[Federal Register Volume 79, Number 122 (Wednesday, June 25, 2014)]
[Rules and Regulations]
[Pages 36146-36170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14632]
[[Page 36145]]
Vol. 79
Wednesday,
No. 122
June 25, 2014
Part II
Department of Housing and Urban Development
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24 CFR Parts 5, 982, and 983
The Housing and Economic Recovery Act of 2008 (HERA): Changes to the
Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher
Programs; Final Rule
Federal Register / Vol. 79 , No. 122 / Wednesday, June 25, 2014 /
Rules and Regulations
[[Page 36146]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5, 982, and 983
[Docket No. FR-5242-F-02]
RIN 2577-AC83
The Housing and Economic Recovery Act of 2008 (HERA): Changes to
the Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher
Programs
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Final rule.
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SUMMARY: HERA, enacted into law on July 30, 2008, made comprehensive
and significant reforms to several HUD programs, including HUD's Public
Housing, Section 8 Tenant-Based Voucher, and Project-Based Voucher
programs. On November 24, 2008, HUD published a notice that provided
information about the applicability of certain HERA provisions to these
programs. The notice identified: those statutory provisions that are
self-executing and required no action on the part of HUD for the
program changes made by HERA to be implemented; and those statutory
provisions that require new regulations or regulatory changes by HUD
for the HERA provisions to be implemented. The notice also offered the
opportunity for public comment on the guidance provided. HUD followed
the November 2008 notice with a May 15, 2012, rule that proposed to
establish, in regulation, the reforms made by HERA solely to the
Section 8 Tenant-Based Voucher and Project-Based Voucher programs as
discussed in the November 2008 notice, to make other related changes to
the regulations, and to further solicit public comment. This final rule
conforms the regulations of the Section 8 Tenant-Based Voucher and
Project-Based Voucher programs to the statutory program changes made by
HERA, makes other related changes to these regulations as discussed in
the May 2012 proposed rule, and makes further changes to the two
voucher program regulations as a result of issues raised by public
comment or as a result of further consideration by HUD of issues
pertaining to these programs.
DATES: Effective Date: July 25, 2014.
FOR FURTHER INFORMATION CONTACT: For information about HUD's Voucher
programs, contact Michael Dennis, Director, Office of Housing Voucher
Programs, Office of Public and Indian Housing, Room 4228, telephone
number 202-402-3882. The address is the Department of Housing and Urban
Development, 451 7th Street SW., Washington, DC 20410. The listed
telephone number is not a toll-free number. Persons with hearing or
speech impairments may access this number through TTY by calling the
toll-free Federal Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background--November 2008 Notice and May 2012 Proposed Rule
HERA (Pub. L. 110-289, 122 Stat. 2654, approved July 30, 2008) made
several changes to the U.S. Housing Act of 1937 (42 U.S.C. 1437 et
seq.) (1937 Act) that affect programs administered by HUD's Office of
Public and Indian Housing (PIH), including, but not limited to, changes
to the definition of income, which also affect the Office of Housing's
project-based assistance programs; the public housing agency (PHA)
plan; the voucher program; and the capital and operating funds with
respect to emergency funds.
November 24, 2008, Notice. HUD published a notice in the Federal
Register on November 24, 2008, at 73 FR 71037, that provided
information about the applicability of the 1937 Act provisions amended
by HERA to HUD's Public Housing, Section 8 Tenant-Based Voucher, and
Section 8 Project-Based Voucher programs. To assist PHAs and assisted
housing providers, the notice identified those provisions that are
self-executing and required no action on the part of HUD for the
program changes to be implemented, and those provisions that require
new regulations or regulatory changes by HUD to be implemented. The
notice also solicited public comment.
May 15, 2012, Proposed Rule, Generally. HUD followed the November
24, 2008 notice with a proposed rule published on May 15, 2012, at 77
FR 28742, for the purpose of: (1) Establishing, in regulation, the
reforms made by HERA to the Section 8 Tenant-Based Voucher and Section
8 Project-Based Voucher programs as discussed in the November 2008
notice, taking into consideration public comment received on the
notice, and (2) making other related regulatory changes. In the May 15,
2012, proposed rule, HUD explained that whether the HERA program
changes are self-executing or not self-executing, a rule is necessary
to ensure that the codified regulations for the programs revised by
HERA reflect the HERA changes. In some cases, the regulatory change is
simply a conforming change; that is, the regulatory revisions conform
the language of the regulation to the language of the 1937 Act, as
amended by HERA. In other cases, however, HUD was required to exercise
discretionary authority to determine how the statutory change should be
implemented. HUD further explained that with respect to the conforming
regulatory changes, a conforming change does not necessarily mean that
HUD is adopting in regulation the statutory language verbatim. For
purposes of clarity or to give precision to the statutory language or
statutory intent, the conforming regulatory change may be worded
differently than the statutory language.
May 15, 2012, Proposed Amendments. The following presents a brief
summary of the key regulatory revisions proposed by the May 15, 2012
rule. A detailed description of all proposed amendments, including
correction or updating of regulatory or statutory citations, specific
terminology changes, and redesignation of regulatory sections as a
result of the inclusion of new sections, and the reasons for the
amendments can be found in the preamble to the proposed rule at 77 FR
28743 to 28748.
Annual Income (24 CFR 5.609(c)(14)). A conforming change was made
to 24 CFR 5.609 to include the Veterans Administration (VA) disability
benefits with the exclusion from income for deferred Social Security
benefits in Sec. 5.609(c)(14).
Rent to Owner: Reasonable Rent (24 CFR 982.507). The procedure for
determining the rent reasonableness standard applicable to dwelling
units receiving low-income housing tax credits (LIHTC) or assistance
under the HOME Investments Partnerships (HOME) program was streamlined
by section 2835(a)(2) of HERA, and the proposed rule revised Sec.
982.507(c) to provide the streamlined process, with the exception of
HOME-assisted units. As advised in the May 15, 2012, proposed rule, the
rent reasonable applicable to HOME-assisted units would be addressed by
separate rulemaking for the HOME program and included a placeholder to
cross-reference to the HOME program regulations pending this issue
being addressed by HOME program rulemaking.
Applicability of the Tenant-Based Voucher Rule (24 CFR 983.2). The
proposed rule removed reference to ``cooperative housing'' from Sec.
983.2(b)(3). Section 983.2(b) lists the types of situations to which
the tenant-based voucher provisions of 24 CFR part 982 do not apply to
the PBV program, and paragraph (b)(3) lists the special housing types
to which the part 982
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provisions do not apply. The inclusion of ``cooperative housing'' in
the list of special housing types to which the part 982 provisions do
not apply is incorrect, and HUD proposed to correct this error.
PBV Definitions (24 CFR 983.3). The proposed rule added new
definitions, and removed and revised others to reflect HERA's amendment
to section 8(o) of the 1937 Act and to remove reference to cooperative
housing. In addition, the rule proposed to revise the definition of
``existing housing'' for the purpose of establishing clear and
measurable standards in determining whether a proposed project is
eligible for selection as existing housing. The proposed revision was
intended to address the potential circumvention of rehabilitation
program requirements by selecting a project as existing housing when
rehabilitation will be performed on the project shortly after execution
of the housing assistance payment (HAP) contract.
Description of the PBV Program (24 CFR 983.5). The proposed rule
amended Sec. 983.5(c) to provide that although a PHA has the
discretion to decide whether to operate a PBV program, the PHA must
notify HUD of its intent to project-base its vouchers.
Maximum Amount of PBV Assistance (24 CFR 983.6). The proposed rule
amended Sec. 983.6 to require advance notification to HUD of the PHA's
intent to project-base its vouchers.
Special Housing Types (24 CFR 983.9). The proposed rule made a
conforming amendment to Sec. 983.9 to clarify that cooperative housing
is an eligible special housing type under the PBV program.
Project-Based Certificate (PBC) Program (24 CFR 983.10). Section
6904 of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and
Iraq Accountability Appropriations Act, 2007 (Pub. L. 110-28, approved
May 7, 2007) provides that a PHA may renew or extend PBC housing
assistance payment (HAP) contracts as PBV HAP contracts, under certain
conditions. The amendment to Sec. 983.10 implemented this change.
Owner Proposal Selection Procedures (24 CFR 983.51). The proposed
rule revised paragraph (a) of Sec. 983.51 to substitute the term
``project'' for ``building'', consistent with the statutory change made
by HERA to section 8(o) of the 1937 Act. Additionally, the proposed
rule slightly reworded paragraph (b)(2) to further clarify that a PHA
may select, without competition, a proposal for housing assisted under
a federal, state or local government housing assistance, community
development, or supportive services program that required a competition
for the selection of proposals; that is, the PHA need not conduct
another competition.
Housing Type (24 CFR 983.52). The proposed rule revised Sec.
983.52, which provides standards by which a unit will be considered an
existing unit for purposes of the PBV program, to provide that a unit
must satisfy Housing Quality Standards (HQS) requirements within 60
days of the date of selection by a PHA. The proposed revision also
would limit the total amount of work that must be performed to
facilitate compliance with HQS to $1,000 per assisted unit.
Additionally, the proposed revision provided that to be considered an
existing unit for purposes of the PBV program, the owner must not plan
to perform rehabilitation work on the units within one year after HAP
contract execution that would cause the units to be in noncompliance
with HQS and that would total more than $1,000 per assisted unit.
Prohibition of Assistance for Ineligible Units (24 CFR 983.53).
Section 2835(a)(1)(F) of HERA allows PHAs to enter into HAP contracts
with respect to units in cooperative housing and in high-rise elevator
projects, and provides that such authority may be exercised without
review and approval by HUD. The proposed rule revised Sec. 983.53 to
remove the requirement of advance HUD approval for HAP contracts with
respect to units in high-rise elevators projects and to make
cooperative housing an eligible housing type.
Prohibition of Excess Public Assistance (24 CFR 983.55). Section
2835(a)(1)(F) of HERA removes the requirement to conduct a subsidy
layering review in the case of a HAP contract for an existing structure
or if such a review has been conducted by the applicable state or local
agency. The proposed rule, in Sec. 983.55, clarified that the subsidy
layering requirements are not applicable to existing housing.
Applicability of 25 Percent Cap on Number of PBV Units (24 CFR
983.56). Prior to amendment by HERA, PBV assistance was limited to 25
percent of the units in a building. Section 2835(a)(1)(A) of HERA
amended 8(o)(13)(D)(i) of the 1937 Act to replace the term ``building''
with the term ``project,'' which is defined to mean a single building,
multiple contiguous buildings, or multiple buildings on contiguous
parcels of land. The proposed rule clarified that the exception to the
25 percent cap on the number of PBV units in a project includes units
for elderly families and/or disabled families; that is, a project for
elderly families, a project for disabled families, or a project that
serves both categories of families.
Environmental Review (24 CFR 983.58). As stated in both the
November 2008 notice and the May 2012 proposed rule, HUD noted that any
federally required environmental review is ``required by law or
regulation,'' and HUD has not identified any federally required
environmental reviews that would be eliminated by Section
8(o)(13)(M)(ii) of the 1937 Act, as added by Section 2835(a)(1)(F) of
HERA. Accordingly, HUD proposed no changes to Sec. 983.58, except to
make a minor change to Sec. 983.58(d) to note that the term ``release
of funds'' is defined in Sec. 983.3, which is the definition section,
PHA-Owned Units (24 CFR 983.59). The proposed rule added a new
paragraph Sec. 983.59 to provide a clarification of the term of the
initial and renewal HAP contract that is consistent with section
8(o)(13)(F) of the 1937 Act, which provides that the PHA and the
independent HUD-approved entity must agree on the term of the HAP
contract and any HAP contract renewal for PHA-owned units.
Additionally, the proposed rule removed the requirement that the
independent entity approved by HUD to determine initial contract rents
to owner must be based on an appraisal by a licensed, state-certified
appraiser.
Housing Quality Standards (24 CFR 983.101). The proposed rule
revised Sec. 983.101 to exclude cooperative housing from the list of
special housing types that are inapplicable to the PBV program.
Purpose and Content of the Agreement to Enter into a HAP Contract
(24 CFR 983.152). The May 15, 2012 rule proposed to clarify Sec.
983.152 by striving to establish a bright-line definition of
``commencement of construction'' to ensure there is no confusion
concerning the requirement that a PHA must enter into an agreement with
the owner prior to the start of construction or rehabilitation on a
project. The clarification provided that construction commences when
excavation or site preparation (including clearing of the land) begins
for the housing.
When Agreement Is Executed (24 CFR 983.153). The proposed rule
clarified when the Agreement, referenced in Sec. 983.153, must be
executed.
Purpose of HAP contract (24 CFR 983.202). The proposed rule made
explicit the existing practice authorized by Sec. 983.153, which is
that a HAP contract covers a single project, with the exception of
single-family scattered site projects. If an owner has multiple
projects, then each project must be
[[Page 36148]]
covered by a separate HAP contract under the proposed clarification.
HAP Contract Information (24 CFR 983.203). The proposed rule
revised Sec. 983.203 to substitute the term ``project'' for
``building'', consistent with the statutory change.
Extension of Term of Initial Housing Assistance Payment (HAP)
Contract (24 CFR 983.205(a)). The maximum term of the initial HAP
contract provided in section 8(o)(13)(F) of the 1937 Act is extended
from 10 to 15 years as a result of the amendment to the 1937 Act made
by section 2835(a)(1)(B) of HERA, and the proposed rule made a
conforming change to 24 CFR 983.205 to reflect the new HAP term.
Extension of Initial Term (24 CFR 983.205). The proposed rule made
a conforming change to Sec. 983.205(b) to reflect the new HAP term.
Section 8(o)(13)(G) of the 1937 Act, as amended by section
2835(a)(1)(C) of HERA, provides that the maximum term for an extension
of the HAP contract is 15 years, at the election of the PHA and owner.
The proposed rule provided that a PHA may provide for multiple
extensions; however, under no circumstances may extensions exceed 15
years cumulatively.
The proposed rule also made a clarifying change to Sec. 983.205(d)
to require HUD approval when an owner seeks to terminate a HAP contract
when the rent for any contract unit is adjusted below the initial rent
level.
Proposed Statutory Notice Requirements: Contract Termination or
Expiration (Adding a New 24 CFR 983.206). The proposed rule added a new
Sec. 983.206 to address the notification requirements established by
section 8(c)(8)(A) of the 1937 Act, as amended by HERA, that the owner
must meet.
HAP Contract Amendments (to Add or Substitute Units) (Redesignated
24 CFR 983.207). Section 983.207 (formerly Sec. 983.206) was revised
to substitute the term ``project'' for ``building'', consistent with
the statutory change made by HERA.
Owner Certification (Redesignated 24 CFR 983.210). Consistent with
the change to Sec. 983.53 (Prohibition of Assistance for Ineligible
Units), the May 15, 2012, rule proposed to revise paragraph (i) in
Sec. 983.210 (formerly Sec. 983.209) to clarify that the owner's
certification does not apply in the case of an assisted family's
membership in a cooperative. The proposed rule also added a new
paragraph (j) to Sec. 983.210, consistent with the revised definition
of ``existing housing'', to reflect what constitutes existing PBV
housing.
Removal of Unit from HAP Contract (24 CFR 983.211). The proposed
rule added a new section to define when units are to be removed from
the HAP contract. The proposed rule inadvertently stated that this new
section clarified existing policy, but in fact the new section
reflected a proposed change. In addition, the preamble explanation that
the change is already referenced in part 983 was also inaccurate. The
preamble language should have been included in the preceding section
which discussed the owner certification requirements in Sec. 983.210.
New Sec. 983.211 addressed removing a unit from the HAP contract. PHAs
receive administrative fees based on the number of units under a HAP
contract. If the PHA has not paid a housing assistance payment on
behalf of a family for 180 days, the family is no longer considered a
participant in the program and, as such, the PHA should no longer
receive administrative fees for the unit.
How Participants Are Selected (24 CFR 983.251(a) and (d)). In Sec.
983.251(a), the proposed rule clarified the pre-existing policy that
restricts owners from leasing to family members or relatives. This
section was revised to remove any ambiguity that a PHA may not approve
the tenancy of a family if the owner (including a principal or other
interested party) of the unit to be leased is the parent, child,
grandparent, grandchild, sister, or brother of any member of the
family, unless the PHA determines that approving the unit would provide
reasonable accommodation for a family member who is a person with a
disability. The proposed rule also provided that the owner
certification, already required under Sec. 983.209, include language
that makes explicit that the unit will not be rented to the enumerated
list of relatives.
The Lease: Provisions Governing Term of Lease and Governing Absence
from Unit (24 CFR 983.256). The proposed rule revised Sec. 983.256(f)
pertaining to the initial term of lease to more fully address the
requirements pertaining to the lease, and not simply the initial term.
Revised paragraph (f) provides that the lease must allow for automatic
renewal after the initial term of the lease. Consequently, the PBV
program will provide tenants with long-term leases unless the owner
provides a good cause for termination or nonrenewal of the lease.
Owner Termination of Tenancy and Eviction (24 CFR 983.257). The
proposed rule revised Sec. 983.257 to substitute the term ``project''
for ``building'', consistent with the statutory change. The proposed
rule also removed paragraph (b)(3) from Sec. 983.257, which allows an
owner to refuse to renew a lease without good cause upon lease
expiration. This change was made for the same reasons the change was
made to Sec. 983.256(f), which is to put in place, for the PBV
program, a reliable long-term lease for a tenant unless the owner
provides good cause for termination of the lease or nonrenewal of the
lease.
Continuation of Housing Assistance Payments (24 CFR 983.258). The
proposed rule added a new Sec. 983.258 to clarify that housing
assistance payments continue until the tenant rent equals the rent to
owner. After 180 days of no subsidy payments being made on behalf of
the family, the unit is to be removed from the HAP contract pursuant to
Sec. 983.211.
Overcrowded, Under-Occupied, and Accessible Units (Redesignated 24
CFR 983.260). The proposed rule revised Sec. 983.260 (formerly Sec.
