[Federal Register Volume 79, Number 194 (Tuesday, October 7, 2014)]
[Proposed Rules]
[Pages 60590-60632]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-23276]



[[Page 60589]]

Vol. 79

Tuesday,

No. 194

October 7, 2014

Part II





Department of Housing and Urban Development





-----------------------------------------------------------------------





24 CFR Parts 891 and 892





Supportive Housing and Services for the Elderly and Persons With 
Disabilities: Implementing Statutory Reforms; Proposed Rule

  Federal Register / Vol. 79 , No. 194 / Tuesday, October 7, 2014 / 
Proposed Rules  

[[Page 60590]]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 891 and 892

[Docket No. FR-5576-P-01]
RIN 2502-AJ10


Supportive Housing and Services for the Elderly and Persons With 
Disabilities: Implementing Statutory Reforms

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would implement amendments made by the 
Section 202 Supportive Housing for the Elderly Act of 2010 (Section 202 
Act of 2010) and the Frank Melville Supportive Housing Investment Act 
of 2010 (Melville Act) to the authorizing statutes for HUD's supportive 
housing for the elderly program, known as the Section 202 program, and 
the supportive housing for persons with disabilities program, known as 
the Section 811 program. These two statutes were enacted on January 4, 
2011, and made important reforms to the Section 202 and Section 811 
programs, several of which have already been implemented through 
separate issuances, as discussed in the Supplementary Information 
section of this rule. In addition to proposing regulations to implement 
reforms of these two statutes, this proposed rule would implement 
several other changes to align with the amendments made by the January 
4, 2011, statutes, and streamline the Section 202 and Section 811 
programs to better provide supportive housing for the elderly and 
persons with disabilities. This proposed rule would establish the 
requirements and procedures for the use of new project rental 
assistance for supportive housing for persons with disabilities; the 
implementation of an enhanced project rental assistance contract; 
allowance of a set-aside for a number of units for elderly individuals 
with functional limitations or other category of elderly persons as 
defined in the notice of funding availability (NOFA); make significant 
changes for the prepayment of certain loans for supportive housing for 
the elderly; implement a new form of rental assistance called Senior 
Preservation Rental Assistance Contracts (SPRACs); modernize the 
capital advance for supportive housing for persons with disabilities; 
and provide grant assistance for applicants without sufficient capital 
to prepare a site for a funding competition. This rule also proposes to 
establish the regulations for the Service Coordinators in Multifamily 
Housing program and the Assisted Living Conversion program.

DATES: Comment Due Date. December 8, 2014.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 451 
7th Street SW., Room 10276, Department of Housing and Urban 
Development, Washington, DC 20410-0500. Communications must refer to 
the above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit comments, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.
    Note: To receive consideration as public comments, comments must be 
submitted through one of the two methods specified above. All 
submissions must refer to the docket number and title of the rule.
    No Facsimile Comments. Facsimile (fax) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. eastern time, 
weekdays, at the above address. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the public 
comments must be scheduled by calling the Regulations Division at 202-
708-3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number through TTY by calling the 
Federal Relay Service, toll free, at 800-877-8339. Copies of all 
comments submitted are available for inspection and downloading at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Alicia Anderson, Grant Policy and 
Management Division, Office of Housing, Department of Housing and Urban 
Development, 451 7th Street SW., Room 6142, Washington, DC 20410-7000; 
telephone number 202-708-3000 (this is not a toll-free number). 
Hearing- and speech-impaired persons may access this number through TTY 
by calling the Federal Relay Service, toll free, at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose of the Regulatory Action

    This rule proposes to implement certain reforms to HUD's Section 
202 program and Section 811 program made by statutory changes to the 
programs, enacted in January 2011, and which require regulations for 
implementation. The Section 202 Act of 2010 (Pub. L. 111-372) includes 
provisions to strengthen the availability of long-term, affordable 
supportive housing for very low-income elderly persons by: Streamlining 
the development procedures for new affordable housing units; supporting 
the preservation of existing units; preventing displacement of elderly 
project residents in the case of refinancing or recapitalization by 
establishing the Senior Preservation Rental Assistance Contracts; and 
supporting greater access to affordable supportive services for the 
elderly.
    The Melville Act of 2010 (Pub. L. 111-374), will offer additional 
methods of financing new supportive housing for persons with 
disabilities, as well as support the preservation of affordable rental 
housing for individuals with disabilities and nonelderly disabled 
families. The amendments will increase the production of new affordable 
rental supportive housing units for persons with disabilities, while 
promoting and facilitating community integration for persons with 
significant and long-term disabilities. The availability of project 
rental assistance funds will stimulate and support innovative state 
approaches that will transform the provision of housing for extremely 
low-income persons with disabilities, while providing voluntary access 
to support and services that address the individual needs of persons 
occupying the HUD supported housing units. This rule would implement 
those components of

[[Page 60591]]

the statute that require regulations to make the new program features 
operable.

B. Summary of the Major Provisions of the Regulatory Action

    This proposed rule, in addition to making conforming changes (those 
changes for which there is no exercise of discretion by HUD), would 
provide for grant assistance for applicants without sufficient capital 
to prepare a housing site in order to compete for funding under the 
Section 202 program or the Section 811 program; revise the development 
cost limits for the Section 811 program; amend the requirements for 
project rental assistance under the Section 811 program to allow for 
adjustments upon renewal and for increases in emergency situations; 
allow Section 811 owners to request the conversion of supportive 
housing units for very low-income persons with disabilities; offer 
voluntary services to persons with disabilities under the Section 811 
program; allow Section 202 sponsors of projects to set aside a 
percentage of units for elderly individuals with functional limitations 
or other category of elderly persons, as defined in the notice of 
funding availability (NOFA), in order to better align the Section 202 
program with Federal, state, and local health care initiatives that 
support very low-income elderly individuals and provide for enhanced 
project rental assistance contracts. These contracts would be available 
to a nonprofit organization submitting a new application under either 
the Section 811 or Section 202 program, and accessing private capital, 
to fund the construction or provide permanent financing for supportive 
housing units for the elderly or persons with disabilities.

C. Costs and Benefits

    The primary impact of this proposed rule will result from 
implementation of the new Enhanced Project Rental Assistance Contracts 
(ePRAC) program. This program would allow future operating subsidy to 
pay debt service under specific circumstances not currently allowed. As 
provided in the accompanying regulatory impact analysis (RIA) for this 
rule, assuming a $20 million appropriations level, HUD estimates that 
there will be $15 million leveraged for new construction, which, under 
the assumptions used in HUD's RIA, is sufficient to fund an additional 
76 units. The benefits from this proposed change are primarily to 
tenants who are able to receive improved housing services and/or 
additional budgetary flexibility from the additional units developed as 
a result of the increased production. While improved housing 
affordability is associated with greater budget flexibility, improved 
housing more generally is often associated with improvements in 
psychological and other health outcomes of tenants. However, HUD's RIA 
notes that no funding has been made available for the development of 
new units in Fiscal Years (FYs) 2012 and 2013; therefore, a significant 
economic impact will not result from new construction under the Section 
202 and 811 programs. The ePRAC program will also be available to 
existing projects where the debt is used to make leveraged investments 
that reduce operating costs by more than the cost of the debt service.
    The RIA assumes a reduction of 20 percent in owner paid utilities, 
which is an estimated savings of $7 million. Under the assumption that 
the costs savings translate into available resources to pay debt 
service over time, these savings could conceivably result in $96 
million, using the same loan terms used for the estimate for new 
construction. However, the actual savings will depend upon the number 
of applications submitted for which HUD concludes the debt service 
would result in ongoing operating costs savings in an amount greater 
than the cost of the debt.
    The benefit of the ePRAC program is the increased flexibility to 
use operating funds to pay debt service, which is intended to result in 
a net increase in capital funds available to construct and rehabilitate 
projects in the Section 202 and 811 programs. The costs of the ePRAC 
program are the additional debt service payments the owner must make, 
and the costs of additional risks inherent in any increase in leverage 
within a project. Though debt may increase the opportunity for up-front 
investment, the interest on the debt is the cost of this benefit, which 
increases the demands on operating funds in the future, and diminishes 
what is available for other operating expenses. However, underwriting 
seeks to ensure that the project's operations and finances remain 
viable even with the possibility of this additional burden.
    The other changes proposed by this rule will not create any new 
costs or benefits. HUD is proposing to codify requirements for funded 
programs (service coordinators and assisted living conversion) that, to 
date, are found in NOFAs.

II. Background

A. Authorizing Statutes for Supportive Housing and Services for the 
Elderly and Persons With Disabilities

    The Section 202 program and the Section 811 program are HUD's core 
programs for providing supportive housing to the elderly and persons 
with disabilities, respectively. The purpose of these programs is to 
allow elderly individuals and persons with disabilities to live as 
independently as possible, but in an environment that provides access 
to voluntary supportive services that may be needed. Section 202 of the 
Housing Act of 1959 (see Pub. L. 86-372, approved September 23, 1959) 
originally provided housing for the elderly and in the later years of 
the Section 202 program also provided housing for persons with 
disabilities. Under this public law, the Section 202 program was 
officially the Section 202 Direct Loan Program for Housing for the 
Elderly or Handicapped Families.\1\ The Cranston-Gonzalez National 
Affordable Housing Act (NAHA) (Pub. L. 101-625, approved November 28, 
1990) amended Section 202 to provide for separate authorization for 
supportive housing for persons with disabilities. NAHA also changed the 
Section 202 program into what is now known as the supportive housing 
for the elderly program the differences between the old Section 202 
program and the existing program is explained below. Section 202b of 
the Housing Act of 1959 authorizes the conversion of elderly housing to 
assisted living facilities, and the Housing and Community Development 
Act of 1992, as originally enacted (Pub. L. 102-550, as approved 
October 28, 1992) and subsequently amended, authorizes funding for 
service coordinators in multifamily housing for the elderly and persons 
with disabilities.
---------------------------------------------------------------------------

    \1\ The statutory name for this program uses the term 
``handicapped families.''
---------------------------------------------------------------------------

Section 202 of the Housing Act of 1959--Supportive Housing for the 
Elderly
    Section 202 of the Housing Act of 1959 (12 U.S.C. 1701q) authorizes 
HUD's supportive housing program for the elderly (Section 202 program). 
The program enables elderly persons to live with dignity and 
independence by providing supportive housing that accommodates special 
needs and provides services tailored to the needs of such elderly 
persons. Originally, the Section 202 program began as a direct loan 
program, which provided low-interest construction loans to nonprofit

[[Page 60592]]

developers to create moderate-income housing for the elderly.
    HUD continues to administer Section 202 direct loans; however, they 
are no longer issued. In 1991, HUD transformed the program into one 
that provides capital advances instead of direct loans, where funds are 
given to nonprofit developers to construct and/or rehabilitate housing 
for very low-income elderly. Under this model, such Federal assistance 
requires no repayment and is interest free as long as the project is 
available for very low-income elderly persons, in accordance with the 
applicable Section 202 program requirements, for no less than 40 years. 
If the owner defaults on the terms and conditions of the Section 202 
program, the owner is liable for the entire balance of the capital 
advance amount with interest and penalties. The capital advance model 
also began providing project rental assistance to fund the difference 
between the HUD-approved operating costs of the project and the 
tenant's contribution toward rent, to assist the owners with the 
operation of the project.
    HUD is taking a renewed look at the Section 202 program and is 
making several enhancements to the program. Specifically, the current 
section 202 of the Housing Act of 1959 contains several important 
authorizations for HUD that will be implemented by this rule. First, 
HUD has authority under section 202(b) of the Housing Act of 1959 to 
provide assistance for other expenses as necessary to expand the supply 
of supportive housing for the elderly, which gives HUD the authority to 
provide technical assistance for preliminary work in the development of 
such housing. Second, HUD has authority under section 202(c) of the 
Housing Act of 1959 to provide an enhanced project rental assistance 
contract option, which is similar to senior preservation rental 
assistance contracts (in connection with the prepayment and refinancing 
of Section 202 projects). Section 202(c) gives HUD the broad authority 
to implement project rental assistance contracts in accordance with the 
goals of the Section 202 program. Third, section 202(f) of the Housing 
Act of 1959 gives HUD the broad authority to set the selection criteria 
for the Section 202 program, in order to make sure funds are used 
effectively. Such authority allows HUD to set selection criteria to 
give a priority for assistance to housing that will provide support to 
elderly individuals with functional limitations. Fourth, section 
202(g)(1) of the Housing Act of 1959 states that HUD must ensure that 
housing assisted under the Section 202 program provides a range of 
services tailored to the needs of the category or categories of elderly 
persons occupying such housing; thereby, providing HUD the authority to 
make sure the needs of elderly persons with functional limitations are 
met. Lastly, section 202(j)(1) of the Housing Act of 1959 authorizes 
HUD to provide technical assistance grants for applicants with limited 
resources in order for the applicants to fully participate in the 
Section 202 program.
Section 202b of the Housing Act of 1959-Assisted Living Conversion
    Section 202b of the Housing Act of 1959 (12 U.S.C. 1701q-2) 
authorizes grants for the substantial capital repair of elderly housing 
or the conversion of elderly housing to assisted living facilities (the 
Assisted Living Conversion program). Assisted living facilities are 
designed to accommodate the frail elderly and persons with disabilities 
who can live independently but need assistance with activities of daily 
living (e.g., assistance with eating, bathing, grooming, dressing, and 
home management activities.) Assisted living facilities must provide 
support services such as personal care, transportation, meals, 
housekeeping, and laundry. Generally, funding for assisted living 
facilities covers basic physical conversion of existing project units, 
common and service spaces.
Section 811 of the Cranston-Gonzalez National Affordable Housing Act of 
1990--Supportive Housing for Persons With Disabilities
    Section 811 of the Cranston-Gonzalez National Affordable Housing 
Act (NAHA) (42 U.S.C. 8013) authorizes HUD's supportive housing for 
persons with disabilities (Section 811 program) and allows persons with 
disabilities to live as independently as possible by providing capital 
advances to increase the supply of supportive housing for such persons. 
In addition, the Section 811 program provides project rental assistance 
to fund the difference between the HUD-approved operating costs of the 
project and the tenants' contribution toward rent. In addition, similar 
to section 202 of the Housing Act of 1959, section 811 of NAHA contains 
several important program authorizations that will be implemented by 
this rule and have been strengthened by the Melville Act. For example, 
section 811(b)(2) of NAHA authorizes HUD to provide assistance for 
other expenses as necessary to expand the supply of supportive housing 
for persons with disabilities. Section 811(d) of NAHA authorizes HUD to 
allow for an enhanced project rental assistance contract option. This 
section gives HUD the broad authority to implement project rental 
assistance contracts in accordance with the goals of the Section 811 
program. Under section 811(j)(1) of NAHA, HUD is authorized to provide 
technical assistance grants for applicants with limited resources in 
order to fully participate in the Section 811 program.
Housing and Community Development Act of 1992--Multifamily Housing 
Service Coordinators
    The Housing and Community Development Act of 1992 (Pub. L. 102-550, 
approved October 28, 1992) in Sections 671 through 677, which establish 
on their own or amend other housing program statutes, authorizes 
funding for service coordinators to assist elderly individuals and 
persons with disabilities, living in federally-assisted multifamily 
housing to obtain needed supportive services from community agencies. 
These sections were amended by section 851 of the American 
Homeownership and Economic Opportunity Act of 2000 (Pub. L. 106-569, 
114 Stat. 2944, approved December 27, 2000) to provide for increased 
flexibility in the use of service coordinators in federally-assisted 
multifamily housing (see 114 Stat. 3023-2025). The services authorized 
are intended to prevent premature and inappropriate 
institutionalization.
Section 811 of the American Homeownership and Economic Opportunity Act 
of 2000--Prepayment of Certain Section 202 Loans
    Section 811 of the American Homeownership and Economic Opportunity 
Act of 2000 (AHEO) (12 U.S.C. 1701q note) authorizes the prepayment of 
certain Section 202 loans. Between 1959 and 1990, HUD loaned funds to 
private nonprofit developers to build housing for the elderly and 
disabled families. Many of these projects are now in need of repair and 
recapitalization, which is typically accomplished through the 
prepayment and refinancing of the Section 202 direct loan, as 
authorized under section 811 of the AHEO. HUD reviews any prepayment 
requests to ensure the prepayment will benefit the project and its 
residents while preserving affordability.

