action, as provided under section 3(f)(1) of the Executive Order).
    As has been discussed in this preamble, this rule proposes to 
establish the regulations for the Rural Housing Stability Assistance 
program. These proposed regulations are intended to work towards the 
goal of eliminating homelessness in rural communities, by providing the 
requirements for the new Rural Housing Stability Assistance program, 
which focuses on improving homeless assistance and prevention in rural 
areas. The funds awarded under the program would go towards rehousing 
and improving the housing situations of individuals and families who 
are homeless or in the worst housing situations in the geographic area, 
stabilizing the housing of individuals and families who are at risk of 
becoming homeless, and improving the ability of the lowest-income 
residents of the community to afford stable housing.
    In addition to establishing the regulatory framework for the new 
Rural Housing Stability Assistance program, this rule also proposes to 
establish a definition for chronically homeless that includes a 
definition of homeless occasion that HUD believes better targets 
persons with the longest histories of homelessness and therefore the 
highest level of need. The definition of homeless occasion also allows 
for limited resources to be more effectively targeted, and considers 
stays in institutions of 90 days or less to be part of an episode of 
homelessness. The goal of ending chronic homelessness is not only a 
goal of HUD but of the Administration. On April 5, 2012, the U.S. 
Interagency Council on Homelessness met to review progress and 
challenges toward the goal of ending chronic homelessness. As reported 
at that meeting, based on HUD's 2011 Point-in-Time estimates for 
chronic homelessness, there has a been a 2.4 percent decline in the 
number of persons experiencing chronic homelessness. The USICH 
acknowledged that the accuracy of the count is limited by the 
difficulty of determining chronic homelessness. The USICH report, based 
on recent research on chronic homelessness in the city of Philadelphia, 
suggests that between 60 and 70 percent of all persons experiencing 
chronic homelessness meet the definition via episodes as opposed to 
being homeless continuously for one year or longer.\2\
---------------------------------------------------------------------------

    \2\ See http://www.usich.gov/population/chronic/in_focus/.
---------------------------------------------------------------------------

    Congress appropriated a total of $1,593,000,000 for the Continuum 
of Care and Rural Housing Stability Assistance programs. (See 
Consolidated and Further Continuing Appropriations Act, 2012, Public 
Law 112-55, approved November 18, 2011). As noted earlier, the 
overwhelming majority of such funding is allocated to the Continuum of 
Care program as it is an established program.
    The RHSP proposed regulations are based on and consistent with the 
regulations that are familiar to recipients that receive funding under 
other McKinney-Vento Act programs, thereby limiting burden associated 
with start-up administration of a new program. As provided under the 
``Reporting and Recordkeeping Burden'' below, HUD has estimated the 
total annual hours for all grantees to comply with the reporting and 
recordkeeping requirements of the RHSP as 202,677 hours. HUD submits 
that the limited burden is due to the fact that HUD is providing RHSP 
requirements with which HUD's homeless assistance grantees are already 
familiar.
    The docket file is available for public inspection in the 
Regulations Division, Office of the General Counsel, Room

[[Page 18740]]

10276, 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). Individuals 
with speech or hearing impairments may access this number via TTY by 
calling the, Federal Relay Service at 800-877-8339 (this is a toll-free 
number).

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 implement 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., 
eastern time, 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 Federal Relay Service at 
800-877-8339 (this is a toll-free number).

Unfunded Mandates Reform Act

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

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. This rule solely 
addresses the allocation and use of grant funds under the new McKinney-
Vento Act Rural Housing Stability Assistance program, as provided by 
the HEARTH Act amendments to the McKinney-Vento Act. The program is a 
voluntary grant program. The proposed regulations established by this 
rule track closely with the statutory requirements, which HUD has no 
discretion to alter, and, where HUD is provided discretion to establish 
requirements administratively, HUD has modeled the RHSP regulations on 
the regulations of the other HEARTH Act programs, to the extent 
consistent with the statutory requirements governing the Rural Housing 
Stability Assistance program. By modeling regulations on the 
regulations of the other HEARTH Act programs, HUD proposed to establish 
requirements, practices and procedures with which grantees are 
familiar, thereby minimizing time to become knowledgeable with the RHSP 
program. Additionally, as is the case with all the HEARTH Act programs, 
funding is provided under the RHSP for administrative costs, which 
minimizes impact for all grantees. Given the regulatory framework 
established for this program, based on statute and other HEARTH Act 
regulations, HUD has determined that this rule would not have a 
significant economic impact on a substantial number of small entities.
    Notwithstanding HUD's determination that this rule would 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.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either (1) imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (2) preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This proposed rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on State and local governments nor preempt State law 
within the meaning of the Executive Order.

Paperwork Reduction Act

    The information collection requirements contained in this proposed 
rule have been submitted to the OMB under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3520). In accordance with the Paperwork 
Reduction Act, an agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless the 
collection displays a currently valid OMB control number.
    The burden of the information collections in this proposed rule is 
estimated as follows:

                                       Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
                                                     Response
     Information collection          Number of       frequency     Total  annual   Burden  hours   Total  annual
                                    respondents      (average)       responses     per  response       hours
----------------------------------------------------------------------------------------------------------------
Sec.   579.102(a) Application                230               1             230              75          17,250
 process........................
Sec.   579.104 Subsidy layering.             230               1             230               1             230
Sec.   579.106 Environmental                 135               1             135               2             270
 review.........................
Sec.   579.208(b) New                          5               1               5             1.0               5
 construction cost comparison...
Sec.   579.214 Signed leases/              1,302               2           2,604             1.0           2,604
 occupancy agreements...........
Sec.   579.216(e) Calculating                155              16           2,480            0.75           1,860
 rental assistance amount.......
Sec.   579.216(f) Calculating                651              65          42,315            0.75          31,736
 rent reasonableness............
Sec.   579.216(k) Signed leases.             155               1             155             1.0             155
Sec.   579.220 Income                        655              65          42,315            0.75          31,736
 determination for
 rehabilitation and repairs of
 participant-owned housing......
Sec.   579.222 Supportive                  6,927               1           6,927             1.5          10,390
 services needs assessment......
Sec.   579.228(c) and (d) Point-             230               1             230              50          11,500
 in-time and housing inventory
 count participation............
Sec.   579.304 Grant agreement                50               1              50             5.0             250
 preparation and execution......
Sec.   579.400(b) Establish                  230               1             230             3.0             690
 written standards for amount
 and types of assistance........

[[Page 18741]]

 
Sec.   579.402 Documenting match             230               1             230             1.0             230
Sec.   579.404(a) State and                    5               1               5             3.0              15
 local requirements--housing
 codes..........................
Sec.   579.404(b) Property                 1,302               2           2,604             1.0           2,604
 standards......................
Sec.   579.406(b) Calculating                456              46          59,317            0.75          44,488
 occupancy charges..............
Sec.   579.406(c) Calculating                651              65          42,315            0.75          31,736
 income.........................
Sec.   579.406(d) Calculating                155              16           2,480            0.75           1,860
 resident rent..................
Sec.   579.418 Termination of                 30               1              30             4.0             120
 assistance to participants.....
Sec.   579.424(g)(3)                         230               4             920             0.5             460
 Affirmatively marketing housing
 and supportive services........
Sec.   579.504(b) Documenting                309               1             309            0.25              77
 homelessness...................
Sec.   579.504(c) Documenting at           4,751               1           4,751            0.25           1,188
 risk of homelessness...........
Sec.   579.504(d) Documenting              1,866               1           1,866            0.25             467
 worst housing situation........
Sec.   579.504(f) Documenting                 17               1              17             0.5               9
 imminent threat of harm........
Sec.   579.504(g) Documenting              6,927               6          41,562            0.25          10,391
 program participant records....
Sec.   579.504(k) Documenting                346               1             346             1.0             346
 faith-based activities.........
Sec.   579.506 Grant changes....               5               1               5             2.0              10
    Total.......................  ..............  ..............  ..............  ..............         202,677
----------------------------------------------------------------------------------------------------------------

 Total Estimated Burden Hours
    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated 
collection techniques or other forms of information technology, for 
example, permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Comments must refer 
to the proposed rule by name and docket number (FR-5573-P-01) and must 
be sent to: HUD Desk Officer, Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Email: [email protected], 
Fax: 202-395-6947 and Reports Liaison Officer, Office of the Assistant 
Secretary for Community Planning and Development, Department of Housing 
and Urban Development, 451 Seventh Street SW., Room 7233, Washington, 
DC 20410-7000.
    Interested persons may submit comments regarding the information 
collection requirements 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.

List of Subjects in 24 CFR Part 579

    Grant programs--housing and community development, rural housing, 
Homeless, Reporting and recordkeeping requirements.
    Accordingly, for the reasons stated in the preamble, HUD proposes 
to add 24 CFR part 579 to read as follows:

PART 579--RURAL HOUSING STABILITY ASSISTANCE PROGRAM

Subpart A--General
Sec.
579.1 Purpose and scope.
579.3 Definitions.
Subpart B--Application
579.100 Eligible applicants.
579.102 Application process.
579.104 Subsidy layering.
579.106 Environmental review.
Subpart C--Eligible Activities
579.200 Types and uses of assistance.
579.202 Rent, mortgage, and utility assistance.
579.204 Relocation assistance.
579.206 Short-term emergency lodging.
579.208 New construction.
579.210 Acquisition.
579.212 Rehabilitation.
579.214 Leasing.
579.216 Rental assistance.
579.218 Operating costs.
579.220 Rehabilitation and repairs of participant-owned housing.
579.222 Supportive services.
579.224 Use of Federal inventory property.
579.226 Capacity building.
579.228 Data collection costs.
579.230 Administrative costs.
579.232 Indirect costs.
Subpart D--Grant Award Process
579.300 Selection process.
579.302 Selection priorities.
579.304 Grant award process.
Subpart E--Program Requirements
579.400 Assessment of program participant eligibility and needs.
579.402 Match.
579.404 General operation.
579.406 Calculating occupancy charges and rent.
579.408 Limitation of stay in transitional housing.
579.410 Term of commitment; Repayment of grants; Prevention of undue 
benefits.
579.412 Displacement, relocation, and acquisition.
579.414 Timeliness standards.
579.416 Limitation on use of funds.
579.418 Termination of assistance to participants.
579.420 Conflicts of interest.
579.422 Program income.
579.424 Applicability of other Federal requirements.
Subpart F--Grant Administration
579.500 Data collection requirements.
579.502 Technical assistance.
579.504 Recordkeeping requirements.
579.506 Grant changes.

[[Page 18742]]

579.508 Enforcement.
579.510 Closeout.

    Authority:  42 U.S.C. 3535(d) and 11408 et seq.

Subpart A--General


Sec.  579.1  Purpose and scope.

    (a) In general. This part establishes the regulations that govern 
assistance provided under the Rural Housing Stability Assistance 
Program, authorized by subtitle G of title IV of the McKinney-Vento 
Homeless Assistance Act (the McKinney-Vento Act) (42 U.S.C. 11408). The 
Rural Housing Stability Assistance Program is designed to rehouse or 
improve the housing situations of individuals and families who are 
homeless or in the worst housing situations in the county receiving 
funds under this program, stabilize the housing of individuals and 
families who are at risk of homelessness, and improve the ability of 
the lowest-income residents of the county to afford stable housing. 
Funds awarded under this part are in lieu of funds awarded under the 
Continuum of Care program, for which the regulations are found in 24 
CFR part 578. Recipients of funds under the Rural Housing Stability 
Assistance Program are not eligible to receive funding under the 
Continuum of Care program nor can funds from the two programs be 
combined in any other way.


Sec.  579.3  Definitions.

    Abbreviated Consolidated Plan means an assessment of housing and 
homeless needs, resources, and planned activities. An abbreviated plan 
must contain sufficient information about:
    (1) Needs;
    (2) Strategies to:
    (i) Provide safe and decent housing; and
    (ii) Assist homeless persons, persons at risk of homelessness, and 
persons living in the worst housing situations by increasing the 
affordable housing stock and the availability of permanent housing;
    (3) Resources that will be used to address identified needs; and
    (4) Planned activities to address the needs to cover the type and 
amount of assistance anticipated to be funded by HUD, in accordance 
with 24 CFR 91.235.
    At risk of homelessness means an individual or family defined as 
being at risk of homelessness in 24 CFR 576.2.
    Chronically homeless means:
    (1) An individual who:
    (i) Is homeless and lives in a place not meant for human 
habitation, a safe haven, or in an emergency shelter; and
    (ii) Has been homeless and living or residing in a place not meant 
for human habitation, a safe haven, or in an emergency shelter 
continuously for at least one year or on at least four separate 
occasions in the last 3 years, where the cumulative total of the four 
occasions is at least one year. Stays in institutions of 90 days or 
less will not constitute a break in homelessness, but rather such stays 
are included in the cumulative total; and
    (iii) Can be diagnosed with one or more of the following 
conditions: substance use disorder, serious mental illness, 
developmental disability (as defined in section 102 of the 
Developmental Disabilities Assistance Bill of Rights Act of 2000 (42 
U.S.C. 15002)), post-traumatic stress disorder, cognitive impairments 
resulting from brain injury, or chronic physical illness or disability;
    (2) An individual who has been residing in an institutional care 
facility, including a jail, substance abuse or mental health treatment 
facility, hospital, or other similar facility, for fewer than 90 days 
and met all of the criteria in paragraph (1) of this definition, before 
entering that facility; or
    (3) A family with an adult head of household (or if there is no 
adult in the family, a minor head of household) who meets all of the 
criteria in paragraph (1) of this definition, including a family whose 
composition has fluctuated while the head of this definition, including 
a family whose composition has fluctuated while the head of household 
has been homeless.
    Consolidated plan means the HUD-approved plan developed in 
accordance with 24 CFR 91.
    Continuum of Care and Continuum mean the group organized to carry 
out the responsibilities set forth in HUD's Continuum of Care program 
regulations in 24 CFR part 578. These organizations can include 
nonprofit homeless providers, victim service providers, faith-based 
organizations, governments, businesses, advocates, public housing 
agencies, school districts, social service providers, mental health 
agencies, hospitals, universities, affordable housing developers, law 
enforcement, organizations that serve homeless and formerly homeless 
veterans and their families, and homeless and formerly homeless persons 
and families to the extent these groups are represented within the 
geographic area and are available to participate.
    County and county equivalent means organized local governments 
authorized in State constitutions and statutes and established to 
provide general government; including those governments designated as 
boroughs in Alaska, as parishes in Louisiana, and as counties in other 
States.
    Emergency shelter is defined in 24 CFR part 576.
    Fair Market Rent (FMR) means the fair market rents determined by 
HUD and published in the Federal Register annually by HUD in accordance 
with HUD's FMR regulations in 24 CFR part 888.
    Homeless, homeless individual, and homeless person are defined in 
24 CFR 576.2.
    Homeless Management Information System (HMIS) means the information 
system designated by a Continuum of Care to comply with HUD's data 
collection, management, and reporting standards and used to collect 
client-level data and data on the provision of housing and services to 
program participants.
    Permanent housing means community-based housing without a 
designated length of stay, and includes permanent supportive housing 
and permanent housing without supportive services. To be permanent 
housing, the program participant must be the tenant on a lease for a 
term of at least one year that is renewable and is terminable only for 
cause.
    Point-in-time count means the count of sheltered and unsheltered 
homeless persons carried out on one night in the last 10 calendar days 
of January or at such other time as required by HUD, in accordance with 
24 CFR 578.7.
    Preliminary Pro Rata Need Amount means the dollar expression of the 
relative need assigned to metropolitan cities, urban counties, and all 
other counties determined by HUD in accordance with the calculation of 
preliminary pro rata need amount in HUD's Continuum of Care regulations 
in 24 CFR 578.17.
    Private nonprofit organization means a private nonprofit 
organization which is a secular or religious organization described in 
section 501(c) of the Internal Revenue Code (IRC) of 1986 (26 U.S.C. 
501(c)), that is exempt from taxation under subtitle A of the IRC, has 
an accounting system and a voluntary board, and practices 
nondiscrimination in the provision of assistance. A private nonprofit 
organization does not include a governmental organization, such as a 
public housing agency or housing finance agency.
    Program means the Rural Housing Stability Assistance Program 
established under this part.
    Program participant means individuals and families who are