983.259) to include the term ``project'' in paragraph (b)(2)(i) of this
section. The proposed rule also revised Sec. 983.260 to clarify, in
paragraph (c), that if a PHA offers the family tenant-based rental
assistance, a PHA must terminate the HAP contract for a wrong-sized or
accessible unit, the earlier of the expiration of the term of the
family's voucher (including any extension granted by the PHA) or the
date upon which the family vacates the unit.
When Occupancy May Exceed 25 Percent Cap on the Number of PBV Units
in Each Project (Redesignated 24 CFR 983.262). The proposed rule
revised Sec. 983.262(d) (formerly Sec. 983.261) to substitute the
term ``project'' for ``building'', consistent with the HERA change in
terminology, and to correct an incorrect regulatory reference. Section
983.262(b) was also revised to clarify existing policy that a PHA, in
referring families to excepted units, need not choose between elderly
or disabled families, but may refer both.
Determination of Rent to Owner (24 CFR 983.301). Section
2835(a)(1)(D) of HERA amended section 8(o)(13)(H) of the 1937 Act to
permit a PHA to use the higher section 8 rent for certain tax credit
units if the LIHTC rent is less than the amount that would be permitted
under section 8. The amendment made by the proposed rule to Sec.
983.301(d) reflects the discretion granted to PHAs.
Redetermination of Rent to Owner (24 CFR 983.302). The proposed
rule added a new paragraph (2) to Sec. 983.302(c) to provide that rent
paid to the owner shall not be reduced below the initial rent to owner
for dwelling units under the initial HAP, except in the following
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situations: (1) To correct errors in calculations in accordance with
HUD requirements; (2) if additional housing assistance has been
combined with PBV assistance after execution of the initial HAP
contract and a rent decrease is required pursuant to a subsidy layering
review; or (3) 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.
Reasonable Rent (24 CFR 983.303). The proposed rule revised Sec.
983.303(a) to include the exception to the comparability requirement of
rent reasonableness, provided by the amendment to section
8(o)(13)(I)(i) made by HERA. This revision provides that the rent to
owner for a contract may not exceed the reasonable rent as determined
by the PHA, except that the rent to owner shall not be reduced below
the initial rent in accordance with Sec. 983.302(c)(2).
Other Subsidy: Effect on Rent to Owner (24 CFR 983.304). The
proposed rule revised Sec. 983.304(e) to clarify that rent reduction
is mandatory when the results of a subsidy layering review disclose the
need for rent reduction.
II. Changes Made at the Final Rule Stage
In response to public comment and further consideration of certain
issues by HUD, this final rule makes the following revisions to the
proposed rule. With respect to changes made in response to public
comment, the issues raised by the commenter and HUD's basis for
responding to the comments are addressed in Section III of this
preamble.
Rent to Owner: Reasonable Rent (24 CFR 982.507)--Preamble
Clarification. As noted in Section I of this preamble, at the proposed
rule stage, the procedure for determining the rent reasonableness
standard applicable to dwelling units receiving low-income housing tax
credits (LIHTC) was streamlined by section 2835(a)(2) of HERA. In the
preamble to the proposed rule, at 77 FR 28743, HUD noted that HERA
makes several changes to coordinate tax incentives for private housing
and federal housing programs, including the Section 8 voucher program.
In this preamble to the final rule, HUD clarifies that this provision
is applicable only to the Section 8 tenant-based voucher program and
not to the Section 8 project-based voucher program.
Additionally, at 77 FR 28743, HUD stated that the rent is to be
considered reasonable if the rent does not exceed the greater of: (1)
The rent for other LIHTC- or HOME-assisted units in the project not
occupied by families with tenant-based assistance, and (2) the payment
standard established by a PHA for a unit of the size involved. However,
the more accurate way for HUD to have stated this provision is as
follows: ``Rent reasonableness is not required if the voucher rent does
not exceed the rent for other LIHTC- or HOME-assisted units in the
project not occupied by families with tenant-based assistance.'' The
regulatory text for Sec. 982.507 was stated correctly in the proposed
rule and no change is required at this final rule stage.
As advised in the May 15, 2012, proposed rule, the revision to the
HOME program is being made by separate rulemaking. Although a final
rule making several regulatory amendments to the HOME program was
published on July 24, 2013, that rule did not address this issue.
Therefore, this final rule will continue to include, as a placeholder,
a cross-reference to the HOME program regulations pending this issue
being addressed by HOME program rulemaking.
PBV Definitions (24 CFR 983.3)--Withdrawn Proposed Revised
Definition of ``Existing Housing'' but Added Revised Definition of
``Special Housing Type''. At this final rule stage, HUD determined to
withdraw its proposed changes to the definition of ``existing
housing.'' HUD leaves in place the currently codified definition of
existing housing. Overall, commenters did not favor HUD's proposed
changes, and suggested alternatives to HUD's proposal, which are
described in Section III of this preamble. Given the many comments on
HUD's proposed changes to the definition of ``existing housing'', HUD
has decided to further consider proposed revisions to the definition of
``existing housing.'' HUD will further consider what may be the best
metric for determining compliance with HQS; that is, whether HUD should
measure the amount of time that must pass from the date of selection to
date of compliance, or identify an appropriate dollar standard of the
total amount of work that must be performed, or determine some other
mechanism. HUD will resubmit for public comment any proposed changes to
the definition of ``existing housing.''
At this final rule stage, HUD is adopting the proposed revised
definition of ``special housing type'' but with one additional change.
HUD has revised the definition of ``special housing type'' to remove
reference to cooperative housing.
Cross-reference to other Federal requirements (24 CFR 983.4)
Revision to ``Labor standards'' cross-reference. In this final rule,
HUD updates the reference to labor standards provisions applicable to
assistance under the PBV program to remove the reference to labor
standards ``applicable to an Agreement'' covering nine or more assisted
units and substitutes a reference to labor standards ``applicable to
development (including rehabilitation) of a project comprising'' nine
or more units. This language clarifies that Davis-Bacon requirements
may apply to existing housing (which is not subject to the agreement)
when the nature of any work planned to be performed prior to HAP
contract execution or after HAP contract execution, within such post-
execution period as may be specified by HUD, constitutes development of
the project.
Description of the PBV Program (24 CFR 983.5) and Maximum Amount of
PBV Assistance (24 CFR 983.6)--Clarification of Timing of Notification
Requirements. As noted in Section I of the preamble, the proposed rule
amended Sec. 983.5(c) and Sec. 983.6 to provide that a PHA must
notify HUD of its intent to project-base its vouchers.
This final rule clarifies in Sec. 983.6 that the notification
provided by a PHA to HUD of the PHA's intent to project-base its
vouchers must be provided before issuance of a Request for Proposals or
a selection made pursuant to Sec. 983.51(b)(2). This clarification is
also made in Sec. 983.5(c) by cross-reference to Sec. 983.6(d).
Special Housing Types (24 CFR 983.9). As noted in section I the
proposed rule made a conforming amendment to Sec. 983.9 to clarify
that cooperative housing is an eligible special housing type under the
PBV program. This final rule clarifies the requirements for rental
assistance when families lease cooperative housing from cooperative
members in Sec. 983.9(c)(3).
Owner Proposal Selection Procedures (24 CFR 983.51). In addition to
the changes noted in Section I from the proposed rule, HUD is adopting
a new paragraph (g) to clarify that an owner proposal selection does
not require submission of a Form HUD-2530 or HUD previous participation
clearance. Questions are raised from time to time as to the
applicability of the previous participation review and clearance
procedures and requirements that are codified in 24 CFR part 200,
subpart H, to the PBV program. Section 200.213 of these regulations,
entitled ``Applicability of procedure'' correctly lists the HUD
programs to which the previous participation requirements apply. The
PBV program is not listed as one of the programs governed by these
procedures, and nor have the
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regulations in 24 CFR part 983 ever cross-referenced to the
requirements in 24 CFR part 200, subpart H, to confirm the
applicability of these requirements and procedures.
Housing Type (24 CFR 983.52)--Withdrawn--Proposed Revised
Definition of ``Existing Housing''. For the same reasons that HUD is
withdrawing its originally proposed definition of ``existing housing''
in Sec. 983.3, HUD similarly does not adopt the originally proposed
definition of ``existing housing'' in Sec. 983.52. However, in Sec.
983.52, HUD clarifies that units for which rehabilitation or new
construction commenced after the owner's proposal submission but prior
to execution of the AHAP do not qualify as existing housing. Changes to
the definition of ``existing housing'' will be addressed through the
Federal Register notice described under the above discussion of Sec.
983.3.
Prohibition of Assistance for Ineligible Units (24 CFR 983.53)--
Addition of Prohibition on Assistance for Units for which Construction
or Rehabilitation Commenced Prior to AHAP. As noted in Section I of
this preamble, HERA allows PHAs to enter into HAP contracts with
respect to units in cooperative housing and in high-rise elevator
projects, and provides that such authority may be exercised without
review and approval by HUD. Accordingly, the proposed rule revised
Sec. 983.53 to remove the requirement of advance HUD approval for HAP
contracts with respect to units in high-rise elevators projects and to
make cooperative housing an eligible housing type.
This final rule adds a new paragraph (d) to Sec. 983.53 to clarify
that a PHA may not attach or pay PBV assistance for units for which
construction or rehabilitation has commenced, as defined in Sec.
983.152 (discussed below), prior to execution of the AHAP.
Prohibition of Excess Public Assistance (24 CFR 983.55)--Further
Clarification of When Subsidy Layering is Not Required. As noted in
Section I of the preamble, the proposed rule clarified that the subsidy
layering requirements are not applicable to existing housing. The final
rule revises Sec. 983.55 to add language that further clarifies that a
``further subsidy layering review is not required for housing selected
as new construction or rehabilitation of housing, if HUD's designee has
conducted a review, which included a review of PBV assistance, in
accordance with HUD's PBV subsidy layering review guidelines.''
Applicability of 25 Percent Cap on Number of PBV Units (24 CFR
983.56)--Removal of Substitution of ``Project'' for ``Building'' in
Sec. 983.56(b)(1)(i). As noted in Section I of the preamble, HERA
amended 8(o)(13)(D)(i) of the 1937 Act to replace the term ``building''
with the term ``project,'' which is defined to mean a single building,
multiple contiguous buildings, or multiple buildings on contiguous
parcels of land. The proposed rule clarified that the exception to the
25 percent cap on the number of PBV units in a project includes units
for elderly families and/or disabled families; that is, a project for
elderly families, a project for disabled families, or a project that
serves both categories of families. In response to public comment, HUD
agreed with commenters that the terminology for paragraph (b)(1)(i),
which addresses when PBV units are not counted in the exception to the
25 percent building cap, was ambiguous. In the final rule, HUD retains
the term ``building'' when used in paragraph (b)(1)(i) to refer to a
single-family building.
Purpose and Content of the Agreement to enter into HAP Contract (24
CFR 983.152)--Clarification of Prohibition on Execution of Agreement
when Construction or Rehabilitation Has Commenced. As noted in Section
I of the preamble, the proposed rule clarifies when the Agreement must
be executed and defines the start of construction or rehabilitation.
The final rule adds a cross-reference to Sec. 983.153 and states that
the prohibition on construction or rehabilitation applies after
proposal submission.
When Agreement Is Executed (24 CFR 983.153)--Clarification of
Prohibition on Execution of Agreement when Construction or
Rehabilitation Has Commenced. As noted in Section I of the preamble,
the proposed rule clarified when the Agreement, referenced in Sec.
983.153, must be executed. The final rule further clarifies that a PHA
is prohibited from entering an Agreement when after proposal submission
construction or rehabilitation has started prior to the execution of
the Agreement.
Extension of Initial Term (24 CFR 983.205)--Clarification of
Additional Extensions beyond Initial Extension of Term. As noted in
Section I of this preamble, the proposed rule made a conforming change
to Sec. 983.205(b) to reflect the new HAP term. Section 8(o)(13)(G) of
the 1937 Act, as amended by HERA, provides that the maximum term for an
extension of the HAP contract is 15 years, at the election of the PHA
and owner. The proposed rule provided that a PHA may provide for
multiple extensions; however, under no circumstances may extensions
exceed 15 years cumulatively.
In response to public comment, the final rule revises this section
to clarify that future extensions beyond the initial extension are
allowed at the end of any extension term provided that not more than 24
months prior to the expiration of the previous extension contract, the
PHA agrees to extend the term, and that such extension is appropriate
to continue providing affordable housing for low-income families or to
expand housing opportunities. The final rule amendment further provides
that extensions after the initial extension term shall not begin prior
to the expiration date of the previous extension term.
In response to public comment, the final rule also amends Sec.
983.205(d) to remove the requirement of notice to and advance approval
by HUD when owners decides to terminate the HAP contract, and maintains
the existing requirement that owners provide notice to the PHA.
HAP Contract Amendments (to Add or Substitute Units) (Redesignated
24 CFR 983.207)--Addition of Language to Specify How to Add Contract
Units. As noted in Section I of the preamble, the proposed rule revised
Sec. 983.207 (formerly Sec. 983.206) to substitute the term
``project'' for ``building'', consistent with the statutory change made
by HERA. In response to public comment, the final rule revises
paragraph (b) to clarify how PBV contract units may be added in the
same project. The revision provides that, at the discretion of the PHA,
and provided that the total number of units in a project that will
receive PBV assistance will not exceed 25 percent of the total number
of dwelling units in the project (assisted and unassisted), (unless
units were initially identified in the HAP contract as excepted from
the 25 percent limitation in accordance with Sec. 983.56(b)), or the
20 percent of authorized budget authority as provided in Sec. 983.6, a
HAP contract may be amended during the three-year period immediately
following the execution date of the HAP contract to add additional PBV
contract units in the same project.
Owner Certification (Redesignated 24 CFR 983.210)--Proposed
Revision for Existing Housing Withdrawn. Although, at this final rule
stage, HUD is withdrawing its proposed definition of ``existing
housing'' in Sec. Sec. 983.3 and 983.52, HUD retains proposed new
paragraph (j), with certain revisions. As noted above in the discussion
of Sec. 983.4, HUD revises the reference to labor standards provisions
applicable to assistance under the PBV program to clarify that Davis-
Bacon requirements may apply to existing housing when the
[[Page 36151]]
nature of any work (including rehabilitation) planned to be performed
prior to HAP contract execution or after HAP contract execution, within
such post-execution period as may be specified by HUD, constitutes
development of the project. Paragraph (j) of the final rule reflects
that in such case, it will be necessary for the certification to
encompass compliance with Davis-Bacon wage requirements.
Removal of Unit from HAP Contract (24 CFR 983.211). As noted in
Section I of the preamble, the proposed rule added a new section to
define when units are to be removed from the HAP contract. Section
983.211(a) requires that units with families whose income has increased
during their tenancy to an amount equivalent to the rent provider to
the owner, shall be removed from the HAP Contract. If the project is
partially assisted, the PHA may substitute a different unit for the
unit removed from the Contract if it is possible for the HAP contract
to be amended. In response to public comment, HUD at the final rule
stage is providing that if the project is not partially assisted, the
unit removed from the HAP contract can be re-instated when the
ineligible family vacates. In addition, HUD is clarifying that the PHA
may substitute a different unit for the unit removed from the contract
when the first eligible substitute becomes available even if at the
time a unit is removed another unit is not immediately available to
substitute under the HAP contract.
How Participants Are Selected (983.251(d))--Clarification of
Preferences for Services Offered. In Sec. 983.251(d), the proposed
rule substituted the word ``qualify'' for ``need'' and added ``or in
conjunction with specific units.'' The language submitted at the
proposed rule stage stated that a preference could be provided for
disabled families who ``qualify for services at a particular project or
in conjunction with specific units.'' The substitution was proposed on
the basis that ``qualify'' may better convey the intent of this
section. However, at the final rule stage and following further
consideration of ``qualify'' versus ``need'', HUD is returning to the
original language of ``need services'' out of concern that ``qualify
for'' may be interpreted in such a way to limit the population eligible
for the preference. Additionally, HUD is returning to the original
language ``services at a particular project'' out of concern that ``or
in conjunction with specific units'' may be unclear. Although HUD is
retaining the language currently codified in HUD's regulations, HUD
will continue to examine the language of this section and how it may be
improved, recognizing that neither term --`` need'' or ``qualify''--may
provide the clear distinction that PHAs are looking for. The best
approach to helping PHAs understand the intent of this section may be
for HUD to issue guidance that provides examples of how a preference
may be structured.
The Lease: Provisions Governing Term of Lease and Governing Absence
from Unit (24 CFR 983.256)--Clarification of Owner Termination of Lease
for Good Cause. As noted in Section I of the preamble, the proposed
rule revised Sec. 983.256(f) pertaining to the initial term of lease
to more fully address the requirements pertaining to the lease.
The final rule clarifies that that if the owner terminates the
lease, the termination must be for good cause.
Overcrowded, Under-Occupied, and Accessible Units (Redesignated 24
CFR 983.260). The proposed rule revised Sec. 983.260 (formerly Sec.
983.259) to include the term ``project'' in paragraph (b)(2)(i) of this
section. The proposed rule also revised Sec. 983.260 to clarify, in
paragraph (c), that, if a PHA offers the family tenant-based rental
assistance under the PBV program, a PHA must terminate the HAP contract
for a wrong-sized or accessible unit, the earlier of the expiration of
the term of the family's voucher (including any extension granted by
the PHA) or the date upon which the family vacates the unit.
The final rule further clarifies PHA termination of housing
assistance payments for wrong-sized or accessible unit by revising
paragraph (c) in two respects. Paragraph (c)(1) provides that if the
PHA offers the family the opportunity to receive tenant-based rental
assistance under the voucher program, the PHA must terminate the
housing assistance payments for a wrong-sized or accessible unit at the
earlier of the expiration of the term of the family's voucher
(including any extension granted by the PHA) or the date upon which the
family vacates the unit, and, as clarified in this final rule, if the
family does not move out of the wrong-sized unit or accessible unit by
the expiration date of the term of the family's voucher, the PHA must
remove the unit from the HAP contract.