[[Page 60593]]

B. The Section 202 Act of 2010 and the Melville Act

Section 202 Act of 2010--Amendments to the Section 202 Program
    The Section 202 Act of 2010 (Pub. L. 111-372, approved January 4, 
2011) amends the Section 202 program to include in the selection 
criteria for funding Section 202 supportive housing the extent to which 
the applicant has ensured that a service coordinator will be employed 
or otherwise retained for the housing. This service coordinator must 
have managerial capacity and responsibility for carrying out supportive 
services. In addition, the Section 202 Act of 2010 amends the 
development cost limitations for the Section 202 program to be 
reasonable. The Section 202 Act of 2010 also limits an owner's deposit 
to cover operating deficits during the first 3 years of operations, and 
prohibits the use of such amount to cover construction shortfalls or 
inadequate initial project rental assistance amounts.
    The Section 202 Act of 2010 redefines ``private nonprofit 
organization'' and authorizes HUD, in the case of a nonprofit 
sponsoring organization of multiple housing projects assisted under 
such Act, to determine the criteria or conditions under which financial 
or administrative responsibilities exercised by a single-entity private 
nonprofit organization that is the owner corporation responsible for 
the operation of an individual housing project may be shared or 
transferred to the governing board of the sponsoring organization. The 
new definition also allows the sole general partner of a for-profit 
limited partnership to be a limited liability or for-profit 
organization company wholly owned and controlled by one or more 
organizations meeting the requirements of such definition.
    The Section 202 Act of 2010 directs HUD to either operate a 
national competition for the nonmetropolitan funds under the Section 
202 program, or to make allocations to regional offices of HUD.
    In addition, the Section 202 Act of 2010 amends section 811 of the 
AHEO, making significant changes for the prepayment of certain Section 
202 loans. The Section 202 Act of 2010 requires that a project owner 
execute an affordability use agreement that extends at least 20 years 
beyond the maturity date of the original Section 202 loan at the time 
of prepayment, authorizes new flexibility in the use of proceeds from 
the refinancing of a project, and creates permanent authority for the 
refinancing of Section 202 projects where debt service savings is not 
anticipated as a result of the refinance.
    The Section 202 Act also authorizes a new form of rental 
assistance, called Senior Preservation Rental Assistance Contracts 
(SPRACs), to be provided in the refinancing of certain Section 202 
projects where no debt service savings is anticipated and where 
unassisted residents would otherwise face potential rent increases. 
This is one of the most significant changes made to the Section 202 
Direct Loan program.
Section 202 Act of 2010--Amendments to the Assisted Living Conversion 
Program
    The Section 202 Act of 2010 also amends section 202b of the Housing 
Act of 1959 to enable the conversion of units to create either an 
assisted living facility or service-enriched housing. Although these 
amendments directly affect the Assisted Living Conversion program, they 
also focus on enhancing the services provided in such facilities. 
Service coordinators are necessary to coordinate the provision of 
supportive services for the elderly, especially for the frail or 
disabled elderly, in part to help them to continue living independently 
in such housing. Service coordinators manage and provide access, 
through third parties, to necessary supportive services for the elderly 
living in supportive housing, assisted living facilities, or service-
enriched housing, because many residents have unmet needs for services 
and assistance that the owner of the project cannot identify or provide 
effectively.
Melville Act--Amendments to the Section 811 Program
    The Melville Act (Pub. L. 111-374, approved January 4, 2011) makes 
significant changes to the Section 811 program. The Melville Act 
improves the Section 811 program by establishing new features that are 
designed to facilitate community integration for persons with 
significant and long-term disabilities. These new features include: 
Providing stronger incentives to Section 811 program participants to 
leverage other sources of capital funding; transferring Section 811 
program vouchers to the Housing Choice Voucher program (also known as 
HUD's Section 8 program), which serves to conform and streamline the 
administrative requirements for rental assistance; adopting the HOME 
Investment Partnerships (HOME) program cost limitations on funds 
invested on a per-unit basis to further conform and streamline 
requirements; providing for delegated processing of applications for 
funding; and allowing for greater tenant protections. The Melville Act 
also amends the definition of ``persons with disabilities'' to mean a 
household composed of one or more persons who is 18 years of age or 
older but less than 62 years of age, and who has a disability.
    Most significantly, the Melville Act implements a new project 
rental assistance authority (section 811(b)(3) of NAHA, as amended by 
the Melville Act) that is separate from the existing project rental 
assistance under the Section 811 program, which provides capital 
advances and contracts for project rental assistance. The new project 
rental assistance provided by the Melville Act provides funding to 
state housing finance agencies and other appropriate entities to assist 
them in providing rental assistance to extremely low-income, nonelderly 
adults (persons 18 years of age or older and less than 62 years of age) 
with disabilities. To be eligible for the project rental assistance, 
the state housing finance agency or other appropriate entity must have 
entered into an agreement with the state health and human services 
agency and the state agency designated to administer or supervise the 
administration of the state plan for medical assistance under title XIX 
of the Social Security Act (the state Medicaid agency). This agreement 
must: (1) Identify and target the populations to be served by the 
project, (2) set forth the methods for outreach and referral, and (3) 
make available appropriate services for tenants of the project. Placing 
this new project rental assistance funding under the control of housing 
finance agencies that have partnered with state health and human 
services and Medicaid agencies, will allow states to more carefully 
target resident populations that will benefit most from integrated 
supportive housing units, and promote and refer these target 
populations to this newly available housing.
    As provided by the Melville Act, projects eligible for the new 
project rental assistance can be either new or existing multifamily 
housing projects. These projects' development costs are paid with 
resources from other public or private sources, including projects that 
have a commitment of Federal Low-Income Housing Tax Credits (LIHTC), 
HOME program funds, any other Federal Government funding, or other 
sources. To ensure that the goals of community integration are 
achieved, the Melville Act provides that in any multifamily housing 
project receiving the new project rental assistance, no more than 25 
percent of the total

[[Page 60594]]

number of dwelling units in the project may be used for supportive 
housing for persons with disabilities and receive the project rental 
assistance, or have an occupancy preference for persons with 
disabilities associated with such units. This does not prevent owners 
from housing persons with disabilities in units not set aside to 
receive the project rental assistance under this program. Persons with 
disabilities are eligible to occupy nonassisted units. Denying 
admission on the basis of disability in nonassisted units would violate 
the Fair Housing Act, Section 504 of the Rehabilitation Act of 1973, 
and the Americans with Disabilities Act.
    The Melville Act also requires all dwelling units receiving the new 
project rental assistance to operate as supportive housing for persons 
with disabilities for a period of not less than 30 years and to only 
serve nonelderly, extremely low-income persons with disabilities and 
extremely low-income households that include at least one nonelderly 
person with a disability.
    In addition, the Melville Act modernizes the capital advance 
portion of the Section 811 program by authorizing the use of project 
rental assistance for emergency situations that are outside the control 
of the owner, and the conversion of units; adopting the cost 
limitations on funds invested on a per-unit basis as provided by the 
HOME program, authorized by title II of NAHA, for the purpose of 
further conforming and streamlining requirements; providing for 
delegated processing of applications for funding; and allowing for 
greater tenant protections.
    The Section 202 Act of 2010 and the Melville Act provide a much-
needed foundation for practical improvements to the Section 202 program 
and Section 811 program, and several of these reforms, which did not 
require a regulatory foundation for implementation, have already been 
implemented.\2\
---------------------------------------------------------------------------

    \2\ HUD issued a notice (H 2012-8) entitled ``Updated 
Requirements for Prepayment and Refinance of Section 202 Direct 
Loans'' on May 4, 2012. See http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/notices/hsg. HUD 
also issued a Notice of Funding Availability on May 15, 2012, for 
the Section 811 Project Rental Assistance Demonstration program, 
authorized by the Melville Act (funding provided under the 
Consolidated and Further Continuing Appropriations Act, 2012, Pub. 
L. 112-55, 125 Stat. 552). See http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/grants/fundsavail/nofa12/sec811PRAdemo.
---------------------------------------------------------------------------

III. This Proposed Rule--Overview

    This section of the preamble provides an overview of the 
regulations to be revised, removed, and added by this proposed rule. 
Although the proposed rule primarily implements the new statutory 
program features authorized by the Section 202 Act of 2010 and the 
Melville Act, these two statutes also require conforming changes to 
existing regulations at 24 CFR part 891, and this rule makes those 
conforming changes. In addition, HUD is also proposing to add a new 
part 892 to establish regulations for the Service Coordinator in 
Multifamily Housing program and the Assisted Living Conversion program, 
as provided by the Section 202 Act of 2010. The requirements for these 
programs have long been addressed only through NOFAs. The enhanced 
features to both programs provided by the Section 202 Act of 2010 
present an optimum time to propose regulations, and solicit feedback on 
whether the regulatory structure for these two programs achieves the 
service-enriched housing that HUD is striving to achieve through this 
proposed rule.

A. Supportive Housing for the Elderly and Persons With Disabilities 
(Part 891)

General Program Requirements (Subpart A)
Purpose and Policy (Sec.  891.100--Revised)
    The purpose and policy for the Section 202 program and Section 811 
program would be revised to align with the changes to the Section 811 
program made by the Melville Act amendments. The revision to this 
section reflects the new policy for the Section 811 program, which 
ensures residents are offered, but are not required to accept, any 
necessary supportive services that address their individual needs. In 
addition, it is clarified that supportive services are voluntary under 
the Section 202 program.
Definitions (Sec.  891.105--Revised)
    Section 891.105 in subpart A, which addresses the definitions for 
both the Section 202 program and Section 811 program, would define 
certain new terms and revise existing terms to reflect the statutory 
changes.
    A key term defined in this section pertains to ePRACs. HUD would 
add a definition for ePRAC, which would mean the contract entered into 
by the nonprofit organization and HUD setting forth the rights and 
duties of the parties with respect to the project and the payments 
under the ePRAC. An ePRAC is made available for nonprofit organizations 
submitting new applications under section 811 of NAHA (42 U.S.C. 8013) 
or section 202 of the Housing Act of 1959 (12 U.S.C. 1701q), and who 
are accessing private capital, to fund the construction or provide 
permanent financing for supportive housing units for the elderly or 
persons with disabilities; as well as for owners of existing properties 
accessing private capital and debt service results in ongoing operating 
cost savings in an amount greater than the cost of debt service. Such 
contract would allow for the inclusion of debt service as an eligible 
expense for the units covered by the contract and would allow for rents 
to be set up to an amount determined by HUD (which may include the 
provision of a service coordinator).
    The definition of ``operating costs'' would be revised to include 
allowances for debt service only for units covered by an ePRAC, or for 
existing properties when such debt service results in ongoing operating 
cost savings in an amount greater than the cost of debt service.
    The definitions for ``project rental assistance contract'' and 
``project rental assistance payment'' would be amended to clarify that 
they do not apply to subpart G, which authorizes the new project rental 
assistance as provided under the Melville Act. In addition, the 
definition of ``project rental assistance contract'' would be amended 
to clarify that this term does not apply to units covered by ePRAC 
under Sec.  891.190 in subpart A. Lastly, the definition of ``project 
rental assistance contract'' would also be amended to include payments 
and the terms as provided in the ePRAC.
Development Cost Limits (Sec.  891.140--Revised)
    The Melville Act revises the development cost limitations for the 
Section 811 program. Accordingly, the current section on development 
cost limits in Sec.  891.140 would be removed because the Section 811 
program and Section 202 program now have separate development cost 
limitations. However, since the development cost limits for the Section 
202 program are not changed, the language under Sec.  891.140 would be 
redesignated as Sec.  891.208 for applicability only to the Section 202 
program.
Owner Deposit (Sec.  891.145--Removed)
    The Melville Act eliminates the owner deposit requirement for the 
Section 811 program, and, therefore, Sec.  891.145 is removed.
Operating Cost Standards (Sec.  891.150--Revised)
    Section 891.150, which addresses operating cost standards for the 
supportive housing programs for the

[[Page 60595]]

elderly and persons with disabilities, would be revised to provide that 
Sec.  891.150 only applies to PRACs, as defined under Sec.  891.105.
Other Federal Requirements (Sec.  891.155--Revised)
    This section's introductory paragraph would be slightly amended to 
reference subpart G, the new project rental assistance. This section 
would also be changed in paragraph (b) by adding language explaining 
that the environmental requirements of 24 CFR part 50 and part 55 do 
not apply to subpart G. As described elsewhere in this preamble under 
Responsibilities of Participating Agencies (Sec.  891.882), the 
environmental standards for the Project Rental Assistance for Projects 
without Capital Advances program under subpart G would be under Sec.  
891.882(e) of this proposed rule. In addition, paragraph (b) would 
clarify that the environmental standards under Sec.  891.882(e) that 
are applicable to prepayments (as provided under Sec. Sec.  891.530 and 
891.700) must consider the use of a senior preservation rental 
assistance contract under subpart H, regardless of whether an 
application for such contract has been made at the time of review.
    Under paragraph (d), it would be clarified that the labor standards 
under this section do not apply to subpart H, which has separate labor 
standards under Sec.  891.882(g) of this proposed rule. While the labor 
standards under this section would apply to prepayments under 
Sec. Sec.  891.530 and 891.700, it should be noted that the labor 
standards may not be triggered by such prepayments, even where 12 or 
more units may continue to be assisted under a preexisting Section 8 
contract. Paragraph (d) would also correct the statutory citations to 
the Davis-Bacon Act and the Contract Work Hours and Safety Standards 
Act.
Audit Requirements (Sec.  891.160--Revised)
    This section, which applies to both the Section 202 program and 
Section 811 program, would be revised to state that nonprofits 
receiving assistance under part 891 are subject to the audit 
requirements in the NOFA. Currently, this section refers to 24 CFR part 
45, which was removed and is no longer applicable (see 62 FR 61616 
(November 18, 1997)).
Duration of Capital Advance (Sec.  891.165--Revised)
    In HUD's final rule published in the Federal Register on June 20, 
2013, at 78 FR 37106, entitled ``Streamlining Requirements Governing 
the Use of Funding for Supportive Housing for the Elderly and Persons 
with Disabilities Programs, as corrected by an amendatory rule 
published on August 15, 2013, at 78 FR 49680, HUD revised Sec.  
891.165(a) to provide that duration of the fund reservation for a 
capital advance with construction advances is 24 months from the date 
of issuance of the award letter to the date of initial closing. HUD, 
however, inadvertently omitted offering a similar amendment to Sec.  
891.165(b). Section 891.165(b), as currently codified, provides that 
the fund reservation for projects that elect not to receive any capital 
advance before construction completion is 24 months from the date of 
issuance of the award letter to the start of construction, and the 
duration can be extended up to 36 months, as approved by HUD on a case-
by-case basis. However to close-out a fund reservation, initial closing 
must occur. A project that elects not to receive any capital advance 
before construction completion does not reach initial closing until 
after construction completion. Therefore, the time frame must be from 
the date of issuance of the award letter to the initial closing. This 
rule would make that revision.
Technical Assistance (Sec.  891.175--Revised)
    Section 891.175, which addresses technical assistance for the 
Section 202 program and the Section 811 program, would be amended to 
provide for grant assistance for applicants without sufficient capital 
to prepare a housing site in order to compete for funding under the 
Section 202 program or Section 811 program. These grants will be 
categorized as technical assistance because the use of this funding 
serves purposes for which technical assistance grants are commonly 
awarded. HUD shall continue to make available appropriate technical 
assistance for both programs, and such technical assistance must ensure 
that applicants having limited resources, particularly minority 
applicants, are able to participate more fully in the programs.
    In addition, the amendments made to this section by this proposed 
rule provide that HUD may offer competitive grants to bolster an 
applicant's capacity in preliminary work required in the development of 
supportive housing for the elderly and persons with disabilities. This 
type of technical assistance is only available if the applicant meets 
the eligibility requirements under the NOFA for the Section 202 program 
or Section 811 program. The applicant must have site control, and lack 
access to capital to undertake initial efforts to confirm site 
feasibility, pursue initial site funding, and undertake the preparatory 
steps necessary to compete in the NOFA for the Section 202 program or 
Section 811 program, as applicable. Such technical assistance may be 
used to cover initial costs of necessary architectural and engineering 
work, site control, and other activities related to the development of 
supportive housing for the elderly and persons with disabilities.
Enhanced Project Rental Assistance Contracts (Sec.  891.190--New)
    A new Sec.  891.190, entitled ``Enhanced Project Rental Assistance 
Contracts'' (ePRACs) would be added to contain the regulations that 
will govern the ePRACs under the Section 811 and Section 202 programs. 
HUD proposes to place the regulations for the ePRACs under subpart A of 
part 891, because these contracts are available to a nonprofit 
organization under either the Section 811program or Section 202 
program. Subpart A provides general requirements for both the Section 
811program and Section 202 program.
    As provided in the discussion of this section, an ePRAC is 
available to a sponsor or owner under the Section 811 program or 
Section 202 program, accessing private capital, to fund the 
construction or provide permanent financing for supportive housing 
units for the elderly or persons with disabilities. The ePRAC would be 
available to sponsors that can provide evidence of a committed funding 
source from a lender for the construction or permanent financing of the 
Section 202 or Section 811 supportive housing units covered by the 
ePRAC. These contracts would allow, among other things, for the 
inclusion of debt service for units covered by the ePRAC as a project 
expense. With the exception of the requirements provided in this 
section for the ePRAC, such contracts must abide by the other 
requirements set forth in the regulations in 24 CFR part 891, subparts 
D and F.
    New Sec.  891.190 is proposed to be structured as follows:
In General (Sec.  891.190(a))
    Paragraph (a) of Sec.  891.190, entitled ``In general,'' states 
that ePRACs are available to private nonprofit organizations, as 
defined under Sec. Sec.  891.205, 891.305, and 891.805, with sponsors 
accessing private capital, and such organizations must abide by the 
requirements set out under Sec.  891.190(b).
Requirements (Sec.  891.190(b))
    Paragraph (b) of Sec.  891.190 provides the requirements for 
ePRACs. These

