[Federal Register Volume 79, Number 122 (Wednesday, June 25, 2014)]
[Rules and Regulations]
[Pages 35940-35942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14915]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 943, and 982

[Docket No. FR-5778-N-01]


HUD Implementation of Fiscal Year 2014 Appropriations Provisions 
on Public Housing Agency Consortia, Biennial Inspections, Extremely 
Low-Income Definition, and Utility Allowances

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

ACTION: Notice of statutory changes.

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SUMMARY: Section 243 of the Department of Housing and Urban Development 
Appropriations Act, 2014 (2014 Appropriations Act) authorizes HUD to 
implement certain statutory changes to the United States Housing Act of 
1937 made by the 2014 Appropriations Act through notice followed by 
notice and comment rulemaking. This notice establishes the terms and 
conditions by which HUD will implement changes to the statutory 
definition of a ``public housing agency'' (PHA), the frequency of 
housing inspections, the statutory definition of ``extremely low-
income,'' and utility allowances for tenant-paid utilities.

DATES: Effective Date: July 1, 2014.

FOR FURTHER INFORMATION CONTACT: For Public Housing and Voucher program 
questions, contact Michael Dennis, Director of the Office of Housing 
Voucher Programs, Department of Housing and Urban Development, 451 7th 
Street SW., Room 4228, Washington, DC 20410; telephone number 202-402-
4059 (this is not a toll-free number). For questions regarding the 
multifamily programs, contact Claire Brolin, 451 7th Street SW., Suite 
6138, Washington, DC 20410 at 202-402-6634 (this is not a toll-free 
number). Persons with hearing or speech impairments may access either 
of these numbers through TTY by calling the toll-free Federal Relay 
Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The general provisions of the 2014 Appropriations Act \1\ include 
five statutory changes to the United States Housing Act of 1937 (42 
U.S.C. 1437 et seq.) (1937 Act) that are designed to reduce 
administrative burdens on PHAs, enable PHAs to better target assistance 
to families in need of such assistance, and reduce Federal costs.\2\ 
Expediting the implementation of these provisions through notice will 
help PHAs to benefit from the changes in the law sooner than if 
implementation was accomplished solely through public rulemaking. The 
only statutory change that is applicable to multifamily project-based 
section 8 programs is the added definition of ``extremely low-income'' 
in section 238. For all other statutory changes, the changes provided 
in this notice apply only to the public housing and section 8 voucher 
programs.
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    \1\ HUD's 2014 Appropriations Act is Title II of Division L of 
Public Law 113-76, 128 Stat. 5, approved January 17, 2014. See 
Public Law 113-76 at 128 Stat. 604.
    \2\ The five general provisions are sections 210, 212, 220, 238, 
and 242. This notice addresses sections 212, 220, 238, and 242. 
Section 210, which pertains to flat rents is addressed separately 
PIH Notice 2014-12, available at http://portal.hud.gov/hudportal/documents/huddoc?id=14-12pihn.pdf.
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    Section 212 of the 2014 Appropriations Act amends the definition of 
a PHA to include a consortium of such entities.
    Section 220 allows PHAs to comply with the requirement to inspect 
assisted dwelling units during the term of a housing assistance payment 
(HAP) contract by conducting biennial housing quality inspections 
instead of annual inspections. PHAs are also able to utilize 
alternative inspection methods to demonstrate that housing meets the 
housing quality requirements under the voucher program.
    Section 238 creates a statutory definition of ``extremely low-
income families,'' which is defined as very low-income families whose 
incomes do not exceed the higher of the Federal poverty level or 30 
percent of Area Median Income.
    Section 242 establishes a cap on the utility allowance for families 
leasing oversized units. The cap is set at an amount based on family 
size rather than the size of the unit leased, with the ability to set a 
higher amount to provide a reasonable accommodation to the family of a 
person with disabilities, harmonizing the utility allowance standard 
with the payment standard requirement.
    In order to allow PHAs to receive, as quickly as possible, the 
benefit of the reduced burden that these provisions are designed to 
achieve, the 2014 Appropriations Act authorizes HUD to implement the 
changes through notice, provided that HUD follows with notice and 
comment rulemaking within six months of the issuance of the notice.