Paragraph (c)(2) provides that if the PHA offers the family the
opportunity for another form of continued housing assistance in
accordance with paragraph (b)(2) of Sec. 983.260 (not in the tenant-
based voucher program), and the family does not accept the offer, does
not move out of the PBV unit within a reasonable time as determined by
the PHA, or both, the PHA must terminate the housing assistance
payments for the wrong-sized or accessible unit, at the expiration of a
reasonable period as determined by the PHA, and, as clarified by this
final rule, remove the unit from the HAP contract.
When Occupancy May Exceed 25 Percent Cap on the Number of PBV Units
in Each Project (Redesignated 24 CFR 983.262)--Providing PHAs with the
Option to Continue to Count an Excepted Unit Based on Elderly or
Disabled Family Status, without an Elderly or Disabled Member under
Certain Conditions. As noted in Section I of this preamble, the
proposed rule revised Sec. 983.262 (formerly Sec. 983.261) to
substitute the term ``project'' for ``building'', and to clarify in
Sec. 983.262(b) that a PHA, in giving a preference to excepted units,
need not choose between the elderly or disabled families, but may give
a preference to both.
This final rule also makes a change to respond to existing concerns
with respect to excepted units based on elderly or disabled family
status and the loss of occupancy of the unit by the elderly or disabled
family member through death, illness, or other circumstances beyond the
family's control. Under current requirements, the family must vacate
the unit and the PHA must cease paying housing assistance payments on
behalf of the family because they no longer qualify for the excepted
unit. The result of such requirements is often displacement of the
family during a time when the family is dealing with hardship due to
the loss, permanent or temporary of the elderly or disabled family
member. The final rule adds a new paragraph (e) to Sec. 983.262 to
give PHAs the discretion to allow the family to continue to reside in
the excepted unit, and to continue to count the unit as an excepted
unit for as long as the family resides in that unit. Once the family
vacates the unit, then in order to continue as an excepted unit under
the HAP contract, the unit must be made available to and occupied by a
qualifying family member.
Determination of Rent to Owner (24 CFR 983.301)--Clarification that
the PHA Has the Discretion to Elect in the HAP Contract that Rent to
Owner Shall Not be Reduced. As noted in Section I of this preamble,
HERA amended section 8(o)(13)(H) of the 1937 Act to permit a PHA to use
the higher section 8 rent for certain tax credit units if the LIHTC
rent is less than the amount that would be permitted under section 8.
The preamble to the proposed rule noted that HERA did not alter the
rent reasonableness requirements of section 8(o)(10)(A), and that
therefore these requirements must continue to be met. The proposed rule
revised Sec. 983.301(e)
[[Page 36152]]
to provide that that the rent to owner shall not be reduced below the
initial rent, with certain limitations, in accordance with Sec.
983.302(c)(2).
The final rule revises paragraph (e) to clarify that the PHA has
the discretion to elect in the HAP contract that the rent to owner
shall not be reduced below the initial rent subject to the limitations
of Sec. 983.302(c)(2). Accordingly, in this final rule, paragraph (e)
provides that the PHA shall determine the reasonable rent in accordance
with Sec. 983.303. The rent to the owner for each contract unit may at
no time exceed the reasonable rent, except in cases where the PHA has
elected within the HAP contract not to reduce rents below the initial
rent to owner and where, upon redetermination of the rent to owner, the
reasonable rent would result in a rent below the initial rent. If the
PHA has not elected within the HAP contract to establish the initial
rent to owner as the rent floor, the rent to owner shall not at any
time exceed the reasonable rent.
Redetermination of Rent to Owner (24 CFR 983.302)--Further
Clarification of When Rent to Owner Shall Not Be Reduced. As noted in
Section I of this preamble, the proposed rule added a new paragraph (2)
to Sec. 983.302(c) to provide that rent paid to the owner shall not be
reduced below the initial rent to owner for dwelling units under the
initial HAP, except under certain circumstances. The final rule revises
paragraph (c)(2) of Sec. 983.302 to clarify that ``if the PHA elected
within the HAP contract to not reduce rents below the initial rent to
owner,'' then the rent to owner shall not be reduced below the initial
rent to owner for dwelling units under the initial HAP contract except
for the ``exception'' circumstances provided in the regulation.
Reasonable Rent (24 CFR 983.303). As noted in Section I of this
preamble, the proposed rule revised Sec. 983.303(a) to include the
exception to the comparability requirement of rent reasonableness,
provided by the amendment to section 8(o)(13)(I)(i) made by HERA. This
revision provides that the rent to owner for a contract may not exceed
the reasonable rent as determined by the PHA, except that the rent to
owner shall not be reduced below the initial rent in accordance with
Sec. 983.302(c)(2).
This final rule further clarifies the comparability requirement of
Sec. 983.303(a). Section 983.303(a) is revised to provide that at all
times during the term of the HAP contract, the rent to the owner for a
contract unit may not exceed the reasonable rent as determined by the
PHA, except, as provided in this final rule, where the PHA has elected
in the HAP contract to not reduce rents below the initial rent under
the initial HAP contract, the rent to owner shall not be reduced below
the initial rent in accordance with Sec. 983.302(e)(2).
III. Discussion of Public Comments and HUD's Responses
The public comment period on the proposed rule closed on July 16,
2012, and 22 public comments were received in response to HUD's May 15,
2012 proposed rule. Comments were submitted by individual members of
the public, Fair Housing interest groups, housing associations, and
public housing authorities. The following presents the significant
issues and questions related to the proposed rule raised by the
commenters.
A few commenters submitted comments generally about their views of
the rule. These comments, for which no response is required, included
such comments as the following.
A commenter stated that HUD must ``broaden its thinking with regard
to administration of the project-based voucher program to recognize the
important preservation tool that project-based vouchers are and will
continue to be (particularly in light of the new Rental Assistance
Demonstration (RAD) program). The commenter stated that, in reading the
proposed changes, it was struck by a tension between expanding program
use and flexibility with a desire to keep the program the small
boutique program that it started out to be. The commenter stated that
the tension is understandable in that the project-based voucher program
was originally intended to be a very small (and voluntary) program to
address tight rental market, but as Congress cuts back on funding for
federal housing programs, the ability to preserve the existing housing
stock has become more critical and Congress has recognized that it must
use its scarce resources to the best outcome (in this case the
preservation of a scarce supply of affordable rental housing). Other
commenters stated that ``the PBV program is an essential component of
state and local supportive housing strategies to reduce reliance on
restrictive settings which violate the Americans with Disabilities Act,
such as state institutions, board and care homes, adult care homes, and
nursing homes.'' Another commenter recommended that HUD revise the
program further to allow greater flexibility to support PBV assistance.
The commenter stated that ``HUD should lobby to increase the percentage
of budget authority for PBV units when the PHA is utilizing PBVs as
replacement housing for public housing.''
The following presents specific issues raised by commenter and
HUD's response to the comments.
Issue: Rent to Owner: Reasonable Rent (Sec. 982.507)
Comment: Commenters stated that HUD's proposed language at Sec.
982.507, regarding the rent reasonableness test, is contrary to
statutory intent by limiting the rent to the lesser of the reasonable
rent and the payment standard. The commenters repeated the statutory
language that states ``the rent shall be considered reasonable if it
does not exceed the greater of (1) the rent for other LIHTC or HOME
assisted units in the project not occupied by families with tenant
based assistance, or (2) the payment standard established by the PHA
for a unit of the size involved.'' The commenters recommend that HUD
re-evaluate the proposed language. A commenter stated that Congress
also has provided that the rent is not reasonable if it exceeds both
the rents charged for comparable units receiving tax credits that are
not occupied by voucher holders and the PHA payment standard for the
unit. The commenter stated that, in other words, if the tax credit rent
is $600 and the payment standard is $650, a PHA can approve a voucher
rent at $650, subject to a rent reasonableness test. Using this
example, HUD could not approve a rent of $675 because it is greater
than the payment standard and the tax credit rent.
HUD Response: HUD disagrees with the first commenter's
interpretation of the statute. The first subsection in the HERA
amendment plainly states that a rent comparability analysis is not
required by the PHA if the rent to owner does not exceed the rent for
other comparable, non-voucher LIHTC units in the project. However, the
second subsection of the HERA amendment is properly read as stating
that if the proposed rent to owner will exceed the amount in the
preceding paragraph, the amendment does not create an exception to the
normal rent comparability requirement in section 8(o)(10)(A) of the
U.S. Housing Act of 1937. In addition, the HERA amendment imposes an
additional rent cap based on the payment standard in these cases.
Therefore, if the rent requested by the owner exceeds the LIHTC rents
for non-voucher families, the PHA must perform a rent comparability
analysis in accordance with program requirements. In addition, the PHA
must cap the rent at the payment standard. The rent to owner in these
cases is therefore set at the lesser
[[Page 36153]]
of the comparable market rent determined by the PHA and the payment
standard.
HUD generally agrees with the commenter that used dollar amounts to
illustrate the test that must be performed when the rent requested by
the owner is greater than the rents charged for other comparable LIHTC
units in the project that are not occupied by voucher families.
However, the commenter excluded the possible impact of the required
rent comparability analysis performed by the PHA. For instance, if the
PHA's comparability analysis determined that the reasonable rent was
$625 that would be the rent to owner, notwithstanding the fact that the
payment standard was $650.
Comment: Commenters stated that the statute does not require PHAs
``to conduct a rent reasonableness test if the requested voucher rent
is at or below the tax credit rent for units not occupied by a voucher
holder.'' A commenter gives an example, stating that ``if the tax
credit rent paid by unassisted tenants is $600 and the rent for the
voucher unit is $550, the PHA would not be required to compare the unit
rent to unassisted units in the private market -- the rent would be
deemed reasonable.
HUD Response: Rent reasonableness is required to be determined as
otherwise provided by paragraph 8(o)(10) of the 1937 Act except that
rent reasonableness shall not be required if the voucher rent is equal
to or lesser than other comparable LIHTC units occupied by non-voucher
families. The statute does not state that such rents shall be ``deemed
reasonable'' as suggested by commenters. Therefore, HUD submits that
the statutory language is permissive, and that while HUD may not
require a rent comparability determination in the situation described,
the statute does not prohibit a PHA from performing such determination
if it so chooses.
Comment: Commenters stated that the proposed language could result
in reducing rents below existing rents and undercut the statute. The
commenters recommended that HUD revise the language ``to follow the
`greater of' statutory language and avoid the unintended penalty for
owners requesting legitimate rent increases that threaten no additional
harm to assisted tenants.'' Other commenters stated that requiring an
owner to reduce rent below existing rents would be contrary to HUD's
own intentions.
HUD Response: Commenters appear to believe the statute states that
the rent shall be considered reasonable if it does not exceed the
greater of (1) the rent for other LIHTC or HOME assisted units in the
project not occupied by families with tenant based assistance, or (2)
the payment standard established by the PHA for a unit of the size
involved. The statute actually states that the rent shall not be
considered reasonable if it exceeds the greater of (1) the rents
charged for other comparable units receiving LIHTC or HOME assistance
in the project that are not occupied by families with tenant based
assistance, and (2) the payment standard established by the PHA for a
unit of the size involved. The statutory language imposes a payment
standard cap in addition to the required rent reasonableness test both
at the time of initial rent setting and when an owner requests a rent
increase. As noted previously, if the rent to owner (at initial rent
setting or during rent increases) does not exceed the LIHTC rent for
comparable, non-voucher units, a PHA rent reasonableness analysis is
not required and there is no payment standard limitation.
Comment: A commenter requested that HUD explain why it is adding
the additional rent reasonableness requirement and why HERA was able to
waive the rent comparison when the rent does not exceed other LIHTC
projects but not when the requested rent exceeds other LIHTC rents?
HUD Response: HUD has clarified in the preamble that if the
requested rent does not exceed the rent for other LIHTC units in the
project not occupied by families with tenant-based assistance, that a
rent reasonableness determination is not required. HUD believes that
the statute is permissive and that a PHA may perform a rent
reasonableness comparison in this instance if it so chooses. The
statute states that the requirements of 8(o)(10) of the 1937 Act apply
including 8(o)(10)(A), which requires that the rent for dwelling units
for which a housing assistance payment contract is established under
subsection 8(o) of the statute shall be reasonable in comparison with
rents charged for comparable dwelling units in the private, unassisted
local market. The HERA amendment does not render the requirement for a
rent comparison analysis pursuant to section 8(o)(10)(A) of the 1937
Act inapplicable when the test under section 8(o)(10)(F)(ii) is met.
Rent reasonableness requirements pursuant to section (8)(o)(10)(A)
continue to apply.
Comment: A commenter recommended that HUD clarify ``that the HERA
policy for determination of `reasonable rents' for LIHTC units with
tenant-based vouchers, incorporated in Sec. 982.507(c)(2), does not
apply to project-based vouchers.''
HUD Response: HUD agrees with this comment and in this preamble to
this final rule HUD has clarified that the regulatory change is only
applicable to the tenant-based voucher program.
Comment: A commenter stated that the HUD should leave the existing
regulatory language as is because the regulatory language complies with
the requirements in HERA and HERA ``does not require PHAs to lower PBV
owners' rents if/when applicable FMRs decrease by five percent or more,
as has been directed by some HUD Field Offices.'' The commenter stated
that the regulation should allow ``PHAs to conduct rent reasonableness
if warranted, but not for PHAs to necessarily lower the existing PBV
rent in these circumstances.'' The commenter stated that ``under the
circumstances described above, regarding decreases in FMR values of
five percent or more, a PHA receives a property owners' annual rent
increase request for a given unit but a PHA's rent reasonableness
determination justifies a lower PBV rent, than a PHA can lower the PBV
rent to the rent reasonable level but not lower than the initial rent.
Some HUD Field Office personnel have misinterpreted and/or misapplied
the PBV regulations governing reasonable rents in the PBV program,
which is why we believe that clarification of the proper implementation
of this regulation is welcomed.''
Another commenter requested that HUD revise Sec. 982.507(c)(2) to
clarify that under HERA PHAs are not required to conduct a rent
reasonableness determination (in accordance with the existing
regulations for Section 8 tenant-based and project-based voucher
programs) if the initial rent or rent requested at subsequent
intervals, is equal to or less than the rent for other comparable units
receiving tax credits or assistance in the project for units that are
not occupied by Section 8 tenant-based or project-based assisted
households. The commenter also requested that HUD clarify that ``there
could be a scenario where the initial rent requested or the rent at
intervals during subsequent lease terms would be `rent reasonable' if
it is equal to the greater of (1) the rent for other comparable units
receiving such tax credits or assistance in the project for units that
are not occupied by Section 8 tenant-based or project-based assisted
households; or (2) a PHA's payment standard for an applicable unit
size.''
HUD Response: The HERA change relates to rents for tenant-based
voucher holders in projects with LIHTCs or
[[Page 36154]]
HOME units. It does not apply to the project-based voucher program. In
addition, the existing regulatory text at Sec. 982.507 also does not
apply to the project-based voucher program. The commenters' other
concerns are addressed in response to other similar comments stated
above.
Issue: Revised Definition of ``Existing Housing'' (Sec. Sec. 983.3,
983.52(a))
As already discussed in this preamble, HUD is not revising the
definition of ``existing housing'', but nevertheless wants to share the
public comments that HUD received on this issue. Commenters responded
to HUD's proposal as follows:
Comment: Several commenters submitted comments on these sections. A
commenter recommended that HUD review the impact of the new limitations
on existing housing. The commenter stated that while the previous text
defined ``existing housing'' as any housing that met HQS upon the
proposal selection date, the revised language limits existing housing
to units that do not require more than $1,000 in repairs to meet HQS,
and requires the owner to certify that planned rehabilitation does not
exceed $1,000 in the first year of the HAP contract. Commenters stated
that the proposed time limit and the monetary limit of $1,000 for
performing compliance work are inappropriate.
A commenter stated that this threshold is very low and ``does not
accurately capture the differences between development and acquisition-
only transactions.'' Another commenter stated that this threshold may
discourage owners from conducting voluntary repairs and replacements to
achieve greater accessibility and/or energy efficiency. A commenter
questioned what an owner should do if a tenant vacates a unit within
one year after a HAP contract is executed?
A commenter stated that ``an owner should have the ability to do
more than $1,000 worth of work on the unit'' because to do a simple ``
`unit turnover'--painting, cleaning and perhaps recarpeting--would cost
more than $1,000.'' Other commenters expressed concern about the cap
when scheduled rehabilitation is required.
A commenter recommended changing the definition to allow PHAs to
determine the threshold or in the alternative if HUD determines a
threshold is appropriate, a reasonable level based on guidelines and
thresholds of other federal funding programs should be considered.
``For example, low-income housing tax credits and the FHA loan programs
use higher rehabilitation thresholds of approximately $6,500 per
unit.''
Other commenters stated that the new definition is contrary to
HUD's new Rental Assistance Demonstration (RAD) program which
encourages owners of certain types of assisted multifamily housing with
expiring subsidy contracts to convert to PBVs. Commenter stated that
many of these projects currently meet HQS but will require additional
rehabilitation with tenants in place. Without the flexibility for PHAs
to treat these projects as existing housing, as appropriate, many of
these proposed preservation transactions will not be feasible.
A commenter stated that the same $1,000 per unit rehab number was
used for Section 8 moderate rehabilitation over 8 years ago and HUD has
failed to recognize inflation costs. Additionally, the commenter noted
that a scheduled rehabilitation that costs more than $1,000 to meet HQS
standards is not the same as a gut rehab which would require tenants to
be displaced. Another commenter stated that the proposed limit will
``hamper HUD's ability to implement the recent preservation policy to
encourage the conversion of Rent Supplement or Rental Assistance
Payments to project-based vouchers. If HUD is indeed focused on
preservation of the assisted housing stock, its rules must reflect that
commitment.''
Commenters stated that this new definition will complicate
transactions when eligible residents are already in place and
renovations are undertaken or when renovations must be made to new or
rehabilitated units that were not originally PBV units. Other
commenters stated that the new definition will significantly narrow
those units that will qualify as existing housing and negatively impact
the preservation of existing housing. A commenter stated that the
revised definition is contrary to HERA's goal to reduce regulatory
requirements and make it easier to attach PBVs to existing housing.