[[Page 60596]]

requirements only apply to a private nonprofit organization, as defined 
under Sec. Sec.  891.205, 891.305, and 891.805, with sponsors accessing 
private capital for the construction or permanent financing of the 
section 202 or section 811 supportive housing units covered by the 
ePRAC. These contracts provide for the inclusion of debt service as an 
under eligible expenses, the of debt service for housing units covered 
by an ePRAC. Debt service for non-section 202 or non-section 811 units 
cannot be included.
    The ePRAC must set the initial rent levels, as well as the rent 
levels at the beginning of each 5-year term of the multiyear contract, 
based on the project's operating expenses that include debt service and 
that do not exceed market rents, subject to a rent comparability study 
(which may take the provision of a service coordinator into 
consideration). Rents during the 5-year term of the multiyear contract 
would be adjusted using the Operating Cost Adjustment Factor (OCAF).
    For Section 202 projects, ePRACs must be for a term of 20 years. 
The 20-year term is linked to the availability of funding. Accordingly, 
the funding for the first year of the contract must be provided in 
accordance with current funding procedures, and funding for subsequent 
years is subject to available appropriations. If, however, funds 
appropriated are inadequate to meet the financial needs of the assisted 
units, HUD will not require the enforcement of the contract term. For 
Section 811 projects, ePRACs must also be for a term of 20 years. 
However, if the project is assisted with any low-income housing tax 
credits or with any tax-exempt housing bonds, the contract term must be 
for a term of 30 years. In accordance with the provisions of the 
Melville Act, for all Section 811 projects utilizing an ePRAC, funding 
for the first 5 years of the contract must be provided. Funding for 
subsequent years is subject to available appropriations.
    Vacancy payments for units under an ePRAC will be in the amount of 
80 percent of the per-unit operating expenses that include debt service 
for the first 60 days of vacancy if the conditions for receipt of the 
vacancy payments are fulfilled under Sec.  891.445.
Section 202 Supportive Housing for the Elderly (Subpart B)
Definitions (Sec.  891.205--Revised)
    Section 891.205, which provides the definitions for the Section 202 
program, would be amended to revise the definition for ``activities of 
daily living,'' and add a new definition for ``functional 
limitations.'' The definition of ``activities of daily living,'' (ADL) 
would be amended to remove references to ``home management 
activities,'' and to add the activity of ``transferring.'' The 
reference to ``home management activities'' was removed because it is 
no longer consistent with the standard ADL definition. ``Transferring'' 
is included as an activity of daily living, and identifies tasks such 
as going from a seated to a standing position, and getting in and out 
of bed. HUD is revising the definition of ``activities of daily 
living,'' to include this recognized category of ADL to identify tasks 
that are essential for maintaining independent living. The amended 
definition provides a comprehensive grouping of everyday activities 
that are an indicator of the services necessary for independent living.
    HUD is also adding a definition for the term ``functional 
limitations,'' since new program requirements would allow for a set-
aside for elderly individuals with functional limitations, as explained 
earlier in this preamble. This term relates to the restriction or loss 
of ability to perform or complete ADL and or Instrumental Activities of 
Daily Living (IADLs) tasks. An elderly person with functional 
limitations requires assistance with three ADLs or one ADL and some 
combination of IDALs and/or other thresholds as established by HUD. An 
assessment of ADLs and IADLs is a useful tool for tailoring services to 
meet the needs of elderly persons to allow for such persons to age-in-
place and live independently.
    HUD is adding a definition for the term Instrumental Activities of 
Daily Living (IADLs) since it is included in the definition of 
functional limitations. IADLs are activities that are more complex than 
those needed for the ADLs, they include but are not limited to handling 
personal finances, meal preparation, shopping, traveling, doing 
housework, using the telephone, and taking or managing medications.
Provisions of Services (Sec.  891.225--Revised)
    Section 891.225, which applies to the provision of services for the 
Section 202 program, would be amended to add a new paragraph (b)(2) to 
provide that sponsors of projects may set aside a percentage of units 
for elderly individuals with functional limitations or other category 
of elderly persons as defined in the NOFA. HUD is allowing sponsors 
this set-aside in order to better align the Section 202 program with 
Federal, state, and local health care initiatives that support very 
low-income elderly individuals. The exact percentage will be determined 
and announced by HUD through a NOFA.
    Any units set aside under this new paragraph (b)(2) must also abide 
by requirements under Sec.  891.410(c)(3), as added by this proposed 
rule, and discussed below.
    Current paragraph (b)(2) of Sec.  891.225 will be redesignated as 
paragraph (b)(3), and redesignated paragraph (b)(3) will be amended to 
clarify that the limit of $15 per unit, per month, for service costs as 
an eligible expense pertains only to the cost of supportive services 
and not to the employment of a service coordinator. The limit of $15 
may also be changed, as determined by HUD, to allow for flexibility. In 
addition, HUD is removing the sentence that stated any cost associated 
with the paragraph is an eligible cost under the contract because this 
sentence is inconsistent with the rest of the paragraph.
Selection Preferences (Sec.  891.230--Removed)
    Section 891.230, which outlines the selection preferences for the 
Section 202 program, would be removed. This section no longer applies 
to the Section 202 program as these Federal preferences were eliminated 
by statute (see HUD final rule published on March 29, 2000, 65 FR 
16692).
Owner Deposit (Sec.  891.235--New)
    The Melville Act eliminates the owner deposit requirement for the 
Section 811 program. Since the Section 202 program still requires an 
owner deposit, the Section 202 language under Sec.  891.145 is moved to 
a new Sec.  891.235 for Section 202 projects. Under Sec.  891.145, if 
an owner has a National Sponsor or a National Co-Sponsor, the Minimum 
Capital Investment shall be one-half of one percent (0.5 percent) of 
the HUD-approved capital advance, not to exceed $25,000, and this 
requirement continues in Sec.  891.235. In addition, as required by the 
Section 202 Act of 2010, such amount must be used only to cover 
operating deficits during the first 3 years of operation, and must not 
be used to cover construction shortfalls or inadequate initial project 
rental assistance amounts.
Section 811 Supportive Housing for Persons With Disabilities (Subpart 
C)
Definitions (Sec.  891.305--Revised)
    The Melville Act amends the definition of ``persons with 
disabilities'' to mean a household composed of one or more persons who 
is 18 years of age or older and less than 62 years of age, and who has 
a disability. The definition of ``disabled household'' in Sec.  891.305 
is amended to align with the Melville Act,

[[Page 60597]]

and would be amended to mean a household composed of one or more 
persons who is 18 years of age or older and less than 62 years of age, 
and who has a disability. In addition, the section would be amended to 
clarify that a surviving member or members in a disabled household must 
have been living in the unit as lawful tenants.
Cost Limits (Sec.  891.308--New)
    A new Sec.  891.308 is added to subpart C to provide the cost 
limitations as authorized by the Melville Act. Under the Melville Act, 
HUD must periodically establish development cost limitations, by market 
area, for group homes of supportive housing for persons with 
disabilities by publishing a notice of such limitations in the Federal 
Register. This language is similar to the current development cost 
limits for the entire Section 811 program, but now only applies to 
group homes. HUD adopts the current regulatory language for development 
cost limits under Sec.  891.140 for group homes.
    For group homes, HUD must use the development cost limits, 
established by notice in the Federal Register and adjusted by locality, 
to calculate the fund reservation amount of the capital advance to be 
made available to individual owners of group homes, as defined under 
section 811(k)(1) of NAHA, as amended by the Melville Act.
    Other than group homes, the provisions of section 212(e) of NAHA 
(42 U.S.C. 12742(e)) and the cost limits established by HUD, pursuant 
to this section which authorizes the HOME program, apply on a per-unit 
basis to supportive housing for persons with disabilities assisted with 
a capital advance as provided under the Melville Act. HUD may provide 
for the waiver of such cost limits under such cases in which the cost 
limits established pursuant to section 212(e) of NAHA may be waived, 
and to provide for the cost of special design features so that housing 
is made accessible to persons with disabilities, so that individual 
dwelling units meet the special needs of persons with disabilities, and 
so that housing is established in a location that is accessible to 
public transportation and community organizations that provide 
supportive services to persons with disabilities. In addition, 
applicants will not receive a waiver in excess of 110 percent of the 
applicable HOME program cost limitations.
    In accordance with the Melville Act, for supportive housing for 
persons with disabilities assisted with a capital advance, HUD will use 
the cost limits under the HOME program to calculate the maximum fund 
reservation amount of the capital advance to be made available to 
individual owners. Owners may request an amount less than the amount 
determined under the cost limits if such amount still allows for the 
project's financial feasibility. However, owners must not decline the 
capital advance amount made available to them.
    As stated in Sec.  891.140, owners that incur actual development 
costs that are less than the amount of the initial fund reservation are 
entitled to retain 50 percent of the savings in a Replacement Reserve 
Account. Such percentage will be increased to 75 percent for owners 
that add energy efficiency features. In addition, the Replacement 
Reserve Account must only be used for repairs, replacements, and 
capital improvements to the project.
Special Project Standards (Sec.  891.310--Revised)
    In order to provide flexibility for the developers of multifamily 
projects as authorized under the Melville Act, Sec.  891.310(b) would 
be amended to clarify that the additional accessibility requirements 
under paragraph (b) of Sec.  891.310 only apply to group homes as 
defined under section 811(k)(1) of NAHA, and independent living 
facilities. In addition, HUD is amending the existing accessibility 
requirements under section 891.310(b). Under the Melville Act, projects 
can no longer limit occupancy based on a type of disability. Instead, 
projects must base eligibility on who will benefit from the services 
provided. Accordingly, Sec.  891.310(b) is revised to state that all 
entrances, common areas, units to be occupied by resident staff, and 
amenities must be readily accessible to and usable by persons with 
disabilities.
    As revised, Sec.  891.310(b) would provide, in paragraph (b)(2), 
that all dwelling units in an independent living facility (or all 
bedrooms and bathrooms in a group home) involving new construction must 
be designed to be accessible or adaptable for persons with physical 
disabilities. Section 891.310(b)(3) would provide that in a project for 
chronically mentally ill individuals involving new construction, a 
minimum of 10 percent of all dwelling units in an independent living 
facility (or 10 percent of all bedrooms and bathrooms in a group home) 
must be designed to be accessible or adaptable for persons with 
physical disabilities. Section 891.310(b)(4) would provide that a 
project involving acquisition and/or rehabilitation may provide less 
than full accessibility if: (i) The project complies with the 
requirements of 24 CFR 8.23; (ii) the cost of providing full 
accessibility makes the project financially infeasible; (iii) fewer 
than one-half of the intended occupants have mobility impairments; and 
(iv) the accessibility requirement will be met through existing 
properties that serve persons with disabilities.
Project Rental Assistance (Sec.  891.330--New)
    As noted earlier in this preamble, one of the most significant 
changes made by the Melville Act is the establishment of a new project 
rental assistance authority (section 811(b)(3) of NAHA, as amended by 
the Melville Act) that is separate from the existing project rental 
assistance under the Section 811 program, and which provides capital 
advances and contracts for project rental assistance. Under the 
Melville Act, project rental assistance under the Section 811 program 
may be adjusted upon renewal and may be increased in emergency 
situations. A new Sec.  891.330 is added to subpart C to reflect these 
changes.
    Upon the expiration of each contract term, subject to the 
availability of appropriations, HUD will adjust the annual contract 
amount for Section 811 projects to provide for reasonable project 
operating costs, including adequate reserves and service coordinators. 
Any contract amounts not used by a project during a contract term will 
not be available for such adjustments upon renewal.
    In addition, for emergencies that are outside the control of the 
owner, HUD will increase the annual contract amount, subject to HUD's 
review and limitations, as may be prescribed by HUD. The Melville Act 
gives HUD broad discretion to increase the annual contract amount in 
emergency situations. Increases in contract amounts will be no greater 
than either 10 percent above the most recently approved budget-based 
rent, or 110 percent of Fair Market Rents (FMR) for market-based rents. 
Such increases will be solely for repaying a loan or equity that was 
used for addressing emergency repairs to the building that are beyond 
normal repair and maintenance, are not attributable to deferred 
maintenance, and caused by matters outside the control of the owner for 
which sufficient insurance proceeds are not available.
Conversions (Sec.  891.335--New)
    A new Sec.  891.335 is added to provide, as authorized by the 
Melville Act, that an owner may request the conversion of supportive 
housing units for very low-income persons with disabilities. Under a 
new Sec.  891.335, an owner may request conversion of some or all units 
from

[[Page 60598]]

supportive housing for very low-income persons with disabilities to 
very low-income persons, without tenancy being conditioned on such very 
low-income persons having disabilities. Under the Melville Act, HUD has 
to determine that the units are no longer needed for supportive housing 
for persons with disabilities. Therefore, a conversion would be 
approved only if the state agency responsible for administering the 
Medicaid program and/or the state health and human services agency 
indicates in writing that the need for supportive housing for very low-
income persons with disabilities no longer exists or that the 
affordable supportive housing for very low-income persons with 
disabilities will be replicated in a more integrated setting. In 
addition, the project must have had persistent vacancy, despite a 
reasonable effort to lease such units, as determined by HUD; and the 
project must show that a demonstrated need exists for the households 
that would benefit from such conversion. In granting a conversion, HUD 
may reserve the right to request a change in management or require a 
conversion only for a certain period.
Limitation on Use of Funds (Sec.  891.340--New)
    In accordance with section 811 of NAHA, as amended by the Melville 
Act, a new Sec.  891.340 is added to subpart C that states that Section 
811 funds may not be used to replace other state or local funds 
previously used or designated for use for persons with disabilities.
Multifamily Projects (Sec.  891.345--New)
    A new Sec.  891.345 is added to subpart C to provide the Melville 
Act restriction on the total number of dwelling units in a multifamily 
project that may be used for persons with disabilities. The restriction 
states that in any multifamily housing project (including any 
condominium or cooperative housing project) that contains any unit for 
which assistance is provided under the regulations in 24 CFR part 891, 
the total number of dwelling units within a multifamily housing project 
that may be used for supportive housing for persons with disabilities, 
or with any occupancy preference for persons with disabilities, may not 
exceed 25 percent of such total; the limit set by statute. This 
restriction applies only to assistance provided after the date of the 
enactment of the Melville Act, and does not apply to any project that 
is a group home or independent living facility.
Voluntary Supportive Services (Sec.  891.350--New)
    Consistent with the Melville Act, housing funded under subpart C 
must make available supportive services to persons with disabilities, 
but these services do not have to be accepted. This requirement is 
added as a new Sec.  891.350 to subpart C. Under this new section, and 
consistent with the Melville Act, a supportive service plan for housing 
for Section 811 projects must allow for voluntary participation and 
permit each resident to take responsibility for choosing and acquiring 
their own services, to receive any supportive services made available 
directly or indirectly by the owner of such housing, or to not receive 
any supportive services.
Project Management (Subpart D)
Determination of Eligibility and Selection of Tenants (Sec.  891.410--
Revised)
    HUD would amend Sec.  891.410 to revise paragraph (c)(2) which 
currently only provides requirements for general project management and 
specific requirements for the Section 811 program, and add a new 
paragraph (c)(3) that will apply to the determination of eligibility 
and selection of tenants. Paragraph (c)(2) will be revised to clarify 
that the owner of the housing may, with the approval of HUD, limit 
occupancy within the housing to persons with disabilities who can 
benefit from the supportive services offered in connection with the 
housing. The Melville Act changed the tenant protections under the 
Section 811 program, and owners can no longer limit occupancy within 
housing to persons with disabilities who have similar disabilities and 
require a similar set of supportive services in a supportive housing 
environment. New paragraph (c)(3) will apply to the Section 202 program 
only. New paragraph (c)(3) states that, under the Section 202 program, 
in order to be eligible for admission the applicant must also meet any 
project occupancy requirements approved by HUD. This standard currently 
exists for the Section 811 program, and HUD has added it for the 
Section 202 program for consistency.
    In addition, and as provided under the discussion of Sec.  891.225, 
if a sponsor has set aside units as provided under Sec.  891.225(b)(2), 
this section provides the requirements by which owners must abide. New 
Sec.  891.410(c)(3) provides that owners must lease units set aside 
under Sec.  891.225(b)(2) to elderly individuals who have been assessed 
by a qualified professional and who can provide evidence of functional 
limitations. Evidence can consist of a doctor's or nurse's written 
evaluation or a letter from the Area Agency on Aging (AAA) or Aging and 
Disability Resource Center (ADRC) or other like social service 
agencies. Examples of service providers include, but are not limited 
to, Medicaid home and community-based service providers or Programs for 
All-Inclusive Care for the Elderly (PACE) providers (including 
colocation of PACE programs on site). Provider organizations must have 
the capacity to bill Medicaid or be affiliated with AAA. HUD has 
determined that such requirements are necessary for units set aside 
under Sec.  891.225(b)(2), to make certain that very low-income elderly 
persons who are aging in place under the Section 202 program are better 
served. Such requirements will allow HUD to ensure that set-aside units 
are leased only to elderly individuals with functional limitations or 
other category of elderly persons as defined in the NOFA.
    Additionally, owners must continue to lease units not set aside for 
elderly individuals to any applicant determined to be eligible for the 
project. Owners are not prohibited from housing other elderly 
individuals with functional limitations or other conditions defined in 
the NOFA who are on their waiting list in units not set aside by the 
sponsor. Owners will make selections in a nondiscriminatory manner, 
without regard to considerations of race, religion, color, sex, 
national origin, familial status, or disability. Owners must also make 
selections without regard to actual or perceived sexual orientation, 
gender identity, or marital status, in accordance with 24 CFR 5.105(a). 
These requirements will ensure that other units not set aside for 
elderly individuals with functional limitations or other category of 
elderly persons as defined in the NOFA can serve other eligible 
applicants, and that all units are leased in a nondiscriminatory 
manner.
    Set-aside units, as proposed by this rule, would be distributed 
throughout the project and must not be segregated to one area of a 
building or the project. A specified number of units, rather than 
specific units (e.g., units 101, 201, etc.), may be set aside for this 
purpose, allowing the owner more flexibility in maintaining the number 
of units set aside by the sponsor for elderly individuals with 
functional limitations or other category of the elderly persons as 
defined in the NOFA.