[[Page 18743]]

assisted with Rural Housing Stability Assistance Program funds.
    Recipient means an applicant that signs a grant agreement with HUD 
to use Rural Housing Stability Assistance Program funds.
    Rural area and rural community mean any county that:
    (1) Has no part of it within an area designated as a standard 
metropolitan statistical area by the Office of Management and Budget 
(OMB); or
    (2) Is within an area designated as a metropolitan statistical area 
or considered as part of a metropolitan statistical area and at least 
75 percent of its population is located on U.S. Census blocks 
classified as nonurban; or
    (3) Is located in a State that has population density of less than 
30 persons per square mile (as reported in the most recent decennial 
census), and of which at least 1.25 percent of the total acreage of 
such State is under Federal jurisdiction, provided that no metropolitan 
city in such State is the sole beneficiary of the grant amounts awarded 
under this part. A metropolitan city means a city that was classified 
as a metropolitan city under section 102(a) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5302(a)) for the fiscal 
year immediately preceding the fiscal year for which Emergency 
Solutions Grants program funds are made available.
    Subrecipient means a unit of general purpose local government or 
private nonprofit organization to which a recipient makes available 
Rural Housing Stability Assistance Program funds.
    Transitional housing means housing, where all program participants 
have signed a lease or occupancy agreement, the purpose of which is to 
facilitate the movement of homeless individuals and families into 
permanent housing within 24 months or such longer period as HUD 
determines necessary. The program participant must have a lease or 
occupancy agreement for a term of at least one month that ends in 24 
months and cannot be extended.
    Victim service provider means a private nonprofit organization 
whose primary mission is to provide services to victims of domestic 
violence, dating violence, sexual assault, or stalking. This term 
includes rape crisis centers, battered women's shelters, domestic 
violence transitional housing programs, and other programs.
    Worst housing situation means housing that has:
    (1) Serious health and safety defects, such as life-threatening 
deficiencies; and
    (2) At least one major system that has failed or is failing 
including: structural support, roofing, cladding, weatherproofing 
(e.g., windows, doors, siding, gutters), plumbing, electrical, heating, 
ventilation, and air conditioning.

Subpart B--Application


Sec.  579.100  Eligible applicants.

    (a) County beneficiary. Program funds are intended to benefit 
eligible counties that meet the definition of a rural county, as 
defined in Sec.  579.3.
    (b) Who may apply. Organizations eligible to apply for funds are:
    (1) Counties;
    (2) Private nonprofit organizations, as defined in Sec.  579.3, 
designated by the county; and
    (3) Units of local government designated by the county.
    (c) Applicant limit. Only one applicant per county may apply.
    (d) Exclusions. Funds awarded under the Rural Housing Stability 
Assistance Program are in lieu of funds awarded under the Continuum of 
Care program for which the regulations are found in 24 CFR part 578. No 
county in which a project funded by the Continuum of Care program is 
administered may receive an award under the Rural Housing Stability 
Assistance Program, either directly or through a designee. To be 
eligible for funds under this part, the Preliminary Pro Rata Need 
(PPRN) amounts associated with the rural county and all metropolitan 
cities therein may only be claimed in an application for funds under 
this part. The rural county and all metropolitan cities therein, will 
be required to exclude all PPRN amounts from any application submitted 
under 24 CFR part 578.


Sec.  579.102  Application process.

    (a) Notice. For each Federal fiscal year, HUD will announce:
    (1) A list of counties eligible to apply;
    (2) The PPRN amounts assigned to metropolitan cities, urban 
counties, and all other counties in accordance with 24 CFR 578.17.
    (3) A notice of funding availability (NOFA) in accordance with the 
requirements of the HUD Reform Act regulations in 24 CFR part 4 setting 
forth the application requirements, including:
    (i) The time and manner in which applicants must submit 
applications;
    (ii) A description of the target population(s), including a plan 
for serving populations throughout the county;
    (iii) A description of the types of assistance to be provided;
    (iv) An assurance that the assistance to be provided is closely 
related to the identified needs of the target population(s);
    (v) A description of the existing assistance available to the 
target population(s), including Federal, State, and local programs, and 
a description of the manner in which the organization will coordinate 
with and expand existing assistance or provide assistance not available 
in the immediate area;
    (vi) An agreement by the applicant that it will collect data on the 
activities conducted by the applicant, including assistance provided, 
number and characteristics of persons served, and causes of 
homelessness for persons served;
    (vii) A description of how individuals and families who are 
homeless or who have the lowest incomes in the county will be involved 
by the applicant through employment, volunteer services, and otherwise, 
in providing, operating, and rehabilitating housing assistance under 
this program and in providing services assisted under this program and 
services for occupants of housing assisted under this program;
    (viii) A description of consultations that took place within the 
county to ascertain the priorities and goals for using the funding 
under this section, including the involvement of potential 
beneficiaries of the project;
    (ix) A description of the extent and nature of homelessness and of 
the worst housing situations in the county;
    (x) A description for how the applicant plans to continue to 
support housing assistance initiated with program funds at the 
conclusion of the grant term; and
    (xi) Other requirements set forth in the NOFA.
    (b) Special case; abbreviated consolidated plan. (1) Each applicant 
must submit the county's consolidated plan or establish an abbreviated 
consolidated plan if the county does not have its own consolidated 
plan.
    (i) A county in which it, or its designee, is a recipient of grant 
funds under this program must submit an abbreviated consolidated plan 
that is applicable to the program, and that meets the requirements of 
HUD's Consolidated Plan regulations in 24 CFR 91.235. HUD will not 
award grants to recipients seeking to serve a rural county unless the 
county submits an abbreviated consolidated plan on or before the time 
of application.
    (ii) The county must identify and describe any areas within the 
county with concentrations of racial/ethnic minorities, stating how it 
defines the term ``area of minority concentration'' for this purpose. 
Where the state in which the county is located has already

[[Page 18744]]

defined ``area of minority of concentration,'' the county may adopt 
that definition in its abbreviated consolidated plan. The locations and 
degree of these concentrations must be identified, either in a 
narrative or on one or more maps.
    (iii) The county must make reasonable efforts to consult with 
public and private social service agencies regarding the needs to be 
served with the funding sought from HUD. The county must contact the 
State to consult on the needs of the county. Counties must conduct a 
citizen participation process as provided in section 107 of the 
Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12707).
    (iv) For the purpose of applications for this program, the citizen 
participation requirements of 24 CFR 91.105 do not apply.


Sec.  579.104  Subsidy layering.

    (a) Applicants to this program must comply with HUD subsidy 
layering requirements in section 102 of the Housing and Urban 
Development Reform Act of 1989 (42 U.S.C. 3545) and the regulations in 
24 CFR part 4, subpart A.
    (b) An applicant must submit information in its application on 
other sources of governmental assistance that the applicant has 
received, or reasonably expects to receive, for a proposed project or 
activities. HUD's review of this information is intended to prevent 
excessive public assistance for a proposed project or activities by 
combining (layering) assistance under this program with other 
governmental housing assistance from Federal, State, or local agencies, 
including assistance such as tax concessions or tax credits.


Sec.  579.106  Environmental review.

    (a) Activities under this part are subject to environmental review 
by HUD under 24 CFR part 50. The recipient or subrecipient shall supply 
all available, relevant information necessary for HUD to perform any 
environmental review required by 24 CFR part 50 for each property. The 
recipient or subrecipient must carry out mitigating measures required 
by HUD or select an alternate eligible property. HUD may eliminate from 
consideration any application that would require an Environmental 
Impact Statement.
    (b) The recipient or subrecipient, its project partners, and their 
contractors may not acquire, rehabilitate, convert, lease, repair, 
dispose of, demolish, or construct property for a project under this 
part, or commit or expend HUD or local funds for such eligible 
activities under this part, until HUD has performed an environmental 
review under 24 CFR part 50 and the recipient or subrecipient has 
received HUD approval of the property.

Subpart C--Eligible Activities


Sec.  579.200  Types and uses of assistance.

    (a) Grant assistance. Assistance is available for eligible 
activities, as further described in this subpart to assist program 
participants. Eligible activities are:
    (1) Rent, mortgage, and utility assistance;
    (2) Relocation assistance;
    (3) Short-term emergency lodging;
    (4) New construction;
    (5) Acquisition;
    (6) Rehabilitation;
    (7) Leasing;
    (8) Rental assistance;
    (9) Operating costs;
    (10) Rehabilitation and repairs of participant-owned housing;
    (11) Supportive services;
    (12) Use of Federal inventory property;
    (13) Capacity building;
    (14) Data collection costs; and
    (15) Administrative costs.
    (b) Multiple purposes. Buildings and other structures used to 
provide housing, supportive housing, or supportive services may also be 
used for other purposes. However, assistance under this part will be 
available only in proportion to the use of the structure for housing, 
supportive housing, or supportive services. If eligible and ineligible 
activities are carried out in separate portions of the same structure 
or in separate structures, grant funds may not be used to pay for more 
than the actual cost of acquisition, construction, or rehabilitation of 
the portion of the structure or structures used for eligible 
activities. If eligible and ineligible activities are carried out in 
the same structure, the costs will be prorated based on the amount of 
time the space is used for eligible activities compared to ineligible 
activities.


Sec.  579.202  Rent, mortgage, and utility assistance.

    (a) Use. Grant funds may be used to provide rental, mortgage, or 
utility payments on behalf of program participants who are currently 
living in a housing unit that they own or rent, to prevent eviction, 
foreclosure, or loss of utility service after two months of nonpayment. 
Funds may be used to pay arrears.
    (b) Duration. Program participants may receive a maximum of 12 
months of cumulative assistance, including arrears payments, for:
    (1) Rental payments or mortgage payments, including property taxes 
associated with mortgage payments; and
    (2) Utility payments, including gas, electric, heat, primary 
telephone, sewage/water.
    (c) Subsequent rental assistance. Following this period of 
assistance, if eligible, participants may receive rental assistance 
under Sec.  579.216 for transitional or permanent housing.


Sec.  579.204  Relocation assistance.

    (a) Use. Grant funds may be used to provide assistance to program 
participants who are moving to a housing unit located outside of the 
county receiving funds under this part.
    Relocation assistance includes:
    (1) Security deposits;
    (2) Utility deposits;
    (3) Rent for the first month of residence at a new location;
    (4) Moving services; and
    (5) Housing information services.
    (b) Eligibility. Program participants are eligible for relocation 
assistance if they have identified a location outside of the county 
where they have acquired new employment, been accepted to an 
educational institution, or will be reunited with family members. 
Program participants must provide credible evidence, as defined in 
Sec.  579.504, of an identified subsequent residence and a 
justification for relocation.


Sec.  579.206  Short-term emergency lodging.

    (a) Use. Grant funds may be used to provide short-term emergency 
lodging to program participants in either motels or shelters. Short-
term emergency lodging includes:
    (1) Lodging costs in motels or hotels for eligible program 
participants; and
    (2) Pro-rata share of the costs of housing program participants in 
existing shelters.
    (b) Limitation on funds used in shelters. Funds used in shelters 
shall be limited to actual costs of creating new and temporary beds 
being made available to assist program participants under this part and 
not to permanently increase the capacity of the shelter. Where existing 
shelter beds are unoccupied and available for eligible program 
participants, no program funds shall be used to place program 
participants in those beds. Where program funds are used to temporarily 
increase the capacity of a shelter, local occupancy code requirements 
must continue to be followed.
    (c) Lodging program participants receiving participant-owned 
rehabilitation and repairs. Funds under this activity may be used to 
assist households in the worst housing

[[Page 18745]]

situations whose housing is being assisted under Sec.  579.220, while 
the housing unit is being repaired and or rehabilitated.
    (d) Duration. Program participants eligible for short-term 
emergency lodging are to receive a maximum of 3 months of assistance. 
When program participants are unable to relocate to a more permanent 
housing situation within 3 months because there is no other housing 
available, the recipient may extend the short-term emergency lodging 
for program participants. For program participants who are eligible to 
exceed the three-month limit, the recipient must determine that the 
program participants are still at risk of homelessness or in the worst 
housing situations at the end of the 3 month period.
    (e) Exception to durational limit. When there are more than 25 
percent of program participants receiving short-term emergency lodging 
beyond the 3 month limit, the recipient must submit a request to HUD 
for an exception. The request must describe the conditions that justify 
an exception, including an assessment of alternative housing sources 
and the particular needs of the program participants.
    (f) Last resort. Program funds shall only be used for this activity 
when no other alternatives exist. A recipient should not make this 
activity a significant part of its abbreviated consolidated plan, where 
applicable.


Sec.  579.208  New construction.

    (a) Use. Grant funds may be used to pay up to 100 percent of the 
cost of new construction to provide transitional or permanent rental 
housing to individuals and families who are homeless or at risk of 
homelessness, including the new construction of a building or other 
structure, an addition to an existing structure that increases the 
floor area by 100 percent or more, and the cost of land associated with 
that construction.
    (b) Cost comparison. If grant funds are used for new construction, 
the applicant must demonstrate that the costs of new construction of a 
building or structure are substantially less than the costs of 
rehabilitation or that there is a lack of available appropriate units 
that could be rehabilitated at a cost less than new construction. For 
purposes of this cost comparison, costs of rehabilitation or new 
construction may include the cost of real property acquisition.
    (c) Eligible costs. Grant funds may be used to pay for eligible 
costs, including but not limited to:
    (1) Development hard costs. These costs include the actual cost of 
constructing housing, as described in this section.
    (2) Site improvement costs. These costs may include the 
construction of on-site roads and the development and installation of 
sewer and water lines necessary to the development of the building or 
structure, including off-site connections from the property line to the 
adjacent street. Such costs also include clearance, demolition, and 
removal of buildings and improvements, including movement of structures 
to other sites and related reasonable and necessary site preparation 
costs.
    (3) Staff and overhead costs. Staff and overhead costs directly 
related to carrying out eligible activities under this section.
    (4) Related reasonable and necessary soft costs. Related reasonable 
and necessary soft costs, including but not limited to:
    (i) Architectural, engineering, or related professional services 
required to prepare plans, drawings, specifications, or work write-ups;
    (ii) Costs of required permits;
    (iii) Costs to provide information services such as affirmative 
marketing and fair housing information; and
    (iv) Costs incurred in order to comply with the environmental 
review requirements under 24 CFR part 50.
    (d) Ineligible costs. Grant funds may not be used for new 
construction on leased property.


Sec.  579.210  Acquisition.

    (a) Use. Grant funds may be used to pay up to 100 percent of the 
cost of acquisition of real property selected for transitional or 
permanent rental housing, other than emergency shelter, for individuals 
and families who are homeless or at risk of homelessness, or for the 
provision of supportive services as defined in Sec.  579.222.
    (b) Eligible costs. Grant funds may be used to pay for eligible 
costs, including but not limited to:
    (1) Staff and overhead costs directly related to carrying out 
eligible activities under this section.
    (2) Related reasonable and necessary soft costs, including but not 
limited to:
    (i) Architectural, engineering, or related professional services 
required to prepare plans, drawings, specifications, or work write-ups;
    (ii) Costs of required permits; and
    (iii) Costs incurred in order to comply with the environmental 
review requirements under HUD's environmental regulations in 24 CFR 
part 50.