Commenters stated that ``the procedures for rehabilitated housing
will delay the initiation of rental assistance, which will create
significant cash shortfalls for many preservation transactions which
rely on the PBV income stream from ``Day One'' to support new financing
(for rehabilitation and often acquisition, where the property is being
transferred). These projects meet HQS on Day One, but may require
significant additional rehab (e.g. for energy retrofits and
modernization) to satisfy the requirements of lenders and tax credit
investors, or to improve long-term sustainability.''
Commenters recommended that HUD maintain the current regulatory
definition. A commenter also recommended eliminating the second half of
the proposed definition. Other commenters recommended deleting the part
of ``the proposed definition that would eliminate the possibility of
rehabbing a property in the first year of the HAP contract and by
increasing the per-unit rehabilitation dollar amount for units that
need immediate repair to pass HQS.'' A commenter recommended the
proposed definition be amended to allow PHAs discretion ``to qualify as
existing housing any property that meets (or can readily meet) HQS,
regardless of the anticipated level of additional future
rehabilitation, where such rehabilitation will be carried out with
tenants in place and is necessary and appropriate to extend the
remaining useful life of the property as affordable housing.'' Another
commenter recommended maintaining the current definition because the
``flexibility has been critical to preserving existing units in
communities where affordable rental housing is scarce or units are
being lost due to gentrification.'' Other commenters recommend that HUD
preserve and promote the discretion of local PHA's by keeping the
current definition.
Issue: Revising the ``PHA Owned Unit'' Definition (Sec. 983.3)
Comment: Commenters stated that the proposed rule failed to address
the definition of ``PHA Owned Unit'' and stated that the current
definition causes continued confusion to industry participants, HUD,
and HUD's Office of Inspector General (OIG). A commenter stated that
the purpose of distinguishing PHA-owned units in the regulation is to
prevent self-dealing by PHAs where they both own and administer voucher
assistance for a given unit, and that the existing definition is
unnecessarily broad and in some cases has led HUD to consider units as
PHA-owned where the PHA is merely a ground lessor or a mortgagee, but
does not exercise control over the project itself. The commenter stated
that when a unit is deemed PHA-owned, then the regulations at Sec.
983.59 apply. Another commenter stated that these require the
engagement and compensation of an independent entity, rather than the
PHA, for certain functions, including inspections and rent
reasonableness determinations. Another commenter recommends tightening
the definition so that the Sec. 983.59 requirements apply only in
those situations where the PHA controls the project and there could
actually be
[[Page 36155]]
a conflict of interest in a PHA performing those functions itself.
A commenter also recommended that the definition require an
independent entity to be involved when a PHA is both the owner and the
voucher administrator.
Some commenters stated that HUD's definition is so broad that PHAs
are determined to ``own'' a property regardless if they have no control
over the property operations. The commenters recommended that HUD
tighten the definition to ensure that ownership equates with having
control over the property and an actual conflict of interest exists.
Other commenters recommended using the following definition ``PHA-
owned unit means a unit in a project that is owned by the PHA, by a PHA
instrumentality, or by a limited liability company or limited
partnership in which the PHA (or PHA instrumentality) holds a
controlling interest in the managing member or general partner.''
HUD Response: HUD appreciates the commenters' recommendations
concerning the definition of PHA-owned units. However, HUD has not
proposed changes to the definition, and believes that the changes
proposed by the commenter should undergo public comment before HUD
adopts any such change.
Issue: New Definition of ``Release of Funds'' (Sec. 983.3)
Comment: A commenter stated that the revised ``release of funds''
would allow HUD to issue a release of funds in lieu of use of form
7015.16 (Authority to Use Grant Funds) but stated that form 7015.16 is
just one manner in which a release funds can be effectuated. The
commenter recommended that the definition be revised to reference
solely a ``release of funds'' or ``a release of funds in accordance
with [24 CFR] Part 58.'' Another commenter recommended removing the
requirement that a specific type of ``Letter to Proceed'' be used,
which ``would facilitate PHA and owner efforts to combine project based
voucher (PBV) assistance with other forms of HUD funding in one Part 58
clearance.''
HUD Response: The reason for the proposed change was to translate
the function of form 7015.16 to actual program operations. The form
grants authority to use grant funds. Issuance of a Letter to Proceed
more accurately reflects the transaction since Section 8 funding under
the voucher program is not provided in grant form.
Issue: Revised Definition of ``Special Housing Type'' (Sec. 983.3)
Comment: A commenter recommended that, as a conforming change to
the rule, HUD remove reference to ``cooperative housing.''
HUD Response: HUD agrees with this comment, and the final rule
removes the reference to cooperative housing from the list of housing
types inapplicable to the PBV program.
Issue: Adding a Definition of ``Financial Closing'' (Sec. 983.3)
Comment: A commenter recommended that HUD add a definition of
``financial closing'' in order to bring clarity to when an AHAP should
be executed. The commenter stated that typically, an AHAP is executed
at the financial closing of the construction financing as a condition
of the lenders and investors of the project, who are depending on the
commitment of the PBV assistance.'' The commenter recommended the
following language: ``A financial closing occurs once all of the
construction financing for a project is in place and the legal
documentation committing the financing to the project has been
executed.''
HUD Response: HUD appreciates the commenter's recommendation to add
a definition of financial closing to the PBV definitions. However, HUD
believes that such a definition is not one that should be adopted at a
final rule stage but should first undergo some measure of public
comment prior to adoption.
Issue: Description of the PBV Program & Maximum Amount of PBV
Assistance (Sec. Sec. 983.5, 983.6)
Comment: A commenter stated that the information being sought have
long been required in a PHA Annual Plans by way of HUD guidance, and
the commenter referenced PIH notice, PIH 2011-54, September 20, 2011.
The commenter requested that HUD explain why such information is now
being requested as part of this rule. The commenter recommended that
Sec. 983.5 be revised to require that a PHA ``include in its PHA plan
the projected number of PBV units, their general locations and how
project basing would be consistent with the plan.''
Another commenter recommended deleting the language added at Sec.
983.6(d) because the language adds administrative burden and HUD
already has appropriate reporting mechanisms in place for PHAs.
Additionally, the commenter stated that the collection of information
only at the beginning of the PBV program is ineffective and the PHA
plan already requires information on PBVs. The commenter recommended
that HUD ``amend Part 903 or the Agency Plan template.''
Other commenters recommended that HUD include in the section that
the PHA include the required information in the PHA Plan.
HUD Response: HUD agrees that the language as proposed is unclear.
HUD is seeking to obtain the information required under Sec. 983.6
prior to the selection of individual PBV proposals. Such information is
not collected through any other HUD system, and the collection is
necessary to ensure that PHA's are not exceeding the 20 percent
statutory limitation on the amount of annual budget authority a PHA may
project-base. As such, Sec. 983.6 is revised, at this final rule
stage, to require that a PHA submit the requested information to HUD
before issuance of a Request for Proposals or a selection made pursuant
to Sec. 983.51(b)(2), including information on the impact the
selection will have on a PHA's annual budget authority.
Issue: Applicability of Owner Proposal Selection Procedures to Public
Housing Revitalization and Replacement Efforts (Sec. 983.51(b))
Comment: A commenter stated that it supported the change to allow
owner selection without a competition in connection with ``public
housing improvement, development or replacement efforts.'' The
commenter stated it would constitute an ``important administrative
streamlining in complex public housing revitalization processes,
without appreciatively affecting competitive opportunities for receipt
of PBV.''
HUD Response: HUD believes that the commenter misunderstood HUD's
intent. Neither the proposed nor this final rule makes the change
stated by the commenter. Neither does the rule make changes to the
section that prohibits the attachment of PBV assistance to public
housing units. The proposed rule simply reiterates the basis for the
requirement.
Comment: Commenters recommended dropping ``the requirement that a
prior competitive selection process not involve any consideration that
the project would receive PBV assistance.'' The commenters stated the
language is unclear and creates obstacles for owners. A commenter
recommended the language be revised by deleting ``, and the earlier
competitive selection did not involve any consideration that the
project would receive project-based assistance.'' Another commenter
stated that this requirement is overly burdensome because it puts
``PHAs and
[[Page 36156]]
owners in an untenable position since they cannot compete for vouchers
without tax credits and cannot compete for tax credits without PBV
assistance.'' The commenter stated if deleting the requirement is not
accepted than the language should be limited to instances ``in which
points were awarded for the inclusion of such vouchers.''
HUD Response: Deleting the restriction would allow for the
inclusion in a competitive selection process that a project will
receive PBV assistance prior to an actual PBV selection. HUD believes
that accepting the commenters' suggestion would lead to the distortion
of both the competitive nature of the PBV program and the legitimacy of
the rationale allowing for the selection of units that have undergone
other recent legitimate competitive selections. Eliminating the
requirement, as suggested, would give an advantage to prospective PBV
project owners in the competitive selection upon which a PHA is relying
to select units under the PBV program which would result in a HUD
program requirement that could possibly taint the outcome of another
Federal, State or local housing program. HUD therefore declines the
commenters' recommendation to remove the current regulatory language.
Comment: Commenters recommended that HUD ``change the current
requirement for a local competitive process in instances where a PHA
will attach project-based vouchers to units in which it has an
ownership interest as part of an initiative to improve, develop or
replace a public housing property or site, provided that the PHA
includes the initiative in its PHA Plan.''
The commenters stated that: ``In this narrow circumstance where a
PHA desires to control the revitalization or replacement of its public
housing through the use of PBVs for its own units, the requirement to
conduct a competitive process is unlikely to be cost-effective and will
add delay and uncertainty to critical public housing revitalization
efforts.'' The commenters specifically recommended providing three
options, and suggested the following language for the third option:
``(3) Selection of a proposal without a competitive process for PHA-
owned housing as part of an initiative to improve, develop, or replace
a public housing property or site.''
HUD Response: HUD appreciates the commenters' recommendation.
However, these changes were not offered at the proposed rule stage and
HUD believes that they should first undergo public comment before
adopting the commenters' suggestions in a rule for effect. HUD,
however, will consider the commenter's recommendation if HUD decides to
propose a substantive change to the competitive selection requirements
in future rulemaking.
Issue: Restrictions on Using PBVs in Public Housing (Sec. Sec.
983.51(d), 983.54(a))
Comment: Commenters expressed concern and recommend that HUD
clarify the current language restricting the use of PBVs in public
housing because it could be interpreted to prevent the combining of
public housing capital funds (including HOPE VI) with project-based
vouchers. The commenters stated that the current language is contrary
to the goal of preservation and believes that this was not HUD's
intended outcome.
A commenter recommended that the existing regulation be revised to
prohibit the use of PBV assistance with units that receiving public
housing operating funds only, revise the final sentence of Sec.
983.51(e) to read as follows: ``Under no circumstances may PBV
assistance be used with a unit receiving public housing operating
funds.;'' and revise Sec. 983.54(a) to read as follows: ``Units
receiving public housing operating funds.''
HUD Response: HUD appreciates the commenters' concern, however, the
concern has been previously addressed by the Department in the 2005 PBV
Final Rule, 70 FR 59892, 59900. The Proposed Rule and this Final Rule
simply restate HUD's longstanding legal interpretation on using
project-based voucher assistance in public housing units. Therefore, as
stated in the 2005 PBV Final Rule, HUD reiterates that Congress'
adoption of disparate or parallel statutory provisions for the public
housing and voucher programs affirms that public housing and voucher
programs are intended to operate as separate, and mutually exclusive,
subsidy systems under the 1937 Act. It is not permissible by law to
combine voucher funds with public housing funds. For HOPE VI funds that
predate fiscal year (FY) 2000, it is generally permissible to combine
these funds in accordance with the terms of the relevant HOPE VI
appropriations act if the HOPE VI funds were not used to develop or
operate public housing units. It is not permissible in any case to
combine HOPE VI funds appropriated on and after FY 2000 (Section 24
funds), because Section 24 funds are public housing funds. If Capital
Funds or Section 24 funds are used in the development of affordable
housing, pro-ration must occur. For example, if a project receives
$2,000 in non-public housing HOPE VI funds and $1,000 in Capital Funds
and there are 60 units in the development, 20 of the units (one-third)
are being funded with capital funds and, therefore, cannot be combined
with project-based vouchers. Provided that the remaining 40 units (two-
thirds) are not receiving any Public Housing funds, the units may be
assisted under the PBV program.
Issue: New Language Allowing PHAs Greater Flexibility (Sec. 983.51)
Comment: A commenter recommended that HUD add a paragraph (g) to
this section that would allow the number of ``units under a HAP
contract to be increased up to the number awarded on the proposal
selection date without an additional competitive selection'' at any
time. The commenter stated that this change will help stabilize
projects and provide long-term affordable housing when owners lose
units for no fault of their own, including over-income tenants and
wrong-sized families, and that the change is crucial because the
regulations at Sec. 983.211 and Sec. 983.258 clarify that a unit must
be removed from the HAP Contract if a unit is over-income or otherwise
not eligible, but Sec. 983.207 only allows the addition of a unit
within three years of the execution of the HAP Contract.
Another commenter stated that to the extent that a unit loses
subsidy for no fault of the owner, the regulations should clarify that
the unit can be included in the HAP Contract upon lease-up of a
subsequent eligible resident. The feasibility of projects is based upon
the commitment of a certain level of PBV assistance during the full
term of the HAP Contract. In order to preserve the affordability of the
projects, the PHA must be able to provide the originally committed
level of assistance when the amount of subsidy is decreased through no
fault of the owner. The commenter recommended the following language
``Once a PBV proposal has been selected pursuant to this section, the
PHA may increase the units under the HAP contract up to the number of
units originally awarded upon the proposal selection.''
HUD Response: HUD appreciates the commenters' recommendation.
However, similar to HUD's response to recommendations to change the
procedures governing an owner' proposal selection for public housing
revitalization and replacement efforts, HUD believes that these changes
should first undergo public comment before adopting the commenters
suggestions in a rule for effect. If in a future rulemaking HUD
proposes a substantive change to the competitive selection
[[Page 36157]]
requirements, the recommendations of the commenters will be considered.
Issue: Subsidy Layering Review Not Required for Existing Housing (Sec.
983.55)
Comment: A commenter recommended that HUD clarify the change to
Sec. 983.55(a) by inserting a period after ``existing housing'' and
making the ``nor'' clause into a separate sentence.
HUD Response: HUD agrees with the commenter and the final rule
clarifies the sentence as suggested by the commenter.
Issue: Cap on Number of PBV Units in Each Project (Sec. 983.56)
Comment: Commenters stated that Sec. 983.56 is unclear in regard
to the types of units excluded, such as single family project units,
and requests clarification in how to apply the 25 percent cap to PBV
units in a project. A commenter stated it is unclear ``in the context
of a project that may combine multifamily structures with structures
containing one or two units. The rule was previously understood to
exclude from the general calculation any building of less than four
units, and we would suggest clarifying the rule to continue this
practice.''
HUD Response: HUD agrees with the commenter and in this final rule
does not contain the proposed change to replace the word building with
project in Sec. 983.56(b)(1)(i).
Comment: A commenter recommended the following language,
``Combining exception categories. Exception categories in a multifamily
housing project may be combined, such that excepted units in a single
project may include elderly families, disabled families, and families
receiving supportive services, or any combination thereof. Additionally
a project may include excepted and non-excepted units (i.e., only those
units over the 25 percent per-project cap must be excepted units).''
HUD Response: HUD believes the intent of the regulation is
adequately discussed in the preamble and does not believe further
revision to the proposed regulatory text is necessary.
Issue: Termination of Rental Assistance for Families in ``Excepted''
Properties That No Longer Qualify for Benefits (Sec. Sec.
983.56(b)(2)(ii)(B)&(C), 983.257(c), 983.261(d))
Comment: Commenters stated that the rule leaves ``unchanged,
provisions in three current sections pertaining to project-based units
that are ``excepted'' from the 25 percent per-property cap on voucher
project basing . . . that requires remaining members of a family that
no longer qualifies for elderly or disabled family status to vacate
their home.'' Commenters stated that these provisions are contrary to
other provisions, such as allowing families to remain in homes at the
end of a FSS contract, contrary to VAWA, and contrary to HUD policy,
and the commenter, as an example, referenced HUD's policy for
allocating VASH vouchers in the event of domestic violence. HUD-VASH Qs
and As, No. D.4.''
HUD Response: HUD agrees with the commenters that family members
residing in a unit that no longer qualifies for elderly or disabled
family status should not be required to vacate the unit under
conditions that are beyond the control of the family, and Section II of
this preamble advises of the change that HUD is making at this final
rule stage to address this concern.
Comment: Commenters stated that the rule requires that to maintain
occupancy the occupants must work, a requirement that is counter to the
principle that housing should be voluntary, and the commenter
references Notice PIH 2011-33, dated as recently as June 24, 2011,
which provides that ``Under no circumstance may a PHA terminate
assistance from the public housing program as a consequence of
unemployment, underemployment, or otherwise failing to meet the work
activity requirement for a particular public housing development.''
Commenters recommended that the PBV termination rule be removed or
HUD should ``[p]redicate such terminations on the availability of
tenant-based vouchers so that a family can move with continued
assistance (similar to the policy that applies to over-or under-housed
families at Sec. 983.259 and that applies to public housing families
at Notice PIH 2011-33); or if the property is partially assisted, allow
the family to remain, substituting the housing assistance contract of
their unit with another unit, if available, as is currently allowed at
Sec. 983.261(d).'' Another commenter stated: ``If the property is
fully assisted, allow the family to remain but when the family vacates
the new tenant would be subject to the requirements that apply to
``excepted'' units.''
HUD Response: The statutory exception to the 25 percent limitation
on dwelling units receiving assistance under a PBV contract
specifically requires that families receive supportive services. If a
family continues to reside in an excepted unit after failing, without
good cause, to complete the service requirement, the unit must be
removed from the HAP contract since it only qualifies as an excepted
unit if the family is receiving supportive services.
The service requirement is a condition of occupancy of the PBV unit
and is a family obligation contained within the Statement of Family
Responsibility that must be signed prior to leasing the unit. A
family's failure to complete the service requirement, without good
cause, is considered a violation of family obligations and grounds for
termination from the program.
