[Federal Register Volume 78, Number 127 (Tuesday, July 2, 2013)]
[Notices]
[Pages 39759-39763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15900]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5630-N-05]


Rental Assistance Demonstration: Final Program Notice

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

ACTION: Notice.

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SUMMARY: On July 26, 2012, HUD announced through notice in the Federal 
Register the final implementation of the statutorily authorized Rental 
Assistance Demonstration (RAD), which has two conversion components. 
RAD provides the opportunity to test the conversion of public housing 
and other HUD-assisted properties to long-term, project-based Section 8 
rental assistance to achieve certain goals, including the preservation 
and improvement of these properties through access by public housing 
agencies (PHAs) and owners to private debt and equity to address 
immediate and long-term capital needs. RAD is also designed to test the 
extent to which residents have increased housing choices after the 
conversion, and the overall impact on the subject properties. The July 
26, 2012 notice provided for full implementation of RAD, and the 
posting of the Final Program Notice (Final Program Notice, PIH-2012-32) 
on HUD's RAD Web site on. This Federal Register notice published today 
announces revisions to the Demonstration and solicits public comment on 
eligibility and selection criteria. It also announces the posting of 
the Revised Final Program Notice (Revised Final program Notice, PIH-
2012-32, REV-1). As provided by the RAD statute, this notice addresses 
the requirement that the demonstration may proceed after publication of 
notice of its terms in the Federal Register. This Notice summarizes the 
key changes made to the Program Notice (PIH 2012-32) issued on July 26, 
2012. This notice also meets the RAD statutory requirement to publish 
waivers and alternative requirements authorized by the statute at least 
10 days before they may take effect, which does not prevent the 
demonstration from proceeding immediately.

DATES: Comment Due Date: August 1, 2013. Interested persons are invited 
to submit comments electronically to [email protected] no later than the 
comment due date.
    Effective Dates: Sections I-IV of this notice, and section II of 
the appendix to this notice, are effective July 2, 2013, for the 
exception of those items listed as subject to Notice and Comment, which 
shall be subject to a 30-day comment period that commences upon 
publication of this notice. Unless HUD receives comment that would lead 
to the reconsideration of any of the indicated changes in eligibility 
and selection criteria, those changes subject to notice and comment 
shall become immediately effective upon August 1, 2013. If HUD receives 
adverse comment that leads to reconsideration, HUD shall notify the 
public in a new revision immediately upon the expiration of the comment 
period.
    The Final Program Notice, PIH-2012-32, REV-1, except for new 
statutory and regulatory waivers specified in section I of the appendix 
to this notice, is effective July 2, 2013.
    The new statutory and regulatory waivers in section I of the 
appendix to this notice are effective July 12, 2013.
    The conversion of Rent Supp and RAP properties under Section III of 
the Program Notice, which is updated by PIH-2012-32, REV-1, was 
effective on March 8, 2012.

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

SUPPLEMENTARY INFORMATION:

I. Background

    RAD, authorized by the Consolidated and Further Continuing 
Appropriations Act, 2012, (Pub. L. 112-55, signed November 18, 2011) 
(2012 Appropriations Act) allows for the conversion of assistance under 
the public housing, Rent Supplement (Rent Supp), Rental Assistance 
(RAP), and Moderate Rehabilitation (Mod Rehab) programs (collectively, 
``covered programs'') to long-term, renewable assistance under Section 
8. As provided in the Federal Register notice that HUD published on 
March 8, 2012, at 77 FR 14029, RAD has two separate components:
    First Component. The first or competitive component of RAD allows 
projects funded under the public housing and Mod Rehab programs to 
convert to long-term Section 8 rental assistance contracts. Under this 
component of RAD, which is covered under Sections I and II of the Final 
Program Notice, PHAs and Mod Rehab owners may apply to HUD to convert 
to one of two forms of Section 8 Housing Assistance Payment (HAP) 
contracts: project-based vouchers (PBVs) or project-based rental 
assistance (PBRA). No additional or incremental funds were authorized 
for this component of RAD. Therefore, PHAs and Mod Rehab owners will be 
required to convert assistance for projects at current subsidy levels. 
The 2012 Appropriations Act authorizes up to 60,000 units to convert 
assistance under this component, to be selected competitively. The 2012 
Appropriations Act further specifies that HUD shall provide an 
opportunity for public comment on draft eligibility and selection 
criteria and on the procedures that will apply to the selection of 
properties that will participate in this component of the 
demonstration. This opportunity for comment was provided by the March 
8, 2012, notice.
    The First Component became effective July 26, 2012. The initial 
application period for this component opened on September 24, 2012. The 
ongoing application period for this component opened on October 24, 
2012 and is currently open.