Sec.  579.212  Rehabilitation.

    (a) Use. Grant funds may be used to pay 100 percent of the cost of 
rehabilitation of structures to provide transitional or permanent 
rental housing or supportive services to individuals and families who 
are homeless or at risk of homelessness.
    (b) Eligible costs. Grant funds may be used to pay for eligible 
costs, including but not limited to:
    (1) Installation of cost-effective energy measures.
    (2) Bringing an existing structure into compliance with State and 
local government health and safety standards.
    (3) Staff and overhead costs directly related to carrying out 
eligible activities under this section.
    (4) Related reasonable and necessary soft costs, including:
    (i) Architectural, engineering, or related professional services 
required to prepare plans, drawings, specifications, or work write-ups;
    (ii) Costs of required permits; and
    (iii) Costs incurred in order to comply with the environmental 
review requirements under 24 CFR part 50.
    (c) Ineligible costs. Grant funds may not be used for 
rehabilitation of leased property.


Sec.  579.214  Leasing.

    (a) Use. (1) Grant funds may be used to pay 100 percent of the 
costs of leasing a structure or structures, or portions thereof, to 
provide program participants transitional or permanent rental housing 
or supportive services. Leasing funds may not be used to lease units or 
structures owned by the recipient, subrecipient, their parent 
organization(s), any other related organization(s), or organizations 
that are members of a partnership where the partnership owns the 
structure, unless HUD authorized an exception for good cause.
    (2) Any request for an exception must include the following:
    (i) A description of how the leasing of these structures is in the 
best interest of the program;
    (ii) Supporting documentation showing that the rent paid with grant 
funds is reasonable for the market; and
    (iii) A copy of the written policy for resolving disputes between 
the landlord and tenant, including a recusal for officers, agents, and 
staff who work for both the landlord and tenant.
    (b) Requirements-(1) Leasing structures. When grants are used to 
pay rent for all or part of a structure or structures, the rent paid by 
the recipient must be reasonable in relation to rent being charged in 
the area for comparable space. In addition, the rent paid by the 
recipient may not exceed rents currently being charged for comparable 
space.
    (2) Leasing individual units. When grants are used to pay rent for

[[Page 18746]]

individual housing units, the rent paid by the recipient must be 
reasonable in relation to rents being charged for comparable units, 
taking into account the location, size, type, quality, amenities, 
facilities, and management services. In addition, the rents may not 
exceed HUD determined fair market rents.
    (3) Utilities. If electricity, gas, and water are provided by the 
landlord under the lease, these utilities may be paid from leasing 
funds. If utilities are paid separately from grant funds, these 
utilities are an operating cost, except for supportive service 
facilities. If the structure is being used as a supportive service 
facility, then these utility costs are a supportive service cost.
    (4) Security deposits and first and last months' rent. Recipients 
and subrecipients may use grant funds to pay security deposits, in an 
amount not to exceed two months of actual rent. An advance payment of 
the last month's rent may be provided to the landlord in addition to 
the security deposit and payment of the first month's rent.
    (5) Occupancy agreements. Occupancy agreements and subleases are 
required as specified in Sec.  579.406(a).
    (c) Calculation of occupancy charges. Occupancy charges and rent 
from program participants must be calculated as provided in Sec.  
579.406.
    (e) Program income. Occupancy charges collected from program 
participants are program income and may be used as provided under Sec.  
579.422.


Sec.  579.216  Rental assistance.

    (a) Use. (1) Grant funds may be used for rental assistance for 
program participants. Rental assistance cannot be provided to a program 
participant who is already receiving tenant-based rental assistance, or 
living in a housing unit receiving project-based rental assistance or 
operating assistance, through other Federal, State or local sources.
    (i) The rental assistance may be short-term, up to 3 months; 
medium-term, for 3 to 24 months of assistance; or long-term, for longer 
than 24 months of assistance. Short- and medium-term rent are subject 
to written standards, as provided in Sec.  579.400(b).
    (ii) The rental assistance may be tenant-based or project-based 
rental assistance, and may be for transitional or permanent housing.
    (2) Grant funds may be used for security deposits in an amount not 
to exceed 2 months of rent. An advance payment of the last month's rent 
may be provided to the landlord in addition to the security deposit and 
payment of first month's rent.
    (3) Grant funds may be used for the payment of reasonable rental 
application fees.
    (b) Rental assistance administrator. Rental assistance must be 
administered by recipients or subrecipients under this program.
    (c) Tenant-based rental assistance-(1) Benefits of tenant-based 
rental assistance. Tenant-based rental assistance is rental assistance 
in which program participants choose rental housing of an appropriate 
size in which to reside. When necessary to facilitate the coordination 
of supportive services, recipients and subrecipients may require 
program participants receiving rental assistance in permanent housing 
to live in a specific area for their entire period of participation, or 
in a specific structure for the first year and in a specific area for 
the remainder of their period of participation. Program participants 
who are receiving rental assistance in transitional housing must live 
in a specific structure for their entire period of participation in 
transitional housing.
    (2) Fleeing domestic violence. Program participants who have 
complied with all program requirements during their residence and who 
have been victims of domestic violence, dating violence, sexual 
assault, or stalking, and who reasonably believe they are imminently 
threatened by harm from further domestic violence, dating violence, 
sexual assault, or stalking (which would include threats from a third 
party, such as a friend or family member of the perpetrator of the 
violence), if they remain in the assisted unit, and are able to 
document the violence and basis for their belief, may retain the rental 
assistance, through the term of assistance, and move to a different 
county if they move out of the assisted unit to protect their health 
and safety.
    (d) Project-based rental assistance. Project-based rental 
assistance is provided through a contract with the owner of an existing 
structure, where the owner agrees to lease the subsidized units to 
program participants. Program participants will not retain the rental 
assistance if they move from a subsidized unit.
    (e) Amount. The amount of rental assistance awarded will be based 
on the number and size of units proposed by the applicant to be 
assisted over the grant period. The amount of rental assistance in each 
project will be calculated by multiplying the number of units proposed 
by the recipient by the area's FMR of each unit on the date the 
application is submitted to HUD, by the term of the grant.
    (f) Rent reasonableness. HUD will only provide rental assistance 
for a unit if the rent is reasonable. The recipient or subrecipient 
must determine whether the rent charged for the unit receiving rental 
assistance is reasonable in relation to rents being charged for 
comparable unassisted units, taking into account the location, size, 
type, quality, amenities, facilities, and management and maintenance of 
each unit. Reasonable rent must not exceed rents currently being 
charged by the same owner for comparable unassisted units.
    (g) Vacancies. If a unit assisted under this part is vacated before 
the expiration of the lease, the assistance for the unit may continue 
for a maximum of 30 days from the end of the month in which the unit 
was vacated, unless occupied by another eligible person. No additional 
assistance will be paid until the unit is occupied by another eligible 
person. Brief periods of stays in institutions, not to exceed 90 days 
for each occurrence, are not considered vacancies.
    (h) Property damage. Recipients and subrecipients may use grant 
funds in an amount not to exceed one month's rent to pay for any damage 
to housing due to the action of a program participant. This shall be a 
one-time cost per participant, incurred at the time a participant exits 
a housing unit. This one-time cost limit is not in addition to a 
deduction to the security deposit, if provided, but rather includes any 
deductions made from the security deposit.
    (i) Resident rent. Rent must be calculated as provided in Sec.  
579.406. Rents collected from program participants are program income 
and may be used as provided under Sec.  579.422.
    (j) Leases-(1) Initial lease. Program participants must enter into 
a lease agreement for a term of at least one year, which is terminable 
for cause. The leases must be automatically renewable upon expiration 
for terms that are a minimum of one month long, except on prior notice 
by either party.
    (2) Initial lease for transitional housing. Program participants in 
transitional housing must enter into a lease agreement for a term of at 
least one month. The lease must be automatically renewable upon 
expiration, except on prior notice by either party, up to a maximum 
term of 24 months.


Sec.  579.218  Operating costs.

    (a) Use. Grant funds may be used to pay the costs of the day-to-day 
operation of transitional and permanent housing in a single structure 
or individual housing units, owned or leased by the recipient or 
subrecipient.

[[Page 18747]]

    (b) Eligible costs. (1) The maintenance and repair of housing;
    (2) Property taxes and property insurance, where the property taxes 
and property insurance incurred in a structure must be charged based on 
the pro rata share of services incurred in the day-to-day operation of 
housing under this activity;
    (3) Scheduled payments to a reserve for replacement of major 
systems of the housing (provided that the payments must be based on the 
useful life of the system and expected replacement cost);
    (4) Building security;
    (5) Electricity, gas, and water;
    (6) Furniture; and
    (7) Equipment.
    (c) Ineligible costs. Operating funds may not be used for rental 
assistance or leasing in the same building or other structure. 
Operating funds may not be used for the operating costs of emergency 
shelters and supportive service only facilities. Operating funds may 
not be used for the maintenance and repair of housing where the costs 
of maintaining and repairing the housing are included in the lease.


Sec.  579.220  Rehabilitation and repairs of participant-owned housing.

    (a) Use. Grant funds may be used to provide repairs and 
rehabilitation to participant-owned housing for participants who are in 
the worst housing situations, with an income level at 50 percent area 
median income (AMI) or below, and who are seeking to repair or 
rehabilitate housing that:
    (1) The participant resides in as their principal place of 
residence; and
    (2) The housing has serious health and safety defects including 
life-threatening deficiencies and has at least one major system that 
has failed or is failing as determined by a certified professional.
    (b) Eligible costs. Eligible costs are the costs of repairing, 
rehabilitating, or replacing major systems that have failed or are 
failing. Housing that is rehabilitated with program funds must meet all 
applicable local codes, rehabilitation standards, ordinances, and 
zoning ordinances at the time of project completion. The county must 
have written standards for rehabilitation that ensure that participant-
owned housing assisted under this activity is decent, safe, and 
sanitary. In the absence of a local code, the rehabilitation must meet, 
as applicable, one of three model codes: Uniform Building Code (ICBO), 
National Building Code (BOCA), Standard (Southern) Building Code 
(SBCCI); or the Council of American Building Officials (CABO) one- or 
two-family code; or the Minimum Property Standards (MPS) in 24 CFR 
200.925 or 200.926.
    (c) Residency requirement after assistance is provided. Program 
participants who receive assistance under this section must enter into 
a written repayment agreement with the recipient or subrecipient that 
states that the program participant agrees to remain in the residence 
following rehabilitation and repairs for a period of 3 years following 
the completion of the repairs and rehabilitation. Program participants 
who leave the premises prior to the fulfillment of the 3 year residency 
requirement may be required to reimburse the recipient up to the full 
amount of assistance that was provided for the repair or rehabilitation 
in accordance with the terms of this repayment agreement.


Sec.  579.222  Supportive services.

    (a) In general. (1) Grant funds may be used to pay for the 
development and delivery of comprehensive and coordinated supportive 
services that use and supplement, as needed, community networks of 
services, or as may be necessary to assist program participants to 
obtain and maintain housing.
    (2) Recipients and subrecipients shall conduct an assessment of the 
service needs of the program participants at least annually and must 
adjust services accordingly. The costs of the assessment are eligible 
costs.
    (i) If the services are being provided by the recipient or 
subrecipient directly, eligible costs are the costs of the labor, 
supplies, and materials directly associated with providing the services 
to program participants.
    (ii) The salary and benefit packages of the recipient and 
subrecipient staff who directly deliver the services constitute an 
eligible cost.
    (iii) Staff training and the costs of obtaining professional 
licenses or certifications are not eligible supportive services costs.
    (iv) If the supportive services are provided in a supportive 
service facility not contained in a housing structure, the costs of 
day-to-day operation of the supportive service facility, including 
maintenance, repair, building security, furniture, utilities, and 
equipment are eligible. The supportive services costs incurred in a 
supportive service facility must be charged based on the pro rata share 
of services incurred in the supportive service facility.
    (3) Supportive service agreement. Recipients and subrecipients may 
require the program participants to take part in supportive services 
that are not disability-related services provided through the project 
as a condition of continued participation in the program. Examples of 
disability-related services include, but are not limited to, mental 
health services, outpatient health services, and provision of 
medication, which are provided to a person with a disability to address 
a condition caused by the disability. Notwithstanding this provision, 
if the purpose of the project is to provide substance abuse treatment 
services, recipients and subrecipients may require program participants 
to take part in such services as a condition of continued participation 
in the program.
    (4) Special populations. All eligible costs are eligible to the 
same extent for program participants who are unaccompanied homeless 
youth, persons living with HIV/AIDS, and victims of domestic violence, 
dating violence, sexual assault, or stalking.
    (b) Eligible costs-(1) Budgeting. The costs of assisting program 
participants to manage their financial resources in order to stabilize 
and maintain housing are eligible costs. Budgeting activities include 
services that provide critical skills related to household budgeting, 
money management, credit counseling, accessing a free personal credit 
report, and resolving personal credit issues.
    (2) Case management. The cost of assessing, arranging, 
coordinating, and monitoring the delivery of individualized services to 
meet the needs of the program participant(s) are eligible costs. 
Component services and activities consist of:
    (i) Counseling;
    (ii) Developing, securing, and coordinating services;
    (iii) Obtaining Federal, State, and local benefits;
    (iv) Monitoring and evaluating program participant progress;
    (v) Providing information and referrals to other providers, 
including referrals to Veterans' services;
    (vi) Providing ongoing risk assessment and safety planning with 
victims of domestic violence, dating violence, sexual assault, and 
stalking; and
    (vii) Developing an individualized housing and service plan, 
including planning a path to permanent housing stability.
    (3) Child care. The costs of establishing and operating child care, 
and providing child care vouchers, for children from program 
participant households with children, including providing meals and 
snacks, and comprehensive and coordinated sets of appropriate 
developmental activities, are eligible costs. The child care center 
must be licensed by the jurisdiction in which it operates in order for 
its costs