HUD disagrees that the service requirement is a work requirement.
Occupancy in a unit excepted from the 25 percent limitation on PBV
units in a family project is not based on employment, but rather the
statute provides that the exception is allowed for units leased by
families receiving supportive services.
Issue: Environmental Review for Existing Structures (Sec. 983.58)
Comment: Commenters expressed disagreement with HUD's
interpretation of the statutory language (Section 2835(a)(1)(f) of
HERA). Commenters stated that the current interpretation renders the
HERA provision meaningless. Another commenter stated that ``HERA
specifically provided that PHAs would not be required to undertake
environmental reviews of an existing structure `except to the extent
that such a review is otherwise required by law or regulation.' ''
Other commenters stated that ``HUD should have interpreted the phrase
`otherwise required' as required by a law or regulation related to
other funding for the units.''
A commenter stated that HUD's interpretation violates principles of
statutory construction by rendering the language superfluous, and HUD's
failure to implement the statute accurately has caused PHAs additional
administrative burdens, ``particularly for PHAs using Project-Based
Vouchers for substantial numbers of existing units on different
sites.''
A commenter recommended that HUD replace Sec. 983.58(c), with the
following: ``(c) Existing housing. Existing housing under this part 983
is exempt from environmental review, unless required by law or
regulation related to funding for the units other than PBV assistance.
If an environmental review is required, the RE [responsible entity]
that is responsible for the environmental review under 24 CFR part 58
must determine whether or not PBV assistance is categorically excluded
from review under the National Environmental Policy Act and whether or
not the assistance is subject to review
[[Page 36158]]
under the laws and authorities listed in 24 CFR 58.5.''
HUD Response: Section 2835(a)(1)(F) of HERA adds section
8(o)(13)(M)(ii) to the 1937 Act and specifically relieves PHAs from
undertaking any environmental review before entering into a HAP
contract for an existing structure, except to the extent such a review
is otherwise required by law or regulation. A number of broadly
applicable Federal statutes, executive orders, and regulations require
environmental reviews of various types to be performed by Federal
agencies prior to agency actions, including approving Federal
assistance for a project. In the case of Section 8, Section 26 of the
1937 Act provides for the assumption by a state or unit of general
local government of these environmental review responsibilities.
Contrary to the commenters' insistence that HUD's interpretation of the
statute renders it meaningless, Section 8(o)(13)(M)(ii) simply does not
relieve a state, unit of general local government, or HUD of these
responsibilities to undertake an environmental review of existing
projects prior to execution of a HAP, and does not authorize HUD to
declare such projects exempt from environmental review.
Comment: A commenter stated that the environmental review should be
limited for existing PBV to situations where such review is required by
funding sources for the units other than PBV. The commenter stated that
this step will eliminate the need for PHA efforts that do not
contribute significantly to environmental protection or the well-being
of residents, as Congress intended.
HUD Response: Environmental reviews on existing projects are
appropriately less extensive than for new construction, and include
evaluation of factors such as flood hazards and site contamination that
do affect the well-being of residents.
Issue: New Language for PHA Owned Units (Sec. 983.59)
Comment: A commenter recommends that HUD add language ``to allow
PHAs to pass the costs of the PBV program to the owners and remove the
requirement that an independent entity must approve a renewal.'' The
commenter states that PHAs have actual expenses in providing PBV
assistance which are not covered by administrative fees, and that
therefore, the ``regulations should make clear that the PHA may pass
those costs on to the owner to be paid as operating costs of the
project, provided that the payment of the tenant shall not be
increased. Additionally, since an independent entity is already
approving the amount of assistance and the inspection of units, we do
not believe that the independent entity is necessarily best suited to
determine the appropriateness of renewals.''
Another commenter suggested that Sec. 983.59(b) be deleted and the
following language replace paragraph (d)(1). ``The PHA may compensate
the independent entity from PHA ongoing administrative fee income
(including amounts credited to the administrative fee reserve). The PHA
may not use other program receipts to compensate the independent entity
for its services; provided, however, that the PHA may pass such costs
on to the owner to be paid as an operating cost of the project.''
HUD Response: The suggested changes involve statutory requirements
and therefore cannot be accepted. Section 8(o)(13)(F) of the 1937 Act
requires that for PHA-owned housing, the term of the contract shall be
agreed upon by the agency and the unit of general local government or
other entity approved by HUD in the manner provided under section
8(o)(11) of the 1937 Act. Section 8(o)(11) provides that the agency is
responsible for payments for determinations made by the unit of general
local government or other approved HUD entity.
Issue: Elimination of an Independent Real Estate Appraisal (Sec.
983.59)
Comment: A commenter stated that the proposal ``to eliminate the
current requirement for a real estate appraisal to determine initial
contract rents to a Section 8 building owner'' is misguided and HUD
provides unsubstantiated evidence for the proposed change. The
commenter recommended that the provision be deleted from the final rule
and HUD should maintain the appraisal requirement.
Another commenter stated that there are certified appraiser readily
available, citing that ``as of December 31, 2011, the number of active
real estate appraisers in the U.S. stood at 86,800. Of this figure,
approximately 30 percent, or 26,000, are classified as Certified
General Real Property Appraisers.'' Another commenter stated that
appraisers provide timely services, with research indicating appraisal
times have stayed relatively constant, and cost competitive services,
reports indicating costs have declined over the years. A commenter
recommended that HUD clarify what data or research supports the
conclusion that certified appraisers are not readily available, do not
provide timely service, and do not provide cost competitive services.
Another commenter stated that ``it is in the best interests of the
Department and taxpayers that the contract rents [paid] to building
owners be based on independent and objective market information. This
information is best provided by qualified real estate appraisers. Real
estate appraisers are trained to provide the information sought by HUD
in an objective and independent manner. We believe doing otherwise
actually puts the limited funds set aside for Section 8 vouchers at
risk.''
HUD Response: Based on the commenter's concerns that rents for PHA-
owned units will not continue to be determined through a state-
certified appraiser and, therefore, determinations will lose
objectivity, HUD believes that the same objective can be achieved
through rent reasonableness determinations by an independent entity.
This requirement was only administratively imposed and because the same
results can be achieved otherwise, HUD is eliminating the requirement
as proposed.
Issue: Eliminate Requirement That an Independent Entity Inspecting PHA
Units Furnish a Copy of Each Inspection Report to the HUD Field Office
(Sec. 983.103)
Comment: A commenter stated that ``there is no evidence that this
paperwork-generating requirement has resulted in better unit
conditions.'' The commenter recommends deleting in Sec. 983.103(f)(2)
the language: ``and to the HUD field office where the project is
located''.
HUD Response: HUD has not proposed a change to Sec. 983.103(f)(2).
Nonetheless, to address the commenter's concern, HUD believes there is
value in the requirement in that it furthers the statutory intent to
provide independent oversight of PHA owned housing in certain areas of
program administration.
Issue: Commencement of Construction (Sec. Sec. 983.152, 983.153)
Comment: Commenters responded to HUD's request for comments on the
applicability of the commencement of new construction requirement for
projects receiving other federal funds on which construction has
already started. Commenters stated that this change would have an
impact on all possible new owners that are interested in a PBV property
after construction has begun rather than just those receiving other
federal funds. A commenter stated ``that it is not uncommon for site
preparation to have begun before a developer submits a proposal for
funding. The
[[Page 36159]]
proposed `commencement of construction' standard eliminates a funding
agency's opportunity to influence a developer to incorporate PBV units
into the development after its selection. Beyond foreclosing
opportunities to incorporate PBV units into a development, it is not
apparent that this definition of commencement of construction serves a
useful purpose.'' A commenter recommended that HUD provide ``the
greatest flexibility allowed by law for owners and PHAs to enter into
AHAPs, even after the proposed definition of `commencement of
construction.' ''
Another commenter stated that it recognized the necessity of
complying with NEPA and not commencing work prior to completion of
environmental reviews, but stated that it sees ``no other HUD objective
served by this rule that could not be accomplished by far less
restrictive means.'' Other commenters stated that the complexity of
financings and regulatory requirements requires flexibility for
developers and finances during the process, especially when a project
doesn't initially rely on PBV. A commenter stated that the layering of
financing is subject to HUD workload constraints and consequent delays
that have severely impacted the ability of projects to meet placed-in-
service (PIS) deadlines. Another commenter stated that HUD could
require that the environmental review be completed prior to ``early
start activities'' and that they are in accordance with other
applicable federal requirements, such as Davis-Bacon wage standards and
Section 3 hiring requirements, without requiring an executed AHAP
contract. The commenter recommended a simple ``certification from the
owner (with HUD's standard text regarding potential penalties for false
statements) that all work performed prior to AHAP execution has been so
performed. If a PHA requests the early release of funding for early
start work, HUD may require such a certification at that time.''
Several commenters stated that there seems to be no apparent policy
rationale offered for HUD's position and recommended revising Sec.
983.152(a) to allow an exception for extenuating circumstances.
Commenters stated that they recognized the need that all part 983
requirements be met, but stated that the PHA can certify to those
requirements without HUD concerning itself with the timing of executing
the AHAP contract.
A commenter stated that the recommended definition will severely
limit the use of the PBV program and ``does not reflect the realities
of how the development process works, and is not necessitated by any
regulatory requirements.'' Another commenter recommended that HUD tie
the execution of the AHAP to the financial closing for the construction
or rehabilitation work, provided the PHA has certified the owner has
met the other HUD requirements. Specifically, the commenter suggested
Sec. 983.152(a) be revised as follows: ``Requirement. The PHA must
enter into an Agreement with the owner upon financial closing. The
Agreement must be in the form required by HUD'' and that Sec.
983.153(c) be revised to read as follows: ``Prompt execution of
Agreement. The Agreement must be executed after the subsidy layering
and environmental approvals are received from HUD at financial
closing.''
HUD Response: The determination of start of construction is
necessary to ensure that units are constructed or rehabilitated in
compliance with section 12(a) of the 1937 Act, and Davis-Bacon wage
rates, where applicable. The Section 8 program, including the PBV
program, is subject to statutory labor standards provisions in Section
12(a) of the 1937 Act. Section 12(a) of the U.S. Housing Act requires
the applicability of Davis-Bacon prevailing wages to the development of
low-income housing projects containing nine or more Section 8-assisted
units, where there is an agreement for Section 8 use before
construction or rehabilitation is commenced. HUD's position has long
been that once a Section 8 housing project has been initially developed
and placed under a HAP contract, a later decision by an owner to repair
or rehabilitate the project as it ages does not constitute
``development'' of the Section 8 project and is not subject to Davis-
Bacon wage rates. However, construction, including rehabilitation work,
performed in connection with the initial placement of a project under a
PBV HAP contract constitutes development of the project and is subject
to Davis-Bacon wage rates where the project contains nine or more
assisted units.
The final rule provides a clear definition of start of construction
and rehabilitation, and requires that no construction or rehabilitation
can proceed after proposal submission and prior to an AHAP being
executed. After AHAP execution all construction and rehabilitation must
be carried out in accordance with the AHAP and program requirements
which may include Davis Bacon wage requirements.
Issue: Extension of Initial Term (Sec. 983.205)
Comment: Several commenters expressed disagreement with HUD's
interpretation that the PBV contract must end after a 15-year renewal.
A commenter stated that HUD's interpretation is contrary to the statute
and proposed the limit be for a maximum of 30 years. The commenter
stated that the extension contracts need to continue to give homeless
people more protection.
Other commenters stated that HUD should comply with the spirit of
the original PBV statute which refers to long-term affordability and
unlimited number of extensions of the initial HAP contract for up to 15
years. Other commenters stated that continued renewals are extremely
important to ensure long-term affordability and is essential to
preserving the stock of housing affordability to extremely low income
people.
A few commenters stated that the language as written is confusing.
The commenters asked ``Is HUD attempting to limit the entire term of
the contract to 30 years? In other words, if a PHA provides a 15 year
initial HAP contract with an agreement to extend for another 15 years,
HUD will disallow any further extensions?''
A commenter stated that it seeks clear language that allows for
multiple renewals of 15 year terms so not to lose the already limited
inventory of affordable housing to the market.
Other commenters stated that the proposed rule violates the
explicit HERA amendment, which permits an advance agreement for a
potentially unlimited number of 15[hyphen]year extensions so long as
the property meets HQS and the rents do not exceed applicable
limitations. A commenter recommended removing sentences two and three,
and replacing sentence one as follows: ``A PHA may agree to enter into
one or more extensions at the time of the initial HAP contract or any
time before expiration of the contract, for an additional term or terms
of up to 15 years each if the PHA determines an extension is
appropriate to continue providing affordable housing for low-income
families.''
A commenter recommended that HUD remove sentences two and three,
and replace the first sentence as follows, ``A PHA at the time of the
initial HAP contract or any time before expiration of the contract, for
an additional term or terms of up to 15 years each if the PHA
determines an extension is appropriate to continue providing affordable
housing for low[hyphen]income families.''
[[Page 36160]]
Another commenter stated that Sec. 983.205(b) should be revised to
``clarify that HAP contracts may be extended for up to 15-year terms,
with no stated limit on the number of extensions.''
A commenter stated that the statute gives the PHA the authority to
extend the contract ``upon a PHA's informed judgment about what is
reasonably appropriate in order to achieve long-term affordability of
the housing or to expand housing opportunities.'' The commenter also
stated that ``Congress' use of the word ``terms,'' and use of the word
``each'' to modify 15 years, demonstrates that Congress' statutory
language in HERA was not intended to limit a PHA to extend PBV HAP
contracts to a ``term'' of up to 15 years exclusively.
Another commenter recommended removing the language at the end of
Sec. 983.205 and using the following language: ``Extension of term. A
PHA may agree to enter into an extension at the time of the initial HAP
contract term or any time before expiration of the contract, for
additional terms of up to 15 years each if the PHA determines an
extension is appropriate to continue providing affordable housing for
low-income families. In the case of PHA-owned units, any extension of
the initial term of the HAP contract shall be determined in accordance
with Sec. 983.59.''
HUD Response: The proposed rule allows for an extension at the
beginning of the initial HAP contract term. Essentially, an initial 30-
year commitment is permissible at the commencement of the HAP contract
provided the PHA is able to make the requisite determination that an
extension is appropriate to continue providing affordable housing for
low-income families or to expand housing opportunities. A 15 year
initial term and a 15 year extension is consistent with requirements
under LIHTC program under which the project owner must agree to
maintain an agreed upon percentage of low income units for an initial
15 year compliance period and subsequent 15-year extended use period.
The required LIHTC extended use period ensures that a 15-year PBV
extension is appropriate to continue providing affordable housing for
low-income families. The HERA amendment, and HUD's reasonable
implementation of it, facilitates preservation of affordable housing
for the LIHTC compliance period and extended use period. In addition,
provided that the PBV program is not repealed, owners and PHAs will
have the opportunity at the end of the 30 year period to go beyond 30
years of assistance (HUD uses LIHTCs as an example since LIHTCs are the
main source of financing used with PBVs. The Department is not
asserting that because the LIHTC period is 30 years, this is
dispositive on how long extensions may be). HUD's initial limitation on
contract extensions is not intended to bar the possibility for future
extensions.
The final rule therefore allows for future extensions at the end of
any extension term provided that not more than 24 months prior to the
expiration of any extension contract, the PHA agrees to an extension of
the term at the end of the previous term, and that such extension is
appropriate to continue providing affordable housing for low-income
families or to expand housing opportunities. HUD is, exercising its
discretion to establish a reasonable limit on the cumulative term of
any contract extension in this manner because HUD believes allowing a
PHA and owner to extend a HAP contract for an endless number of terms
during the initial HAP contract, as suggested by some commenters, may
conflict with the PHA's statutorily required determination that must be
made prior to extending the underlying contract both initially and for
subsequent extensions.
Issue: Terminating a HAP Contract When a Rent Reduction Falls Below
Initial Rent Level (Sec. 983.205)
Comment: A commenter requested that HUD clarify why it is
requiring, given there is no statutory requirement, for ``an owner
seeking to terminate a HAP contract when the rent for any contract unit
is adjusted below the initial rent level would be required to provide a
notice to the PHA and HUD and seek HUD approval.'' Another commenter
stated that the continued allowance that an owner can terminate a
contract if a rent reduction is below the initial rent level creates a
conflict with Sec. 983.302. The commenter recommended changing Sec.
983.302(c)(2) to include an ``a requirement that the owner accept the
regular, tenant-based voucher of a prior PBV tenant. The use of a
voucher in the unit would be subject to regular HCV rules of rent
reasonableness and HQS compliance. But if an owner opts out of a PBV
contract rather than accept a rent reduction, the PHA finds the rent to
be reasonable, and the tenant wants to remain and pay the likely
additional rent above the PHA payment standard, HUD's rules should
encourage such stability.''
HUD Response: The regulation reflects an existing requirement.
Under the May 15, 2012, rule, HUD proposed that the owner provide
notice to HUD, as well as the PHA, and receive approval from HUD when
terminating the HAP contract due to a rent reduction causing rents to
fall below the initial rent level. Upon further consideration, HUD
withdraws its proposed change and maintains the current regulatory
language. A commenter stated that there is a conflict between the
existing regulation of allowing the owner to terminate the contract if
a rent reduction causes the rent to fall below the initial rent level,
and Sec. 983.302. HUD disagrees since in limited circumstances, as
enumerated in Sec. 983.302(c)(2) the rent to owner may be required to
be reduced below the initial rent (e.g., if additional housing
assistance has been combined with PBV assistance after execution of the
initial HAP contract and a rent decrease is required pursuant to the
prohibition of excess public assistance (see Sec. 983.55)). The
commenter also suggests that HUD require an owner to accept a regular
voucher when the owner exercises the right to terminate assistance in
accordance with (Sec. 983.205). HUD declines to make the change since
HUD does not have the authority to require that an owner accept a
voucher.
Issue: Statutory Notice Requirements (Sec. 983.206)
Comment: Several commenters expressed their support for this
provision. Several commenters expressed support for the requirement in
Sec. 983.206(b) and (d) that would require owners to provide tenants
one-year notice of the owner's intent to terminate a PBV housing
assistance payment contract. Certain commenters suggested that the
notice be in writing and that the notice require ``owners, after a
contract is terminated, to accept any replacement tenant-based
assistance provided to residents who had been assisted with PBV.''