II. Implementation Requirements

A. PHA Consortia

    Section 212 of the 2014 Appropriations Act amends the definition of 
``public housing agency'' at subparagraph (A) of section 3(b)(6) of the 
1937 Act (42 U.S.C. 1437a(b)(6)(A)) to include in its general 
definition ``a consortium of such entities or bodies as approved by the 
Secretary.'' PHAs may follow 24 CFR part 943 to form, participate in, 
and utilize consortia. PHAs may request a waiver of any current 
provision related to consortium organization, elements of the 
agreement, the relationship between HUD and the consortium, and the 
responsibilities of the consortium.
    The Secretary will not approve any consortium of PHAs for 
administration of multifamily project-based section 8 program 
contracts.

B. Biennial Inspections

    Section 220 of the 2014 Appropriations Act allows PHAs to comply 
with the requirement to inspect assisted dwelling units during the term 
of a HAP contract by inspecting such units not less than biennially 
instead of annually and to rely upon alternative inspection methods to 
meet this requirement. However, a PHA may not use the alternative 
inspection method in lieu of the initial unit or any interim 
inspection. PHAs are still required to conduct an initial inspection, 
prior to entering into a HAP contract, and interim inspections, if a 
family or government official notifies the PHA of a unit's failure to 
comply with housing quality standards, in accordance with the housing 
quality standards (HQS) of the HCV program.
1. In General
    In order to bring relief to PHAs and owners as expeditiously as 
possible, HUD is implementing certain elements

[[Page 35941]]