[[Page 39760]]

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

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

    The following highlights key changes made to the Program Notice, 
PIH 2012-32, issued on July 26, 2012:

First Component

    1. Providing RAD awards for projects requiring multi-phased 
development to facilitate the assembly of financing (see Section 
1.9.E). [Subject to 30-day Notice & Comment]
    2. Allowing a PHA to apply for a Portfolio Award for a set of 
projects, wherein HUD will reserve RAD conversion authority for all 
projects contained in the portfolio, provided the PHA submits 
individual completed RAD Applications for at least 50% of the projects. 
The PHA then has 365 days to submit a completed application for each of 
the remaining projects (see Section 1.9.F, Attachment 1C). [Subject to 
30-day Notice & Comment]
    3. Providing contract rents at FY 2012 rent levels (as posted in 
the RAD Application) for all applications submitted prior to the end of 
CY 2013. This provision facilitates conversion of a public housing 
project, a multi-phase project, or a PHA-defined portfolio of projects 
by providing assurances to lenders and PHAs about contract rents to be 
established at the time of conversion (see Section 1.6.B.5; Section 
1.7.A.5, Attachment 1C).
    4. Allowing PHAs to adjust subsidy (and initial contract rents) 
across multiple projects to facilitate financing. The combined subsidy 
for these ``bundled'' projects may not exceed the aggregate funding for 
all of the projects the PHA is proposing to bundle (see Section 
1.6.B.5; Section 1.7.A.5, and Section 1.9.D).
    5. Allowing Moving to Work (MTW) agencies who are applying for two 
or more projects to use their MTW block grant flexibility to set 
initial contract rents, subject to RAD rent caps and continued service 
requirements (see Section 1.6.B.5, Section 1.7.A.5, and Section 1.9.D).
    6. Expanding eligibility of HOPE VI projects (see Section 
1.11.C.2.c). [Subject to 30-day Notice & Comment]
    7. Eliminating the caps on awards to PHAs and to Mixed-Finance 
projects (see Section 1.11.C.2.c).
    8. Exempting awarded public housing projects from scoring under the 
Public Housing Assessment System (PHAS) to support redevelopment 
planning and need for temporary relocation during construction (see 
Section 1.5.I).
    9. Allowing PHAs to use the Choice Neighborhoods Implementation 
(CNI) Notice of Funding Availability (NOFA) to apply for Joint RAD/CNI 
Awards (see Section 1.11.C.2.c). [Subject to 30-day Notice & Comment]
    10. Opening the Mod Rehab Ongoing Application Period under the 
First Component and removing the cap on Mod Rehab Projects applying 
under the First Component (see Section 2.2.10). [Subject to 30-day 
Notice & Comment]
    11. Allowing a Mod Rehab owner to request a Portfolio Award for a 
grouping of projects, wherein HUD will reserve RAD conversion authority 
for all projects contained in the grouping, provided the owner submits 
a completed application for at least 50% of the projects. The owner 
then has 365 days to submit a completed application for the remaining 
projects (see Section 2.2.8.C). [Subject to 30-day Notice & Comment]
    12. Providing RAD awards for projects requiring multi-phased 
development to facilitate the assembly of financing (see Section 
2.2.8.D). [Subject to 30-day Notice & Comment]

III. The Final Program Notice and Reponses to Public Comments

    The Revised Final Program Notice for RAD, PIH-2012-32, REV-1, can 
be found at www.hud.gov/rad. Also posted on HUD's RAD Web site is a 
summary of the public comments received in response to the March 8, 
2012 notice and HUD's responses to the comments. The RAD Web site will 
also post a summary of the public comments received in response to the 
publication of the revised Final Program Notice following the 
expiration of the 30 day comment period commencing on effective July 2, 
2013.

IV. Environmental Review

    A Finding of No Significant Impact with respect to the environment 
was made in connection with the Program Notice issued on March 8, 2012, 
and in accordance with HUD regulations in 24 CFR part 50 that implement 
section 102(2)(C) of the National Environmental Policy Act of 1969 (42 
U.S.C. 4332(2)(C)). The Finding remains applicable to the Final Program 
Notice and is available for public inspection during regular business 
hours in the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
Finding by calling the Regulations Division at 202-402-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Relay Service at 
800-877-8339.