Other commenters stated that providing notice to tenants will allow
them ``to search for and secure affordable replacement housing.'' The
commenters also noted support for (d) that ``ensures that tenants must
be able to remain in their units without a rent increase if the owner
fails to provide timely notice.''
A commenter recommended replacing the word ``notify'' with
``provide written notice'' in Sec. 983.206(b) and revising Sec.
983.206(d)(1). The commenter suggested that when the owner does not
give timely written notice than the owner must permit the tenants in
assisted units to remain in their units for the required notice period
until one year following the legally required
[[Page 36161]]
notice, with no increase in the tenant portion of their rent and with
no eviction. This same commenter recommended adding a paragraph (e)
stating: ``Following termination of the contract, an owner shall accept
any replacement tenant-based assistance provided to assisted tenants in
residence at the time of the termination, provided that this
requirement shall not limit the reasonable market rent charged by the
owner.''
Another commenter requested that HUD reconsider requiring owners to
provide notice one year prior to termination because it is not required
by the statue and may have disadvantages to residents. The commenter
stated that the statute does not require notice for the PBV program
when it is tenant-based assistance. Specifically, the commenter noted
that ``unlike other project based programs, if the PBV HAP Contract is
terminated, each resident would receive a tenant-based voucher to
either stay at the project or move to another place of their choice. A
year of notice is counter-productive since it causes great concern for
the residents, even though their housing assistance is not in
jeopardy.'' The commenter recommended that HUD require 60 days' notice
and HUD could consider requiring that ``if the Owner will continue to
operate the project as rental housing, the tenants may not be evicted
except under the terms of their lease.''
HUD Response: HUD appreciates the comments in support of Sec.
983.206, but disagrees with the commenter's that stated that the
statutory requirement to provide a one-year notice of termination or
expiration does not apply to the PBV program. Section 8(c)(8) applies
to project based assistance and Section 8(f) of the statute defines
project-based assistance to include assistance provided under Section
8(o)(13) (PBV assistance).
Issue: Recommending a Change to the 3-Year Limit on Adding Units to an
Existing HAP Contract (Sec. 983.207)
Comment: Certain commenters objected to the existing three year
limit for a PHA to add units to a HAP contract. The commenters stated
that the need to add usually because ``families living in those units
were not eligible for the vouchers'' upon execution of the HAP
contract. The commenters recommended HUD provide no limit on adding
units.
Another commenter requested that HUD clarify Sec. 983.207(d) so
``that the PHA may amend the HAP Contract at any time to add additional
units, provided that the total number of units does not exceed the
original award/HAP Contract. To the extent those units were part of the
initial award, the fact that the contract was terminated with respect
to specific units in accordance with 24 CFR 983.211 should not make
those units ineligible for assistance provided that future families are
eligible for assistance.'' Another commenter recommended amending Sec.
983.207(b) by adding that ``or at any time when a unit that has been
occupied by an ineligible family since that execution date becomes
occupied by an eligible family'' after the language ``during the three-
year period immediately following the execution date of the HAP
contract.'' A commenter stated that allowing units to be added after
the three years from the initial HAP contract where turnover provides
``would facilitate contract administration, as well as financing when
renovations are involved.''
Another commenter stated that being able to add units is important
for the feasibility of the project and the PHA should be able to
increase the number of units under the HAP contract to the number
originally awarded. This same commenter recommended the following
language for Sec. 983.207(b): ``Amendment to add contract units. At
the discretion of the PHA, a HAP contract may be amended to add
additional PBV contract units in the same project up to the number of
units originally awarded upon the proposal selection. An amendment to
the HAP contract is subject to all PBV requirements (e.g. rents are
reasonable), except that a new PBV request for proposals is not
required. The anniversary and expiration dates of the HAP contract for
the additional units must be the same as the anniversary and expiration
dates of the HAP contract term for the PBV units originally placed
under HAP contract.''
HUD Response: HUD appreciates the commenters' recommendation and is
providing for the reinstatement of some units to the HAP contract under
Sec. 983.211.
Issue: Amendment To Add Contract Units--Clarifying the 25% Per-Project
Cap When Adding Units to an Existing HAP Contract (Sec. 983.207)
Comment: Commenters requested that HUD amend Sec. 983.207(b) to
clarify that the HAP can ``assist more than the 25% per-project cap if
the assisted units are excepted units in accordance with 983.56.'' A
commenter recommended that HUD strike the language and simply require
additional units to comply with the regulations in 24 CFR part 983.
HUD Response: HUD agrees with the commenter and the final rule
makes this clarification. The rule clarifies that the 25 percent
limitation applies unless the units are excepted units pursuant to
Sec. 983.56.
Issue: Removal of Units From HAP Contract (Sec. Sec. 983.211, 983.258)
Comment: A commenter stated that the change proposed to Sec.
983.211 is important, but recommended that HUD ``improve on the
proposed rule by allowing a PHA, where there is not another unit that
can be substituted to maintain the number of PBV units in the property,
to allow the unit to remain under the PBV contract despite the absence
of housing assistance payments for the unit. The commenter stated that
alternatively, HUD should allow the reduction in units under the PBV
contract to be temporary, to enable the original number of PBV units to
be restored if a unit becomes vacant and is rented to an eligible
family. (A change in Sec. 983.258 also would be required to implement
this recommended policy.)''
Another commenter stated that volume for PBVs are governed by
budget authority rather than number of units, so ``allowing units with
unsubsidized families to remain under HAP contract would facilitate
program administration with no negative effects on the program.'' Other
commenters stated that HUD's proposal does not provide a return of PBV
units to the HAP Contract. The commenters recommended that if units are
removed from the HAP contract without fault of the owner, the units
should be added back to the HAP contract with no delay when the units
are re-released to eligible families.
HUD Response: HUD appreciates the commenters' recommendation and is
adopting language that allows for a project that is not partially
assisted to re-instate units when an ineligible family vacates and
clarifying when a partially assisted unit may substitute a unit in
Sec. 983.211. However, the other changes recommended by the commenters
should first undergo public comment before being adopted in a rule for
effect. HUD will consider such changes in future rulemaking for the PBV
program.
Issue: Participant Selection--Preference for People With Disabilities
(Sec. 983.251)
Comment: Commenters stated that the interpretation of Sec.
983.251(d) has been challenging for PHAs and HUD, and that the use of
the word ``qualify'' in place of ``need'' in the rule is an improvement
in tenant selection preference policies. A commenter stated that PBV
can be used to create supportive housing properties or sub-set of units
at a property, and the housing could have outside service providers or
on-site services provided. Other commenters
[[Page 36162]]
recommended that the language be changed to ``(d) Preference for
services offered. In selecting families, PHAs may give preference to
disabled families who qualify for services offered in conjunction with
the assisted units, in accordance with the limits under this paragraph.
. . .''
HUD Response: HUD appreciates the commenters' feedback and
recommendations. As noted earlier in this preamble, the final rule uses
the existing codified term ``need'' and does not substitute ``qualify''
for ``need'' based on concern that ``qualify'' may be interpreted in
such a way as to exclude tenants eligible for the preference. Further,
HUD does not adopt the commenters' phrase of ``services offered in
conjunction with the assisted units'' because HUD returns to the
existing language ``services offered at a particular project.'' HUD
believes the language distinguishing between ``services offered at a
particular project and services offered in conjunction with specific
units'' may be misinterpreted as more limiting than the existing
language.
Issue: Participant Selection--Rescreening (Sec. 983.251(b))
Comment: Commenters stated that tenants residing at the time of
conversion from one form of assistance to PBVs should be exempt from
rescreening in fulfillment of ``HUD's duty to minimize displacement in
administration of its programs, 42 U.S.C. 5313 note.'' Other commenters
recommended adding as the second to last sentence of Sec. 983.251(b)
the following language, ``In addition, such families who were
recipients of another form of HUD rental assistance at the time of
project selection will not be subject to additional elective screening
requirements and may be evicted from the property only for good cause
in accordance with the lease.''
HUD Response: HUD does not have the statutory authority to
eliminate mandatory PHA screening requirements. The issue of permissive
screening activities a PHA may engage in is beyond the scope of this
rule. Any changes HUD might seek to make in the future would require
that such changes be proposed to give interested parties the
opportunity to comment.
Issue: Termination of Leases (Sec. 983.256)
Comment: Commenters stated that the preamble to the proposed rule
states the intent is to provide ``a reliable long-term lease for a
tenant unless the owner provides good cause for termination of the
lease or nonrenewal of the lease.'' However, Sec. 983.256(f)(3)(i) of
the proposed regulatory text continues to allow an owner to terminate a
lease without good cause. Other commenters recommended that HUD revise
the language to state ``(i) The owner terminates the lease for good
cause.'' A commenter recommended that that language be changed to
protect those who may be targeted because of bias. Another commenter
recommended that Sec. 983.256 include explicit language stating that a
tenancy may only be terminated for good cause.
HUD Response: The PBV regulations at Sec. Sec. 983.256 and 983.257
must be read in conjunction with the cross-referenced tenant-based
regulation (Sec. 982.310) which only allows termination for good
cause. The PBV provision that allowed an owner to renew without good
cause, former Sec. 983.257(b)(3), has been removed. Nonetheless, to
eliminate the possibility of confusion, the final rule revises Sec.
983.256 to clearly state that an owner may only terminate a lease for
good cause during the lease term.
Issue: Overcrowded, Under-Occupied, and Accessible Units (Sec.
983.260)
Comment: A commenter stated the rule ``states that a PHA must
terminate PBV for a family in a wrong-sized unit or in a unit with
unneeded accessibility features, while also requiring a PHA to provide
continued housing assistance.'' Other commenters requested that HUD
clarify by providing guidance regarding the type of assistance that
should be offered and suggested adding language stating that ``an
appropriate unit must be offered if one is available in the same
building or development. If an appropriate unit is not available, a PHA
may offer another form of project-based assistance. However, a PHA must
always offer tenant-based voucher assistance in addition to project-
based assistance, allowing a family to choose the form of assistance.''
A commenter recommended that for families that resided in a unit
for at least a year the PHA should be required to offer tenant-based
voucher assistance ``and allow the family to choose the form of
assistance it will receive. In addition, when a family has received a
tenant-based voucher because its PBV assistance is terminated due to
unit size or accessibility features, the rule should explicitly require
the PHA to help the family find an appropriate unit, consistent with
the requirement in 24 CFR Sec. 982.403.'' This same commenter stated
that the proposed change is confusing and fails to provide protections
for family similar to other HUD project-based rental assistance
programs. The commenter requested that HUD use the existing language
concerning termination of the ``housing assistance payment'' to prevent
confusion that the ``HAP contract'' is being terminated and ``ensure
that units are not made unavailable for other families who would be
eligible for project-based assistance when a vacating family receives a
tenant-based voucher. In addition, the final rule should clarify that
such termination should occur only when an available unit has been
identified for a family receiving a tenant-based voucher. This change
is consistent with the parallel rule in the regular tenant-based
program, and is necessary to avoid causing the displaced family to
become homeless.
HUD Response: The PBV regulations at Sec. Sec. 983.260(c)(1) and
983.260(c)(2) are clarified in this final rule to express HUD's intent
that if a family does not move out of the wrong-sized or accessible PBV
unit by the expiration of the term of the family's voucher (including
any extension) or within a reasonable time of the PHA's offer of
assistance in accordance with Sec. 983.260(c)(2), the PHA must remove
the unit from the HAP contract.
Issue: Suggested Change to Utility Allowance (Sec. 983.301(f))
Comment: A commenter recommended that HUD revise the RAD program
and other preservation conversions that have a PHA utility allowance,
but permit the use of property based utility allowances when available.
The commenter stated that the rule directs PHAs ``to use their current
PHA wide utility allowances for purposes of calculating rents'' which
works when PBVs ``are added to a previously unassisted project where
the property utility data is not available. However, for properties
that have had HUD assistance, it is very likely that the property will
have its own utility allowance which is probably more up to date than
the PHA allowance and certainly will be reflective of the property.''
Allowing the use of the PHA utility allowance creates a disincentive
``for the property owner to undertake energy efficiency retrofits.''
HUD Response: This rule is limited to revising and updating
regulations for the PBV program. Regulations applicable to RAD, which
is a demonstration program, are covered by the RAD notices.
Issue: Implementation of the Rent Floor Permissible Rather Than
Mandatory (Sec. Sec. 983.301, 983.302, 983.303)
Comment: Commenters stated that the current language in Sec. Sec.
983.301 and 983.302 goes beyond the statutory
[[Page 36163]]
language of HERA. A commenter stated that HERA explicitly delegated the
authority to make the decision about rent floors for a PBV contract to
the PHA, and doing so makes good policy sense. For example, the
commenter stated that ``It may be important to have such rent security
in locations where it could reasonably be expected that rents are
volatile and the PBV contract will enable the owner to leverage
additional funds for development or rehabilitation. But in other
situations, such as where the PBV contract is for existing housing,
such rent security could potentially come at the expense of a PHA's
ability to assist additional families.'' Other commenters recommended
that these two regulatory sections be revised to allow the PHA in its
discretion to not reduce the rents below the initial rents, if the
contract rents are not reasonable. PHAs need to retain this discretion
to weigh the needs of the particular project against other projects.
A commenter requested that HUD make it clear that PHAs could reduce
the rent based on the reasons specific in the rule and clarify ``that
whether or not the PHA has agreed contractually to not reduce rents
below the initial rent, a PHA is not required to reduce PBV rents below
the initial rent if the FMR declines by more than 5% or the rent would
otherwise exceed 110% of FMR. PHAs should be able to make the decisions
of whether to reduce PBV rents when the FMR declines on a case-by-case
basis.''
Another commenter suggested that HUD change Sec. 983.301(e) to
require that the ``rent to the owner for each contract unit may at no
time exceed the reasonable rent, except in cases where, upon
redetermination of the rent to owner, the reasonable rent would result
in a rent below the initial rent.'' The commenter stated that the
statutory language does not require the stipulation in the PBV HAP
contract and ``if a PHA chooses to include this stipulation in the PBV
HAP contract with the consent of the owner, the language in HERA
requires that the provision stipulate the maximum rent permitted for a
dwelling unit shall not be less than the initial rent for the dwelling
unit under the initial housing assistance payments contract covering
the PBV assisted unit.''
HUD Response: HUD appreciates the comments received on the
implementation of the HERA provision allowing initial PBV rents to be
considered the rent floor for purposes of rent adjustments, but HUD
disagrees with the commenters' opinion that the statutory provision
explicitly delegates the authority to make the decision about rent
floors for a PBV contract to the PHA. Congress explicitly delegated
certain decisions to PHAs in HERA (e.g., the statute specifically
states that the PHA may, in its discretion continue to provide
assistance under the contract . . . for a dwelling unit that becomes
vacant . . .). In regard to rent adjustments, the statute states, in
relevant part, that the contract may provide that the maximum rent
permitted for a dwelling unit shall not be less than the initial rent
for the dwelling unit under the initial housing assistance payments
contract. Since the HAP contract is a HUD-prescribed form, HUD proposed
a reasonable policy to implement the statutory provision. However,
while HUD does not agree that the statute explicitly delegates the
authority to PHAs, HUD agrees that PHAs are in the best position to
make such determinations based on their individual markets, and other
local considerations. Therefore, the final rule provides that the PHA
may elect, in the HAP contract, to establish that the initial contract
rent shall serve as the rent floor. The PBV HAP contract will also be
revised.
Issue: Removing Families With Below-Market Rents Who Are Not Receiving
PBV Assistance From the Rent Reasonableness Calculation (Sec. 983.303)
Comment: Commenters stated that HUD has recognized when a housing
conversion action takes place, an owner will often not raise rents on
existing tenants who are not receiving rental subsidies in connection
with the conversion. The commenters suggested adding a new Sec.
983.303(c)(4) stating ``Units in the premises or project for which the
owner is continuing below-market rents to families who were in
occupancy but did not receive project-based voucher assistance at the
beginning of the HAP contract are not to be taken into consideration
for rent reasonableness determinations.''
HUD Response: The commenters are requesting that HUD expand the
definition of assisted units for purposes of rent comparability to
include units in the project for which the owner is continuing below-
market rents to families who were in occupancy but did not receive
project-based voucher assistance at the beginning of the HAP contract.
In the very limited cases where a property has undergone a housing
conversion action, HUD allows units occupied by tenants on the date of
the eligibility event who do not receive vouchers to be considered
assisted units if the owner chooses to continue charging below market
rents to those families by offering lower rents, rent concessions, or
other assistance to those families. These non-voucher families in a
housing conversion action are often long-time tenants, many of whom are
elderly and who had been paying below market rents prior to the housing
conversion action. Considering such units assisted for purposes of rent
reasonableness is an exception to the long-standing policy that an
assisted unit is a unit that is assisted under a Federal, State, or
local government program. However, for rent reasonableness
determinations in the Housing Choice Voucher program, including the
project-based voucher program, in the case of a family moving into a
multifamily property, the PHA may choose to only consider the most
recent rentals in determining the rents that the owner is charging for
comparable unassisted units. In some markets, new tenants routinely pay
higher rents than the rents that longer time tenants in comparable
units may be paying. PHAs should refer to PIH Notice 2011-46 for
guidance on rent reasonableness determinations.
IV. Findings and Certifications
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 the rule is not required by statute, or (2) the
rule preempts state law, unless the agency meets the consultation and
funding requirements of section 6 of the Order. This rule does not have
federalism implications and would not impose substantial direct
compliance costs on state and local governments nor preempt state law
within the meaning of the Order.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
This rule largely makes conforming amendments to HUD regulations that
govern the public and assisted housing programs, for which changes were
recently made by the Housing and Economic Recovery Act of 2008. As
advised in the November 24, 2008, notice that preceded this rule, the
statutory changes made to these programs were largely self-executing,
and required only
[[Page 36164]]
conforming regulatory amendments. This rule makes those conforming
amendments. The statutory changes to the programs, as reflected in the
conforming amendments, impose no significant economic impact on a
substantial number of small entities. This rule makes other changes for
the purposes of updating certain regulations to reflect current
practices, and clarifying other regulations which, based on experience,
HUD determined would benefit from clarification. Therefore, the
undersigned certifies that this rule will not have a significant impact
on a substantial number of small entities.