of section 220 through this notice in a somewhat limited fashion. HUD 
recognizes that fuller implementation of these elements (e.g., the use 
of alternative inspection methodologies and the treatment of mixed-
finance properties) may necessitate additional complexity and certain 
trade-offs, and that HUD will greatly benefit from stakeholder input on 
how best to effectuate these statutory changes through the rulemaking 
process.
    Section 220 will be immediately effective for any unit under HAP 
contract where the PHA has conducted an HQS inspection within the 12 
months preceding the effective date of this notice. If a PHA has 
conducted an HQS inspection in that time period, the PHA will not be 
required to re-inspect until the lapse of 24 months following their 
last inspection. If the most recent inspection occurred prior to the 12 
months preceding the effective date of this notice, then the PHA is 
required to conduct an annual HQS inspection for that unit and is 
afforded no relief from that annual inspection responsibility as a 
result of the change in the law. However, once that unit has been 
inspected, the PHA will then have the option to wait up until two years 
before the next inspection is required.
    This notice does not require a PHA to wait two years from the last 
inspection before conducting an inspection. If a PHA desires to make 
inspections on a more frequent basis, it may do so.
    Currently, HUD's Section 8 Management Assessment Program (SEMAP) 
evaluates PHAs on the frequency with which they conduct inspections. 
HUD will score PHAs based on their compliance with the statutory 
requirement that they conduct inspections at least biennially.
2. Alternative Inspections
    A PHA may comply with the biennial inspection requirement through 
reliance upon an inspection conducted for another housing assistance 
program. If a PHA relies on an alternative inspection to fulfill the 
biennial inspection requirement for a particular unit, then the PHA 
must identify the alternative standard in its administrative plan. Such 
a change may be a significant amendment to the plan, in which case the 
PHA must follow its PHA plan amendment and public notice requirements 
before utilizing the alternative inspection method.
    Compliance with the biennial inspection requirement may be met by 
reliance upon an inspection of housing assisted under the HOME 
Investment Partnerships (HOME) program (under Title II of the Cranston-
Gonzalez National Affordable Housing Act, 42 U.S.C. 12701 note) or 
housing financed via the Treasury Department's Low-Income Housing Tax 
Credit program (LIHTC), taking into account the standards employed by 
those programs. A PHA may also comply with the biennial inspection 
requirement by relying upon an inspection performed by HUD, for example 
an inspection performed by HUD's Real Estate Assessment Center. A PHA 
is permitted to rely upon inspections conducted for the HOME or LIHTC 
program or performed by HUD with no action other than amending its 
administrative plan.
    If a PHA wishes to rely upon an inspection conducted to a standard 
other than a standard listed above, then it must first submit to its 
local HUD Field Office a certification affirming, under penalty of 
perjury, that the standard ``provides the same or greater protection to 
occupants of dwelling units meeting such standard or requirement'' as 
would HQS. Once this certification has been submitted, the PHA must 
amend its administrative plan to formalize its adoption of the 
standard. A PHA that has chosen to rely upon an alternative inspection 
method must monitor any changes to the standards and requirements 
applicable to such method so that the PHA is made aware of any 
weakening of the method that would cause it to no longer meet or exceed 
HQS, in which case the PHA may not rely upon such method to comply with 
the biennial inspection requirement.
    The statute makes clear that, in order for an inspection to qualify 
as an ``alternative inspection method,'' a property inspected pursuant 
to such method must ``meet the standards or requirements regarding 
housing quality or safety'' applicable to properties assisted under the 
program that employs the alternative inspection method (e.g., HOME, 
LIHTC). For purposes of this notice, HUD is implementing this statutory 
element as follows:
     If a property is inspected under an alternative inspection 
method, and the property receives a ``pass'' score, then the PHA may 
rely on that inspection to demonstrate compliance with the biennial 
inspection requirement.
     If a property is inspected under an alternative inspection 
method, and the property receives a ``fail'' score, then the PHA may 
not rely on that inspection to demonstrate compliance with the biennial 
inspection requirement.
     If a property is inspected under an alternative inspection 
method that does not employ a pass/fail determination--for example, in 
the case of the LIHTC program, where deficiencies are simply noted--
then the PHA must review the list of deficiencies to determine whether 
any cited deficiency would have resulted in a ``fail'' score under HQS. 
If no such deficiency exists, then the PHA may rely on the inspection 
to demonstrate compliance with the biennial inspection requirements; if 
such a deficiency does exist, then the PHA may not rely on the 
inspection to demonstrate such compliance.
    Under any circumstance described above in which a PHA is prohibited 
from relying on an alternative inspection methodology, the PHA must 
conduct an HQS inspection of any units in the property occupied by 
voucher program participants and follow HQS procedures to remedy any 
noted deficiencies. The HQS inspection must take place within a 
reasonable period of time. HUD will solicit input through rulemaking on 
circumstances under which a PHA could rely upon corrective actions 
taken under an alternative inspection method to assure that the 
property is brought into compliance with the standards or requirements 
regarding housing quality or safety applicable to the alternative 
inspection method.
    As with all other inspection reports, and as required by 24 CFR 
982.158(f)(4), reports for inspections conducted pursuant to an 
alternative inspection method must be retained for at least three 
years.
3. Interim Inspections
    If a family or government official reports a condition that is 
life-threatening (i.e., the PHA would require the owner to make the 
repair within no more than 24 hours in accordance with 24 CFR 
982.404(a)(3)), then the PHA must inspect the housing unit within 24 
hours of when the PHA received the notification. If the reported 
condition is not life-threatening (i.e., the PHA would require the 
owner to make the repair within no more than 30 calendar days), then 
the PHA must inspect the unit within 15 days of when the PHA received 
the notification. In the event of extraordinary circumstances, such as 
if a unit is within a Presidentially declared disaster area, HUD may 
waive the 24-hour or the 15-day inspection requirement until such time 
as an inspection is feasible.
4. Mixed-Finance Properties
    Section 220 gives HUD the authority to alter the frequency of 
inspections for mixed-finance properties assisted with project-based 
vouchers to facilitate the use of an alternative inspection method. HUD 
intends to exercise this authority through the rulemaking process as

[[Page 35942]]

opposed to this implementation notice. In the interim, a unit under HAP 
contract must be re-inspected at least biennially, through either the 
regular inspection process or the alternative inspection method.