    Dated: June 26, 2013.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.

Appendix--RAD Waivers and Alternative Requirements

    The RAD statute provides that waivers and alternative 
requirements authorized under the first component shall be published 
by notice in the Federal Register no later than

[[Page 39761]]

10 days before the effective date of such notice. This appendix 
carries out that statutory requirement. Under the second component 
of RAD, HUD is authorized to waive or alter the provisions of 
subparagraphs (C) and (D) of section 8(o)(13) of the United States 
Housing Act of 1937. Although waivers under the second component are 
not subject to a Federal Register publication requirement, the 
second component waivers are included in this appendix as a matter 
of convenience.
    Additionally, the RAD statute imposes certain requirements that 
must be followed under the demonstration, such as requiring long-
term renewable use and affordability restrictions for assisted units 
in properties that convert from assistance under section 9. The RAD 
statute also authorizes HUD to establish requirements for converted 
assistance under the demonstration. HUD has used this authority, for 
example, by establishing in the Final Notice the requirements of 24 
CFR part 880, with modifications appropriate for the converted 
assistance under the demonstration. These types of requirements are 
not subject to the publication requirement applicable to the waiver 
and alternative requirements listed in this appendix.
    On July 26, 2012, HUD published by notice a list of RAD waivers 
and alternative requirements. That list, which became effective 
August 6, 2012, is still in effect and will not be reproduced here. 
Provided below, will be a list of new waivers and alternative 
requirements that shall come into effect on July 12, 2013.
    The list of waivers and alternative requirements, as described 
above, follows:

I. Public Housing Conversions

A. Changes to Requirements for Public Housing

    Use of Public Housing Funds. Provision affected: Section 9 of 
the United States Housing Act of 1937 (42 U.S.C. 1437g). Alternative 
requirements: PHAs are required under the Demonstration to use 
available public housing funding, including remaining Operating 
Funds and remaining Capital Funds to fund the Housing Assistance 
Payments Contracts during the initial calendar year of conversion, 
including the provision of RAD Rehab Assistance Payments.
    Section 33 Required Conversion Assessment. Provisions affected: 
Section 33 of the United States Housing Act of 1937 (42 USC 1437z-
5); 24 CFR part 972, subpart A. Alternative requirements: PHAs will 
not be required to assess projects that have been issued a CHAP or 
are covered by a Portfolio or Multi-phase Award because HUD 
considers the RAD conversion process to fulfill the requirements of 
Section 33 of the Act. Accordingly, HUD is waiving 24 CFR part 972, 
subpart A for projects covered by a CHAP, a Portfolio Award, or a 
Multi-phase Award.
    Public Housing Assessment System. Provisions affected: 24 CFR 
part 902, subpart A. Alternative Requirements: Upon issuance of a 
CHAP, all public housing units covered by the CHAP shall not be 
issued scores for the fiscal year in which the CHAP was issued, nor 
any subsequent fiscal year until such time as conversion, at which 
point the units shall be subject to applicable Section 8 program 
requirements. If HUD revokes the CHAP, HUD reserves the right to 
reassess and rescore all PHAS indicators and issue a new PHAS score 
and designation for all fiscal years concerning these units covered 
by the CHAP.
    Resident Opportunities and Self Sufficiency Service Coordinators 
(ROSS-SC) and Public Housing Family Self-Sufficiency. Provisions 
affected: Section 23 of the United States Housing Act of 1937 (42 
USC 1437u); Section 34 of the United States Housing Act of 1937 (42 
USC 1437z-6); 24 CFR 984.303(b)(5)(iii). Alternative requirement: 
None, The provisions are waived.