Environmental Impact
A Finding of No Significant Impact (FONSI) with respect to the
environment was made at the proposed rule stage 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)). That
FONSI remains applicable to this final rule 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 FONSI by calling the Regulations Division at
202-402-3055 (this is not a toll-free number).
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments and the private sector. This rule does not impose
any federal mandates on any state, local, or tribal government or the
private sector within the meaning of UMRA.
Paperwork Reduction Act
The information collection requirements contained in this interim
rule have been approved by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), and
assigned OMB Control Number 2577-0169. 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.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance numbers applicable to
the programs that would be affected by this rule are: 14.195, 14.850,
14.856, and 14.871.
List of Subjects
24 CFR Part 5
Administrative practice and procedure, Aged, Claims, Drug abuse,
Drug traffic control, Grant programs--housing and community
development, Grant programs--Indians, Individuals with disabilities,
Loan programs--housing and community development, Low and moderate
income housing, Mortgage insurance, Pets, Public housing, Rent
subsidies, Reporting and recordkeeping requirements.
24 CFR Part 982
Grant programs--housing and community development, Housing, Low-
and moderate-income housing, Rent subsidies, Reporting and
recordkeeping requirements.
24 CFR Part 983
Grant programs--housing and community development, Housing, Low-
and moderate-income housing, Rent subsidies, Reporting and
recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, HUD amends 24
CFR parts 5, 982, and 983, as follows.
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
0
1. The authority citation for part 5 continues to read as follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n, 3535(d),
Sec. 327, Pub. L. 109-115, 119 Stat. 2936, and Sec. 607, Pub. L.
109-162, 119 Stat. 3051.
0
2. In Sec. 5.609, paragraph (c)(14) is revised to read as follows:
Sec. 5.609 Annual income.
* * * * *
(c) * * *
(14) Deferred periodic amounts from supplemental security income
and Social Security benefits that are received in a lump sum amount or
in prospective monthly amounts, or any deferred Department of Veterans
Affairs disability benefits that are received in a lump sum amount or
in prospective monthly amounts.
* * * * *
PART 982--SECTION 8 TENANT BASED ASSISTANCE: HOUSING CHOICE VOUCHER
PROGRAM
0
3. The authority citation for part 982 continues to read as follows:
Authority: 42 U.S.C. 1437f and 3535(d).
0
4. In Sec. 982.507, paragraph (a)(1) and the introductory text to
paragraph (b) are revised, paragraph (c) is redesignated as paragraph
(d), and a new paragraph (c) is added to read as follows:
Sec. 982.507 Rent to owner: Reasonable rent.
(a) PHA determination. (1) Except as provided in paragraph (c) of
this section, the PHA may not approve a lease until the PHA determines
that the initial rent to owner is a reasonable rent.
* * * * *
(b) Comparability. The PHA must determine whether the rent to owner
is a reasonable rent in comparison to rent for other comparable
unassisted units. To make this determination, the PHA must consider:
* * * * *
(c) Units assisted by low-income housing tax credits or assistance
under HUD's HOME Investment Partnerships (HOME) program. (1) General.
For a unit receiving low-income housing tax credits (LIHTCs) pursuant
to section 42 of the Internal Revenue Code of 1986 or receiving
assistance under HUD's HOME Program (for which the regulations are
found in 24 CFR part 92), a rent comparison with unassisted units is
not required if the voucher rent does not exceed the rent for other
LIHTC- or HOME-assisted units in the project that are not occupied by
families with tenant-based assistance.
(2) LIHTC. If the rent requested by the owner exceeds the LIHTC
rents for non-voucher families, the PHA must perform a rent
comparability study in accordance with program regulations and the rent
shall not exceed the lesser of the:
(i) Reasonable rent as determined pursuant to a rent comparability
study; and
(ii) The payment standard established by the PHA for the unit size
involved.
(3) HOME Program. [Reserved]
* * * * *
PART 983--PROJECT-BASED VOUCHER (PBV) PROGRAM
0
5. The authority citation for part 983 continues to read as follows:
Authority: 42 U.S.C. 1437f and 3535(d).
[[Page 36165]]
0
6. In Sec. 983.2, paragraphs (b)(3), (c)(2)(i), and (c)(7) are revised
to read as follows:
Sec. 983.2 When the tenant-based voucher rule (24 CFR part 982)
applies.
* * * * *
(b) * * *
(3) Provisions on the following special housing types: Shared
housing, manufactured home space rental, and the homeownership option.
(c) * * *
(2) * * *
(i) Section 982.310 (owner termination of tenancy) applies to the
PBV program, but to the extent that those provisions differ from Sec.
983.257, the provisions of Sec. 983.257 govern; and
* * * * *
(7) In subpart M of part 982:
(i) Sections 982.603, 982.607, 982.611, 982.613(c)(2), 982.619(a),
(b)(1), (b)(4), (c); and
(ii) Provisions concerning shared housing (Sec. 982.615 through
Sec. 982.618), manufactured home space rental (Sec. 982.622 through
Sec. 982.624), and the homeownership option (Sec. 982.625 through
Sec. 982.641).
0
7. In Sec. 983.3(b):
0
a. Definitions for ``housing credit agency'', ``partially assisted
project,'' ``project'', ``project-based certificate (PBC) program'',
and ``release of funds'' are added in alphabetical order;
0
b. The following definitions are revised: ``Excepted units''
``premises,'' ``qualifying families,'' ``special housing type,'' and
``wrong-size unit''; and
0
c. The definitions for ``partially assisted building'' and ``state
certified appraiser'' are removed.
Sec. 983.3 PBV definitions.
* * * * *
(b) * * *
Excepted units (units in a multifamily project not counted against
the 25 percent per- project cap). See Sec. 983.56(b)(2)(i).
* * * * *
Housing credit agency. For purposes of performing subsidy layering
reviews for proposed PBV projects, a housing credit agency includes a
State housing finance agency, a State participating jurisdiction under
HUD's HOME program (see 24 CFR part 92), or other State housing
agencies that meet the definition of ``housing credit agency'' as
defined by section 42 of the Internal Revenue Code of 1986.
* * * * *
Partially assisted project. A project in which there are fewer
contract units than residential units.
* * * * *
Premises. The project in which the contract unit is located,
including common areas and grounds.
Project. A project is a single building, multiple contiguous
buildings, or multiple buildings on contiguous parcels of land.
Contiguous in this definition includes ``adjacent to'', as well as
touching along a boundary or a point.
Project-based certificate (PBC) program. The program in which
project-based assistance is attached to units pursuant to an Agreement
executed by a PHA and owner before January 16, 2001 (see Sec. 983.10).
* * * * *
Qualifying families (for purpose of exception to 25 percent per-
project cap). See Sec. 983.56(b)(2)(ii).
Release of funds (for purposes of environmental review). Release of
funds in the case of the project-based voucher program, under 24 CFR
58.1(b)(6)(iii) and Sec. 983.58, means that HUD approves the local
PHA's Request for Release of Funds and Certification by issuing a
Letter to Proceed (in lieu of using form HUD-7015.16) that authorizes
the PHA to execute an ``agreement to enter into housing assistance
payment contract'' (AHAP) or, for existing housing, to directly enter
into a HAP with an owner of units selected under the PBV program.
* * * * *
Special housing type. Subpart M of 24 CFR part 982 states the
special regulatory requirements for single-room occupancy (SRO)
housing, congregate housing, group homes, and manufactured homes.
Subpart M provisions on shared housing, manufactured home space rental,
and the homeownership option do not apply to PBV assistance under this
part.
* * * * *
Wrong-size unit. A unit occupied by a family that does not conform
to the PHA's subsidy guideline for family size, by being either too
large or too small compared to the guideline.
0
8. In Sec. 983.4, the ``Labor standards'' paragraph is revised to read
as follows:
Sec. 983.4 Cross-reference to other Federal requirements.
* * * * *
Labor standards. Regulations implementing the Davis-Bacon Act,
Contract Work Hours and Safety Standards Act (40 U.S.C. 3701-3708), 29
CFR part 5, and other federal laws and regulations pertaining to labor
standards applicable to development (including rehabilitation) of a
project comprising nine or more assisted units.
* * * * *
0
9. In Sec. 983.5, paragraph (c) is revised to read as follows:
Sec. 983.5 Description of the PBV program.
* * * * *
(c) PHA discretion to operate PBV program. A PHA has discretion
whether to operate a PBV program. HUD approval is not required, except
that the PHA must notify HUD of its intent to project-base its
vouchers, in accordance with Sec. 983.6(d).
0
10. In Sec. 983.6, paragraph (d) is added to read as follows:
Sec. 983.6 Maximum amount of PBV assistance.
* * * * *
(d) Before a PHA issues a Request for Proposals in accordance with
Sec. 983.51(b)(1) or makes a selection in accordance with Sec.
983.51(b)(2), the PHA must submit the following information to a HUD
field office for review:
(1) The total amount of annual budget authority;
(2) The percentage of annual budget authority available to be
project-based; and
(3) The total amount of annual budget authority the PHA is planning
to project-base pursuant to the selection and the number of units that
such budget authority will support.
0
11. In Sec. 983.9, paragraph (a)(2) is revised and a new paragraph (c)
is added to read as follows:
Sec. 983.9 Special housing types.
(a) * * *
(2) In the PBV program, the PHA may not provide assistance for
shared housing, manufactured home space rental, or the homeownership
option.
* * * * *
(c) Cooperative housing. (1) Applicability of part 983. Except as
provided in paragraph (c)(3) of this section, assistance under this
housing type is subject to the regulations of part 983, except the
following sections of part 983, subpart F: Sec. Sec. 983.256(b) and
(c), 983.258 and 983.259 do not apply.
(2) Applicability of part 982. (i) Cooperative housing under the
PBV program is also subject to the requirements of 24 CFR
982.619(b)(2), (b)(3), (b)(5), (d), and (e).
(ii) Cooperative housing under the PBV program is not subject to
the requirements of 24 CFR 982.619(a), (b)(1), (b)(4), and (c).
(3) Assistance in cooperative housing. Rental assistance for PBV
cooperative housing where families lease cooperative housing units from
cooperative members is not a special housing type and all requirements
of 24 CFR 983 apply.
[[Page 36166]]
(4) Rent to owner. The regulations of 24 CFR part 983, subpart G,
apply to PBV housing under paragraph (c) of this section. The
reasonable rent for a cooperative unit is determined in accordance with
Sec. 983.303. For cooperative housing, the rent to owner is the
monthly carrying charge under the occupancy agreement/lease between the
member and the cooperative.
(5) Other fees and charges. Fees such as application fees, credit
report fees, and transfer fees shall not be included in the rent to
owner.
0
12. In Sec. 983.10, paragraph (b) is revised and a new paragraph (c)
is added to read as follows:
Sec. 983.10 Project-based certificate (PBC) program.
* * * * *
(b) What rules apply? Units under the PBC program are subject to
the provisions of 24 CFR part 983, codified as of May 1, 2001, with the
following exceptions:
(1) PBC renewals. (i) General. Consistent with the PBC HAP
contract, at the sole option of the PHA, HAP contracts may be renewed
for terms for an aggregate total (including the initial and any renewal
terms) of 15 years, subject to the availability of appropriated funds.
(ii) Renewal of PBC as PBV. At the sole discretion of the PHA, upon
the request of an owner, PHAs may renew a PBC HAP contract as a PBV HAP
contract. All PBV regulations (including 24 CFR part 983, subpart G--
Rent to Owner) apply to a PBC HAP contract renewed as a PBV HAP
contract with the exception of Sec. Sec. 983.51, 983.56, and
983.57(b)(1). In addition, the following conditions apply:
(A) The term of the HAP contract for PBC contracts renewed as PBV
contracts shall be consistent with Sec. 983.205.
(B) A PHA must make the determination, within one year before
expiration of a PBC HAP contract, that renewal of the contract under
the PBV program is appropriate to continue providing affordable housing
for low-income families.
(C) The renewal of PBC assistance as PBV assistance is effectuated
by the execution of a PBV HAP contract addendum as prescribed by HUD
and a PBV HAP contract for existing housing.
(2) Housing quality standards. The regulations in 24 CFR 982.401
(housing quality standards) (HQS) apply to units assisted under the PBC
program.
(i) Special housing types. HQS requirements for eligible special
housing types, under this program, apply (See 24 CFR 982.605. 982.609
and 982.614).
(ii) Lead-based paint requirements. (A) The lead-based paint
requirements at 24 CFR 982.401(j) do not apply to the PBC program.
(B) 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, and R, apply to the PBV program.
(iii) HQS enforcement. The regulations in 24 CFR parts 982 and 983
do not create any right of the family or any party, other than HUD or
the PHA, to require enforcement of the HQS requirements or to assert
any claim against HUD or the PHA for damages, injunction, or other
relief for alleged failure to enforce the HQS.
(c) Statutory notice requirements. In addition to provisions of 24
CFR part 983 codified as of May 1, 2001, Sec. 983.206 applies to the
PBC program.
0
13. In Sec. 983.51:
0
a. Paragraph (a) is amended by removing the term ``building'' and
adding in its place ``project'' in the last sentence;
0
b. Paragraph (b)(2) is revised; and
0
c. Paragraph (g) is added to read as follows:
Sec. 983.51 Owner proposal selection procedures.
* * * * *
(b) * * *
(2) Selection based on previous competition. The PHA may select,
without competition, a proposal for housing assisted under a federal,
State, or local government housing assistance, community development,
or supportive services program that required competitive selection of
proposals (e.g., HOME, and units for which competitively awarded low-
income housing tax credits (LIHTCs) have been provided), where the
proposal has been selected in accordance with such program's
competitive selection requirements within 3 years of the PBV proposal
selection date, and the earlier competitively selected housing
assistance proposal did not involve any consideration that the project
would receive PBV assistance.
* * * * *
(g) Owner proposal selection does not require submission of form
HUD-2530 or other HUD previous participation clearance.
0
14. In Sec. 983.52, paragraph (a) is revised to read as follows.
Sec. 983.52 Housing type.
* * * * *
(a) Existing housing--A housing unit is considered an existing unit
for purposes of the PBV program, if at the time of notice of PHA
selection the units substantially comply with HQS.
(1) Units for which rehabilitation or new construction began after
owner's proposal submission but prior to execution of the AHAP do not
subsequently qualify as existing housing.
(2) Units that were newly constructed or rehabilitated in violation
of program requirements also do not qualify as existing housing.
* * * * *
0
15. In Sec. 983.53 is revised by:
0
a. Adding the word ``and'' after the semicolon in paragraph (a)(5);
0
b. Removing paragraph (a)(6);
0
c. Redesignating paragraph (a)(7) as paragraph (a)(6);
0
d. Removing paragraph (b);
0
e. Redesginating paragraphs (c) and (d) as paragraphs (b) and (c)
respectively;
0
f. Revising newly redesignated paragraph (b); and
0
g. Adding a new paragraph (d).
Sec. 983.53 Prohibition of assistance for ineligible units.
* * * * *
(b) Prohibition against assistance for owner-occupied unit. The PHA
may not attach or pay PBV assistance for a unit occupied by an owner of
the housing. A member of a cooperative who owns shares in the project
assisted under the PBV program shall not be considered an owner for
purposes of participation in the PBV program.
* * * * *
(d) Prohibition against assistance for units for which commencement
of construction or rehabilitation occurred prior to AHAP. The PHA may
not attach or pay PBV assistance for units for which construction or
rehabilitation has commenced as defined in Sec. 983.152 after proposal
submission and prior to execution of an AHAP.
0
16. In Sec. 983.55, paragraphs (a) and (b) are revised to read as
follows:
Sec. 983.55 Prohibition of excess public assistance.
(a) Subsidy layering requirements. The PHA may provide PBV
assistance only in accordance with HUD subsidy layering regulations (24
CFR 4.13) and other requirements. The subsidy layering review is
intended to prevent excessive public assistance for the housing by
combining (layering) housing assistance payment subsidy under the PBV
program with other governmental housing assistance from federal, state,
or local agencies, including assistance such as tax
[[Page 36167]]
concessions or tax credits. The subsidy layering requirements are not
applicable to existing housing. A further subsidy layering review is
not required for housing selected as new construction or rehabilitation
of housing, if HUD's designee has conducted a review, which included a
review of PBV assistance, in accordance with HUD's PBV subsidy layering
review guidelines.
(b) When subsidy layering review is conducted. The PHA may not
enter into an Agreement or HAP contract until HUD or a housing credit
agency approved by HUD has conducted any required subsidy layering
review and determined that the PBV assistance is in accordance with HUD
subsidy layering requirements.
* * * * *
0
17. In Sec. 983.56:
0
a. The section heading is revised;
0
b. The word ``building'' is removed and ``project'' is added in its
place everywhere it appears in paragraph (a), including the heading of
paragraph (a), and in paragraph (b)(1) introductory text, (b)(1)(ii),
(b)(2)(i), and (b)(3)(i);
0
c. Paragraph (b)(2)(ii)(A) is revised;
0
d. The reference ``Sec. 983.261(d)'' in paragraph (b)(2)(ii)(B) is
removed and ``Sec. 983.262(d)'' is added in its place;
0
e. Paragraph (b)(3) is redesignated as paragraph (b)(4), and a new
paragraph (b)(3) is added; and
0
f. Paragraph (c) is revised to read as follows.
Sec. 983.56 Cap on number of PBV units in each project.
* * * * *
(b) * * *
(2) * * *
(ii) * * *
(A) Elderly and/or disabled families; and/or
* * * * *
(3) Combining exception categories. Exception categories in a
multifamily housing project may be combined.