[[Page 18748]]

to be eligible. To be eligible for child care, a child must be:
    (i) Under the age of 13, unless the child is disabled; or
    (ii) Under the age of 18 if the child is disabled.
    (4) Education services. The costs of improving knowledge and basic 
educational skills are eligible costs.
    (i) Services include instruction or training in consumer education, 
health education, substance abuse prevention, community protection and 
safety education, literacy, English as a Second Language, and General 
Educational Development (GED).
    (ii) Component services or activities are screening, assessment, 
and testing; individual or group instruction; tutoring; provision of 
books, supplies, and instructional material; counseling; and referral 
to community resources.
    (5) Emergency food and clothing. The cost of providing meals or 
groceries and suitable clothing to program participants are eligible 
costs. Emergency clothing refers to clothing suitable for persons to be 
modestly covered and appropriate for the weather in the recipient 
jurisdiction, including coats and blankets where needed.
    (6) Employment assistance and job training. The costs of services 
or activities provided to assist individuals in securing employment; 
acquiring or learning skills that promote opportunities for employment, 
advancement, and increased earning potential; and in retaining a job, 
including the acquisition of vocational licenses and/or certificates. 
Learning skills include those skills that can be used to secure and 
retain a job, including the acquisition of vocational licenses and/or 
certificates. The cost of providing reasonable stipends to program 
participants to participate in employment assistance and job training 
programs is an eligible cost. Services that assist individuals in 
securing employment consist of:
    (i) Employment screening, assessment, or testing;
    (ii) Structured job skills and job seeking skills;
    (iii) Special training and tutoring, including literacy training 
and prevocational training; (iv) Books, supplies and instructional 
material;
    (v) Counseling or job coaching;
    (vi) Referral to community resources;
    (vii) Reasonable registration fees for job placement agencies; and
    (viii) Reasonable registration fees to attend job career fairs and 
conventions that are relevant to the participants' needs.
    (7) Health related services. The costs of in-home or out-of-home 
services or activities that provide direct treatments or are designed 
to assist individuals and families to attain and maintain a favorable 
condition of health and are provided by licensed medical professionals 
are eligible costs. Component services and activities include the cost 
of:
    (i) Providing an analysis or assessment of a program participant's 
health problems and the development of a treatment plan;
    (ii) Assisting program participants to identify and understand 
their health needs;
    (iii) Providing directly or assisting program participants to 
locate, provide or secure, and understand their health needs;
    (iv) Providing directly or assisting program participants to obtain 
appropriate medical treatment, preventive medical care, and health 
maintenance services, including in-home health services and emergency 
medical services;
    (v) Appropriate medication and follow-up services as needed; and
    (vi) Preventive and noncosmetic dental care.
    (8) Housing search and counseling services. The costs of assisting 
eligible program participants to locate, obtain, and retain suitable 
housing are eligible costs.
    (i) Component services or activities include tenant counseling; 
assisting individuals and families to understand leases; securing 
utilities; and making moving arrangements.
    (ii) Other eligible costs:
    (A) Mediation with property owners and landlords on behalf of 
eligible program participants; and
    (B) The payment of rental application fees.
    (iii) Costs of renegotiating mortgage or loan terms for current 
homeowners are not eligible costs.
    (9) Legal services. Eligible costs are the costs of referral to 
legal services, for advice and representation in matters that interfere 
with a program participant's ability to obtain and retain housing. 
Eligible costs of referral to legal services include staff costs to 
assess participants' needs for legal assistance, costs associated with 
holding a legal clinic and inviting pro bono attorneys to assess 
participants' needs and then refer them to an appropriate service 
venue, and costs associated with state and local bar associations that 
offer attorney referral services to initially assess participants and 
refer them to an appropriate legal service provider. Eligible subject 
matters are child support; guardianship; paternity; emancipation; legal 
separation; orders of protection and other civil remedies for victims 
of domestic violence, dating violence, sexual assault, and stalking; 
appeal of veterans and public benefit claim denials; landlord tenant 
disputes; and the resolution of outstanding criminal warrants.
    (10) Life skills training. The costs of teaching critical life 
management skills that may never have been learned or have been lost 
during the course of physical or mental illness, domestic violence, 
substance use, and homelessness are eligible costs.
    (i) These services must be necessary to assist the individual to 
function independently in the community.
    (ii) Component life skills training are household management of 
time and household responsibilities, conflict management, shopping for 
food and needed items, nutrition, the use of public transportation, and 
parent training.
    (11) Mental health services. Eligible costs are the direct 
outpatient treatment of mental health conditions and are provided by 
licensed professionals.
    (i) Mental health services are the application of therapeutic 
processes to personal, family, situational, or occupational problems in 
order to bring about positive resolution of the problem or improved 
individual or family functioning or circumstances. Problem areas may 
include family and marital relationships, parent-child problems, or 
symptom management.
    (ii) Component services include crisis interventions; counseling; 
individual, family or group therapy sessions; the prescription of 
psychotropic medications or explanations about the use and management 
of medications; and combinations of therapeutic approaches to address 
multiple problems.
    (12) Moving services. Reasonable one-time moving costs are eligible 
and include truck rental, hiring a moving company, or short-term 
storage fees. Short-term storage fees are permitted for either a 
maximum of 3 months or until the program participant moves into 
housing, whichever is shorter.
    (13) Outreach services. The costs of activities to engage persons 
for the purpose of providing immediate support and intervention, as 
well as identifying potential program participants, are eligible costs.
    (i) Eligible costs include the transportation and cell phone costs 
incurred by outreach workers in the performance of these activities.
    (ii) Component activities and services consist of:
    (A) Initial assessment;
    (B) Crisis counseling;

[[Page 18749]]

    (C) Addressing urgent physical needs such as providing meals, 
blankets, clothes or toiletries;
    (D) Actively connecting and providing people with information and 
referrals to homeless and mainstream programs; and
    (E) Advertising housing and services eligible under this program to 
all persons who may qualify for admission to the housing or services 
project.
    (14) Substance abuse treatment services. Eligible substance abuse 
treatment services are designed to prevent, reduce, eliminate, or deter 
relapse of substance abuse or addictive behaviors and are provided by 
licensed or certified professionals.
    (i) Eligible treatment consists of client intake and assessment, 
and outpatient treatment for up to 30 days. Group and individual 
counseling and drug testing are eligible costs.
    (ii) Inpatient detoxification and other inpatient drug or alcohol 
treatment are ineligible.
    (15) Transportation. (i) Generally, the recipient may provide 
temporary transportation services directly to program participants if 
the recipient determines such assistance is necessary; however, the 
preferred method of direct provision of transportation services is the 
provision of tokens, vouchers, or other appropriate instruments so that 
program participants may use available public transportation options.
    (ii) Eligible costs consist of:
    (A) A program participant's travel on public transportation or in a 
vehicle provided by the recipient or subrecipient to and from medical 
care, employment, child care, or other services eligible under this 
section;
    (B) Mileage allowance for service workers to visit program 
participants and to carry out housing quality inspections;
    (C) The cost of purchasing or leasing a vehicle in which staff 
transports program participants and/or staff serving program 
participants, including the cost of gas, insurance, taxes and 
maintenance for the vehicle;
    (D) The costs recipient staff incurs to accompany or assist program 
participants to utilize public transportation; and
    (E) If public transportation options are not sufficient within a 
county, the recipient may make a one-time payment on behalf of a 
program participant needing car repairs or maintenance required to 
operate a personal vehicle subject to the following:
    (1) Payments for car repairs or maintenance on behalf of the 
program participant may not exceed 10 percent of the Blue Book value of 
the vehicle (Blue book refers to the guidebook that compiles and quotes 
prices for new and used automobiles and other vehicles of all makes, 
models and types) or a reasonable estimate of the current market value 
if no Blue Book value is available;
    (2) Payments for car repairs or maintenance must be paid by the 
recipient directly to the third party that repairs or maintains the 
car; and
    (3) The recipients may require program participants to share in the 
cost of car repairs or maintenance as a condition of receiving 
assistance with car repairs or maintenance.


Sec.  579.224  Use of Federal inventory property.

    (a) In addition to the eligible activities listed elsewhere in 
subpart C and as provided in paragraph (b) of this section, certain 
costs related to the recipient's or subrecipient's use of excess or 
surplus Federal real property made available under title V of the 
McKinney-Vento Act or real property made available under section 204(g) 
of the National Housing Act (12 U.S.C. 1710(g)) to house homeless 
persons are eligible costs.
    (b) With respect to the activities described in paragraph (a) of 
this section, the following costs are eligible:
    (1) The costs of preparing and submitting applications to obtain 
ownership of the real property;
    (2) The costs of bringing the real property into compliance with 
local building codes, with bringing public water, sanitation, sewers, 
and utilities to the property; and
    (3) The costs of creating or improving access to the real property 
from public roads.


Sec.  579.226  Capacity building.

    (a) In general. Capacity building activities are those activities 
that assist recipient personnel to maintain or improve the skills 
necessary to strengthen the capability of recipients to deliver housing 
and supportive services to program participants and to administer 
grants under this program. Eligible capacity building activities may 
include costs such as salaries, wages, other employee compensation and 
benefits, employee education, training, and travel.
    (b) Staff retention. Available funds may also be used for staff 
retention activities such as financial incentives to staff; paying for 
continuing education opportunities; cross-training within an 
organization; staff training and professional licensing or 
certification; and other professional development activities of persons 
employed by agencies providing housing and supportive services under 
this part.
    (c) Limit. No more than 20 percent of the total amount awarded to, 
or on behalf of, a county under this part may be used for capacity 
building activities.


Sec.  579.228  Data collection costs.

    (a) Eligible costs. (1) The recipient or subrecipient may use 
program funds to pay the costs of contributing data to an HMIS 
designated by a Continuum of Care. Recipients or subrecipients may also 
use program funds to pay the costs of establishing their own comparable 
data collection system where the recipient or subrecipient cannot 
obtain approval from a Continuum of Care to contribute data to its 
existing HMIS. Eligible costs include:
    (i) Purchasing or leasing computer hardware;
    (ii) Purchasing software or software licenses;
    (iii) Purchasing or leasing equipment, including telephones, faxes, 
and furniture;
    (iv) Obtaining technical support;
    (v) Leasing office space;
    (vi) Paying charges for electricity, gas, water, phone service, and 
high-speed data transmission necessary to operate or contribute data to 
the HMIS;
    (vii) Paying salaries for operating HMIS, including:
    (A) Completing data entry;
    (B) Monitoring and reviewing data quality;
    (C) Completing data analysis;
    (D) Reporting data to the HMIS Lead;
    (E) Training staff on using the HMIS; and
    (F) Implementing and complying with HMIS requirements;
    (viii) Paying costs of staff to travel to and attend HUD-sponsored 
and HUD-approved training on HMIS and programs authorized by title IV 
of the McKinney-Vento Act;
    (ix) Paying staff travel costs to conduct intake; and
    (x) Paying participation fees charged by the HMIS Lead. The HMIS 
Lead is the entity designated by the Continuum of Care to operate the 
area's HMIS.
    (2) If the recipient or subrecipient is a victim services provider, 
as defined in section 401(32) of the McKinney-Vento Act, or a legal 
services provider, it may use program funds to establish and operate a 
comparable database that collects client-level data over time (i.e., 
longitudinal data) and generates unduplicated aggregate reports based 
on the data. Information entered into a comparable database must not be 
entered directly into or provided to an HMIS.
    (b) General restrictions. Activities funded under this section must 
comply

[[Page 18750]]

with HUD's standards on participation, data collection, and reporting 
under a local HMIS.
    (c) Point-in-time count participation. All recipients must 
participate in or plan for and conduct a point-in-time count of 
sheltered and unsheltered homeless persons within the county within the 
last 10 days of January, unless HUD authorized an exception for good 
cause during the grant period.
    (1) Manner of point-in-time count. The point-in-time count must be 
conducted in the manner prescribed by HUD. Recipients may participate 
in the point-in-time count of an adjacent Continuum of Care, including 
the planning, implementation, and evaluation of the count, if the 
adjacent Continuum of Care is willing to include the recipients in 
their point-in-time process.
    (2) Exception time frame. If an exception to conducting the point-
in-time count within the last 10 days of January is authorized, 
recipients must conduct the count between December 1 and March 31.
    (3) Good cause for exception. Good cause for an exception includes:
    (i) A longstanding tradition for performing such a count at a date 
between December 1 and March 31; and
    (ii) Unanticipated inclement weather (i.e., snowstorm, hurricane, 
tornado) and other natural disasters.
    (4) Actual costs. Actual costs of conducting or participating in 
the count of an adjacent Continuum of Care are allowable administrative 
costs.
    (d) Housing inventory count participation. (1) During the grant 
period, recipients must perform an annual housing inventory survey and 
report their data in accordance with a manner prescribed by HUD.
    (2) Participation with an adjacent Continuum of Care. Recipients 
may participate with an adjacent Continuum of Care to conduct their 
housing inventory count, if the adjacent Continuum of Care is willing 
to include the recipients in their housing inventory count process. If 
recipients are participating in an adjacent Continuum of Care's point-
in-time count and the recipient wants to participate with a Continuum 
of Care to conduct its housing inventory count, it must participate 
with the same Continuum of Care for both the point-in-time and the 
housing inventory count.
    (3) Actual costs of conducting this survey, including participation 
with an adjacent Continuum of Care, are allowable administrative costs.


Sec.  579.230  Administrative costs.

    (a) In general. No more than 7.5 percent of the total grant awarded 
under this part may be used for the purpose of paying costs of 
administering assistance. If the recipient is using a subrecipient to 
operate a project, the amount of administrative costs shared must be 
reasonable under the circumstances.
    (b) Eligible administrative costs. (1) Administrative costs include 
the costs of accounting for the use of grant funds, costs of preparing 
an abbreviated consolidated plan, preparing reports for submission to 
HUD, audits, and the cost of staff performing these activities. Costs 
may also include training for staff who will administer the program or 
case managers who will serve program participants, as long as this 
training is directly related to McKinney-Vento Act programs.
    (2) Administrative costs do not include the costs of carrying out 
eligible activities.
    (3) Administrative costs are not capacity building activities.


Sec.  579.232  Indirect costs.

    (a) In general. Program funds may be used to pay indirect costs in 
accordance with OMB Circulars A-87 or A-122, as applicable. Circular A-
87 is entitled ``Cost Principles for States, Local, and Indian Tribal 
Governments.'' Circular A-122 is entitled ``Cost Principles for Non-
Profit Organizations.'' The provisions of these cost principle 
circulars are codified in the governmentwide regulations found at 2 CFR 
part 225, and 2 CFR part 230, respectively.
    (b) Allocation. Indirect costs may be allocated to each eligible 
activity, as long as that allocation is consistent with an indirect 
cost rate proposal developed in accordance with OMB Circulars A-87 or 
A-122, as applicable.

Subpart D--Grant Selection and Award Process


Sec.  579.300  Selection process.

    (a) Selection criteria. The selection criteria include:
    (1) The participation of program participants in assessing the need 
for, and importance of, the grant in the county;
    (2) The degree to which the grant addresses the worst housing 
situations present in the county;
    (3) The degree of collaboration with others in the county to meet 
the goals described in Sec.  579.1;
    (4) The performance of the applicant in improving housing 
situations, taking into account the severity of the barriers of 
individuals and families served by the applicant;
    (5) For applicants that have previously received funding under this 
part, the extent to which the county has successfully demonstrated 
improvement in meeting the needs of program participants through the 
administration of its previous grants under this part, as determined by 
HUD;
    (6) The need for such funds, as determined by the formula 
established under section 427(b)(2) of the McKinney-Vento Act; and
    (7) Any other relevant criteria as determined by HUD.
    (b) Selection decision. HUD will award funds to recipients through 
a national competition based on selection criteria as defined in 
paragraph (a) of this section.


Sec.  579.302  Selection priorities.

    (a) In general. HUD will, at a minimum, make selections of awards 
according to the following selection priorities:
    (1) Set-aside for counties with populations of less than 10,000. Of 
the total funds HUD awards under this program for a fiscal year, HUD 
will award a minimum of 50 percent of the total award funds to 
applicants applying to serve counties that have county populations of 
less than 10,000.
    (2) Priority within the set-aside. Within the set-aside for 
counties with populations of less than 10,000, HUD will give priority 
to applicants applying to serve counties with county populations of 
less than 5,000.
    (3) Counties without significant Federal assistance. In awarding 
grants for this program for a fiscal year, including the grants awarded 
in accordance with paragraph (a) of this section, HUD will give 
priority to applicants applying to serve counties that are not 
currently receiving Federal assistance under the Emergency Solutions 
Grants program, for which the regulations are found in 24 CFR part 576, 
or under the Continuum of Care program, for which the regulations are 
found in 24 CFR part 578.
    (4) State limit. In awarding Rural Housing Stability Assistance 
Program grants for a fiscal year, HUD will not award to eligible 
applicants in a single State an aggregate sum of more than 10 percent 
of the total award amount for the program.


Sec.  579.304  Grant award process.

    (a) Notification of selection. HUD will notify applicants selected 
for awards of any conditions imposed on the award. Conditions must be 
satisfied before HUD will execute a grant agreement with the applicant.