B. Changes to PBV Requirements for Public Housing Conversions

    Maximum Amount of PBV Assistance. Provisions affected: Section 
3(a)(1) of the United States Housing Act of 1937 (42 USC 
1437a(a)(1)); 24 CFR 983.3. Alternative Requirements: If a tenant's 
monthly rent increases by more than the greater of 10 percent or $25 
purely as a result of conversion, the rent increase will be phased 
in over 3 or 5 years. To implement this provision, HUD is waiving 
section 3(a)(1) of the Act, as well as 24 CFR 983.3 (definition of 
``total tenant payment'' (TTP)) only to the extent necessary to 
allow for the phase-in of tenant rent increases. A PHA must create a 
policy setting the length of the phase in period at three years, 
five years or a combination depending on circumstances (For example, 
a PHA may create a policy that uses a three year phase-in for 
smaller increases in rent and a five year phase-in for larger 
increases in rent. This policy must be in place at conversion and 
may not be modified after conversion).
    The below method explains the set percentage-based phase-in an 
owner must follow according to the phase-in period established. For 
purposes of this section ``standard TTP'' refers to the TTP 
calculated in accordance with regulations at 24 CFR 5.628 and the 
``most recently paid TTP'' refers to the TTP recorded on line 9j of 
the family's most recent HUD Form 50058 Three Year Phase-in:
     Year 1: Any recertification (interim or annual) 
performed prior to the second annual recertification after 
conversion--33% of difference between most recently paid TTP and the 
standard TTP
     Year 2: Year 2 Annual Recertification (AR) and any 
Interim Recertification (IR) prior to Year 3 AR--66% of difference 
between most recently paid TTP and the standard TTP
     Year 3: Year 3 AR and all subsequent recertifications--
Full standard TTP Five Year Phase in:
     Year 1: Any recertification (interim or annual) 
performed prior to the second annual recertification after 
conversion--20% of difference between most recently paid TTP and the 
standard TTP
     Year 2: Year 2 AR and any IR prior to Year 3 AR--40% of 
difference between most recently paid TTP and the standard TTP
     Year 3: Year 3 AR and any IR prior to Year 4 AR--60% of 
difference between most recently paid TTP and the standard TTP
     Year 4: Year 4 AR and any IR prior to Year 5 AR--80% of 
difference between most recently paid TTP and the standard TTP
     Year 5 AR and all subsequent recertifications--Full 
standard TTP.
    Please Note: In either the three year phase-in or the five-year 
phase-in, once the standard TTP is equal to or less than the 
previous TTP, the phase-in ends and tenants will pay full TTP from 
that point forward.
    Housing Choice Voucher Earned Income Disregard. Provisions 
affected: 24 CFR 5.617(b). Alternative Requirements: Under the 
Housing Choice Voucher program, the EID exclusion is limited to only 
persons with disabilities (24 CFR 5.617(b)). In order to allow all 
tenants (including non-disabled persons) who are currently within 
the 48 month EID eligibility period at the time of conversion to 
continue to benefit from this exclusion in the PBV project, the 
provision in 24 CFR 5.617(b) limiting EID to only disabled persons 
is waived. The waiver and resulting alternative requirement only 
applies to tenants who are currently within the 48 month EID 
eligibility period at the time of conversion. No other tenant (e.g., 
tenants that move into the property following conversion, etc.) is 
covered by this waiver.
    Administrative Fees for Public Housing Conversions. Provisions 
affected: Section 8(q) of the United States Housing Act of 1937 (42 
U.S.C. 1437f(q)) and related appropriations act provisions in effect 
immediately before the Quality Housing and Responsibility Act of 
1998; 24 CFR 982.152(b). Alternative Requirements: For the initial 
Calendar Year in which a project's assistance has been converted, 
RAD PBV projects will be funded with public housing money. Since the 
public housing funding will not have been transferred to the TBRA 
account and since this funding is not section 8 assistance the 
annual contributions contract (ACC) between the PHA and HUD will 
cover the project units, but be for zero dollars. For this 
transition period, the ACC will primarily serve as the basis for 
covering the units and requiring PHA compliance with HUD 
requirements, but it will not be (as it is in the regular PBV 
program) the funding vehicle for the PBV RAD vouchers. Given this, 
and given the fact that PHAs will be receiving full public housing 
funding for the PBV units during this transition period, PHAs will 
not receive ongoing section 8 administrative fee funding during this 
time.
    Generally, PHAs receive ongoing administrative fees for units 
under a HAP contract, consistent with recent appropriation act 
references to ``section 8(q) of the [United States Housing Act of 
1937] and related appropriations act provisions in effect 
immediately before the Quality Housing and Responsibility Act of 
1998'' and 24 CFR 982.152(b). During the transition period mentioned 
in the preceding paragraph, these provisions are waived, and PHAs 
will not receive section 8 ongoing administrative fees for PBV RAD 
units.
    After this transition period, the ACC will be amended to include 
section 8 funding that corresponds to the units covered by the ACC.