[[Page 60599]]

Denial of Admission, Termination of Tenancy, and Modification of Lease 
(Sec.  891.430--Revised)
    The Melville Act amends the termination and the modification of 
lease requirements for the Section 811 program. Accordingly, Sec.  
891.430 would be revised to include these changes. HUD's regulations in 
24 CFR part 5, subpart I, which pertain to preventing crime in 
federally assisted housing and denying admission and terminating 
tenancy for criminal activity or alcohol abuse, would continue to apply 
to Section 811 capital advance projects. In addition, HUD's regulations 
in 24 CFR part 247, which address evictions from certain subsidized and 
HUD-owned projects, would continue to apply to all decisions by an 
owner to terminate the tenancy or modify the lease of a household 
residing in a unit (or residential space in a group home). However, an 
owner of a Section 811 project may not terminate a tenancy or refuse to 
renew a lease except for serious or repeated violation of the terms and 
conditions of the lease; for violation of applicable Federal, state, or 
local law; or for other good cause. In addition, the tenant must 
receive (in accordance with the Melville Act), no less than 30 days 
before the date of such termination or refusal to renew, a written 
notice specifying the grounds for such action.
Loans for Housing for the Elderly and Persons With Disabilities 
(Subpart E) Replacing ``Handicapped Person'' With ``Person With 
Disabilities''
    Through this rule, HUD also proposes to update terminology in the 
part 891, subpart E, regulations, which regulations still use the term 
``handicap'' and not ``disability.'' Not only is the term 
``disability'' the preferred term, it is the term used in the Melville 
Act. Accordingly, this rule proposes to replace ``handicap person'' 
with ``person with disabilities,'' and similar terminology changes.
Prepayment Privileges (Sec.  891.530 and Sec.  891.700--Revised)
    The existing regulatory sections pertaining to prepayment 
privileges, both found in subpart E of part 891, would be revised to 
reflect the changes made by the Section 202 Act of 2010. These sections 
are Sec.  891.530, which addresses direct loan prepayment privileges 
for Section 202 projects for the elderly, and Sec.  891.700, which 
addresses prepayment of direct loans for housing for persons with 
disabilities. Section 891.700 would be amended to reference Sec.  
891.530 because both sections list the same requirements. These two 
sections would be amended to expressly require an extension of 
affordability for at least 20 years beyond the maturity date of the 
original loan as a condition for prepayment approval, as required by 
section 201 of the Section 202 Act of 2010. In addition, the revisions 
to these two regulatory sections recognize that the continued operation 
of the project following the prepayment must remain under terms at 
least as advantageous to current and future residents as the provisions 
of the Section 202 direct loan, as well as any project-based rental 
assistance contract that may be in place at the property (which would 
include SPRAC assistance if such assistance is made available as part 
of the prepayment transaction).
    Direct loans were made under the Section 202 program to private 
nonprofit developers so they could build housing for elderly and 
disabled families. Under section 811(a) of the American Homeownership 
and Economic Opportunity Act (AHEO), as amended by the Section 202 Act 
of 2010, HUD may not grant approval for the prepayment unless the 
transaction will ensure the continued operation of the project, until 
at least 20 years following the maturity date of the original Section 
202 loan, in a manner that will provide rental housing for the elderly 
and persons with disabilities on terms at least as advantageous to 
existing and future tenants as the terms required by the original 
Section 202 loan agreement and any project-based rental assistance 
payment contract related to the project. Such a prepayment may involve 
refinancing if the refinancing results in a lower interest rate on the 
principal of the project and in reductions in the debt service, as 
authorized under section 811(b)(2) of the AHEO, as amended by the 
Section 202 Act of 2010.
    In addition, the prepayment may involve refinancing of certain 
``early 202'' projects. These ``early 202'' projects are properties 
financed with a Section 202 Direct Loan carrying an interest rate of 6 
percent or lower. Because of the low interest rate on the Direct Loan, 
the refinancing may not result in a reduction in debt service. If there 
is an increase in debt service, the prepayment and refinance of such a 
202 project may be approved if the refinance meets certain 
requirements, as authorized under section 811(b)(2) and (3) of the 
AHEO, as amended by the Section 202 Act of 2010. These requirements are 
that the project owner must address the physical needs of the project, 
the transaction may not result in an increase in rent for unassisted 
families, and the transaction must address the capital needs of the 
project and ensure physical viability for the term of the new 
financing. In addition, the increase in debt service must not increase 
the overall costs of providing any rental assistance for the project 
under section 8 of the 1937 Act, unless approved by HUD. HUD may only 
approve an increase in rental assistance under this scenario if 
contracts are marked-up-to-market pursuant to section 524(a)(3) of the 
Multifamily Assisted Housing Reform and Affordability Act (MAHRA) (42 
U.S.C. 1437f note) for properties owned by nonprofit organizations; or 
marked-up-to-budget pursuant to section 524(a)(4) of MAHRA (42 U.S.C. 
1437f note), for properties owned by eligible owners (as such term is 
defined in section 202(k) of the Housing Act of 1959 (12 U.S.C. 
1701q(k)).
    If the refinancing of an ``early 202'' project would result in a 
rent increase for unassisted residents, HUD may issue SPRAC assistance 
to these households under the Section 202 Act of 2010. As provided 
under the discussion of new subpart H, to be eligible for SPRAC 
assistance, unassisted residents must meet the Section 8 income 
guidelines for a low-income family, which in some cases may be lower 
than income limitations imposed by the Section 202 Direct Loan project 
where the families reside. At the time of closing of the Section 202 
direct loan, SPRAC assistance will be provided for units occupied by 
unassisted, income-eligible families. Because HUD may provide SPRAC 
assistance for ``early 202'' refinances where the rent charged to 
unassisted residents would otherwise be increased, and because 
appropriations for SPRACs may not be available, HUD may set priorities 
for the consideration of prepayment approvals that require the 
provision of a SPRAC.
    Section 811(c) of the AHEO was also amended by the Section 202 Act 
of 2010 to authorize, subject to HUD approval, the use of loan proceeds 
resulting from the refinancing of the project to ensure such proceeds 
are used in a manner advantageous to the tenants of the Section 202 
project. Under this new statutory authority, loan proceeds in excess of 
those required to pay off the Section 202 Direct Loan must be expended 
within 5 years of the closing of the refinance, except for approved 
ongoing social services. Proceeds may be used for up to 15 percent of 
the cost of increasing the availability or provision of supportive 
services, which may include the financing of service coordinators and 
congregate services.

[[Page 60600]]

The use of loan proceeds may include modernization, accessibility 
modifications or retrofits for the project, construction of an addition 
or another facility in the project, rent reduction of unassisted 
tenants residing in the project, or the rehabilitation of the project 
to ensure long-term viability. Loan proceeds may also be used to pay 
the project owner, sponsor, or third- party developer a developer's fee 
in an amount not to exceed or duplicate, in the case of a project 
refinanced through a low-income housing tax credit (LIHTC) program, the 
fee permitted by the LIHTC program; or in the case of a project 
refinanced through any other source of refinancing, 15 percent of the 
acceptable development cost, which includes the cost of acquisition, 
rehabilitation, loan prepayment, initial reserve deposits, and 
transaction costs.
    In addition, HUD may approve the use of proceeds from the 
refinancing of the Section 202 direct loan in a manner advantageous to 
the tenants of the project or for the provision of affordable housing 
and related social services for elderly persons who are tenants of 
other HUD-assisted senior housing. Such housing must be owned by the 
same private nonprofit organization that is the project owner, the 
project sponsor, or the private developer of the Section 202 project 
being refinanced. The other HUD-assisted senior housing must be 
designated as senior housing serving only those residents 62 years of 
age and older, and must have an active program in place to provide 
social services for elderly residents. At the time of application for 
the Section 202 Direct Loan prepayment, the level of affordability of 
the project(s) receiving proceeds from the refinance must be at least 
as affordable as the Section 202 Direct Loan project being refinanced. 
All project(s) to receive proceeds from the refinance must have or put 
in place a Use or Regulatory Agreement requiring operation of the 
project as affordable senior housing for a period at least 10 years 
beyond the date of closing of the Section 202 refinance, or the date of 
termination of the existing Use or Regulatory Agreement, whichever is 
later. The other HUD-assisted senior housing may include Section 202 
Direct Loan and Section 202 Capital Advance properties, or may include 
affordable senior projects that receive HUD assistance or financing 
such as project-based rental assistance, Federal Housing Administration 
(FHA) mortgage insurance, Project-Based Vouchers, HOME Investment 
Partnerships (HOME), or Community Development Block Grant (CDBG) 
assistance. HUD must approve the use of proceeds in other HUD-assisted 
senior housing, and such use will only be approved if the proposed 
refinancing will address all physical and financial needs of the 
Section 202 Direct Loan project.
Term of Project Assistance Contracts (Sec.  891.710--Removed)
    All of the initial PACs terms (of 20 years) have expired, and 
current PACs are renewed yearly. Therefore, HUD is removing Sec.  
891.710.
For-Profit Limited Partnerships and Mixed-Finance Development for 
Supportive Housing for the Elderly or Persons With Disabilities 
(Subpart F)
Project Rental Assistance (Sec.  891.810--Revised)
    This section would be amended to clarify that ``project rental 
assistance contract'' and ``project rental assistance payment'' are 
defined in Sec.  891.105, rather than in this section, which is 
entitled ``project rental assistance.'' In addition, this section would 
be amended to clarify that ``project rental assistance payment'' is 
provided for operating costs, not covered by tenant contributions, 
attributable to the number of units funded by capital advances under 
the Section 202 program and the Section 811 program, subject to the 
provisions of Sec.  891.445.
Drawdown (Sec.  891.830--Revised)
    Section 891.830(c)(5), in the currently codified regulations, 
requires each drawdown to be consistent with the ratio of Section 202 
or Section 811 supportive housing units to other units. This 
unnecessarily requires a proration that lacks flexibility for mixed-
finance projects. Paragraph (b) of Sec.  891.830 sufficiently protects 
HUD's interests by requiring approval of a drawdown schedule while 
allowing the needed flexibility to permit low-income housing tax 
credits to be used effectively while reducing the amount of waivers 
that must be granted.
Eligible Uses of Project Rental Assistance (Sec.  891.835--Revised)
    Section 891.835(b)(1) would be amended to clarify that Section 202 
or Section 811 project rental assistance may not be used to pay for 
debt service on construction or permanent financing for any units in 
development, except for units under an ePRAC under Sec.  891.190.
Development Cost Limits (Sec.  891.853--Revised)
    Section 891.853 would be amended to reflect the new development 
cost limit sections for mixed-finance developments under the Section 
202 and Section 811 programs.
Project Rental Assistance for Projects Without Capital Advances 
(Subpart G--New)
    HUD proposes to establish a new regulatory subpart G, entitled 
``Project Rental Assistance for Projects without Capital Advances,'' to 
reflect that the new project rental assistance would only apply to 
certain properties, and not the entire Section 811 program. This new 
subpart G is proposed to be structured as follows:
Applicability (Sec.  891.870)
    Section 891.870, entitled ``Applicability,'' states that this new 
subpart applies only to the new project rental assistance that is made 
available to projects without capital advances under the Section 811 
program.
Definitions (Sec.  891.872)
    In addition to the definitions provided in Sec. Sec.  891.105 and 
891.305, Sec.  891.872 defines certain terms applicable to the new 
project rental assistance.
    Admission. ``Admission'' is defined as the point in time the 
applicant and owner execute the lease agreement, and where occupancy is 
imminent. Project rental assistance under this subpart may only be 
provided for dwelling units that are set aside for extremely low-income 
persons with disabilities and extremely low-income households that 
include at least one person with a disability. The person with 
disabilities must be at least 18 years of age or older and less than 62 
years of age at the time of admission, as defined in this section.
    Eligible Applicant. ``Eligible applicant'' is defined as any state 
housing agency currently allocating LIHTC, or any state housing or 
state community development agency allocating and overseeing assistance 
under the HOME program, section 8 of the 1937 Act, or other similar 
Federal or state program, and which has a formal partnership with the 
state health and human services agency and the state agency designated 
to administer or supervise the administration of the state plan for 
medical assistance under title XIX of the Social Security Act 
(Medicaid). Such agency must be in good standing, as determined by HUD, 
in its administration of assistance. An eligible applicant may also be 
a state, regional, or local housing agency or agencies; or a 
partnership or collaboration of state housing agencies and/or state and 
local/regional housing agencies.