[[Page 18751]]

    (b) Conditions precedent to grant execution. HUD will withdraw the 
award if the applicant does not meet all requirements for obligation of 
the funds, including:
    (1) Documenting evidence of meeting match requirements;
    (2) Conducting environmental review;
    (3) Documenting financial feasibility; and
    (4) Correcting all issues and conditions attached to the grant 
award within 12 months of the announcement of the award.
    (c) Exception. HUD may execute a grant agreement with the applicant 
before all the conditions in paragraph (b) of this section are 
satisfied, subject to the condition that the applicant may only use 
grant funds obligated for one or all of the following eligible costs: 
capacity building, supportive services provided at sites not operated 
by the recipient or subrecipient, or HMIS eligible costs. If an 
applicant expends funds for capacity building, supportive services to 
sites not operated by the recipient or subrecipient, or HMIS and fails 
to subsequently meet the conditions precedent for the other activities 
HUD may recapture the applicant's grant funds.
    (d) Obligation deadline. All grant funds must be obligated by the 
recipient by the end of the recipient's second fiscal year. Any funds 
that remain unobligated after the recipient's second fiscal year must 
be recaptured by HUD. All funds must be spent by recipients by the end 
of the grant term.
    (e) Required agreements. Recipients will be required to sign a 
grant agreement in which the recipient agrees to:
    (1) Ensure the operation of the grant in accordance with the 
provisions of the McKinney-Vento Act and all requirements under this 
part;
    (2) Monitor and report the programmatic and financial progress of 
the grant to HUD;
    (3) Ensure, to the maximum extent practicable, that low- and very-
low income individuals and families, including those individuals and 
families experiencing or at risk of homelessness or in the worst 
housing situations, are involved, through employment, provision of 
volunteer services, or otherwise, in constructing, rehabilitating, 
maintaining, and operating facilities for the project and in providing 
supportive services for the project as required by section 491(d)(6) of 
the McKinney-Vento Act;
    (4) Require a certification from each subrecipient in which the 
subrecipient certifies to:
    (i) Maintain the confidentiality of records pertaining to any 
individual or family who was provided family violence prevention or 
treatment services through the project;
    (ii) Maintain the confidentiality of the address or location of any 
family violence shelter project assisted under this part, except with 
written authorization of the person responsible for the operation of 
such project;
    (iii) Establish policies and practices that are consistent with, 
and do not restrict the exercise of rights provided by, subtitle B of 
title VII of the McKinney-Vento Act (42 U.S.C. 11431 et seq.) and other 
laws relating to the provision of educational and related services to 
individuals and families experiencing homelessness;
    (iv) In the case of projects that provide housing or services to 
families, designate a staff person to be responsible for ensuring that 
children being served in the program are enrolled in school and 
connected to appropriate services in the community, including early 
childhood programs such as Head Start, part C of the Individuals with 
Disabilities Education Act, and programs authorized under subtitle B of 
title VII of McKinney-Vento Act (42 U.S.C. 11431 et seq.); and
    (iv) Provide information, such as data and reports, as required by 
HUD;
    (5) Monitor and report the provision of matching funds to HUD;
    (6) Take the educational needs of children into account when 
families are placed in housing and to the maximum extent practicable, 
place families with children as close as possible to their school of 
origin so as not to disrupt such children's education;
    (7) Make known that use of the facilities, assistance, and services 
is available to all on a nondiscriminatory basis;
    (8) Monitor subrecipients at least annually; and
    (9) Comply with such other terms and conditions as HUD may 
establish.

Subpart E--Program Requirements


Sec.  579.400  Assessment of program participant eligibility and needs.

    (a) In general. The recipient or its subrecipient must conduct an 
initial evaluation and, when required by HUD, periodic reevaluations to 
determine the eligibility of each family or individual and to determine 
the amount and types of assistance each family or individual needs to 
regain stability in permanent housing.
    (b) Written standards for determining the amount and types of 
assistance. (1) The recipient must have written standards for the 
provision of assistance under this part and must consistently apply 
those standards for all program participants.
    (2) At a minimum, these written standards must include:
    (i) Standards for determining and prioritizing which eligible 
families and individuals will receive assistance; and
    (ii) The limits on the assistance that each program participant may 
receive.
    (c) Annual income. When determining the annual income of an 
individual or family, the recipient or subrecipient must use the 
standard for calculating annual income under 24 CFR 5.609, except that 
the value of the program participant's principal residence should be 
excluded from the calculation of the Net Family Assets when providing 
rehabilitation and repairs to participant-owned housing.


Sec.  579.402  Match.

    (a) In general. The recipient or subrecipient must match all grant 
funds, except for leasing funds, data collection costs, and 
administrative costs, with no less than 25 percent of funds or in-kind 
contributions from other sources.
    (b) Cash resources. (1) Cash match must be for the costs of 
activities that are eligible under subpart C of this part.
    (2) Cash match must be cash resources provided to the project by 
one or more of the following:
    (i) The recipient;
    (ii) The Federal Government;
    (iii) State and local governments; or
    (iv) Private resources.
    (c) Sources. A recipient may use funds from any source, including 
any other Federal sources (excluding Rural Housing Stability Assistance 
Program funding), as well as State, local, and private sources, 
provided that funds from the source are not statutorily prohibited to 
be used as a match. The recipient must ensure that any funds used to 
satisfy the matching requirements of this section are eligible under 
the laws governing the funds in order to be used as matching funds for 
a grant awarded under this program.
    (d) Noncash contributions. (1) In-kind contributions must be used 
to provide services that are eligible under subpart C of this part.
    (2) The requirements of 24 CFR 84.23, pertaining to cost sharing or 
matching for nonprofit organizations, and 24 CFR 85.24, pertaining to 
cost sharing or matching for State, local, and Federally recognized 
Indian tribal governments, apply.
    (3) Before grant execution, services to be provided by a third 
party must be documented by a memorandum of understanding (MOU) or a

[[Page 18752]]

memorandum of agreement (MOA) between the recipient or subrecipient and 
the third party that will provide the services. Services provided by 
individuals must be valued at rates consistent with those ordinarily 
paid for similar work in the recipient's or subrecipient's 
organization. If the recipient or subrecipient does not have employees 
performing similar work, the rates must be consistent with those 
ordinarily paid by other employers for similar work in the same labor 
market.
    (i) The MOU or MOA must establish the unconditional commitment, 
except for selection to receive a grant, by the third party to provide 
the services, the specific service to be provided, the profession of 
the persons providing the service, and the hourly cost of the service 
to be provided.
    (ii) During the term of the grant, the recipient or subrecipient 
must keep and make available for inspection, records documenting the 
service hours provided.


Sec.  579.404  General operation.

    (a) State and local requirements. Each recipient and subrecipient 
of assistance under this part must provide housing or services that 
comply with all applicable State and local housing codes, licensing 
requirements, and any other requirements imposed on the provision of 
housing or services by the jurisdiction in which the project is 
located.
    (b) Property standards. Except for such variations as are proposed 
by the recipient and approved by HUD, all funds used for housing except 
for rehabilitation of participant-owned housing, must meet the 
following requirements:
    (1) New construction, acquisition and rehabilitation. All housing 
assisted under this part must meet State or local building code. In the 
absence of such code, the construction must be in compliance with one 
of the three model codes (Uniform Building Code (ICBO) National 
Building Code (BOCA), Standard (Southern) Building Code (SBCCI)); or 
the Council of American Building Officials (CABO), or the Minimum 
Property Standards (MPS) in 24 CFR 200.925 or 200.926.
    (2) Leasing, Rental Assistance, and Operating Costs. (i) Housing 
assisted under this part must meet the applicable housing quality 
standards (HQS) under HUD's Housing Choice Voucher regulations in 24 
CFR 982.401, except that 24 CFR 982.401(j) does not apply, and instead 
part 35, subparts A, B, K, M, and R of this title apply. For congregate 
facilities, such as group homes, 24 CFR 982.609 applies.
    (ii) Before any assistance will be provided on behalf of a 
participant, the recipient, or subrecipient, must physically inspect 
each unit to assure that each unit meets HQS. Assistance will not be 
provided for units that fail to meet HQS, unless the owner corrects any 
deficiencies within 30 days from the date of the lease agreement and 
the recipient verifies that all deficiencies have been corrected.
    (iii) Recipients must also inspect all units at least annually 
during the grant period to ensure that the units continue to meet HQS.
    (3) Physical accessibility requirements. Recipients must comply 
with the Federal accessibility requirements of the Fair Housing Act, 
Section 504 of the Rehabilitation Act, and titles II and III of the 
Americans with Disabilities Act, as applicable.
    (c) Payment of grant. (1) The grant amount awarded is intended to 
serve the program participants over the entire grant period. An 
applicant's grant request is an estimate of the amount needed to 
provide the activities outlined in the grant application. Recipients 
must make draws at least quarterly from the grant funds to pay the 
actual costs of eligible activities for program participants.
    (2) A recipient must serve at least as many participants as shown 
in its approved application for assistance.
    (d) Ongoing assessment of supportive services. Each recipient of 
assistance under this part must conduct an ongoing assessment of the 
supportive services required by the program participants of the grant, 
the availability of such services, and the coordination of services 
needed to ensure long-term housing stability and make adjustments as 
appropriate.


Sec.  579.406  Calculating occupancy charges and rent.

    (a) Occupancy agreements and leases. Recipients and subrecipients 
must have signed occupancy agreements or leases (or subleases) with 
program participants residing in housing.
    (b) Calculation of occupancy charges. Recipients and subrecipients 
are not required to impose occupancy charges on program participants as 
a condition of residing in the housing. However, if occupancy charges 
are imposed, they may not exceed the highest of:
    (1) 30 percent of the family's monthly adjusted income (adjustment 
factors include the number of people in the family, age of family 
members, medical expenses, and child care expenses);
    (2) 10 percent of the family's monthly income; or
    (3) If the family is receiving payments for welfare assistance from 
a public agency and a part of the payments (adjusted in accordance with 
the family's actual housing costs) is specifically designated by the 
agency to meet the family's housing costs, the portion of the payments 
that is designated for housing costs.
    (c) Income calculation. Income must be calculated in accordance 
with 24 CFR 5.609 and 24 CFR 5.611(a). Recipients and subrecipients 
must examine a program participant's income initially, and if there is 
a change in family composition (e.g., birth of a child) or a decrease 
in the program participant's income during the year, the program 
participant may request an interim reexamination, and the occupancy 
charge will be adjusted accordingly.
    (d) Resident rent-(1) Amount of rent. Each program participant, on 
whose behalf rental assistance payments are made, must pay a 
contribution toward rent in accordance with section 3(a)(1) of the U.S. 
Housing Act of 1937 (42 U.S.C. 1437a(a)(1)).
    (i) When determining the rent of a person occupying an intermediate 
care facility assisted under title XIX of the Social Security Act, the 
gross income of this person is the same as a person being assisted 
under title XVI of the Social Security Act.
    (ii) Income of program participants must be calculated in 
accordance with 24 CFR 5.609 and 24 CFR 5.611(a).
    (2) Review. Recipients or subrecipients must examine a program 
participant's income initially, and at least annually thereafter, to 
determine the amount of the contribution toward rent payable by the 
program participant. Adjustments to a program participant's rental 
payment must be made as changes in income are identified.
    (3) Verification. As a condition of participation in the program, 
each program participant must agree to supply the information or 
documentation necessary to verify the program participant's income. 
Program participants must provide the recipient or subrecipient with 
information at any time regarding changes in income or other 
circumstances that may result in changes to a program participant's 
rental payment.


Sec.  579.408  Limitation on transitional housing.

    An eligible individual or family may remain in transitional housing 
for a period longer than 24 months, if permanent housing for the 
individual or family has not been located or if the individual or 
family requires additional

[[Page 18753]]

time to prepare for independent living. However, HUD may discontinue 
assistance for a transitional housing project if more than half of the 
eligible individuals or families remain in that project longer than 24 
months.


Sec.  579.410  Term of commitment; Repayment of grants; Prevention of 
undue benefits.

    (a) Duration of grants. Grant terms will be established through the 
annual NOFA.
    (b) In general. All recipients and subrecipients receiving grant 
funds for acquisition, rehabilitation, or new construction for rental 
housing or a facility must agree to operate the housing or provide 
supportive services in accordance with this part, for a term of at 
least 15 years from the date of initial occupancy or date of initial 
service provision. Recipients and subrecipients must execute and record 
a HUD-approved Declaration of Restrictive Covenants before receiving 
payment of grant funds.
    (c) Sustainability plan. All recipients receiving grant funds to 
provide housing must comply with the sustainability plan that was 
submitted as part of the approved application that described how the 
project will continue to operate when the grant term terminates.
    (d) Repayment of grant funds. If the housing is not operated as 
transitional or permanent housing for 10 years following the date of 
initial occupancy, HUD will require repayment of the entire amount of 
the grant used for acquisition, rehabilitation, or new construction. If 
the housing is used for such purposes for more than 10 years, the 
payment amount will be reduced by 20 percentage points for each year 
beyond the 10-year period in which the project is used for transitional 
or permanent housing.
    (e) Prevention of undue benefits. Except as provided in paragraph 
(f) of this section, upon any sale or other disposition of a project 
site that received grant funds for acquisition, rehabilitation, or new 
construction, occurring before the 15-year period, the recipient must 
comply with such terms and conditions as HUD may prescribe to prevent 
the recipient or subrecipient from unduly benefiting from such sale or 
disposition.
    (f) Exception. A recipient or subrecipient for all activities other 
than repairs or rehabilitation to participant-owned property will not 
be required to comply with the terms and conditions prescribed under 
paragraphs (d) and (e) of this section if:
    (1) The sale or disposition of the property used for the project 
results in the use of the property for the direct benefit of very low-
income persons;
    (2) All the proceeds are used to provide transitional or permanent 
housing that meet the requirements of this part; or
    (3) Project-based rental assistance or operating cost assistance 
from any Federal program or an equivalent State or local program is no 
longer made available and the project is meeting applicable performance 
standards, provided that the portion of the project that had benefitted 
from such assistance continues to meet the tenant income and rent 
restrictions for low-income units under section 42(g) of the Internal 
Revenue Code of 1986.