[[Page 39762]]

At that time, the regular section 8 administrative fee funding 
provisions will apply.

C. Changes to Project-Based Rental Assistance (PBRA) Requirements 
for Public Housing Conversions

    Classification of Converting Projects as Pre-1981 Act Projects. 
Provision affected: Section 16(c)(2) of the United States Housing 
Act of 1937 (42 U.S.C. 1437(n)(c)(2)); 24 CFR 5.653(d)(2). 
Alternative Requirements: For purposes of ensuring maximum 
flexibility in converting to PBRA, all such projects converting to 
PBRA shall be treated as Pre-1981 Act Projects under Section 16(c) 
of the United States Housing Act of 1937. Section 16(c)(1) of the 
U.S. Housing Act of 1937, which applies to pre-1981 Act projects, 
restricts occupancy by families that are other than very low-income 
to 25% of overall occupancy. Thus, owners of projects converting to 
PBRA may admit applicants with incomes up to the low-income limit. 
HUD Headquarters tracks the 25% restriction on a nationwide basis. 
Owners of projects converting to PBRA do not need to request an 
exception to admit low-income families. In order to implement this 
provision, HUD is waiving section 16(c)(2) of the United States 
Housing Act of 1937 and 24 CFR 5.653(d)(2) and is instituting an 
alternative requirement that owners of projects converting to PBRA 
adhere to the requirements of section 16(c)(1) of the United States 
Housing Act of 1937 and 24 CFR 5.653(d)(1).
    Phase-in of Tenant Rent Increases. Provision affected: Section 
3(a)(1) of the United States Housing Act of 1937 (42 U.S.C. 
1437a(a)(1)); 24 CFR 880.201. Alternative Requirements: If a 
resident's monthly rent increases by more than the greater of 10 
percent or $25 purely as a result of conversion, the rent increase 
will be phased in over 3 years, which a PHA may extend to 5 years. 
To implement this provision, HUD is waiving section 3(a)(1) of the 
Act, as well as 24 CFR 880.201 (definition of ``total tenant 
payment''), to the limited extent necessary to allow for the phase-
in of tenant rent increases. A PHA must set the length of the phase-
in period to be three years, five years or a combination depending 
on circumstances. (For example, a PHA may create a policy that uses 
a three year phase-in for smaller increases in rent and a five year 
phase-in for larger increases in rent. This policy must be in place 
at conversion and may not be modified after conversion.)
    The below method explains the set percentage-based phase-in an 
owner must follow according to the phase-in period established. For 
purposes of this section ``Calculated Multifamily TTP'' refers to 
the TTP calculated in accordance with regulations at 24 CFR 5.628 
and the ``most recently paid TTP'' refers to the TTP recorded on the 
family's most recent HUD Form 50059.

Three Year Phase-In

     Year 1: Any recertification (interim or annual) 
performed prior to the second annual recertification after 
conversion--33% of difference between most recently paid Total 
Tenant Payments (TTP) and the calculated Multifamily housing TTP.
     Year 2: Year 2 Annual Recertification (AR) and any 
Interim Recertification (IR) in prior to Year 3 AR--66% of 
difference between most recently paid TTP and calculated Multifamily 
housing TTP.
     Year 3: Year 3 AR and all subsequent recertifications--
Year 3 AR and any IR in Year 3: Full Multifamily housing TTP.