[[Page 60601]]

    Extremely Low-Income Family. The definition of ``extremely low-
income family'' is the same definition as defined in 24 CFR 5.603. 
Therefore, an extremely low-income family is a family whose annual 
income does not exceed 30 percent of the median income for the area, as 
determined by HUD, with adjustments for smaller and larger families. 
However, HUD may establish income ceilings higher or lower than 30 
percent of the median income for the area if HUD finds that such 
variations are necessary because of unusually high or low family 
incomes.
    Housing Agency. ``Housing Agency'' is defined as a state, regional, 
or local housing agency.
    Interagency Partnership Agreement. ``Interagency Partnership 
Agreement'' is defined as the formalized agreement entered into between 
the eligible applicant and the state health and human services agency, 
and the applicable state Medicaid agency, if different entities. 
Project rental assistance under this subpart may only be provided for 
eligible projects that conform to this agreement.
    Nonelderly Adult. ``Nonelderly adult'' is defined as a person who 
is 18 years of age or older and less than 62 years of age, in 
accordance with the definition of ``persons with disabilities'' under 
the Melville Act.
    Participating Agencies. ``Participating agencies'' is defined as 
the eligible applicant awarded project rental assistance funds, the 
state agency responsible for health and human services programs, and 
the state agency designated to administer or supervise the 
administration of the state plan for medical assistance under the 
Medicaid program.
    Project rental assistance. ``Project rental assistance'' is defined 
as funding that is made available by HUD to eligible applicants. This 
funding shall be used to provide long-term rental assistance for 
supportive housing for nonelderly, extremely low-income persons with 
disabilities and for extremely low-income households that include at 
least one nonelderly person with a disability.
    Rental Assistance Contract (RAC). ``Rental assistance contract 
(RAC)'' is defined as the contract between the approved housing agency 
and the multifamily property owner, authorized under section 811(b)(3) 
of the National Affordable Housing Act (NAHA) (42 U.S.C. 8013). Section 
811(b)(3) authorizes the separate project rental assistance only for 
projects without capital advances.
Allocation of Funds (Sec.  891.874)
    This new section reflects that HUD may allocate funds made 
available in any fiscal year for project rental assistance under this 
new subpart G by competition or in accordance with the formula 
allocation provided under HUD's regulations in 24 CFR part 791 
(Allocations for Housing Assistance Funds). In determining the method 
of allocation, HUD will take into account the amount of funds 
available, the number and types of eligible applicants, the period of 
funding availability, and administrative efficiency. This flexibility 
will allow HUD to fund project rental assistance under this new subpart 
G as necessary each fiscal year.
Eligible Projects (Sec.  891.876)
    Section 891.876 provides that funding of project rental assistance 
under this subpart may be provided to a new or existing multifamily 
housing project subject to several requirements. First, such project's 
development costs must be paid with resources from other public and/or 
private sources. These other sources may be LIHTC, equity, private debt 
(such as a private mortgage or financing on the property), or HOME 
funds. Second, an eligible project must not otherwise be receiving 
Section 811 program funds. Lastly, a commitment of funding for project 
costs must be made by the LIHTC allocation agency, participating 
jurisdiction receiving assistance under the HOME program, or any 
Federal, state or local government.
    For existing multifamily housing projects, these projects may only 
receive project rental assistance under this subpart if the assisted 
units have no existing contractual obligation to serve persons with 
disabilities, such as a recorded use agreement. In addition, existing 
units currently receiving any form of operating housing subsidy under 
section 8 of the 1937 Act cannot receive project rental assistance 
under this proposed rule. HUD is implementing these requirements in 
order to increase, rather than maintain, the number of supportive 
housing units for persons with disabilities.
Eligible Tenants (Sec.  891.878)
    Section 891.878 addresses eligible persons that may reside in units 
receiving project rental assistance as provided under the new subpart 
G. This section provides that project rental assistance may be provided 
only for dwelling units that are set aside for extremely low-income 
persons with disabilities and extremely low-income households that 
include at least one person with a disability. This requirement is 
statutory and ensures that the project rental assistance serves those 
persons with disabilities who are most in need of supportive housing.
    In addition to being extremely low-income, the person with 
disabilities must be at least 18 years of age or older and less than 62 
years of age at the time of admission, as defined under Sec.  891.872. 
The Interagency Partnership Agreement must include the target 
population to be served that will benefit from the assisted units under 
this subpart and the available services.
    The person with disabilities must also be eligible for community-
based, long-term services and supports as provided through Medicaid 
waivers, Medicaid state plan options, state-funded services, or other 
appropriate services (provided by state, local, nonprofit, or other 
entities) related to the target populations identified under the 
Interagency Partnership Agreement. However, participation in services 
is voluntary and cannot be required as a condition of tenancy.
Terms and Conditions of Project Rental Assistance Financing (Sec.  
891.880)
    As discussed earlier in this preamble, the project rental 
assistance made available by the Melville Act provides state housing 
agencies and other eligible applicants with a method of funding 
supportive housing for nonelderly, extremely low-income persons with 
disabilities that does not require capital advances from HUD under the 
Section 811 program. Accordingly, Sec.  891.880 establishes the terms 
and conditions for the use of this new project RAC. Approved housing 
agencies receiving project rental assistance under this subpart must 
comply with the requirements of this section, and all the terms and 
conditions of the rental assistance contract.
    Under Sec.  891.880(b), the housing agency administering the 
project rental assistance funds must enter into a RAC with the owner of 
the project. The RAC will provide the housing assistance payments to 
the owner for eligible tenants, as determined under Sec.  891.878, 
residing in units that have been set aside by the owner as supportive 
housing for persons with disabilities, as defined in the NOFA. Section 
891.880(c) provides that the initial term of the RAC between the 
approved housing agency administering the project rental assistance 
program and the owner of the multifamily housing project must be for a 
minimum of 20 years. In addition, Sec.  891.880(c) states that RACs may 
be renewed as long as all parties approve such renewal, subject to

[[Page 60602]]

the availability of project rental assistance funds.
    Section 891.880(d) addresses the statutory use restrictions 
required for this project rental assistance. The Melville Act requires 
all dwelling units assisted with the new project rental assistance to 
operate as supportive housing for extremely low-income persons with 
disabilities and extremely low-income households that include at least 
one person with a disability for a period of not less than 30 years. 
Section 891.880(d) reflects this statutory requirement, and any unit 
must be subject to a recorded 30-year minimum use agreement for 
nonelderly, extremely low-income persons with disabilities. In 
addition, Sec.  891.880(d) provides that if a RAC is renewed in 
accordance with new subpart G, the corresponding use agreement must be 
extended for the duration of the renewal.
    Section 891.880(e) provides the accessibility requirements for 
projects under this section. Projects must meet the accessibility 
requirements of section 504 of the Rehabilitation Act of 1973 and 
titles II and III of the Americans with Disabilities Act, as 
applicable. Covered multifamily dwellings must also meet the design and 
construction requirements of the Fair Housing Act.
    Section 891.880(f), consistent with the statutory requirement, 
provides that in any multifamily housing project receiving the project 
rental assistance, no more than 25 percent of the total number of 
dwelling units in the project may be set aside for supportive housing 
for persons with disabilities, or have any occupancy preference for 
persons with disabilities associated with such unit. These units must 
be distributed throughout the project, must not be segregated to one 
area of a building or the project (such as on a particular floor, part 
of a floor in a building, or certain sections within a project), and 
can consist of both accessible and non-accessible units. Owners may 
designate unit types (e.g., accessible, 1-bedroom, etc.) rather than 
designating specific units (e.g., units 101, 201, etc.) to be set aside 
for supportive housing for persons with disabilities. This type of 
designation would allow flexibility in offering the next available unit 
to a person with a disability under this program as long as the unit 
type was designated as being set aside for persons with disabilities 
and the number of units occupied by persons with disabilities under the 
set-aside had not been met.
Responsibilities of Participating Agencies (Sec.  891.882)
    Section 891.882 addresses the responsibilities of the participating 
agencies. New project rental assistance may only be provided for 
eligible projects that conform with the Interagency Partnership 
Agreement. To be eligible for the rental assistance funding, HUD must 
have reviewed and approved this Interagency Partnership Agreement to 
confirm that such agreement: (1) Identifies the target populations to 
be served by the project, (2) sets forth methods for outreach and 
referral, and (3) describes the services to be made available/offered 
to the tenants of the project.
    The Interagency Partnership Agreement must include the target 
populations to be served that will benefit from the assisted units 
under this subpart and the available services. In addition to being 
extremely low-income, the person with disabilities as defined in Sec.  
891.305, must have a disability appropriate to the services to be 
provided in the community under such agreement. In the Interagency 
Partnership Agreement, states must identify the available state-funded 
services and other appropriate services (provided by state, local, 
nonprofit, or other entities), and describe how such services will be 
made available to the tenants.
    To comply with this statutory requirement for state agency 
involvement, this section requires participating agencies to develop a 
formalized collaboration, herein referred to as Interagency Partnership 
Agreement that will result in long-term strategies to increase 
affordable permanent supportive housing units, new and/or existing 
units, with structured access to appropriate services. This Interagency 
Partnership Agreement must include the eligible applicant, and the 
state health and human services agency, and the applicable state 
Medicaid agency, if different entities. This formalized agreement must 
be evidenced by a memorandum of understanding (MOU), joint letter, or 
other binding document. In states where health and human service 
functions have been separated, both agencies' participation should be 
evidenced.
    Section 891.882 further provides that participating agencies must 
provide a plan detailing the process by which the availability of units 
for project rental assistance and waiting lists will be managed. This 
plan must include the costs and authority and/or sources for paying for 
those costs for establishing the infrastructure and the process to 
implement this plan if no such process currently exists, as well as a 
consideration of training. This process is essential in order to 
provide expeditious and efficient service to nonelderly, extremely low-
income persons with disabilities and extremely low-income households 
that include at least one nonelderly person with a disability.
    Section 891.882 also requires participating agencies to describe 
how the process of referring eligible persons with disabilities to the 
assisted multifamily housing projects will be carried out, describe how 
households will be tracked, and to provide a list of people who 
property owners can contact if there are any problems. These details 
will also provide for an efficient process that will serve the greatest 
number of needy, nonelderly, extremely low-income persons with 
disabilities. In addition, this section provides that the plan and 
process must be incorporated into the Interagency Partnership Agreement 
between participating agencies.
    Section 891.882 further provides that a percentage, as defined by 
HUD in the NOFA, of the total project rental assistance award may be 
used for initial and administrative costs relating to the 
administration of the project rental assistance program under this new 
subpart G. This section provides that such costs may include costs of 
hiring ongoing staff, contract assistance, infrastructure costs, and 
information technology. No charges relating to the administration of 
the program may be charged to the tenants.
    Section 891.882 also provides fair housing and equal opportunity 
requirements. Participating agencies must ensure that all applicable 
fair housing and equal opportunity requirements are met. First, 
participating agencies must adopt affirmative marketing procedures for 
their project rental assistance program funded under this subpart. 
Affirmative marketing procedures consist of actions to provide 
information and otherwise attract eligible persons to the program 
regardless of race, color, national origin, religion, sex, disability, 
or familial status, who are not likely to apply to the program without 
special outreach. Participating agencies must annually assess the 
success of their affirmative marketing activities and make any 
necessary changes to their affirmative marketing procedures as a result 
of the evaluation. Participating agencies must keep records describing 
actions taken to affirmatively market the program and records to assess 
the results of these actions. Eligible applicants must

[[Page 60603]]

describe their methods of outreach and referral and waiting list 
policies in their applications, as prescribed in the NOFA. All methods 
of outreach and referral and management of the waiting list must be 
consistent with fair housing and civil rights laws and regulations and 
affirmative marketing requirements.
    Second, participating agencies must adopt a process for providing 
full disclosure to each applicant of any option available to the 
applicant in the selection of the development in which to reside, 
including basic information about available sites and an estimate of 
the period of time the applicant would likely have to wait to be 
admitted to units of different sizes and types at each site. Third, 
participating agencies must require projects receiving project rental 
assistance under this subpart to maintain records on the race, 
ethnicity, sex, and place of previous residency for applicants and 
approved eligible households. The owner must submit such reports to the 
housing agency to demonstrate compliance with applicable civil rights 
and equal opportunity requirements.
    Section 891.882 also provides specific environmental requirements 
for the administration of this program under the new subpart G. As HUD 
does not approve funding for specific activities or projects of the 
selected housing agencies under this program, HUD will not perform 
environmental reviews on such activities or projects. However, to 
ensure that the tenets of HUD environmental policy and the requirements 
of applicable statutes and authorities are met, housing agencies 
selected for funding will be required to implement the special 
environmental analyses and determinations for specific program 
activities and projects that are detailed in this section. The approved 
housing agency's signature on the RAC would constitute an assurance 
that all environmental requirements under this section will be met. In 
addition, to the extent that property standards or restrictions on the 
use of properties stated in this section are more stringent than 
provisions of the authorities cited, the requirements in this section 
shall control.
    Section 891.882 also provides for compliance with the lead-based 
paint requirements. Approved housing agencies must abide by 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 part 35, subparts A, B, H, 
J, and R of this title.
Senior Preservation Rental Assistance (Subpart H--New)
    As noted earlier in this preamble, this proposed rule would 
introduce the authority for senior preservation rental assistance, as 
authorized under title II of the Section 202 Act of 2010. HUD has 
decided to place the regulations applicable to such assistance in a new 
subpart H entitled ``Senior Preservation Rental Assistance'' because 
this type of assistance is only available for certain Section 202 
projects, and does not apply to the entire Section 202 program. In 
addition, in certain sections, HUD has retained current regulatory 
requirements for SPRAC for consistency and administrative ease.
    New subpart H is proposed to be structured as follows:
Applicability (Sec.  891.900)
    The requirements set forth in this subpart H apply only in 
connection with a prepayment plan for a project approved by HUD to 
prevent displacement of elderly residents of a Section 202 project in 
the case of refinancing or recapitalization, and the project is 
provided project-based rental assistance under a senior preservation 
rental assistance contract, as defined under Sec.  891.902.
Definitions (Sec.  891.902)
    In addition to the definitions provided in Sec. Sec.  891.105, 
891.205, and 891.505, Sec.  891.902 defines certain terms applicable to 
senior preservation rental assistance.
    Family(ies) means an Elderly Family as defined by 24 CFR 891.505, 
and may include a ``Disabled Family,'' as defined in 24 CFR 891.505, 
pursuant to the terms and conditions of an applicant's original Section 
202 Loan. As noted earlier in this preamble, HUD is replacing 
``handicap'' terminology with ``disability'' terminology, in the 
subpart E regulations.
    Low-Income Family and Very Low-Income Family. The definitions of 
``low-income family'' and ``very low-income family'' are the same 
definitions as defined in 24 CFR 5.603. Therefore, a low-income family 
is a family whose annual income does not exceed 80 percent of the 
median income for the area and a very low-income family is a family 
whose annual income does not exceed 50 percent of the median income for 
the area, as determined by HUD, with adjustments for smaller and larger 
families, except that HUD may establish income ceilings higher or lower 
than 80 or 50 percent of the median income for the area on the basis of 
HUD's findings that such variations are necessary because of unusually 
high or low family incomes.
    Senior Preservation Rental Assistance Contract (SPRAC). SPRACs are 
project-based rental assistance made available to a private nonprofit 
organization owner for a term of at least 20 years, subject to annual 
appropriations with the ability to renew the contract upon expiration 
of the initial 20-year term, and governed by the regulations of this 
subpart. Such contract is subject to a use agreement having a term of 
the SPRAC or such term as is required by the prepayment of the Section 
202 Direct Loan, whichever is longer. The Section 202 Direct Loan use 
agreement requires compliance with the SPRAC requirements, which 
includes the renewal of SPRAC for the life of the use agreement.
Contract Execution (Sec.  891.904)
    A SPRAC sets forth the rights and duties of the owner and HUD with 
respect to the project and the senior preservation rental assistance 
payments. Upon the closing of the refinancing for the project, and 
following the approval of the prepayment of the Section 202 direct 
loan, the owner and HUD must execute a SPRAC on a form prescribed by 
HUD. The effective date of such SPRAC will be the date of the closing 
of the refinancing.
    Under the SPRAC, payments may be made to assist eligible families 
leasing assisted units under part 891. The amount of such payment is 
equal to the difference between the contract rent for the unit and the 
tenant rent payable by the family. Payments under the SPRAC may also be 
made to owners for vacant assisted units. The amount of and conditions 
for vacancy payments are described in Sec.  891.912(k). Vacancy 
payments only apply to units that were initially occupied at the time 
the SPRAC was executed, in the case that those units are later 
unoccupied during the term of the contract. In addition, SPRAC payments 
are made monthly by HUD upon proper requisition by the owner. If a 
SPRAC Unit remains vacant for more than 60 consecutive days upon tenant 
turnover, the owner shall not be eligible to receive further SPRAC 
payments for that SPRAC Unit. The unit must have been in decent, safe, 
and sanitary condition during the vacancy period for which payment is 
claimed.
    Under a SPRAC, as applicable, a utility reimbursement will be paid 
to a family occupying an assisted unit as an additional housing 
assistance payment. The SPRAC will provide that the owner must make 
this payment on behalf of HUD, and funds will be paid to the owner in 
trust solely for the purpose of