* * * * *
(c) Additional, local requirements promoting partially assisted
projects. A PHA may establish local requirements designed to promote
PBV assistance in partially assisted projects. For example, a PHA may:
(1) Establish a per-project cap on the number of units that will
receive PBV assistance or other project-based assistance in a
multifamily project containing excepted units or in a single-family
building,
(2) Determine not to provide PBV assistance for excepted units, or
(3) Establish a per-project cap of less than 25 percent.
0
18. In Sec. 983.58, paragraph (d)(1)(i) is revised to read as follows:
Sec. 983.58 Environmental review.
* * * * *
(d) * * *
(1) * * *
(i) The responsible entity has completed the environmental review
procedures required by 24 CFR part 58, and HUD has approved the
environmental certification and HUD has given a release of funds, as
defined in Sec. 983.3(b);
* * * * *
0
19. In Sec. 983.59:
0
a. Paragraph (b)(1) is revised;
0
b. Paragraph (b)(2) is redesignated as paragraph (b)(3), and a new
paragraph (b)(2) is added; and
0
c. Paragraph (d) is revised to read as follows:
Sec. 983.59 PHA-owned units.
* * * * *
(b) * * *
(1) Determination of rent to owner for the PHA-owned units. Rent to
owner for PHA-owned units is determined pursuant to Sec. Sec. 983.301
through 983.305 in accordance with the same requirements as for other
units, except that the independent entity approved by HUD must
establish the initial contract rents based on PBV program requirements;
(2) Initial and renewal HAP contract term. The term of the HAP
contract and any HAP contract renewal for PHA-owned units must be
agreed upon by the PHA and the independent entity approved by HUD. Any
costs associated with implementing this requirement must be paid for by
the PHA; and
* * * * *
(d) Payment to independent entity. (1) The PHA may compensate the
independent entity from PHA ongoing administrative fee income
(including amounts credited to the administrative fee reserve). The PHA
may not use other program receipts to compensate the independent entity
for its services.
(2) The PHA, and the independent entity, may not charge the family
any fee for the services provided by the independent entity.
0
20. In Sec. 983.101, paragraph (b) is revised to read as follows:
Sec. 983.101 Housing quality standards.
* * * * *
(b) HQS for special housing types. For special housing types
assisted under the PBV program, HQS in 24 CFR part 982 apply to the PBV
program. (Shared housing, manufactured home space rental, and the
homeownership option are not assisted under the PBV program.) HQS
contained within 24 CFR part 982 that are inapplicable to the PBV
program pursuant to Sec. 983.2 are also inapplicable to special
housing types under the PBV program.
* * * * *
0
21. In Sec. 983.152:
0
a. Paragraphs (a), (b), and (c) are redesignated as paragraphs (b), (a)
and (d), respectively;
0
b. Newly redesignated paragraph (b) is revised; and
0
c. A new paragraph (c) is added to read as follows:
Sec. 983.152 Purpose and content of the Agreement to enter into HAP
contract.
* * * * *
(b) Requirement. The PHA must enter into an Agreement with the
owner at such time as provided in Sec. 983.153. The Agreement must be
in the form required by HUD headquarters (see 24 CFR 982.162).
(c) Commencement of construction or rehabilitation. The PHA may not
enter into an agreement if commencement of construction or
rehabilitation has commenced after proposal submission.
(1) Construction begins when excavation or site preparation
(including clearing of the land) begins for the housing;
(2) Rehabilitation begins with the physical commencement of
rehabilitation activity on the housing.
* * * * *
0
22. In Sec. 983.153, add introductory text and revise paragraph (c) to
read as follows:
Sec. 983.153 When Agreement is executed.
The agreement must be promptly executed, in accordance with the
following conditions:
* * * * *
(c) Prohibition on construction or rehabilitation. The PHA shall
not enter into the Agreement with the owner if construction or
rehabilitation has commenced after proposal submission
0
23. In Sec. 983.202, paragraph (a) is revised to read as follows:
Sec. 983.202 Purpose of HAP contract.
(a) Requirement. The PHA must enter into a HAP contract with the
owner. With the exception of single family scattered site projects, a
HAP contract shall cover a single project. If multiple projects exist,
each project shall be covered by a separate HAP contract. The HAP
contract must be in such form as may be prescribed by HUD.
* * * * *
0
24. In Sec. 983.203, paragraph (h) is revised to read as follows:
Sec. 983.203 HAP contract information.
* * * * *
[[Page 36168]]
(h) The number of units in any project that will exceed the 25
percent per-project cap (as described in Sec. 983.56), which will be
set-aside for occupancy by qualifying families (elderly and/or disabled
families and families receiving supportive services); and
* * * * *
0
25. In Sec. 983.205, paragraphs (a) and (b) are revised to read as
follows:
Sec. 983.205 Term of HAP contract.
(a) 15-year initial term. The PHA may enter into a HAP contract
with an owner for an initial term of up to 15 years for each contract
unit. The length of the term of the HAP contract for any contract unit
may not be less than one year, nor more than 15 years. In the case of
PHA-owned units, the term of the initial HAP contract shall be
determined in accordance with Sec. 983.59.
(b) Extension of term. A PHA may agree to enter into an extension
at the time of the initial HAP contract term or any time before
expiration of the contract, for an additional term of up to 15 years if
the PHA determines an extension is appropriate to continue providing
affordable housing for low-income families. A HAP contract extension
may not exceed 15 years. A PHA may provide for multiple extensions;
however, in no circumstance may such extensions exceed 15 years,
cumulatively. Extensions after the initial extension are allowed at the
end of any extension term provided that not more than 24 months prior
to the expiration of the previous extension contract, the PHA agrees to
extend the term, and that such extension is appropriate to continue
providing affordable housing for low-income families or to expand
housing opportunities. Extensions after the initial extension term
shall not begin prior to the expiration date of the previous extension
term. Subsequent extensions are subject to the same limitations
described in this paragraph. Any extension of the term must be on the
form and subject to the conditions prescribed by HUD at the time of the
extension. In the case of PHA-owned units, any extension of the initial
term of the HAP contract shall be determined in accordance with Sec.
983.59.
* * * * *
0
26A. Sections 983.206, 983.207, 983.208, and 983.209 are redesignated,
respectively, as Sec. Sec. 983.207, 983.208, 983.209, and 983.210.
0
26B. A new Sec. 983.206 is added to read as follows.
Sec. 983.206 Statutory notice requirements: Contract termination or
expiration.
(a) Notices required in accordance with this section must be
provided in the form prescribed by HUD.
(b) Not less than one year before termination of a PBV or PBC HAP
contract, the owner must notify the PHA and assisted tenants of the
termination.
(c) For purposes of this section, the term ``termination'' means
the expiration of the HAP contract or an owner's refusal to renew the
HAP contract.
(d)(1) If an owner does not give timely notice of termination, the
owner must permit the tenants in assisted units to remain in their
units for the required notice period with no increase in the tenant
portion of their rent, and with no eviction as a result of an owner's
inability to collect an increased tenant portion of rent.
(2) An owner may renew the terminating contract for a period of
time sufficient to give tenants one-year advance notice under such
terms as HUD may require.
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27. In redesignated Sec. 983.207, paragraph (b) is revised to read as
follows:
Sec. 983.207 HAP contract amendments (to add or substitute contract
units).
* * * * *
(b) Amendment to add contract units. At the discretion of the PHA,
and provided that the total number of units in a project that will
receive PBV assistance will not exceed 25 percent of the total number
of dwelling units in the project (assisted and unassisted), (unless
units were initially identified in the HAP contract as excepted from
the 25 percent limitation in accordance with Sec. 983.56(b)), or the
20 percent of authorized budget authority as provided in Sec. 983.6, a
HAP contract may be amended during the three-year period immediately
following the execution date of the HAP contract to add additional PBV
contract units in the same project. An amendment to the HAP contract is
subject to all PBV requirements (e.g., rents are reasonable), except
that a new PBV request for proposals is not required. The anniversary
and expiration dates of the HAP contract for the additional units must
be the same as the anniversary and expiration dates of the HAP contract
term for the PBV units originally placed under HAP contract.
* * * * *
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28. In redesignated Sec. 983.210, paragraph (i) is revised and a new
paragraph (j) is added to read as follows:
Sec. 983.210 Owner certification.
* * * * *
(i) The family does not own or have any interest in the contract
unit. The certification required by this section does not apply in the
case of an assisted family's membership in a cooperative.
(j) Repair work on a project selected as an existing project that
is performed after HAP execution within such post-execution period as
specified by HUD may constitute development activity, and if determined
to be development activity, the repair work undertaken shall be in
compliance with Davis-Bacon wage requirements.
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29. A new Sec. 983.211 is added to subpart E to read as follows:
Sec. 983.211 Removal of unit from HAP contract.
(a) Units occupied by families whose income has increased during
their tenancy resulting in the tenant rent equaling the rent to the
owner, shall be removed from the HAP Contract 180 days following the
last housing assistance payment on behalf of the family.
(b) If the project is fully assisted, a PHA may reinstate the unit
removed under paragraph (a) of this section to the HAP contract after
the ineligible family vacates the property. If the project is partially
assisted, a PHA may substitute a different unit for the unit removed
under paragraph (a) of this section to the HAP contract when the first
eligible substitute becomes available.
(c) A reinstatement or substitution of units under the HAP
contract, in accordance with paragraph (b) of this section, must be
permissible under Sec. 983.207. The anniversary and expirations dates
of the HAP contract for the unit must be the same as it was when it was
originally placed under the HAP contract. The PHA must refer eligible
families to the owner in accordance with the PHA's selection policies.
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30. In Sec. 983.251, a new paragraph (a)(4) is added to read as
follows:
Sec. 983.251 How participants are selected.
(a) * * *
(4) A PHA may not approve a tenancy if the owner (including a
principal or other interested party) of a unit is the parent, child,
grandparent, grandchild, sister, or brother of any member of the
family, unless the PHA determines that approving the unit would provide
reasonable accommodation for a family member who is a person with
disabilities.
* * * * *
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31. In Sec. 983.256, paragraphs (f) and (g) are revised to read as
follows:
[[Page 36169]]
Sec. 983.256 Lease.
* * * * *
(f) Term of lease. (1) The initial lease term must be for at least
one year.
(2) The lease must provide for automatic renewal after the initial
term of the lease. The lease may provide either:
(i) For automatic renewal for successive definite terms (e.g.,
month-to-month or year-to-year); or
(ii) For automatic indefinite extension of the lease term.
(3) The term of the lease terminates if any of the following
occurs:
(i) The owner terminates the lease for good cause;
(ii) The tenant terminates the lease;
(iii) The owner and the tenant agree to terminate the lease;
(iv) The PHA terminates the HAP contract; or
(v) The PHA terminates assistance for the family.
(g) Lease provisions governing absence from the unit. The lease may
specify a maximum period of family absence from the unit that may be
shorter than the maximum period permitted by PHA policy. (PHA
termination-of-assistance actions due to family absence from the unit
are subject to 24 CFR 982.312, except that the unit is not terminated
from the HAP contract if the family is absent for longer than the
maximum period permitted.)
Sec. 983.257 [Amended]
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32. In Sec. 983.257, paragraph (b) is removed and paragraph (c) is
redesignated as paragraph (b) and amended by removing the word ``per-
building'' and adding in its place ``per-project''..
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33A. Sections 983.258, 983.259, 983.260, and 983.261 are redesignated
as Sec. Sec. 983.259, 983.260, 983.261, and 983.262, respectively.
0
33B. A new Sec. 983.258 is added to read as follows:
Sec. 983.258 Continuation of housing assistance payments.
Housing assistance payments shall continue until the tenant rent
equals the rent to owner. The cessation of housing assistance payments
at such point will not affect the family's other rights under its
lease, nor will such cessation preclude the resumption of payments as a
result of later changes in income, rents, or other relevant
circumstances if such changes occur within 180 days following the date
of the last housing assistance payment by the PHA. After the 180-day
period, the unit shall be removed from the HAP contract pursuant to
Sec. 983.211.
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34. In redesignated Sec. 983.260, the word ``building'' is removed and
``project'' is added in its place everywhere it appears in paragraph
(b)(2)(i), and paragraph (c) is revised to read as follows:
Sec. 983.260 Overcrowded, under-occupied, and accessible units.
* * * * *
(c) PHA termination of housing assistance payments. (1) If the PHA
offers the family the opportunity to receive tenant-based rental
assistance under the voucher program, the PHA must terminate the
housing assistance payments for a wrong-sized or accessible unit at the
earlier of the expiration of the term of the family's voucher
(including any extension granted by the PHA) or the date upon which the
family vacates the unit. If the family does not move out of the wrong-
sized unit or accessible unit by the expiration date of the term of the
family's voucher, the PHA must remove the unit from the HAP contract.
(2) If the PHA offers the family the opportunity for another form
of continued housing assistance in accordance with paragraph (b)(2) of
this section (not in the tenant-based voucher program), and the family
does not accept the offer, does not move out of the PBV unit within a
reasonable time as determined by the PHA, or both, the PHA must
terminate the housing assistance payments for the wrong-sized or
accessible unit, at the expiration of a reasonable period as determined
by the PHA, and remove the unit from the HAP contract.
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35. In redesignated Sec. 983.262, the section heading and paragraphs
(b) and (d) are revised and a new paragraph (e) is added to read as
follows.
Sec. 983.262 When occupancy may exceed 25 percent cap on the number
of PBV units in each project.
* * * * *
(b) In referring families to the owner for admission to excepted
units, the PHA must give preference to elderly and/or disabled
families, or to families receiving supportive services.
* * * * *
(d) A family (or the remaining members of the family) residing in
an excepted unit that no longer meets the criteria for a ``qualifying
family'' in connection with the 25 percent per project cap exception
(i.e., a family that does not successfully complete its FSS contract of
participation or the supportive services requirement as defined in the
PHA administrative plan or the remaining members of a family that no
longer qualifies for elderly or disabled family status where the PHA
does not exercise its discretion under paragraph (e) of this section)
must vacate the unit within a reasonable period of time established by
the PHA, and the PHA shall cease paying housing assistance payments on
behalf of the non-qualifying family. If the family fails to vacate the
unit within the established time, the unit must be removed from the HAP
contract unless the project is partially assisted, and it is possible
for the HAP contract to be amended to substitute a different unit in
the project in accordance with Sec. 983.207(a); or the owner
terminates the lease and evicts the family. The housing assistance
payments for a family residing in an excepted unit that is not in
compliance with its family obligations (e.g., a family fails, without
good cause, to successfully complete its FSS contract of participation
or supportive services requirement) shall be terminated by the PHA.
(e) The PHA may allow a family that initially qualified for
occupancy of an excepted unit based on elderly or disabled family
status to continue to reside in a unit, where through circumstances
beyond the control of the family (e.g., death of the elderly or
disabled family member or long term or permanent hospitalization or
nursing care), the elderly or disabled family member no longer resides
in the unit. In this case, the unit may continue to count as an
excepted unit for as long as the family resides in that unit. Once the
family vacates the unit, in order to continue as an excepted unit under
the HAP contact, the unit must be made available to and occupied by a
qualifying family.
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36. In Sec. 983.301, paragraphs (d) and (e) are revised to read as
follows:
Sec. 983.301 Determining the rent to owner.
* * * * *
(d) Rent to owner for other tax credit units. Except in the case of
a tax-credit unit described in paragraph (c)(1) of this section, the
rent to owner for all other tax credit units may be determined by the
PHA pursuant to paragraph (b) of this section.
(e) Reasonable rent. The PHA shall determine the reasonable rent in
accordance with Sec. 983.303. The rent to the owner for each contract
unit may at no time exceed the reasonable rent, except in cases where,
the PHA has elected within the HAP contract not to reduce rents below
the initial rent to owner and, upon redetermination of the rent to
owner, the reasonable rent would result in a rent below the initial
rent. If the PHA has not elected within the HAP contract to establish
the initial rent to
[[Page 36170]]
owner as the rent floor, the rent to owner shall not at any time exceed
the reasonable rent.
* * * * *
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37. In Sec. 983.302:
0
a. Paragraph (c) is revised to read as set forth below; and
0
b. The reference in paragraph (e)(3) to ``Sec. 983.206(c)'' is removed
and ``Sec. 983.207(c)'' is added in its place.
Sec. 983.302 Redetermination of rent to owner.
* * * * *
(c) Rent decrease. (1) If there is a decrease in the rent to owner,
as established in accordance with Sec. 983.301, the rent to owner must
be decreased, regardless of whether the owner requested a rent
adjustment.
(2) 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 HAP contract, except:
(i) To correct errors in calculations in accordance with HUD
requirements;
(ii) If additional housing assistance has been combined with PBV
assistance after the execution of the initial HAP contract and a rent
decrease is required pursuant to Sec. 983.55; or
(iii) 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.
* * * * *
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38. In Sec. 983.303, paragraphs (a), (b)(3), and (f)(1) are revised to
read as follows:
Sec. 983.303 Reasonable rent.
(a) Comparability requirement. At all times during the term of the
HAP contract, the rent to the owner for a contract unit may not exceed
the reasonable rent as determined by the PHA, except that where the PHA
has elected in the HAP contract to not reduce rents below the initial
rent under the initial HAP contract, the rent to owner shall not be
reduced below the initial rent in accordance with Sec. 983.302(e)(2).
(b) * * *
(3) Whenever the HAP contract is amended to substitute a different
contract unit in the same building or project; and
* * * * *
(f) Determining reasonable rent for PHA-owned units. (1) For PHA-
owned units, the amount of the reasonable rent must be determined by an
independent agency approved by HUD in accordance with Sec. 983.59,
rather than by the PHA. The reasonable rent must be determined in
accordance with this section.
* * * * *
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39. In Sec. 983.304, paragraph (e) is revised to read as follows:
Sec. 983.304 Other subsidy: effect on rent to owner.
* * * * *
(e) Other subsidy: rent reduction. To comply with HUD subsidy
layering requirements, at the direction of HUD or its designee, a PHA
shall reduce the rent to owner because of other governmental subsidies,
including tax credits or tax exemptions, grants, or other subsidized
financing.
* * * * *
Dated: June 16, 2014.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2014-14632 Filed 6-24-14; 8:45 am]
BILLING CODE 4210-67-P