Sec.  579.412  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, recipients and subrecipients must ensure that 
they have taken all reasonable steps to minimize the displacement of 
persons (families, individuals, businesses, nonprofit organizations, 
and farms) as a result of projects assisted with Rural Housing 
Stability Assistance Program funds. ``Project,'' as used in this 
section, means any activity or series of activities assisted with 
program funds received or anticipated in any phase of an undertaking.
    (b) Temporary relocation. Owner-occupants that must temporarily 
relocate as a result of rehabilitation or demolition for a project are 
not covered by this paragraph (b), but may be eligible for short-term 
emergency lodging assistance under Sec.  579.206(c) and other 
assistance under this part. Temporary relocation, as discussed in this 
section, differs from relocation assistance under Sec.  579.204 which 
allows relocation assistance as an eligible activity where a program 
participant is being moved permanently from the county based on the 
request of the program participant for at least one of the reasons 
specified in Sec.  579.204(b). No other person may be required to 
relocate temporarily for a project except consistent with paragraph 
(c)(2)(ii) of this section, if the person is a residential tenant or 
program participant, and in accordance with 49 CFR part 24, Appendix A, 
Sec.  24.2(a)(9)(ii)(D). No residential tenant may be temporarily 
relocated if the residential tenant cannot be offered a decent, safe, 
and sanitary dwelling unit in the same building or complex upon project 
completion under reasonable terms and conditions. Any residential 
tenant who has been temporarily relocated for a period beyond one year 
must be offered relocation assistance and payments consistent with 
paragraph (c) of this section. Such residential tenants may be given 
the opportunity to choose to continue to remain temporarily relocated 
for an agreed-to period (based on new information about when they can 
return to the displacement unit or another unit in the same building or 
complex), choose to permanently relocate to the unit which has been 
their temporary unit, and/or choose to permanently relocate elsewhere 
with assistance for displaced persons described in paragraph (c) of 
this section. The length of occupancy requirements in Sec.  579.408 may 
prevent a person from returning to the property upon project 
completion. (See paragraph (c)(2)(iii)(D) of this section). Persons, 
other than owner-occupants, temporarily relocated in accordance with 
the policies described in this paragraph (b) must be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses 
incurred in connection with the temporary relocation, including the 
cost of moving to and from the temporarily occupied unit and any 
increase in monthly rent/occupancy charges, and utility costs; and
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable unit to be made available for the 
temporary period (if the person is a residential tenant, the suitable 
unit must be a decent, safe, and sanitary dwelling);
    (iii) The reasonable terms and conditions under which the person 
will be able to lease and/or occupy a suitable unit in the building or 
complex upon project completion (if the person is a residential tenant, 
the suitable unit must be a decent, safe, and sanitary dwelling); and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. (1) In general. A 
displaced person (defined in paragraph (c)(2) of this section) must be 
provided relocation assistance in accordance with the requirements of 
the Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970 (URA), as amended, 42 U.S.C. 4601-4655, and 
implementing regulations at 49 CFR part 24. A displaced person must be 
advised of his or her rights under the Fair Housing Act. Whenever 
possible, minority persons must be given reasonable opportunities to 
relocate to decent, safe, and sanitary replacement dwellings, not 
located in an area of

[[Page 18754]]

minority concentration, that are within their financial means. This 
policy, however, does not require providing a person a larger payment 
than is necessary to enable a person to relocate to a comparable 
replacement dwelling. (See 49 CFR 24.205(c)(2)(ii)(D)).
    (2) Displaced person. (i) For the purposes of paragraph (c) of this 
section, the term ``displaced person'' means any person (family, 
individual, business, nonprofit organization, or farm) that moves from 
real property, or moves personal property from real property, 
permanently, as a direct result of acquisition, rehabilitation, or 
demolition for a project assisted with Rural Housing Stability 
Assistance Program funds. This includes any permanent, involuntary move 
for a project, including any permanent move from the real property that 
is made:
    (A) After the recipient (or subrecipient, as applicable) issues a 
notice to move permanently from the property, if the move occurs after 
the recipient (or subrecipient, as applicable) submits an application 
for assistance to HUD (or the recipient, as applicable) that is later 
approved and funded;
    (B) After the owner (or person in control of the site) issues a 
notice to move permanently from the property, or refuses to renew an 
existing lease, if the move occurs after the date of submission of a 
request for financial assistance by the property owner (or person in 
control of the site) that is later approved for the requested activity;
    (C) Before the date described under paragraph (c)(2)(i)(A) or (B) 
of this section, if the recipient or HUD determines that the 
displacement resulted directly from acquisition, rehabilitation, or 
demolition for the project; or
    (D) By a residential tenant or program participant occupying the 
property, provided that the person is not an owner-occupant, as 
provided in paragraph (c)(2)(ii) of this section:
    (ii) For the purposes of paragraph (c) of this section, the term 
``displaced person'' means any person (family, individual, business, 
nonprofit organization, or farm) that moves from real property, or 
moves personal property from real property, permanently, as a direct 
result of acquisition, rehabilitation, or demolition for a project. 
This includes any permanent, involuntary move for a project that is 
made by a program participant occupying the property, as provided in 
paragraph (c)(2)(i)(D) of this section if any one of the following 
three situations occurs:
    (A) The residential tenant or program participant moves after 
execution of the agreement covering the acquisition, rehabilitation, or 
demolition of the property for the project and either is not eligible 
to return upon project completion or the move occurs before the 
residential tenant or program participant is provided written notice 
offering an opportunity to occupy a suitable, decent, safe, and 
sanitary dwelling in the same building or complex upon project 
completion under reasonable terms and conditions. Such reasonable terms 
and conditions for a residential tenant must include a lease (or 
occupancy agreement, as applicable) consistent with program 
requirements, including a monthly rent or occupancy charge and monthly 
utility costs that do not exceed the maximum amounts established in 
Sec.  579.216; or
    (B) The residential tenant or program participant is required to 
relocate temporarily, does not return to the building or complex, and 
any one of the following situations occurs:
    (1) The residential tenant or program participant is not offered 
payment for all reasonable out-of-pocket expenses incurred in 
connection with the temporary relocation;
    (2) The residential tenant or program participant is not eligible 
to return to the building or complex upon project completion; or
    (3) Other conditions of the temporary relocation are not 
reasonable; or
    (C) The residential tenant or program participant is required to 
move to another unit in the same building or complex, and any one of 
the following situations occurs:
    (1) The residential tenant or program participant is not offered 
reimbursement for all reasonable out-of-pocket expenses incurred in 
connection with the move;
    (2) The residential tenant or program participant is not eligible 
to remain in the building or complex upon project completion; or
    (3) Other conditions of the move are not reasonable.
    (iii) Notwithstanding the provisions of paragraph (c)(2)(i) or (ii) 
of this section, a person does not qualify as a ``displaced person,'' 
if:
    (A) The person has been evicted for serious or repeated violation 
of the terms and conditions of the lease or occupancy agreement; the 
eviction complied with Federal, State, and local requirements (see 
Sec.  579.418); and the eviction was not undertaken for the purpose of 
evading the obligation to provide relocation assistance;
    (B) The person moved into the property after the submission of the 
application but, before signing a lease or occupancy agreement and 
commencing occupancy, was provided written notice of the project's 
possible impact on the person (e.g., the person may be displaced, 
temporarily relocated, or incur a rent increase) and the fact that the 
person would not qualify as a ``displaced person'' (or for any 
relocation assistance provided under this section), as a result of the 
project;
    (C) The person is ineligible under 49 CFR 24.2(a)(9)(ii);
    (D) The person must move as a direct result of the length of 
occupancy restriction under Sec.  579.408; or
    (E) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (iv) At any time, the recipient may request HUD's determination of 
whether a displacement is or would be covered under this section.
    (3) Initiation of negotiations. For purposes of determining the 
formula for computing replacement housing payment assistance to be 
provided to a displaced person pursuant to this section, if the 
displacement is a direct result of privately undertaken rehabilitation, 
demolition, or acquisition of the real property, ``initiation of 
negotiations'' means the execution of the agreement between the 
recipient and the subrecipient, or between the recipient (or 
subrecipient, as applicable) and the person owning or controlling the 
property. In the case of an option contract to acquire property, the 
initiation of negotiations does not become effective until execution of 
a written agreement that creates a legally enforceable commitment to 
proceed with the acquisition, such as a purchase agreement.
    (d) Real property acquisition requirements. Except for acquisitions 
described in 49 CFR 24.101(b)(1) through (5), the URA and the 
requirements of 49 CFR part 24, subpart B, apply to any acquisition of 
real property for a project where there are Rural Housing Stability 
Assistance Program funds in any part of the project costs.
    (e) Appeals. A person who disagrees with the recipient's (or 
subrecipient's, if applicable) determination concerning whether the 
person qualifies as a displaced person, or the amount of relocation 
assistance for which the person is eligible, may file a written appeal 
of that determination with the recipient. (See 49 CFR 24.10.) A low-
income person who is dissatisfied with the recipient's determination on 
his or her appeal may submit a written request for review of that 
determination to the local HUD field office.

[[Page 18755]]

Sec.  579.414  Timeliness standards.

    (a) In general. Any funds that remain unobligated after the second 
fiscal year must be recaptured by HUD. Grant terms, and associated 
grant operations, cannot extend beyond the availability of funds.
    (b) Payment. A recipient that receives funds through this part 
must:
    (1) Pay funds to subrecipients in accordance with 24 CFR 85.21 and 
24 CFR 84.22; and
    (2) Draw down funds at least once per quarter of the program year 
after eligible activities commence to pay eligible costs.
    (c) Withdrawal of awards. HUD will withdraw the award if the 
applicant does not correct all issues and conditions attached to the 
grant award within 12 months of the announcement of the award.


Sec.  579.416  Limitation on use of funds.

    (a) Maintenance of effort. No assistance provided under this part 
(or any State or local government funds used to supplement this 
assistance) will be awarded, or may be used, to replace State or local 
funds previously used, or designated for use, to assist persons who are 
homeless, at-risk of homelessness, or in the worst housing situations.
    (b) Program fees. Recipients and subrecipients may not charge 
program participants program fees.
    (c) Faith-based activities-(1) Equal treatment of program 
participants and program beneficiaries-(i) Program participants. 
Organizations that are religious or faith-based are eligible, on the 
same basis as any other organization, to participate in the Rural 
Housing Stability Assistance Program. Neither the Federal Government 
nor a State or local government receiving funds under the Rural Housing 
Stability Assistance Program shall discriminate against an organization 
on the basis of the organization's religious character or affiliation. 
Recipients and subrecipients of program funds shall not, in providing 
program assistance, discriminate against a program participant or 
prospective program participant on the basis of religion or religious 
belief.
    (ii) Beneficiaries. In providing services supported in whole or in 
part with federal financial assistance, and in their outreach 
activities related to such services, program participants shall not 
discriminate against current or prospective program beneficiaries on 
the basis of religion, religious belief, refusal to hold a religious 
belief, or refusal to attend or participate in a religious practice.
    (2) Separation of explicitly religious activities. Recipients and 
subrecipients of Rural Housing Stability Assistance Program funds that 
engage in explicitly religious activities, including activities that 
involve overt religious content such as worship, religious instruction, 
or proselytization, must perform such activities and offer such 
services outside of programs that are supported with Federal financial 
assistance separately, in time or location, from the programs or 
services funded under this part, and participation in any such 
explicitly religious activities must be voluntary for the program 
beneficiaries of the HUD-funded programs or services.
    (3) Religious identity. A faith-based organization that is a 
recipient or subrecipient of Rural Housing Stability Assistance Program 
funds is eligible to use such funds as provided under the regulations 
of this part without impairing its independence, autonomy, expression 
of religious beliefs, or religious character. Such organization will 
retain its independence from Federal, State, and local government, and 
may continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs, 
provided that it does not use direct program funds to support or engage 
in any explicitly religious activities, including activities that 
involve overt religious content, such as worship, religious 
instruction, or proselytization, or in any manner prohibited by law. 
Among other things, faith-based organizations may use space in their 
facilities to provide program-funded services, without removing or 
altering religious art, icons, scriptures, or other religious symbols. 
In addition, a Rural Housing Stability Assistance Program-funded 
religious organization retains its authority over its internal 
governance, and it may retain religious terms in its organization's 
name, select its board members on a religious basis, and include 
religious references in its organization's mission statements and other 
governing documents.
    (4) Alternative provider. If a program participant or prospective 
program participant of the Rural Housing Stability Assistance Program 
supported by HUD objects to the religious character of an organization 
that provides services under the program, that organization shall, 
within a reasonably prompt time after the objection, undertake 
reasonable efforts to identify and refer the program participant to an 
alternative provider to which the prospective program participant has 
no objection. Except for services provided by telephone, Internet, or 
similar means, the referral must be to an alternate provider in 
reasonable geographic proximity to the organization making the 
referral. In making the referral, the organization shall comply with 
applicable privacy laws and regulations. Recipients and subrecipients 
shall document any objections from program participants and prospective 
program participants and efforts to refer such participants to 
alternative providers in accordance with the requirements of Sec.  
579.504(k). Recipients shall ensure that all subrecipient agreements 
make organizations receiving program funds aware of these requirements.
    (5) Structures. Program funds may not be used for the acquisition, 
construction, or rehabilitation of structures to the extent that those 
structures are used for explicitly religious activities. Program funds 
may be used for the acquisition, construction, or rehabilitation of 
structures only to the extent that those structures are used for 
conducting eligible activities under this part. When a structure is 
used for both eligible and explicitly religious activities, program 
funds may not exceed the cost of those portions of the acquisition, new 
construction, or rehabilitation that are attributable to eligible 
activities in accordance with the cost accounting requirements 
applicable to the Rural Housing Stability Assistance Program. 
Sanctuaries, chapels, or other rooms that a Rural Housing Stability 
Assistance Program-funded religious congregation uses as its principal 
place of worship, however, are ineligible for Rural Housing Stability 
Assistance Program-funded improvements. Disposition of real property 
after the term of the grant, or any change in the use of the property 
during the term of the grant, is subject to governmentwide regulations 
governing real property disposition (see 24 CFR parts 84 and 85).
    (6) Supplemental funds. If a State or local government voluntarily 
contributes its own funds to supplement federally funded activities, 
the State or local government has the option to segregate the Federal 
funds or commingle them. However, if the funds are commingled, this 
section applies to all of the commingled funds.


Sec.  579.418  Termination of assistance to program participants.

    (a) Termination of assistance. The recipient or subrecipient may 
terminate assistance to a program participant who violates program 
requirements or conditions of occupancy. Termination under this section 
does not bar the recipient or subrecipient from providing further 
assistance at a later date to the same individual or family.

[[Page 18756]]

    (b) Due process. In terminating assistance to a program 
participant, the recipient or subrecipient must provide a formal 
process that recognizes the rights of individuals receiving assistance 
to due process of law and should consider the target population of the 
program. This process, at a minimum, must consist of:
    (1) Providing the program participant with a written copy of the 
program rules and the termination process before the program 
participant begins to receive assistance;
    (2) Written notice to the program participant containing a clear 
statement of the reasons for termination;
    (3) A review of the decision, in which the program participant is 
given the opportunity to present written or oral objections before a 
person other than the person (or a subordinate of that person) who made 
or approved the termination decision; and
    (4) Prompt written notice of the final decision to the program 
participant.
    (c) Hard-to-house populations. Recipients and subrecipients that 
are providing permanent housing with supportive services for hard-to-
house populations of homeless persons must exercise judgment and 
examine all extenuating circumstances in determining when violations 
are serious enough to warrant termination so that a program 
participant's assistance is terminated only in the most severe cases.


Sec.  579.420  Conflicts of interest.