[[Page 60604]]

making the additional payment. The owner may pay the utility 
reimbursement jointly to the family and the utility company, or if the 
family and utility company consent, directly to the utility company.
Contract Term (Sec.  891.906)
    This section provides that the minimum term of the SPRAC for 
assisted units under this subpart shall be 20 years.
    Pursuant to title II of the Section 202 Act of 2010, any projects 
for which a SPRAC is provided shall be subject to a use agreement to 
ensure continued project affordability having a term of the longer of 
(A) the term of the SPRAC, or (B) such term as is required by the new 
financing.
Leasing to Eligible Families (Sec.  891.910)
    Under the regulations for the SPRAC, as proposed by this rule, 
eligible families that may occupy assisted units under this part must 
meet the income guidelines for a low-income family under section 8 of 
the 1937 Act. During the term of the SPRAC, an owner shall make 
available for occupancy by eligible families, the total number of units 
for which assistance is committed under the SPRAC. This means that the 
owner is conducting marketing in accordance with Sec.  891.912(c); has 
leased or is making good-faith efforts to lease the units to eligible 
families, including taking all feasible actions to fill vacancies by 
renting to such families; and has not rejected any eligible applicant 
family, except for reasons acceptable to HUD.
    If the owner is temporarily unable to lease all units for which 
assistance is committed under the SPRAC to eligible families, one or 
more units may, with the prior approval of HUD, be leased to otherwise 
eligible families that do not meet the income eligibility requirements. 
Those over-income families must pay 30 percent of their income towards 
rent, up to the contract rent level. Failure on the part of the owner 
to comply with the requirements under this section is a violation of 
the SPRAC and grounds for all available legal remedies, including an 
action for specific performance of the SPRAC, suspension or debarment 
from HUD programs, and reduction of the number of units under the 
SPRAC.
    HUD may reduce the number of units covered by the SPRAC to the 
number of units available for occupancy by eligible families if the 
owner fails to comply with the applicable requirements. Notwithstanding 
any prior approval by HUD, HUD may reduce the number of units if HUD 
determines that the inability to lease units to eligible families is 
not a temporary issue. An amendment to the SPRAC will be authorized by 
HUD to provide for the subsequent restoration of the reduction of units 
if HUD determines that the restoration is justified by demand; the 
owner has a record of compliance with the owner's obligations under the 
SPRAC; and contract and budget authority is available.
    HUD may permit SPRAC units in the project to be leased to 
nonelderly families if the owner has made reasonable efforts to lease 
assisted and unassisted units to eligible families, the owner has been 
granted HUD approval, and the owner is temporarily unable to achieve or 
maintain a level of occupancy sufficient to prevent financial default 
and foreclosure. HUD approval for this situation would be of limited 
duration. If there is an FHA-insured mortgage on the project, HUD may 
also impose terms and conditions applicable to FHA-insured mortgages 
for this approval that are consistent with the program objectives, and 
necessary to protect its interest under the FHA-insured loan.
    HUD's regulations in subpart L of 24 CFR part 5, which applies to 
the admission and occupancy of eligible families in cases where there 
is or there is claimed to be incidents of, or there is criminal 
activity related to, domestic violence, dating violence, or stalking, 
would also apply to the SPRAC.
Applicability of Other Part 891 Regulations (Sec.  891.912)
    This section contains all of the requirements for subpart H that 
are from other sections of part 891. HUD has put these requirements 
under this section for consistency and ease of administration.
SPRAC Administration (Sec.  891.912(a))
    Section 891.912(a) provides that HUD is responsible for the 
administration of the SPRAC.
Notice Upon SPRAC Expiration (Sec.  891.912(b))
    Section 891.912(b) provides that the owner of any projects assisted 
by a SPRAC must follow the notice requirements under Sec.  891.590 for 
contract expirations. Under Sec.  891.590, the SPRAC must provide that 
the owner will notify each family leasing an assisted unit of any 
increase in the amount the family must pay as rent as a result of the 
expiration. The owner must notify the assisted family at least 1 year 
before the end of the SPRAC. Such notice must be sent by a first-class 
letter, be properly stamped, and be addressed to the family at its 
address at the project, with a proper return address. A copy of the 
notice must be served on any adult person answering the door at the 
leased dwelling unit, or if no adult responds, by placing the notice 
under or through the door, if possible, or else by affixing the notice 
to the door. Service will be considered effective when the notice is 
mailed and served properly. The date on which the notice will be 
considered to be received by the family will be the date on which the 
owner mails the first-class letter, or the date on which the notice is 
properly served, whichever is later.
    Under Sec.  891.590, the notice must advise each affected family 
that, after the expiration date of the SPRAC, the family will be 
required to bear the entire cost of the rent and that the owner may, 
subject to requirements and restrictions contained in the regulatory 
agreement, the lease, and state or local law, change the rent. The 
notice must also state the actual (if known) or the estimated rent that 
will be charged following the expiration of the SPRAC, the difference 
between the new rent and the total tenant payment toward rent under the 
SPRAC, and the date the SPRAC will expire.
    In addition, the owner must give HUD a certification that families 
have been notified properly and in accordance with Sec.  891.590, and 
must attach to the certification an example of the text of the notice. 
Section 891.590 applies to all SPRACs.
Responsibilities of the Owner (Sec.  891.912(c))
    Section 891.912(c), the owner is responsible for all requirements 
under Sec.  891.600, except for Sec.  891.600(a)(1) and (a)(3). 
Therefore, for owners, marketing must be done in accordance with the 
HUD-approved affirmative fair housing marketing plan and all Federal, 
state, or local fair housing and equal opportunity requirements. See 24 
CFR 5.105(a). The purpose of the plan and requirements is to achieve a 
condition in which eligible families of similar income levels in the 
same housing market have a like range of housing choices available to 
them regardless of discriminatory considerations, such as their race, 
color, religion, familial status, disability, sex or national origin. 
Marketing must also be done in accordance with the communication and 
notice requirements of HUD's Section 504 regulations at 24 CFR 8.6 and 
24 CFR 8.54.
    Under Sec.  891.600, the owner is responsible for all management 
functions. These functions include selection and admission of tenants, 
required reexaminations of incomes for

[[Page 60605]]

families occupying assisted units, collection of rents, termination of 
tenancy and eviction, and all repair and maintenance functions 
(including ordinary and extraordinary maintenance and replacement of 
capital items). All functions must be performed in compliance with fair 
housing and equal opportunity requirements.
    With HUD approval, the owner may contract with a private or public 
entity for performance of the services or duties required under Sec.  
891.600. However, such an arrangement does not relieve the owner of 
responsibility for these services and duties. All such contracts are 
subject to the restrictions governing prohibited contractual 
relationships described in Sec. Sec.  891.130 and 891.505, if 
applicable. (These prohibitions do not extend to management contracts 
entered into by the owner with the sponsor or its nonprofit affiliate).
    The owner must promote awareness and participation of minority and 
women's business enterprises in contracting and procurement activities 
consistent with the objectives of Executive Order No. 11625 (36 FR 
19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order 
No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139; unless otherwise 
noted); Executive Order No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 
198; unless otherwise noted); and Executive Order No. 12138 (44 FR 
29637, 3 CFR, 1979 Comp., p. 393; unless otherwise noted.
    The owner must submit to HUD within 60 days after the end of each 
fiscal year of project operations, financial statements for the project 
audited by an independent public accountant and in the form required by 
HUD; and other statements regarding project operation, financial 
conditions and occupancy as HUD may require to administer the SPRAC and 
to monitor project operations.
    The owner must also maintain a separate project fund account in a 
depository or depositories that are members of the Federal Deposit 
Insurance Corporation or National Credit Union Share Insurance Fund, 
and must deposit all rents, charges, income, and revenues arising from 
project operation or ownership to this account. All project funds are 
to be deposited in Federally-insured accounts. All balances must be 
fully insured at all times, to the maximum extent possible. Project 
funds must be used for the operation of the project (including required 
insurance coverage), to make required principal and interest payments 
on the project mortgage, and to make required deposits to the 
replacement reserve under Sec. Sec.  891.605 and 891.745 (as 
applicable), in accordance with a HUD-approved budget. Any project 
funds in the project funds account (including earned interest) 
following the expiration of the fiscal year must be deposited in a 
federally insured residual receipts account within 60 days following 
the end of the fiscal year. Withdrawals from this account may be made 
only for project purposes and with the approval of HUD. If there are 
funds remaining in the residual receipts account when the mortgage is 
satisfied, such funds must be returned to HUD.
    Lastly, the owner must submit such reports as HUD may prescribe to 
demonstrate compliance with applicable civil rights and equal 
opportunity requirements.
Replacement Reserve (Sec.  891.912(d))
    Section 891.912(d) provides the owner must comply with all 
requirements under Sec.  891.605. Therefore, the owner must establish 
and maintain a replacement reserve to aid in funding extraordinary 
maintenance, and repair and replacement of capital items. The owner 
must make monthly deposits to the replacement reserve in an amount 
determined by HUD. The reserve must be built up to and maintained at a 
level determined by HUD to be sufficient to meet projected 
requirements, and if the reserve reaches that level, the amount of the 
deposit to the reserve may be reduced with the approval of HUD.
    Replacement reserve funds must be deposited with HUD or in a 
federally insured depository in an interest-bearing account(s) whose 
balances are fully insured at all times. All earnings including 
interest on the reserve must be added to the reserve. Funds may be 
drawn from the reserve and used only in accordance with HUD guidelines 
and with the approval of, or as directed by, HUD.
Selection and Admission of Tenants (Sec.  891.912(e))
    Section 891.912(e) provides that the owner must comply with the 
requirements under Sec.  891.610, except for Sec.  891.610(c). However, 
an applicant must meet the low-income eligibility guidelines for a low-
income family under section 8 of the 1937 Act in order to be eligible 
under this subpart.
    The owner must adopt written tenant selection procedures that 
ensure nondiscrimination in the selection of tenants, that are 
consistent with the purpose of improving housing opportunities for low-
income elderly families or persons with disabilities; and reasonably 
related to program eligibility and an applicant's ability to perform 
the obligations of the lease.
    Owners must promptly notify in writing any rejected applicant of 
the grounds for the rejection. Owners must maintain a written, 
chronological waiting list showing the name, race, gender, ethnicity, 
and the date of application for each person applying for the program. 
For applications, the owner must accept applications for admission to 
the project in the form prescribed by HUD. In addition, applicant 
families must sign a release of information consent for verification of 
information, and complete a certification of eligibility as part of the 
application for admission. Applicant families must meet the disclosure 
and verification requirements for Social Security numbers, and sign and 
submit consent forms for the obtaining of wage and claim information 
from State Wage Information Collection Agencies, as provided in HUD's 
regulations in 24 CFR part 5, subpart B, which address the disclosure 
and verification of Social Security numbers and employer identification 
numbers and the procedures for obtaining income information. The owner 
and the applicant must complete and sign the application for admission. 
On request, the owner must furnish copies of all applications for 
admission to HUD.
    If the owner determines that the family is eligible and units are 
available, the owner will assign the family a unit of appropriate size 
in accordance with HUD's general occupancy guidelines. If no suitable 
unit is available, the owner will place the family on a waiting list 
for the project and notify the family of when a suitable unit may 
become available. If the waiting list is so long that the applicant 
would not be admitted within the next 12 months, the owner may advise 
the applicant that no additional applications for admission are being 
considered for that reason, except that the owner may not refuse to 
place an applicant on the waiting list if the applicant is otherwise 
eligible for assistance.
    If the owner determines that an applicant is ineligible for 
admission, or the owner is not selecting the applicant for other 
reasons, the owner must promptly notify the applicant in writing of the 
determination, the reasons for the determination, and that the 
applicant has a right to request a meeting with the owner or managing 
agent to review the rejection, in accordance with HUD requirements. If 
a review is requested, the review may not be conducted by a member of 
the owner's staff who made the initial decision to reject the 
applicant. The applicant may also

[[Page 60606]]

exercise other rights (e.g., rights granted under Federal, state, or 
local civil rights laws), if the applicant believes he or she is being 
discriminated against on a prohibited basis.
    In addition, records on applicants and approved eligible families, 
which provide racial, ethnic, sex, disability status, and place of 
previous residency data required by HUD, must be retained for 3 years.
    Also, the owner must reexamine the income and composition of the 
family at least every 12 months. Upon the verification of the 
information, the owner must make appropriate adjustments in the total 
tenant payment in accordance with 24 CFR 5.628 and determine whether 
the family's unit size is still appropriate. The owner must adjust 
tenant rent and the housing assistance payment, and must carry out any 
unit transfer in accordance with the administrative instructions issued 
by HUD. At the time of the reexamination, the owner must require the 
family to meet the disclosure and verification requirements for Social 
Security numbers, as provided under 24 CFR part 5, subpart B.
    In addition, the family must comply with the provisions in their 
lease regarding interim reporting of changes in income. If the owner 
receives information concerning a change in the family's income or 
other circumstances between regularly scheduled reexaminations, the 
owner must consult with the family and make any adjustments determined 
to be appropriate. Any change in the family's income or other 
circumstances that results in an adjustment in the total tenant 
payment, tenant rent, and housing assistance payment must be verified. 
A family must remain eligible for senior preservation rental assistance 
payments until the total tenant payment equals or exceeds the gross 
rent. The termination of subsidy eligibility will not affect the 
family's other rights under its lease.
    SPRAC payments may be resumed if, as a result of changes in income, 
rent, or other relevant circumstances during the term of the SPRAC, the 
family meets the income eligibility requirements and housing assistance 
is available for the unit under the terms of the contract.
    A family's eligibility for senior preservation rental assistance 
payments may be terminated in accordance with HUD requirements, for 
such reasons as failure to submit requested verification information, 
including information related to disclosure and verification of Social 
Security numbers, or failure to sign and submit consent forms for the 
obtaining of wage and claim information from State Wage Information 
Collection Agencies, as provided by 24 CFR part 5, subpart B.
Obligations of the Family (Sec.  891.912(f))
    The obligations of the family are applicable to both the Section 
202 and Section 811 programs, as provided under Sec.  891.415. Under 
Sec.  891.415, the assisted household or family must pay amounts due 
under the lease directly to the owner. The assisted household or family 
must supply such certification, release of information, consent, 
completed forms or documentation as the owner or HUD determines 
necessary. In addition, the assisted household or family must allow the 
owner to inspect the dwelling unit or residential space at reasonable 
times and after reasonable notice. The assisted household family must 
notify the owner before vacating the dwelling unit or residential 
space, and use the dwelling unit or residential space solely for 
residency by the household or family and as the principal place of 
residence.
    The assisted household or family must not assign the lease or 
transfer the unit or residential space; or occupy, or receive 
assistance for the occupancy of, a unit or residential space governed 
under this part while occupying, or receiving assistance for the 
occupancy of, another unit assisted under any Federal housing 
assistance program, including any Section 8 programs.
Overcrowded and Under Occupied Units (Sec.  891.912(g))
    Under this proposed rule, the owner must comply with the 
requirements under Sec.  891.620. Therefore, if the owner determines 
that because of a change in family size, an assisted unit is smaller or 
larger than appropriate for the eligible family to which it is leased; 
SPRAC payments with respect to the unit will not be reduced or 
terminated until the eligible family has been relocated to an 
appropriate alternate unit. If possible, the owner will, as promptly as 
possible, offer the family an appropriate alternate unit. The owner may 
receive vacancy payments for the vacated unit if the owner complies 
with the requirements of Sec.  891.650, except Sec.  891.650(b) does 
not apply.
Lease Requirements (Sec.  891.912(h))
    The lease requirements are provided in Sec.  891.425. Section 
891.425 applies to capital advances under the Section 202 program and 
the Section 811 program, as well as loans financed under subpart E of 
part 891. Under Sec.  891.425, the term of the lease may not be less 
than one year. Unless the lease has been terminated by appropriate 
action, upon expiration of the lease term, the household and owner may 
execute a new lease for a term not less than 1 year, or may take no 
action. If no action is taken, the lease will automatically be renewed 
for successive terms of 1 month.
    In addition, all leases may contain a provision that permits the 
household to terminate the lease upon 30-day advance notice. A lease 
for a term that exceeds 1 year must contain such provision.
    Section 891.425 requires the owner to use the lease form as 
prescribed by HUD. In addition to required provisions of the lease 
form, the owner may include a provision in the lease permitting the 
owner to enter the leased premises at any time without advance notice 
when there is reasonable cause to believe that an emergency exists or 
that health or safety of a family member is endangered.
Adjustment of Rents (Sec.  891.912(i))
    The initial project rents shall not exceed the lesser of either 
comparable market rents for the market area as specified under the 
recipient's rent comparability study (RCS), and approved by HUD.
    After initial rent setting, rents shall be adjusted by an OCAF on 
the anniversary of each executed SPRAC. Section 514(e)(2) of MAHRA (42 
U.S.C. 1437f note) requires HUD to establish guidelines for rent 
adjustments based on an OCAF. HUD has therefore developed a single 
factor to be applied uniformly to all projects utilizing OCAFs as the 
method by which renewal rents are established or adjusted. Under this 
subpart, the contract administrator shall conduct annual project rent 
adjustments according to the OCAF methodology prescribed under this 
notice.
    At the expiration of each 5-year period of the SPRAC, the contract 
administrator shall compare existing contract rents with comparable 
market rents for the market area. At such contract anniversary, the 
contract administrator will make any adjustment necessary in the 
monthly contract rents necessary to set the contract rents for all unit 
sizes at comparable market rents. Such adjustments may result in a 
negative adjustment (decrease) or positive adjustment (increase) of the 
contract rents for one or more unit sizes.
    To assist in the redetermination of contract rents, the contract 
administrator may require that the owner submit to the contract 
administrator a rent comparability study prepared at the owner's 
expense.
    The rent payable by families occupying units that are not assisted