C. Extremely Low-Income

    Section 238 of the 2014 Appropriations Act amends section 3 of the 
1937 Act (42 U.S.C. 1437a) to add a definition of extremely low-income 
(ELI) families. ELI families are defined as very low-income families 
whose incomes do not exceed the higher of the Federal poverty level or 
30 percent of Area Median Income. This provision affects the ELI 
targeting requirements in section 16 of the 1937 Act (42 U.S.C. 1437n) 
for the public housing, housing choice voucher (HCV), project-based 
voucher (PBV), and multifamily project-based section 8 programs. As of 
the effective date of this notice, compliance with the targeting 
requirements under each of these programs must take into account the 
new definition of ELI.
    Beginning with the effective date of this notice, a PHA or HUD, if 
HUD is the contract administrator, shall meet its targeting 
requirements through a combination of ELI admissions prior to the 
effective date (using the old definition) and ELI admissions after the 
effective date (using the new statutory definition). Neither a PHA nor 
HUD may skip over a family on the waiting list if that family meets the 
new definition of ELI as enacted by this section.
    For the public housing program, not less than 40 percent of the 
units that become available per PHA fiscal year must be made available 
for occupancy by ELI families.
    For the HCV and PBV programs, compliance with targeting 
requirements is determined for each of the PHA's fiscal years based on 
new admissions to both programs (i.e., a single, combined total). Not 
less than 75 percent of such admissions shall be ELI families.
    For the multifamily project-based section 8 programs, the contract 
administrator (i.e., HUD or a PHA under an Annual Contributions 
Contract with HUD) must make available for occupancy by ELI families 
not less than 40 percent of the section 8-assisted dwelling units that 
become available for occupancy in any fiscal year.
    The following example clarifies how a PHA administering the HCV and 
PBV programs would comply with this provision: A PHA with a fiscal year 
end of December 31 shall consider admissions to the HCV and PBV 
programs from January 1 up until the effective date of this notice 
using the old definition; from the effective date of this notice 
through December 31, it shall consider admissions using the new 
definition. To further illustrate, assume the PHA admitted 50 families 
into their HCV program between January 1 and the effective date of this 
notice. Forty families were ELI (under the old definition), 6 families 
did not meet the old definition of ELI but would have met the new 
definition of ELI had it been implemented at the time of their 
admission, and 4 did not meet either definition of ELI. In terms of 
calculating the ELI targeting requirement for the period of the PHA 
fiscal year prior to implementation of the change in the ELI 
definition, only 40 families met the ELI definition with regard to the 
targeting requirement (not 46). Assume the PHA admitted another 50 
families before the end of the PHA fiscal year and 45 of those families 
met the new definition of ELI. The total number of families that met 
the ELI requirement for the PHA fiscal year would be 85 (40 plus 45), 
or 85 percent.
    In some communities, the extremely low-income and very low-income 
levels will be identical for some or all household sizes, in which case 
PHAs meet their ELI targeting requirements by serving VLI households, 
since those families meet the new definition of ELI. To reduce the work 
a PHA or contract administrator must do to determine which standard it 
should be using, HUD's Office of Policy Development and Research has 
calculated the new income limits for extremely low-income families, 
taking the previous sentence into account, and has made the new area 
income limits available online at http://www.huduser.org/portal/datasets/il/il14/index.html.

D. Utility Allowances

    Section 242 of the 2014 Appropriations Act limits the utility 
allowance payment for tenant-based vouchers to the family unit size for 
which the voucher is issued, irrespective of the size of the unit 
rented by the family, with an exemption for families with a person with 
disabilities.
    Under section 242, the utility allowance for a family shall be the 
lower of: (1) The utility allowance amount for the family unit size; or 
(2) the utility allowance amount for the unit size of the unit rented 
by the family. However, upon the request of a family that includes a 
person with disabilities, the PHA must approve a utility allowance 
higher than the applicable amount if such a higher utility allowance is 
needed as a reasonable accommodation in accordance with HUD's 
regulations in 24 CFR part 8 to make the program accessible to and 
usable by the family member with a disability. This provision applies 
only to vouchers issued after the effective date of this notice and to 
current program participants. For current program participants, a PHA 
must implement the new allowance at the family's next annual 
reexamination, provided that the PHA is able to provide a family with 
at least 60 days' notice prior to the reexamination.

    Dated: June 12, 2014.
Carol J. Galante,
Assistant Secretary for Housing--Federal Housing Commissioner.
Milan Ozdinec,
Deputy Assistant Secretary for the Office of Public Housing and Voucher 
Program.
[FR Doc. 2014-14915 Filed 6-24-14; 8:45 am]
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