    (a) Organizational conflicts of interest. The provision of any type 
or amount of assistance under this part may not be conditioned on an 
individual's or family's acceptance or occupancy of housing that the 
recipient, subrecipient, or a parent or subsidiary of the subrecipient, 
owns. No subrecipient, or parent or subsidiary of a subrecipient, may, 
with respect to individuals or families occupying housing that the 
subrecipient, or any parent or subsidiary of the subrecipient, owns, 
carry out the intake assessment.
    (b) Individual conflicts of interest. For the procurement of goods 
and services, the recipient and its subrecipients must comply with the 
codes of conduct and conflict of interest requirements under 24 CFR 
85.36 (for governments) and 24 CFR 84.42 (for private nonprofit 
organizations). For all other transactions and activities, the 
following restrictions apply:
    (1) Conflicts prohibited. No person described in paragraph (b)(2) 
of this section who exercises or has exercised any functions or 
responsibilities with respect to activities assisted under this part, 
or who is in a position to participate in a decisionmaking process or 
gain inside information with regard to activities assisted under this 
part, may obtain a financial interest or benefit from an assisted 
activity, have a financial interest in any contract, subcontract, or 
agreement with respect to an assisted activity, or have a financial 
interest in the proceeds derived from an assisted activity, either for 
him or herself or for those with whom he or she has family or business 
ties, during his or her tenure or during the one-year period following 
his or her tenure.
    (2) Persons covered. The conflict of interest provisions of 
paragraph (b)(1) of this section apply to any person who is an 
employee, agent, consultant, officer, or elected or appointed official 
of the recipient or its subrecipients.
    (3) Exceptions. Upon the written request of the recipient, HUD may 
grant an exception to the provisions of this section on a case-by-case 
basis, taking into account the cumulative effects of the criteria in 
paragraph (b)(3)(ii) of this section, provided that the recipient has 
satisfactorily met the threshold requirements of paragraph (b)(3)(i) of 
this section.
    (i) Threshold requirements. HUD will consider an exception only 
after the recipient has provided the following documentation:
    (A) Disclosure of the nature of the conflict, accompanied by an 
assurance, if the recipient is a government, that there has been public 
disclosure of the conflict and a description of how the public 
disclosure was made and, if the recipient is a nonprofit, that the 
conflict has been disclosed in accordance with their written code of 
conduct or other conflict of interest policy; and
    (B) An opinion from the recipient's attorney that the interest for 
which the exception is sought would not violate State or local law.
    (ii) Factors to be considered for exceptions. In determining 
whether to grant a requested exception after the recipient has 
satisfactorily met the threshold requirements under paragraph (b)(3)(i) 
of this section, HUD must conclude that the exception will serve to 
further the purposes of this program and the effective and efficient 
administration of the recipient's or subrecipient's project, taking 
into account the cumulative effect of the following factors, as 
applicable:
    (A) Whether the exception would provide a significant cost benefit 
or an essential degree of expertise to the program or project that 
would otherwise not be available;
    (B) Whether an opportunity was provided for open competitive 
bidding or negotiation;
    (C) Whether the affected person has withdrawn from his or her 
functions, responsibilities or the decisionmaking process with respect 
to the specific activity in question;
    (D) Whether the interest or benefit was present before the affected 
person was in the position described in paragraph (b)(1) of this 
section;
    (E) Whether undue hardship will result to the recipient, the 
subrecipient or the person affected, when weighed against the public 
interest served by avoiding the prohibited conflict; and
    (F) Any other relevant considerations.
    (c) Contractors. All contractors of the recipient or subrecipient 
must comply with the same requirements that apply to subrecipients 
under this section.


Sec.  579.422  Program income.

    (a) Defined. Program income is the income received by the recipient 
or subrecipient directly generated by a grant supported activity.
    (b) Use. Program income earned during the grant term shall be 
retained by the recipient, and added to funds committed to the project 
by HUD and the recipient, and used for eligible activities in 
accordance with the requirements of this part. Costs incident to the 
generation of program income may be deducted from gross income to 
calculate program income, provided the costs have not been charged to 
grant funds.
    (c) Rent and occupancy charges. Rents and occupancy charges 
collected from program participants are program income. In addition, 
rents and occupancy charges collected from residents of transitional 
housing may be reserved, in whole or in part, to assist the residents 
from whom they are collected to move to permanent housing.


Sec.  579.424  Applicability of other Federal requirements.

    (a) In general. In addition to the requirements set forth in 24 CFR 
part 5, use of assistance provided under this part must comply with the 
following Federal requirements:
    (1) Flood Disaster Protection Act. The Flood Disaster Protection 
Act of 1973 (42 U.S.C. 4001-4128) prohibits the approval of 
applications for assistance for acquisition or construction (including 
rehabilitation) for supportive housing located in an area identified by 
the Federal Emergency Management Agency (FEMA) as having special flood 
hazards, unless:
    (i) The community in which the area is situated is participating in 
the

[[Page 18757]]

National Flood Insurance Program (see 44 CFR parts 59 through 79), or 
less than a year has passed since FEMA notification regarding such 
hazards; and
    (ii) Flood insurance is obtained as a condition of approval of the 
application.
    (2) National Flood Insurance Program. Applicants with supportive 
housing located in an area identified by FEMA as having special flood 
hazards and receiving assistance for acquisition or construction 
(including rehabilitation) are responsible for assuring that flood 
insurance under the National Flood Insurance Program is obtained and 
maintained.
    (3) Solid Waste Disposal Act. State agencies and agencies of a 
political subdivision of a State that are using assistance under this 
part for procurement, and any person contracting with such an agency 
with respect to work performed under an assisted contract, must comply 
with the requirements of section 6003 of the Solid Waste Disposal Act, 
as amended by the Resource Conservation and Recovery Act. In accordance 
with Sec.  6002, these agencies and persons must:
    (i) Procure items designated in guidelines of the Environmental 
Protection Agency (EPA) at 40 CFR part 247 that contain the highest 
percentage of recovered materials practicable, consistent with 
maintaining a satisfactory level of competition, where the purchase 
price of the item exceeds $10,000 or the value of the quantity acquired 
in the preceding fiscal year exceeded $10,000;
    (ii) Procure solid waste management services in a manner that 
maximizes energy and resource recovery; and
    (iii) Must have established an affirmative procurement program for 
the procurement of recovered materials identified in the EPA 
guidelines.
    (4) Transparency Act Reporting. In accordance with section 872 of 
the Duncan Hunter Defense Appropriations Act of 2009, including 
additional requirements published by the Office of Management and 
Budget (OMB), recipients are required to report subawards made either 
as pass-through awards, subrecipient awards, or vendor awards in the 
Federal governmentwide Web site www.fsrs.gov or its successor system. 
The reporting of award and subaward information is in accordance with 
the requirements of the Federal Financial Assistance Accountability and 
Transparency Act of 2006, as amended by section 6202 of Public Law 110-
252 and in OMB Policy Guidance issues to the Federal Agencies on 
September 14, 2010 (75 FR 55669).
    (b) Coastal Barrier Resources Act. The Coastal Barrier Resources 
Act of 1982 (16 U.S.C. 3501 et seq.) may apply to proposals under this 
part, depending on the assistance requested.
    (c) Applicability of OMB Circulars. The requirements of 24 CFR part 
85--Administrative Requirements for Grants and Cooperative Agreements 
to State, Local and Federally Recognized Indian Tribal Governments and 
2 CFR Part 225--Cost Principles for State, Local, And Indian Tribal 
Governments (OMB Circular A-87) apply to governmental recipients and 
subrecipients, except where inconsistent with the provision of this 
part. The requirements of 24 CFR part 84--Uniform Administrative 
Requirements for Grants and Agreements with Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations; 2 CFR part 
230--Cost Principles for Non-Profit Organizations (OMB Circular A-122); 
and 2 CFR part 220--Cost Principles for Education Institutions (OMB 
Circular A-21) apply to nonprofit recipients and subrecipients, except 
where inconsistent with the provision of this part.
    (d) Lead-based paint. The Lead-Based Paint Poisoning Prevention Act 
(42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard 
Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing 
regulations at 24 CFR part 35, subparts A, B, H, J, K, M, and R of this 
title apply to activities under this program.
    (e) Audit. Recipients and subrecipients must comply with the audit 
requirements of OMB Circular A-133, ``Audits of States, Local 
Governments, and Non-profit Organizations.''
    (f) Davis-Bacon Act. The provisions of the Davis-Bacon Act (40 
U.S.C. 3141 et. seq.) do not apply to this program.
    (g) Fair Housing and Equal Opportunity. (1) Nondiscrimination and 
equal opportunity requirements. The nondiscrimination and equal 
opportunity requirements set forth in 24 CFR 5.105(a) are applicable.
    (2) Housing for specific subpopulations. Recipients and 
subrecipients may exclusively serve a particular homeless subpopulation 
in transitional or permanent housing if the housing addresses a need 
identified by the rural county and meets one of the following:
    (i) The housing may be limited to one sex where it consists of a 
single structure with shared bedrooms or bathing facilities such that 
the considerations of personal privacy and the physical limitations of 
the configuration of the housing make it appropriate for the housing to 
be limited to one sex.
    (ii) The housing may be limited to a specific subpopulation as long 
as admission does not discriminate against any protected class under 
Federal nondiscrimination laws in 24 CFR 5.105 (e.g., the housing may 
be limited to homeless veterans, victims of domestic violence and their 
children, or chronically homeless persons and families).
    (iii) The housing may be limited to families with children.
    (iv) If the housing has in residence at least one family with a 
child under the age of 18, the housing may exclude registered sex 
offenders and persons with a criminal record that includes a violent 
crime from the project so long as the child resides in the housing.
    (v) Sober housing may exclude persons who refuse to sign an 
occupancy agreement or lease that prohibits program participants from 
possessing, using, or being under the influence of illegal substances 
and/or alcohol on the premises.
    (vi) If the housing is assisted with funds under a Federal program 
that is limited by Federal statute or Executive Order to a specific 
subpopulation, the housing may be limited to that subpopulation (e.g., 
housing also assisted with funding from the Housing Opportunities for 
Persons with AIDS program, under 24 CFR part 574, may be limited to 
persons with acquired immunodeficiency syndrome or related diseases).
    (vii) Recipients may limit admission to or provide a preference for 
the housing to subpopulations of homeless persons and families who need 
the specialized supportive services that are provided in the housing 
(e.g., substance abuse addiction treatment, domestic violence services, 
or a high intensity package designed to meet the needs of hard-to-reach 
homeless persons). While the housing may offer services for a 
particular type of disability; no otherwise eligible individuals with 
disabilities or families including an individual with a disability who 
may benefit from the services provided may be excluded on the grounds 
that they do not have a particular disability.
    (3) Affirmatively furthering fair housing. A recipient must 
implement its programs in a manner that affirmatively furthers fair 
housing, which means that the recipient must:
    (i) Affirmatively market their housing and supportive services to 
eligible persons regardless of race, color, national origin, religion, 
sex, age, familial status, or handicap who are least likely to apply in 
the absence of

[[Page 18758]]

special outreach, and maintain records of those marketing activities;
    (ii) Where a recipient encounters a condition or action that 
impedes fair housing choice for current or prospective program 
participants, provide such information to the jurisdiction that 
provided the Abbreviated Consolidated Plan or Consolidated Plan; and
    (iii) Provide program participants with information on rights and 
remedies available under applicable Federal, State and local fair 
housing and civil rights laws.
    (4) Accessibility and integrative housing and services for persons 
with disabilities. Recipients and subrecipients must comply with the 
accessibility requirements of the Fair Housing Act (24 CFR part 100), 
Section 504 of the Rehabilitation Act of 1973 (24 CFR part 8), and 
titles II and III of the Americans with Disabilities Act, as applicable 
(28 CFR parts 35 and 36). In accordance with the requirements of 24 CFR 
8.4(d), recipients must ensure their program's housing and supportive 
services are provided in the most integrated setting appropriate to the 
needs of persons with disabilities.
    (5) Prohibition against involuntary family separation. The age and 
gender of a child under age 18 must not be used as a basis for denying 
any family's admission to a project that receives funds under this 
part.
    (6) Section 3. Recipients and subrecipients must comply with 
Section 3 of the Housing and Urban Development Act of 1968 and its 
implementing regulations at 24 CFR part 135, as applicable. Section 3 
requires that, to the greatest extent feasible, training, employment, 
contracting, and other economic opportunities will be directed to low- 
and very-low income persons in the area in which projects are located.
    (h) Equal participation of religious organizations in HUD programs 
and activities. Requirements regarding the equal participation of 
religious organizations at 24 CFR 5.109 apply to programs and 
activities funded under this part.

Subpart F--Grant Administration


Sec.  579.500  Data collection requirements.

    (a) Purpose. Recipients and subrecipients of funds under this 
program will be required to collect and report data using methods 
determined by HUD. Recipients and subrecipients may collect data in a 
Homeless Management Information System (HMIS) or comparable data 
collection system that conforms to HUD's HMIS data collection 
requirements as established by Notice, including a system that collects 
client-level data over time (i.e., longitudinal data) and generates 
unduplicated aggregate reports based on the data. Data collection 
requirements include, but are not limited to:
    (1) Participation in Homeless Management Information Systems (HMIS) 
or a Comparable Data Collection System. Recipients and subrecipients 
electing to participate in an HMIS are required to designate an HMIS 
currently being operated by a Continuum of Care within the State and to 
contribute data to the HMIS. Recipients and subrecipients will be 
permitted to use program funds to pay the costs of maintaining, 
managing, and contributing data as set forth in Sec.  579.228. 
Recipients and subrecipients should make reasonable efforts to contact 
a Continuum of Care to determine whether to contribute data to its 
existing HMIS, or whether to establish a comparable data collection 
system that complies with the data collection requirements of this 
program, and allows the collection and reporting of required data to 
HUD. If a recipient or subrecipient elects to use HMIS, victim service 
providers will not enter their data into the HMIS but must still 
collect data in a comparable database and be able to provide the 
aggregated data to the recipient for the purpose of reporting.
    (2) Point-in-time count participation. All recipients must 
participate in or plan for and conduct a point-in-time count of 
sheltered and unsheltered homeless persons within the county within the 
last 10 days of January in accordance with Sec.  579.228, or as 
otherwise determined by HUD, during the grant period.
    (3) Housing inventory count participation. All recipients must 
perform an annual housing inventory survey and report their data to 
HUD, or as otherwise determined by HUD, during the grant period.
    (b) [Reserved]


Sec.  579.502  Technical assistance.

    (a) Purpose. The purpose of the program's technical assistance is 
to increase the effectiveness with which eligible recipients develop 
projects that effectively assist individuals and families that are 
homeless, at risk of homelessness, or are in the worst housing 
situations; improve recipients' capacity to prepare funding 
applications; and increase recipients' ability to gain access to other 
Federal resources that may be used to assist individuals and families 
that are homeless, at risk of homelessness, or are in the worst housing 
situations in rural counties.
    (b) Defined. Technical assistance means the transfer of skills and 
knowledge to entities that may need, but do not possess, such skills 
and knowledge. The assistance may include, but is not limited to, 
written information such as papers, manuals, guides and brochures; 
person-to-person exchanges; web-based curriculums, and training and 
webinars and their related costs.


Sec.  579.504  Recordkeeping requirements.