[[Page 60607]]

under the SPRAC will be equal to the contract rent.
Adjustment of Utility Allowances (Sec.  891.912(j))
    In connection with adjustments of contract rents, as provided in 
Sec.  891.905(b), the requirements for the adjustment of utility 
allowances, provided in Sec.  891.440, apply.
Conditions for Receipt of Vacancy Payments for Assisted Units (Sec.  
891.912(k))
    Section 891.912(k) provides that the owner must comply with the 
requirements under Sec.  891.650, except Sec.  891.650(b) does not 
apply. Therefore, vacancy payments under the SPRAC will not be made 
unless the conditions for receipt of these senior preservation rental 
assistance payments set forth in this section are fulfilled.
    If an eligible family vacates a unit, the owner is entitled to 
vacancy payments in the amount of 80 percent of the contract rent for 
the first 60 days of vacancy if the owner certifies that it did not 
cause the vacancy by violating the lease, the SPRAC, or any applicable 
law; and the owner notified HUD of the vacancy or prospective vacancy 
and the reasons for the vacancy immediately upon learning of the 
vacancy or prospective vacancy. The owner must have fulfilled and 
continued to fulfill the requirements specified in Sec.  891.600(a)(2) 
and (3), and in this section; and for any vacancy resulting from the 
owner's eviction of an eligible family, certify that it has complied 
with Sec.  891.630.
    If a SPRAC unit remains vacant for more than 60 consecutive days 
upon tenant turnover, the owner shall not be eligible to receive 
further SPRAC payments for that SPRAC unit.
    The unit must have been in decent, safe, and sanitary condition 
during the vacancy period for which payment is claimed. The owner must 
have fulfilled and continues to fulfill the requirements specified in 
this section, as appropriate. The owner must demonstrate to the 
satisfaction of HUD that, for the period of vacancy, the project is not 
providing the owner with revenues at least equal to project expenses 
(exclusive of depreciation) and the amount of payments requested is not 
more than the portion of the deficiency attributable to the vacant 
unit; and that the project can achieve financial soundness within a 
reasonable time.
    If the owner collects payments for vacancies from other sources 
(tenant rent, security deposits, payments under Sec.  891.435(c), or 
governmental payments under other programs), the owner is not entitled 
to collect vacancy payments to the extent these collections from other 
sources plus the vacancy payment exceed contract rent.
Default by Owner (Sec.  891.914)
    If HUD determines that the owner is in default under the SPRAC, 
this section provides that HUD will notify the owner in writing of the 
actions required to cure the default and of the remedies that must be 
satisfied, including specific performance under the SPRAC, and a 
reduction or suspension of senior preservation rental assistance 
payments and recovery of overpayments or inappropriate payments, where 
appropriate.
    If HUD determines that the owner is in default of any of the terms 
and requirements of the SPRAC, HUD will notify the owner in writing of 
the nature of the default, the actions required to cure the default, 
and the time within which the default must be cured. The notice will 
also identify the remedies that HUD may impose if the default is not 
cured within the applicable time. These may include termination of the 
SPRAC, reduction or suspension of payments under the SPRAC, and 
recovery of overpayments or inappropriate payments, where appropriate.
SPRAC Extension or Renewal (Sec.  891.916)
    A Section 202 owner shall agree in writing that upon expiration of 
each annual increment of a given SPRAC, the owner shall accept each 
offer of annual increment renewal during the period of the use 
agreement. Each such offer of a renewal and the renewals themselves are 
subject to the availability of appropriations and further subject to 
the requirements of this part. The number of assisted units under the 
renewed SPRAC must equal the number of assisted units under the 
original SPRAC, subject to the availability of appropriations, except 
that HUD and the owner may agree to reduce the number of assisted units 
by the number of assisted units that are not occupied by eligible 
families at the time of the renewal.
    With respect to Section 202 Direct Loan prepayments with approved 
SPRAC units, each owner shall agree to enter into a Section 202 Direct 
Loan use agreement, which will expire at either 20 years beyond the 
maturity date of the original Section 202 Direct Loan, or the term of 
new financing, whichever is longer. Upon expiration of the term of the 
SPRAC and at HUD's sole discretion, the term of the SPRAC may be 
renewed or extended (subject to available funds) pursuant to the terms 
and conditions of the SPRAC and the use agreement.
    Each owner shall agree in writing to operate the assisted Section 
202 project for the full term specified under the executed SPRAC and 
for each renewal term in accordance with all statutory, regulatory, and 
administrative requirements of the SPRAC program.
    The number of assisted units under the extended or renewed SPRAC 
must equal the number of assisted units under the original SPRAC, 
subject to the availability of appropriations, except that HUD and the 
owner may agree to reduce the number of assisted units by the number of 
assisted units that are not occupied by eligible families at the time 
of the extension or renewal.
Denial of Admission, Termination of Tenancy, and Modification of the 
Lease (Sec.  891.918)
    The regulations of 24 CFR part 5, subpart I, apply to projects 
previously financed with Section 202 direct loans under this subpart. 
The provisions of 24 CFR part 247 apply to all decisions by an owner to 
terminate the tenancy or modify the lease of a family residing in a 
unit.
    In actions or potential actions to terminate tenancy, the owner 
must follow 24 CFR part 5, subpart L, in all cases where domestic 
violence, dating violence, stalking, or criminal activity directly 
related to domestic violence, dating violence, or stalking is involved 
or claimed to be involved.
Security Deposits (Sec.  891.920)
    The general requirements for security deposits on assisted units 
are provided under Sec.  891.435, with additional requirements under 
Sec.  891.635 applying to properties with direct loans. The owner must 
maintain a record of the amount in the segregated interest-bearing 
account that is attributable to each family in residence in the 
project. Annually for all families, and when computing the amount 
available for disbursement under Sec.  891.435(b)(3), the owner must 
allocate to the family's balance the interest accrued on the balance 
during the year.
    Unless prohibited by state or local law, the owner may deduct for 
the family, from the accrued interest for the year, the administrative 
cost of computing the allocation to the family's balance. The amount of 
the administrative cost adjustment must not exceed the accrued interest 
allocated to the family's balance for the year.

[[Page 60608]]

Labor Standards (Sec.  891.922)
    Section 891.922 consists of the labor standards applicable to 
assisted units under this subpart. All laborers and mechanics employed 
by contractors and subcontractors in the construction, rehabilitation, 
or repair performed in connection with the provision of assistance 
under this subpart to nine or more units of housing in a project, where 
the total cost of such repair, replacement, or capital improvement is 
in excess of $500,000, shall be paid wages at rates not less than those 
prevailing in the locality, as determined by the Secretary of Labor in 
accordance with the Davis-Bacon Act (40 U.S.C. 3141 et seq.). These 
standards are consistent with other labor standards under this part, 
adjusted for this program.
    In addition, contracts involving employment of laborers and 
mechanics shall be subject to the provisions of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 3701 et seq.). Sponsors, owners, 
contractors, and subcontractors must comply with related rules, 
regulations, and requirements as directed by HUD.

B. Service Coordinator in Multifamily Housing and Assisted Living 
Conversion Programs (Part 892--New)

General Program Requirements (Subpart A)
Applicability and Scope (Sec.  892.100)
    The requirements set forth in this subpart A apply to the Service 
Coordinator in Multifamily Housing program, as authorized under 
sections 671, 672, 674, 676, and 677 of the Housing and Community 
Development Act of 1992 (Pub. L. 102-550, approved October 28, 1992), 
as amended by section 851 of the AHEO (Pub. L. 106-569, approved 
January 24, 2000); and to the Assisted Living Conversion program, as 
authorized under section 202b of the Housing Act of 1959 (12 U.S.C. 
1701q-2).
Definitions (Sec.  892.105)
    This section defines certain terms applicable to part 892. Certain 
terms with definitions unique to the Service Coordinator in Multifamily 
Housing and Assisted Living Conversion programs are defined in 
Sec. Sec.  892.205 and 892.305, as applicable.
    Activities of daily living (ADLs). Under this part, the definition 
of ``activities of daily living'' will have the same meaning as Sec.  
891.205. HUD has determined that the definition under Sec.  891.205, 
which is applicable to the Section 202 program, is also applicable to 
the Service Coordinator in Multifamily Housing and Assisted Living 
Conversion programs. These programs serve the same populations.
    Elderly person. Under this part, an ``elderly person'' means a 
person who is at least 62 years of age. This definition is consistent 
with the definition of an ``elderly person'' under section 202 of the 
Housing Act of 1959.
    Eligible housing project. In order to receive assistance under this 
part, a project must be an ``eligible housing project,'' which can fall 
under one of seven categories as defined under section 202b(b) of the 
Housing Act of 1959 (12 U.S.C. 1701q-2). An eligible housing project 
can be housing that:
--Receives project-based assistance under section 8 of the 1937 Act (42 
U.S.C. 1437f);
--Is assisted under section 202 of the Housing Act of 1959 (12 U.S.C. 
1701q);
--Is assisted under section 202 of the Housing Act of 1959, as such 
section existed before the enactment of the NAHA;
--Is financed by a loan or mortgage insured under section 221(d)(3) of 
the National Housing Act (12 U.S.C. 1715) that bears interest at a rate 
determined under section 221(d)(5) of such Act;
--Is assisted under section 515 of the Housing Act of 1949 (42 U.S.C. 
1485), which authorizes assistance for rural housing projects and such 
projects are also receiving rental assistance under the 1937 Act;
--Is insured, assisted, or held by the Secretary, a state, or a state 
agency under section 236 of the National Housing Act (12 U.S.C. 1715z-
1);
--Is constructed or substantially rehabilitated pursuant to assistance 
provided under section 8(b)(2) of the 1937Act (42 U.S.C. 1437f), as in 
effect before October 1, 1983, and that is assisted under a contract 
for assistance under such section.
    Each of these categories may provide for assisted living facilities 
or service-enriched housing, as authorized under this part.
    Frail elderly person. A ``frail elderly person'' is an elderly 
person who is unable to perform at least three of the activities of 
daily living. This definition is similar to Sec.  891.205. HUD has 
determined that the definition under Sec.  891.205, which is applicable 
to the Section 202 program, is also applicable to the Service 
Coordinator in Multifamily Housing and Assisted Living Conversion 
programs. These programs serve the same populations.
    Functional limitations. The definition of ``functional 
limitations'' will be the same as Sec.  891.205.
    Housing assistance. The definition of ``housing assistance'' will 
apply only to federally assisted housing as provided under this part. 
``Housing assistance'' is defined to mean the grant, contribution, 
capital advance, loan, mortgage insurance, or other assistance provided 
for an eligible housing project, as defined under this section. This 
term also includes any assistance provided for the housing by HUD, 
including any rental assistance for low-income occupants.
    Instrumental activities of daily living (IADLs). Under this part, 
the definition of instrumental activities of daily living has the same 
meaning as in Sec.  891.205
    Low-income and very low-income family. Under this part, the 
definitions for ``low-income family'' and ``very low-income family'' 
will have the same meanings as provided under section 3(b)(2) of the 
1937 Act.
    Owner. The definition of ``owner'' will have the same meaning as 
provided under Sec.  891.205. HUD has determined that the definition 
under Sec.  891.205, which is applicable to the Section 202 program, is 
also applicable to the Service Coordinator in Multifamily Housing and 
Assisted Living Conversion programs. These programs serve the same 
populations.
    Person with disabilities. Under this part, a ``person with 
disabilities'' will have the same meaning as provided under Sec.  
891.305. HUD has determined that the definition under Sec.  891.305, 
which is applicable to the Section 811 program, is also applicable to 
the Service Coordinator in Multifamily Housing and Assisted Living 
Conversion programs. These programs serve the same populations.
    Private nonprofit organization. The definition of ``private 
nonprofit organization'' will have the same meaning as provided under 
Sec.  891.205. HUD has determined that the definition under Sec.  
891.205, which is applicable to the Section 202 program, is also 
applicable to the Service Coordinator in Multifamily Housing and 
Assisted Living Conversion programs. These programs serve the same 
populations.
    Retain. The definition of ``retain'' means service coordination 
performed by a partnering agency that results in a reduction to the 
project's cost to hire or contract a service coordinator.
    Service coordinator. The definition of ``service coordinator'' 
means a social service person hired, contracted, or retained by the 
assisted housing owner or its management company, who assists residents 
in identifying, locating, and acquiring supportive services necessary 
for elderly persons and

[[Page 60609]]

nonelderly persons with disabilities to live independently and age in 
place.
    Supportive services. Under this part, ``supportive services'' mean 
health-related services, mental health services, services for 
nonmedical counseling, meals, transportation, personal care, bathing, 
toileting, housekeeping, chore assistance, safety, group and 
socialization activities, assistance with medications (in accordance 
with any applicable state laws), case management, personal emergency 
response, and other appropriate services that are designed to prevent 
hospitalization or institutionalization and permit elderly residents to 
age in place and live independently in a residential setting. The 
services may be provided through any agency of the Federal, state, or 
local government or other public or private department, agency, or 
organization.
    Service expenses. Under this part, the definition of ``service 
expenses'' means those costs of providing supportive services necessary 
to permit residents to live independently, age in place, and prevent 
hospitalization or institutionalization.
    Vicinity of the housing project. The definition of ``vicinity of 
the housing project'' means the area close enough to the eligible 
housing project to allow for easy access by individuals to the service 
coordinator's office space, and by service coordinators to individuals' 
residences.
Eligible Funding Recipients (Sec.  892.110)
    This section provides that recipients who receive assistance under 
the Service Coordinator in Multifamily Housing and Assisted Living 
programs must own an eligible housing project, as defined in Sec.  
892.105, and comply with any regulatory agreement, housing assistance 
payment (HAP) contract, or any other HUD grant or contract, where 
applicable. In addition, recipients must be current in mortgage 
payments for any FHA-insured loan or Section 202 direct loan, unless 
the entity has signed a work-out agreement for the delinquent loan, and 
is current on and in compliance with the workout agreement, as 
applicable. Recipient must also meet the Physical Condition Standards 
in 24 CFR part 5, subpart G, as evidenced by a satisfactory score in 
the most recent final physical inspection report or by an approved 
work-out plan for housing projects that received a failing score.
Nondiscrimination and Equal Opportunity Requirements (Sec.  892.115)
    This section provides the nondiscrimination and equal opportunity 
requirements for recipients who receive assistance under the Service 
Coordinator in Multifamily Housing and Assisted Living programs. 
Recipients must comply with all applicable nondiscrimination and equal 
opportunity requirements, including HUD's generally applicable 
nondiscrimination and equal opportunity requirements at 24 CFR 
5.105(a). This includes, but is not limited to, the Fair Housing Act 
and its implementing regulations at 24 CFR part 100; title VI of the 
Civil Rights Act of 1964 and its implementing regulations at 24 CFR 
part 1; section 504 of the Rehabilitation Act of 1973 and its 
implementing regulations at 24 CFR part 8; and titles II and III of the 
Americans with Disabilities Act and their implementing regulations at 
28 CFR parts 35 and 36.
    In addition, recipients must affirmatively further fair housing in 
their use of funds for the programs under this part. Specific 
activities will be detailed in the individual program NOFAs.
    Lastly, recipients must ensure that programs or activities are 
administered in the most integrated setting appropriate to the needs of 
qualified individuals with disabilities. The ``most integrated 
setting'' is defined as a setting that enables individuals with 
disabilities to interact with nondisabled persons to the fullest extent 
possible.\3\
---------------------------------------------------------------------------

    \3\ This direction is consistent with HUD's guidance on the U.S. 
Supreme Court landmark decision in Olmstead v. L.C., 527 U.S. 581 
(1999), affirming that unjustified segregation of individuals with 
disabilities is a form of discrimination prohibited by title II of 
the Americans with Disabilities Act (ADA). See http://portal.hud.gov/hudportal/documents/huddoc?id=OlmsteadGuidnc060413.pdf. This guidance is consistent with 
efforts across Federal agencies and in many states to provide health 
care and related support and services for individuals with 
disabilities in the most integrated setting appropriate to their 
needs.
---------------------------------------------------------------------------