Five Year Phase-In

     Year 1: Any recertification (interim or annual) 
performed prior to the second annual recertification after 
conversion--20% of difference between most recently paid TTP and the 
calculated Multifamily housing TTP.
     Year 2: Year 2 AR and any IR prior to Year 3 AR--40% of 
difference between most recently paid TTP and calculated Multifamily 
housing TTP.
     Year 3: Year 3 AR and any IR prior to Year 4 AR--60% of 
difference between most recently paid TTP and calculated Multifamily 
housing TTP.
     Year 4: Year 4 AR and any IR prior to Year 5 AR--80% of 
difference between most recently paid TTP and calculated Multifamily 
housing TTP.
     Year 5 AR and all subsequent recertifications--Full 
Multifamily housing TTP.
    Please Note: In either the three year phase-in or the five-year 
phase-in, once Multifamily housing TTP is equal to or less than the 
previous TTP, the phase-in ends and tenants will pay full 
multifamily housing TTP from that point forward.
    Calculation of Tenant Rent. Provision affected: 24 CFR 5.628. 
Alternative Requirements: Tenants who are employed and are currently 
receiving the EID exclusion at the time of conversion will continue 
to receive the EID exclusion after conversion, in accordance with 
regulations at 24 CFR 960.255. After conversion, no other tenants 
will be eligible to receive the EID. If a tenant receiving the EID 
exclusion undergoes a break in employment, ceases to use the EID 
exclusion, or the EID exclusion expires in accordance with 24 CFR 
960.255, the tenant will no longer receive the EID exclusion and the 
Owner will no longer be subject to the provisions of 24 CFR 960.255. 
Furthermore, tenants whose EID ceases or expires after conversion 
shall not be subject to the rent phase-in provision, as described in 
Section 1.7.B.3; instead, the rent will automatically be adjusted to 
the appropriate rent level based upon tenant income at that time.
    RAD Rehab Assistance Payments. Provision affected: 24 CFR 
880.504(a). Alternative Requirement: Units that are not occupied and 
will be undergoing rehabilitation or construction as identified in 
the approved Financing Plan and RAD Conversion Commitment will be 
eligible for assistance equal to the Public Housing Operating Fund 
and the Capital Fund amounts that formed the basis for the 
calculation of initial contract rents (see Attachment 1C). During 
the period of rehabilitation or construction as identified in the 
approved Financing Plan and RCC, the maximum RAD Rehab Assistance a 
PHA may receive (i.e. for occupied units, units eligible for vacancy 
payments, or units eligible for Rehab Assistance Payments) is 
limited to the number of units eligible for Operating Fund subsidy 
prior to conversion. As a result, not all units included in the 
converting property will be eligible for rehab assistance payments. 
As necessary to implement this provision, HUD is waiving the 
applicability of additional provisions in section 8 of the Act and 
24 CFR part 983 and instituting an alternative requirement.
    Following the earlier of (1) the end of the construction period 
determined within the HUD-approved Financing Plan or (2) the end of 
actual construction, the PHA will no longer be eligible to receive 
RAD Rehab Assistance Payments and all units under contract will be 
eligible for payment only for occupied units or for vacancy 
payments, as applicable.

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

    Under-occupied Units. Provision affected: HUD is waiving 24 CFR 
983.259(b)(1); 24 CFR 983.259(b)(2) and 24 CFR 983.259(c). 
Alternative Requirements: For households of more than two 
individuals (or single-person households, where that individual is 
elderly or disabled), occupying a unit determined by HUD regulations 
to be under-occupied, shall upon conversion to PBV, be allowed to 
remain in those units until such time as an appropriate-size unit 
becomes available. When an appropriate size unit becomes available 
in the project, the family living in the oversized unit must move to 
the appropriate size unit within a reasonable time, as determined by 
the PHA. If the unit size required by the family does not physically 
exist at the project, the family shall remain in its current unit 
unless and until a more appropriate size unit is available. If or 
when a smaller size unit becomes available, the family must move to 
the smaller size unit.
    For households consisting of single individuals who are not 
elderly or disabled, the unit shall not be included in the PBV HAP 
contract. The PHA shall provide an enhanced voucher to such 
individuals who have the statutory right to remain in the project 
(see PIH Notice 2001-41 for enhanced voucher requirements and PIH 
Notice 2008-12 for guidance on enhanced voucher requirements for 
overhoused households). If the tenant moves with tenant-based 
voucher assistance, the unit is not eligible for conversion under 
RAD since the funding to support the converted unit is no longer 
available.
    Rent Determination. Provisions affected: 24 CFR 983.301(e); 24 
CFR 983.302(c); and 24 CFR 983.303(a). Alternative Requirements: 
Initial and re-determined rents for PBV contracts are determined by 
the PHA. Such rents cannot exceed the lowest of: (i) An amount 
determined by the PHA, not to exceed 110 percent of the applicable 
fair market rent (or any exception payment standard approved by the 
Secretary) for the unit bedroom size minus any utility allowance; 
(ii) the reasonable rent; or (iii) the rent requested by the owner. 
(See 24 CFR part 983, subpart G, for program requirements on 
establishing PBV rents). Re-determined rents may result in a 
downward adjustment in certain circumstances (e.g. rent is no longer 
reasonable). For purposes of

[[Page 39763]]