    (a) In general. The recipient and its subrecipients must establish 
and maintain standard operating procedures for ensuring that program 
funds are used in accordance with the requirements of this part, and 
must establish and maintain sufficient records to enable HUD to 
determine whether the recipient and its subrecipients are meeting the 
requirements of this part.
    (b) Homeless status. Acceptable evidence of the homeless status is 
set forth in 24 CFR 576.500(b).
    (c) At risk of homelessness status. For those recipients and 
subrecipients that serve persons at risk of homelessness, the recipient 
or subrecipient must keep records that establish ``at risk of 
homelessness'' status of each individual or family. Acceptable evidence 
is found in 24 CFR 576.500(c).
    (d) Worst housing situation. Source documents from a certified 
professional, such as a licensed building inspector, verifying that one 
or more of the major systems in the house are failing and that it poses 
a health or safety risk to the family. Documentation of the source's 
licensure or certification must also be maintained.
    (e) Annual income. For each program participant who receives 
housing assistance where rent or an occupancy charge is paid by the 
program participant, the recipient or subrecipient must keep the 
following documentation of annual income:
    (1) Income evaluation form specified by HUD and completed by the 
recipient or subrecipient; and
    (2) Source documents (e.g., wage statement, unemployment 
compensation statement, public benefits statement, bank statement) for 
the assets held by the program participant and income received before 
the date of the evaluation; or
    (3) To the extent source documents are unobtainable, a written 
statement by the relevant third party (e.g., employer, government 
benefits administrator) or written certification by the recipient's or

[[Page 18759]]

subrecipient's intake staff of the oral verification by the relevant 
third party of the income the program participant received over the 
most recent period; or
    (4) To the extent source documents and third party verification are 
unobtainable, the written certification by the program participant of 
the amount of income the program participant reasonably expected to 
receive over the three-month period following the evaluation.
    (f) Records of reasonable belief of imminent threat of harm. For 
each program participant who moved to a different county due to 
imminent threat of further domestic violence, dating violence, sexual 
assault, or stalking under Sec.  579.216, each recipient or 
subrecipient of assistance under this part must retain:
    (1) Documentation of the original incidence of domestic violence, 
dating violence, sexual assault, or stalking, only if the original 
violence is not already documented in the program participant's case 
file. This may be, written observation of the housing or service 
provider; a letter or other documentation from a victim service 
provider, social worker, legal assistance provider, pastoral counselor, 
mental health provider, or other professional from whom the victim has 
sought assistance; medical or dental records; court records or law 
enforcement records; or written certification by the program 
participant to whom the violence occurred or by the head of household.
    (2) Documentation of the reasonable belief of imminent threat of 
further domestic violence, dating violence, sexual assault, or 
stalking, which would include threats from a third-party, such as a 
friend or family member of the perpetrator of the violence. This may be 
written observation by the housing or service provider; a letter or 
other documentation from a victim service provider, social worker, 
legal assistance provider, pastoral counselor, mental health provider, 
or other professional from whom the victim has sought assistance; 
current restraining order, recent court order, or other court records; 
law enforcement reports or records; communication records from the 
perpetrator of the violence or family members or friends of the 
perpetrator of the violence, including emails, voicemails, text 
messages, and social media posts; or a written certification by the 
program participant to whom the violence occurred or by the head of 
household.
    (g) Program participant records. In addition to evidence of 
``homeless'' status, ``at risk of homelessness'' status, or ``worst 
housing situation'' status, as applicable, the recipient or 
subrecipient must keep records for each program participant that 
document:
    (1) The services and assistance provided to that program 
participant, including, as applicable, the security deposit, rental 
assistance, and utility payments made on behalf of the program 
participant;
    (2) Compliance with the applicable requirements for providing those 
services and assistance to that program participant under the eligible 
activities provisions at Sec.  579.202 through Sec.  579.230, and the 
provision on determining eligibility and amount and type of assistance 
at Sec.  579.200; and
    (3) In the case of program participants in the worst housing 
situations that received assistance in the form of repairs and 
rehabilitation to participant-owned housing, records demonstrating that 
the program participants are complying with the 3-year residency 
requirement. Participants or subrecipients are also required to 
maintain copies of the repayment agreements on file that these program 
participants are required to enter under Sec.  579.220.
    (h) Subsidy layering. The recipient must keep records indicating 
other sources of governmental assistance that the applicant has 
received, or reasonably expects to receive, in accordance with Sec.  
579.104.
    (i) Match. The recipient and subrecipient must keep copies of the 
Memorandums of Understanding or Memorandums of Agreement with third 
parties and records of the source and use of contributions made to 
satisfy the matching requirement in Sec.  579.402. The records must 
show how the value placed on third-party noncash contributions was 
derived. To the extent feasible, volunteer services must be supported 
by the same methods that the organization uses to support the 
allocation of regular personnel costs.
    (j) Conflicts of interest. The recipient and its subrecipients must 
keep records to show compliance with the organizational conflicts of 
interest requirements in Sec.  579.420, a copy of the personal 
conflicts of interest policy developed and implemented to comply with 
the requirements in Sec.  579.420, and records supporting exceptions to 
the personal conflicts of interest prohibitions.
    (k) Faith-based activities. The recipient and its subrecipients 
must document their compliance with the faith-based activities 
requirements under Sec.  579.416(c), as applicable.
    (l) Other Federal requirements. The recipient and its subrecipients 
must document their compliance with the Federal requirements in Sec.  
579.424, as applicable, including:
    (1) Participants in the programs administered by the Department 
shall furnish to the Department such data concerning the race, color, 
religion, sex, national origin, age, handicap, and family 
characteristics of persons and households who are applicants for, 
program participants in, or beneficiaries or potential beneficiaries of 
those programs, as the Secretary may determine to be necessary or 
appropriate to enable him or her to carry out his or her 
responsibilities under the authorities referred to in 24 CFR 121.1.
    (2) Copies of their marketing, outreach, and other materials used 
to inform eligible persons of the program to document compliance with 
the requirements in Sec.  579.424(g)(3).
    (3) Records demonstrating compliance with the administrative 
requirements in 24 CFR part 85 (for governments) and 24 CFR part 84 
(for nonprofit organizations).
    (4) Records demonstrating compliance with the environmental review 
requirements in this part, including flood insurance requirements.
    (5) Records demonstrating compliance with the lead-based paint 
requirements in this part.
    (6) Records demonstrating compliance with the debarment and 
suspension requirements under 2 CFR part 180 and 2 CFR part 2424.
    (7) Records concerning intergovernmental review, as applicable, as 
required by this part.
    (8) Certifications and disclosure forms required under the lobbying 
and disclosure requirements in 24 CFR part 87.
    (m) Credible evidence for relocation assistance. (1) Recipients and 
subrecipients must maintain sufficient documentation of program 
participants' eligibility for relocation assistance.
    (2) Program participants seeking relocation assistance in the event 
of a permanent move out of the assisting county, under Sec.  579.204, 
must provide the recipient or subrecipients credible evidence to 
document and justify their move as a result of one of the following:
    (i) Securing employment;
    (ii) Enrollment in school/educational opportunities; or
    (iii) Family reunification.
    (3) Credible evidence is an oral or written statement documenting 
employment, enrollment in school/educational opportunities, and/or 
family reunification. The credible evidence must also contain a plan 
for how program participants will maintain self-sufficiency.

[[Page 18760]]

    (n) Financial records. (1) The recipient must retain supporting 
documentation for all costs charged to the Rural Housing Stability 
Assistance Program grant in accordance with 24 CFR 85.20 and 24 CFR 
84.21, including records demonstrating that any pre-award costs charged 
to the recipient's grant meet the requirements of this part and are 
reimbursable.
    (2) The recipient and its subrecipients must keep documentation 
showing that Rural Housing Stability Assistance Program grant funds 
were spent on allowable costs in accordance with the requirements for 
eligible activities under Sec.  579.202 through Sec.  579.230 and the 
cost principles in OMB Circulars A-87 (2 CFR part 225) and A-122 (2 CFR 
part 230).
    (3) The recipient and its subrecipients must retain records of the 
receipt and use of program income.
    (o) Subrecipients and contractors. (1) The recipient must retain 
copies of all solicitations of and agreements with subrecipients, 
records of all payment requests by and dates of payments made to 
subrecipients, documentation of subrecipient monitoring schedules, all 
monitoring performed, and all sanctions imposed on subrecipients, as 
applicable.
    (2) The recipient and its subrecipients must retain copies of all 
procurement contracts and documentation of compliance with the 
procurement requirements in 24 CFR 85.36 and 24 CFR 84.40-84.48.
    (3) The recipient's subrecipients must comply with the 
recordkeeping requirements specified by the recipient and HUD notice or 
regulations.
    (p) Property standards. Records (e.g., inspection reports) 
demonstrating that each project assisted with funds under this program 
meets the applicable property standards and building codes at project 
completion.
    (q) Construction records. The recipients and its subrecipients must 
maintain records of all construction plans, drawings, renderings, and 
specifications outlining estimated project costs and expenses.
    (r) Rehabilitation records. The recipients and its subrecipients 
must maintain records demonstrating compliance with all Federal, State, 
and local laws, including property standards and lead-based paint 
requirements.
    (s) Data Collection. As specified in Sec.  579.500, data on all 
persons served and all activities assisted under this program must be 
collected in HMIS or a comparable data collection system. The recipient 
must keep records of the participation in HMIS or the comparable data 
collection system by all programs of the recipient and its 
subrecipients.
    (t) Other records specified by HUD. The recipient and subrecipients 
must keep other records specified by HUD.
    (u) Confidentiality. (1) The recipient and its subrecipients must 
develop and implement procedures to ensure:
    (i) All records containing personally identifying information, as 
defined in HUD's standards for participation, data collection, and 
reporting in a local HMIS or data collection system, of any individual 
or family who applies for and/or receives assistance under this program 
will be kept secure and confidential;
    (ii) The address or location of any domestic violence, dating 
violence, sexual assault, or stalking shelter project assisted under 
this program will not be made public, except with written authorization 
of the person responsible for the operation of the shelter; and
    (iii) The address or location of any housing of a program 
participant will not be made public, except as provided under a 
preexisting privacy policy of the recipient or subrecipient and 
consistent with State and local laws regarding privacy and obligations 
of confidentiality.
    (2) The confidentiality procedures of the recipient and its 
subrecipients must be in writing and must be maintained in accordance 
with this section.
    (v) Period of record retention. All records pertaining to each 
fiscal year of program funds must be retained for the greater of 5 
years or the period specified below. Copies made by microfilming, 
photocopying, or similar methods may be substituted for the original 
records.
    (1) Documentation of each program participant's qualification as a 
family or individual at risk of homelessness or as a homeless family or 
individual and other program participant records must be retained for 5 
years after the expenditure of all funds from the grant under which the 
program participant was served; and
    (2) Where program funds are used for the acquisition, new 
construction, or rehabilitation of a project site, records must be 
retained until 15 years after the date that program funds are first 
obligated for the acquisition, new construction, and rehabilitation.
    (w) Access to records-(1) Federal Government rights. 
Notwithstanding the confidentiality procedures established under 
paragraph (s) of this section, HUD, the HUD Office of the Inspector 
General, and the Comptroller General of the United States, or any of 
their authorized representatives, have the right of access to all 
books, documents, papers, or other records of the recipient and its 
subrecipients that are pertinent to the program grant, in order to make 
audits, examinations, excerpts, and transcripts. This right of access 
is not limited to the required retention period but lasts as long as 
the records are retained.
    (2) Public rights. The recipient must provide citizens, public 
agencies, and other interested parties with reasonable access 
(consistent with State and local laws regarding privacy and obligations 
of confidentiality and the confidentiality requirements in this part) 
to records regarding any uses of program funds the recipient received 
during the preceding 5 years.
    (x) Obligation. The recipient must retain records to indicate the 
obligation of its funds within the requisite 2-year obligation period.


Sec.  579.506  Grant changes.

    (a) HUD approval for significant changes. Recipients and 
subrecipients may not make any significant programmatic or budget 
changes without prior HUD approval, evidenced by an amendment to the 
grant agreement that has been signed by HUD and the recipient. 
Significant changes include a shift in a single year of more than 10 
percent of the total amount awarded under the grant for one approved, 
eligible activity to another activity, and a change of subpopulations. 
To be approved, the recipient must be able to demonstrate that the 
change is necessary to better serve eligible persons within the 
geographic area and is consistent with the recipient's approved 
consolidated plan or abbreviated consolidated plan. If an amendment 
would adversely impact the score the application received on any 
selection criterion used in the year in which the grant was awarded, 
HUD will disapprove the amendment.
    (b) Documentation of changes not requiring a grant amendment. Any 
changes to an approved grant other than changes outlined in paragraph 
(a) of this section must be fully documented in the recipient's or 
subrecipient's records.


Sec.  579.508  Enforcement.

    (a) Performance reviews. (1) HUD will review the performance of 
each recipient in carrying out its responsibilities under this part 
whenever determined necessary by HUD, but at least annually. In 
conducting performance reviews, HUD will rely primarily on information 
obtained from the records and reports from the recipient and, when 
appropriate, its subrecipients, as well as information from on-site 
monitoring, and from audit reports. Where applicable, HUD may also 
consider relevant information pertaining to the

[[Page 18761]]

recipient's performance gained from other sources, including citizen 
comments, complaint determinations, and litigation. Reviews to 
determine compliance with specific requirements of this part will be 
conducted as necessary, with or without prior notice to the recipient.
    (2) If HUD determines preliminarily that the recipient or one of 
its subrecipients has not complied with a program requirement, HUD will 
give the recipient notice of this determination and an opportunity to 
demonstrate, within the time prescribed by HUD and on the basis of 
substantial facts and data that the recipient has complied with all 
program requirements. HUD may change the method of payment to require 
the recipient to obtain HUD's prior approval each time the recipient 
requests payment of grant funds. To obtain prior approval, the 
recipient may be required to manually submit its payment requests and 
supporting documentation to HUD in order to show that the funds to be 
drawn down will be expended on eligible activities in accordance with 
all program requirements.
    (3) If the recipient fails to demonstrate to HUD's satisfaction 
that the activities were carried out in compliance with program 
requirements, HUD will notify the recipient of its determination of 
noncompliance and the reasons for that determination. Upon such 
notification, HUD may take one or more of the remedial actions or 
sanctions specified in paragraph (b) of this section.
    (b) Remedial actions and sanctions. Remedial actions and sanctions 
for a failure to meet a program requirement will be designed to prevent 
a continuation of the deficiency; mitigate, to the extent possible, its 
adverse effects or consequences; and prevent its recurrence.
    (1) HUD may instruct the recipient to submit and comply with 
proposals for action to correct, mitigate, and prevent noncompliance 
with program requirements, including:
    (i) Preparing and following a schedule of actions for carrying out 
activities affected by the noncompliance, including schedules, 
timetables, and milestones necessary to implement the affected 
activities;
    (ii) Establishing and following a management plan that assigns 
responsibilities for carrying out the remedial actions;
    (iii) Canceling activities likely to be affected by the 
noncompliance, before expending program funds for the activities;
    (iv) Suspending disbursement of program funds for some or all 
activities;
    (v) Reducing or terminating the remaining grant of a subrecipient 
and reallocating those funds to other subrecipients; and
    (vi) Making matching contributions before or as draws are made from 
the recipient's Rural Housing Stability Assistance Program grant.
    (2) HUD may change the method of payment to a reimbursement basis.
    (3) HUD may suspend payments to the extent HUD determines necessary 
to preclude the further expenditure of funds for affected activities.
    (4) HUD may deny matching credit for all or part of the cost of the 
affected activities and require the recipient to make further matching 
contributions to make up for the contribution determined to be 
ineligible.
    (5) HUD may require the recipient to reimburse its line of credit 
in an amount equal to the funds used for the affected activities.
    (6) HUD may reduce or terminate the remaining grant of a recipient.
    (7) HUD may take other remedies that are legally available.


Sec.  579.510  Closeout.

    (a) In general. Grants will be closed out in accordance with the 
requirements of 24 CFR parts 84 and 85, as applicable, and closeout 
procedures established by HUD.
    (b) Reports. Applicants must submit all reports required by HUD no 
later than 90 days from the date of the end of the operating year, and 
as HUD deems necessary.
    (c) Closeout agreement. Any obligations remaining as of the date of 
the closeout must be covered by the terms of a closeout agreement. The 
agreement will be prepared by HUD in consultation with the recipient. 
The agreement must identify the grant being closed out, and include 
provisions with respect to the following:
    (1) Identification of any closeout costs or contingent liabilities 
subject to payment with program funds after the closeout agreement is 
signed;
    (2) Identification of any unused grant funds to be deobligated by 
HUD;
    (3) Identification of any program income on deposit in financial 
institutions at the time the closeout agreement is signed;
    (4) Description of the recipient's responsibility after closeout 
for:
    (i) Compliance with all program requirements in using program 
income on deposit at the time the closeout agreement is signed and in 
using any other remaining program funds available for closeout costs 
and contingent liabilities;
    (ii) Use of real property assisted with program funds in accordance 
with the affordability and use requirement;
    (iii) Use of personal property purchased with program funds; and
    (iv) Compliance with requirements governing program income received 
subsequent to grant closeout.
    (5) Other provisions appropriate to any special circumstances of 
the grant closeout, in modification of or in addition to the 
obligations in paragraphs (c) of this section. The agreement shall 
provide that findings of noncompliance may be taken into account by HUD 
as unsatisfactory performance of the recipient, in consideration of any 
future grant award under this part.

    Dated: February 28, 2013.
Mark Johnston,
Deputy Assistant Secretary for Special Needs Programs.
[FR Doc. 2013-06521 Filed 3-26-13; 8:45 am]
BILLING CODE 4210-67-P