RAD, PHAs may elect, in the HAP contract, to establish the initial 
contract rent as the rent floor. PHAs should consider their 
individual markets, number of families served, annual budget 
authority and factors that may influence funding amounts and any 
other local concerns prior to electing to establish the initial 
contract rent as the rent floor. If the PHA has elected within the 
HAP contract to not reduce rents below the initial rent to owner, 
the rent to owner shall not be reduced below the initial rent to 
owner for dwelling units under the initial PBV HAP contract, except:
     To correct errors in calculations in accordance with 
HUD requirements;
     If additional housing assistance has been combined with 
PBV assistance after the execution of the initial PBV HAP contract 
and a rent decrease is required pursuant to 24 CFR 983.55; or
     If a decrease in rent to owner is required based on 
changes in the allocation of responsibility for utilities between 
the owner and the tenant.

III. Rent Supplement and Rental Assistance Payment Project Conversions

    Under-occupied Units. Provision affected: HUD is waiving 24 CFR 
983.259(b)(1); 24 CFR 983.259(b)(2) and 24 CFR 983.259(c). 
Alternative Requirements: Under-occupied Units Converting to PBV. 
For households of more than two individuals (or single-person 
households, where that individual is elderly or disabled,) occupying 
a unit determined by HUD regulations to be under-occupied, shall 
upon conversion to PBV, be allowed to remain in those units until 
such time as an appropriate-sized unit becomes available. When an 
appropriate size unit becomes available in the project, the family 
living in the oversized unit must move to the appropriate size unit 
within a reasonable time, as determined by the PHA. If the unit size 
required by the family does not physically exist at the project, the 
family shall remain in its current unit unless and until a more 
appropriate size unit is available. If or when a smaller size unit 
becomes available, the family must move to the smaller size unit. To 
effectuate this new alternative requirement, HUD is waiving 24 CFR 
983.259(b)(1)(2) and (c).
    For households consisting of single individuals who are not 
elderly or disabled, the unit shall not be included in the PBV HAP 
contract. The household member shall be provided a tenant protection 
voucher and may choose to move with such voucher or enter into a 
tenant-based tenancy with the owner provided the unit is eligible 
under the tenant-based voucher program; or if a qualifying mortgage 
pre-payment would trigger the provision of enhanced vouchers, the 
tenant has the statutory right to remain in the project (see PIH 
Notice 2001-41 for enhanced voucher requirements and PIH Notice 
2008-12 for guidance on enhanced voucher requirements for overhoused 
households). In either case, if the tenant moves with tenant-based 
voucher assistance, the unit is not eligible for conversion under 
RAD since the funding to support the converted unit is no longer 
available under RAD since the funding to support the converted unit 
is no longer available.
    Rent Determination. Provisions affected: 24 CFR 983.301(e); 24 
CFR 983.302(c); and 24 CFR 983.303(a). Alternative Requirements: 
Initial and Re-Determined Rents. Initial and re-determined rents for 
PBV contracts are determined by the PHA. Such rents generally cannot 
exceed the lowest of: (i) An amount determined by the PHA, not to 
exceed 110 percent of the applicable fair market rent (or any 
exception payment standard approved by the Secretary) for the unit 
bedroom size minus any utility allowance; (ii) the reasonable rent; 
or (iii) the rent requested by the owner. (See 24 CFR part 983, 
subpart G, for program requirements on establishing PBV rents). Re-
determined rents may result in a downward adjustment in certain 
circumstances (e.g. rent is no longer reasonable). For purposes of 
RAD, PHAs may elect, in the HAP contract, to establish the initial 
contract rent as the rent floor. PHAs should consider their 
individual markets, number of families served, annual budget 
authority and factors that may influence funding amounts, and any 
other local concerns prior to electing to establish the initial 
contract rent as the rent floor. If the PHA has elected within the 
HAP contract to not reduce rents below the initial rent to owner, 
the rent to owner shall not be reduced below the initial rent to 
owner for dwelling units under the initial PBV HAP contract, except:
     To correct errors in calculations in accordance with 
HUD requirements;
     If additional housing assistance has been combined with 
PBV assistance after the execution of the initial PBV HAP contract 
and a rent decrease is required pursuant to 24 CFR 983.55; or
     If a decrease in rent to owner is required based on 
changes in the allocation of responsibility for utilities between 
the owner and the tenant.

[FR Doc. 2013-15900 Filed 7-1-13; 8:45 am]
BILLING CODE 4210-67-P