Environmental Requirements (Sec.  892.120)
    This section provides the environmental requirements that apply to 
the Service Coordinator in Multifamily Housing and Assisted Living 
programs. The National Environmental Policy Act of 1969, and HUD's 
implementing regulations at 24 CFR part 50, including the related 
authorities described in 24 CFR 50.4, apply to this part. In addition, 
if funding under subpart B will be used to cover the cost of any 
activities that are not exempt from environmental review requirements, 
such as acquisition, leasing, construction, or building rehabilitation, 
HUD must perform an environmental review to the extent required by 24 
CFR part 50. Such environmental review must be performed before the 
grant award.
Service Coordinator in Multifamily Housing Program (Subpart B)
Purpose and Applicability (Sec.  892.200)
    As explained in this section, the Service Coordinator in 
Multifamily Housing program allows owners of eligible projects to 
assist elderly persons and nonelderly persons with disabilities living 
in HUD-assisted housing and in the vicinity of the housing project to 
obtain needed supportive services from the community that enable 
independent living and aging in place. HUD makes funds available to 
employ and support a service coordinator by awarding grants and by 
approving owners' requests to use certain classes of project funds. 
Thus, the requirements set forth in this subpart B apply only to the 
Service Coordinator in Multifamily Housing program, as authorized under 
sections 671, 672, 674, 676, and 677 of the Housing and Community 
Development Act of 1992.
Definitions (Sec.  892.205)
    This section defines certain terms applicable to the Service 
Coordinator in Multifamily Housing program (subpart B). The definitions 
under Sec.  892.105 also apply.
    At-risk elderly person. The definition of ``at-risk elderly 
person'' means an elderly person who is unable to perform one or two of 
the ADLs, as defined under Sec.  892.105. Defining this category of 
elderly will help to determine the various levels of ADL needed, as 
well as ensure that the services provided by service coordinators are 
not limited to only those residents defined as ``frail elderly.'' The 
definition will also serve as a means for owners to identify those 
residents who may have higher ADL needs in the future. Estimating 
future supportive service needs supports HUD's efforts to ensure 
elderly residents age in place.
    Available funds. Under this subpart, ``available funds'' means 
funds for supportive services, as approved by HUD, and must not be used 
to address critical property needs.
    Eligible project. Under this subpart, an ``eligible project'' is 
defined to include an eligible housing project as defined in Sec.  
892.105. ``Eligible project'' also includes a project that has no 
``project funds,'' as defined under Sec.  892.105, available to pay for 
a service coordinator, and that is designed or designated for the 
elderly or persons with disabilities and continues to

[[Page 60610]]

operate as such. This latter project includes any building within a 
mixed-use development that was designed for occupancy by elderly 
persons or persons with disabilities at its inception and continues to 
operate as such, or consistent with title VI, subtitle D, of the 
Housing and Community Development Act of 1992 (Pub. L. 102-550). If a 
project was not designed at its inception for occupancy by elderly 
persons or persons with disabilities, an eligible project includes a 
property in which the owner gives preferences in tenant selection (with 
HUD approval) to eligible elderly persons or nonelderly persons with 
disabilities for all units in that property.
Sources of Funding (Sec.  892.210)
    This section provides that owners of eligible housing projects may 
request the use of or apply for different types of funding to cover 
Service Coordinator in Multifamily Housing program expenses. Service 
coordinator expenses will be considered an eligible project expense, in 
accordance with Sec.  891.250(b). Amounts available for such costs 
include funding provided through section 8 of the 1937 Act (42 U.S.C. 
1437f), and PRACs, pursuant to section 802 of NAHA (42 U.S.C. 8011); 
income generated from these programs or from tenant rental payments 
that exceed operating expenses and that may be used only upon approval 
from HUD; and multifamily service coordinator grants, subject to and 
consistent with the availability of appropriations.
Application and Selection (Sec.  892.215)
    HUD will provide through a NOFA the form and manner of applications 
for grants under this subpart and for selection of applicants to 
receive such grants.
Duties (Sec.  892.220)
    This section outlines the duties of service coordinators, as 
required under section 671 of the Housing and Community Development Act 
of 1992 (42 U.S.C. 13631). Service coordinators must perform an 
initial-needs screening, and subsequent annual reviews, to identify 
service needs. If a comprehensive assessment is required, the service 
coordinator must refer the tenant to a qualified professional. For 
residents identified through such screening, service coordinators must 
refer and link residents to an agency in the community that provides 
supportive service; monitor the ongoing provision of services from 
community agencies; and manage the provision of supportive services 
where appropriate. Service coordinators may provide case management 
when such service is not available through the general community.
    Service coordinators must also educate residents on matters such as 
service availability, application procedures, and client rights, and 
provide advocacy as appropriate; maintain detailed case files on each 
resident served; help the residents build informal support networks 
with other residents, family and friends; establish linkages with 
agencies such as, but not limited to, local Area Agencies on Aging 
(AAA)/Aging and Disability Resource Centers (ADRC), and home and 
community-based service providers, to enhance service provision; and 
create a directory of providers for use by both housing staff and 
residents. Service coordinators must affirmatively market the service 
coordinator's services to residents of the property and surrounding 
community who are least likely to inquire, and find counselors to help 
tenants with counseling for mobility and fair housing choice. Service 
coordinators may work and consult with tenant organizations and 
resident management corporations; provide training to residents of the 
project in the obligations of tenancy or coordinate such training; and 
may carry out other appropriate activities for residents of the 
eligible housing project or for low-income elderly and persons with 
disabilities living in the vicinity of the eligible housing project.
    However, there are also activities that service coordinators must 
not perform. Service coordinators must not act as a recreational or 
activities director, or provide supportive services directly.
Qualifications (Sec.  892.225)
    This section provides the qualification requirements that 
individuals must meet to participate in the Service Coordinator in 
Multifamily Housing program as service coordinators. As set forth in 
this section, service coordinators must possess a bachelor's degree and 
have experience in social service delivery for the elderly and persons 
with disabilities. In addition, service coordinators must demonstrate a 
working knowledge of supportive services and other resources available 
for the elderly and persons with disabilities in the area served by the 
eligible housing project, and the ability to advocate, organize, 
problem-solve, and provide results for the elderly and persons with 
disabilities. However, this section provides for HUD to substitute a 
bachelor's degree based on the extent of qualifications, as set forth 
in paragraphs (b) through (d) of this section, and/or other 
qualifications that the service coordinator may present. The extent of 
qualifications will be determined by HUD through a NOFA.
Form of Employment or Retention (Sec.  892.230)
    This section states that an owner may directly employ a service 
coordinator or may procure by contract the services of a service 
coordinator. Owners may also utilize a service coordinator whose 
expenses are supported by external sources of funding.
Training (Sec.  892.235)
    As required under section 672 of the Housing and Community 
Development Act of 1992 (42 U.S.C. 8011(d)(4)), this section provides 
that service coordinators must receive and document training, at 
minimum, in the following subject areas: The aging process; elderly and 
disability services; eligibility for and procedures of Federal and 
applicable state entitlement programs; legal liability issues relating 
to providing service coordination; drug and alcohol use and abuse by 
the elderly; and mental health issues.
Administrative Requirements (Sec.  892.240)
    This section describes the administrative requirements for the 
Service Coordinator in the Multifamily Housing program. Owners must 
provide on-site private office space for the service coordinator to 
allow for confidential meetings with residents. Such office space must 
be accessible to persons with disabilities and meet all Federal 
accessibility standards, including section 504 of the Rehabilitation 
Act of 1973, 24 CFR part 8, and titles II and III of the Americans with 
Disabilities Act of 1990, as applicable. In addition, resident files 
must be kept in a secured location and only be accessible to the 
service coordinator as required under Sec.  892.245, unless the 
residents provide signed consent otherwise. Resident files must include 
documentation that demonstrates the resident's supportive service 
needs, referrals for needed supportive services (both short- and long-
term) and follow-up from the service coordinator on the types and 
amounts of services residents receive, and any aging-in-place 
statistics or information. As directed, performance reports completed 
by the service coordinator and financial reports detailing program 
expenses must be submitted by the owner to HUD.
Confidentiality (Sec.  892.245)
    Under the Service Coordinator in Multifamily Housing program, 
service

[[Page 60611]]

coordinators must store, in a secure manner, all files containing 
information related to the provision of supportive services for 
residents. Files must be accessible only to the service coordinator. A 
service coordinator may not disclose to any person any individually 
identifiable information that relates to the provision of supportive 
services to a resident, unless the resident has knowingly consented. 
Any such consent must be in writing and be signed by the resident, and 
must clearly identify the parties to whom the information may be 
disclosed, as well as the scope and purpose of the disclosure. If there 
is no applicable consent to disclosure, service coordinators may 
disclose individually identifiable information that relates to the 
provision of supportive services to a resident, to the extent necessary 
to protect the safety or security of a resident, housing project staff, 
or the housing project. However, confidentiality policies must be 
consistent with maintaining confidentiality of information related to 
any individual as required by the Privacy Act of 1974 (5 U.S.C. 552a).
Program Costs (Sec.  892.250)
    This section provides the eligible and ineligible program costs for 
the Service Coordinator in Multifamily Housing program. Funds may be 
used to cover the costs of employing or otherwise retaining the 
services of one or more service coordinators. Eligible program expenses 
include salary and fringe benefits; training; creating private office 
space; purchase of office furniture and equipment, supplies and 
materials, computer hardware, software, and Internet service; and other 
related administrative expenses approved by HUD.
    Eligible costs must be reasonable, necessary, and recognized as 
expenditures in compliance with the uniform government-wide cost 
principles and other grant requirements found in HUD's regulations at 
24 CFR part 84 (for private nonprofit organizations) and part 85 (for 
governments). Grant recipients must additionally be subject to 
allowable cost provisions in NOFAs and grant agreements. Owners of 
eligible housing projects who use a class or classes of project funds 
under this program must comply with the requirements that are 
applicable to approved withdrawals or uses of the class or classes of 
project funds under their governing agreements with HUD.
    Ineligible program expenses are any costs that are not directly 
related to employing the service coordinator. Examples of ineligible 
program expenses are expenses associated with holiday parties, purchase 
of televisions or exercise equipment, and recreational activities for 
residents.
Services for Low-Income Elderly or Persons With Disabilities (Sec.  
892.255)
    This section provides that a service coordinator funded under Sec.  
892.210 may provide services to low-income elderly individuals or 
nonelderly persons with disabilities living in the vicinity of an 
eligible housing project. Community residents choosing to seek 
assistance from a service coordinator must come to the eligible housing 
project to meet with and receive assistance from the service 
coordinator. Service coordinators must make reasonable accommodations 
for those persons with disabilities unable to travel to the housing 
project, and have the option to make accommodations for other community 
residents.
Sanctions (Sec.  892.260)
    This section provides the sanctions for noncompliance with the 
requirements of the Service Coordinator in Multifamily Housing program. 
If HUD determines that an owner has not complied with the requirements 
of this subpart, then HUD may impose any or a combination of sanctions 
as listed in this section. HUD may temporarily withhold reimbursements, 
approvals, extensions, or renewals until the owner adequately remedies 
the deficiency. HUD may disallow all or part of the cost attributable 
to activities undertaken not in compliance with applicable 
requirements, and if applicable, require the owner to remit to HUD, or 
to redeposit in the source, account funds in the amount that has been 
disallowed. HUD may suspend or terminate, in part or in whole, the 
grant or approval to use project funds. HUD may place conditions on the 
awards of grants or approvals of one or more classes of project funds 
so that the deficiency be remedied and that adequate steps be taken to 
prevent future deficiencies. Lastly, HUD may impose other sanctions 
authorized by law or regulation.
Assisted Living Conversion Program (Subpart C)
Purpose and Applicability (Sec.  892.300)
    This section describes the purpose of the Assisted Living 
Conversion program. This program provides grants for the physical 
conversion of eligible multifamily assisted housing developments to 
assisted living facilities or service-enriched housing for the elderly. 
Grants provided under this program must be used for the purposes 
described in section 202b of the Housing Act of 1959 (12 U.S.C. 1701q-
2). In addition, the requirements set forth in this subpart C apply 
only to eligible projects under the Assisted Living Conversion program, 
as authorized under section 202b(b)(1) of the Housing Act of 1959 (12 
U.S.C. 1701q-2).
Definitions (Sec.  892.305)
    This section defines certain terms applicable to the Assisted 
Living Conversion program (subpart C). The definitions under Sec.  
892.105 also apply.
    Assisted living facility (ALF). Under this subpart, an ``assisted 
living facility'' will have the same meaning as provided under section 
232(b) of the National Housing Act (12 U.S.C. 1715w(b)). Under this 
statute, an ``assisted living facility'' means a public facility, 
proprietary facility, or facility of a private nonprofit corporation. 
Each of these facilities must be licensed and regulated by the state 
(or if there is no state law providing for such licensing and 
regulation by the state, by the municipality or other political 
subdivision in which the facility is located). Such facility must make 
available to residents supportive services to assist the residents in 
carrying out activities of daily living (as defined under Sec.  
891.205). Lastly, such facility must provide separate dwelling units 
for residents, each of which contain a full bathroom and may contain a 
full kitchen, and include common rooms and other facilities appropriate 
for the provision of supportive services to the residents of the 
facility.
    Congregate space. ``Congregate space,'' otherwise known as 
community space, shall have the same meaning as provided under section 
202(h)(1) of the Housing Act of 1959 (12 U.S.C. 1701q(h)(1)). This term 
excludes halls, mechanical rooms, laundry rooms, parking areas, 
dwelling units, and lobbies. Community space does not include 
commercial areas.
    Conversion. The definition of ``conversion'' means activities in an 
eligible project designed to convert dwelling units into assisted 
living facilities. Conversion can include unit configuration and 
related common and service space, and any necessary remodeling, 
consistent with the Uniform Federal Accessibility Standards, section 
504 of the Rehabilitation Act of 1973, and HUD's implementing 
regulations at 24 CFR part 8, as well as any applicable provisions of 
the Americans with Disabilities Act of 1990 and applicable Fair Housing 
Act design and construction requirements

[[Page 60612]]

for all portions of the development physically affected by such 
conversion. Where conversion may involve Medicaid reimbursement, 
conversion should be undertaken in accordance with the Home and 
Community-Based Services regulations of the U.S. Department of Health 
and Human Services (see 42 U.S.C. part 441.)
    Eligible project. An ``eligible project'' under this subpart means 
eligible housing projects as defined under Sec.  892.105; eligible 
projects as described in section 638(2) of the Housing and Community 
Development Act; and section 202 properties, as defined under Sec.  
891.105, with a PRAC.
    Emergency capital repairs. ``Emergency capital repairs'' are 
repairs to a project that correct a situation that presents an 
immediate threat to the life, health, and safety of the project 
tenants, and if left untreated, would result in an evacuation of the 
tenants or long-term tenant displacement.
    Repairs. Under the Assisted Living Conversion, ``repairs'' mean 
substantial and emergency capital repairs to a project that are needed 
to rehabilitate, modernize, or retrofit aging structures, common areas, 
or individual dwelling units.
    Service-enriched activities. This section defines ``service-
enriched activities'' as activities designed to convert dwelling units 
in the eligible project to service-enriched housing for elderly 
persons, as applicable under the Assisted Living Conversion program.
    Service-enriched housing. This section defines ``service-enriched 
housing'' as housing that makes available, through licensed or 
certified third party service providers, supportive services to assist 
the residents in carrying out activities of daily living. Under this 
definition, ``activities of daily living'' means the definition under 
Sec.  891.205. ``Service-enriched housing'' is housing that has a 
service coordinator, which may be funded as an operating expense of the 
property; provides separate dwelling units for residents, each of which 
contain a full bathroom and may contain a full kitchen; includes common 
rooms and other facilities appropriate for the provision of supportive 
services to the residents of the housing; and provides residents with 
control over health care and supportive services decisions, including 
the right to accept, decline, or choose such services and to have the 
choice of a provider.
Other Federal Requirements (Sec.  892.310)
    This section is similar to section 891.155 (Other Federal 
requirements) that is being revised by this proposed rule; however, the 
contents of this section are tailored to the program in this subpart. 
In addition to the requirements set forth in 24 CFR part 5, the 
requirements in this section apply to the Assisted Living Conversion 
program under this subpart.
    In particular, this section incorporates requirements applicable 
for the rehabilitation, other construction, and related activities to 
be undertaken for the conversions to be conducted under this subpart. 
The introductory paragraph of this section is more focused than its 
counterpart in Sec.  891.155, because the scope of this subpart is 
narrower. Similarly, Sec.  891.155(e)(3), on acquisition, is not 
incorporated into this subpart based on the presumption that 
acquisitions will not be assisted under this program. Acquisitions may 
be assisted under one or more other HUD programs, and their regulations 
would apply to the acquisition.
    In addition, all laborers and mechanics (other than volunteers 
under the conditions set out in 24 CFR part 70) employed by contractors 
and subcontractors in the construction (including rehabilitation) of 
housing with 12 or more units assisted under this program must be paid 
wages at rates not less than those prevailing in the locality, as 
determined by the Secretary of Labor in accordance with the Davis-Bacon 
Act (40 U.S.C. 276a-276a-5). A group home for persons with disabilities 
is not covered by the labor standards under this paragraph. Contracts 
involving employment of laborers and mechanics under this subpart shall 
be subject to the provisions of the Contract Work Hours and Safety 
Standards Act (40 U.S.C. 327-333). Sponsors, owners, contractors, and 
subcontractors must comply with all rules, regulations, and 
requirements related to the Davis-Bacon Act (40 U.S.C. 276a-276a-5).
    The Lead Safe Housing regulations (LSHR) (24 CFR 35, subparts B-R) 
is incorporated in the proposed Sec.  892.310(h) because children under 
age 6 are not prohibited from residing in pre-1978 supportive housing 
for the elderly under this new subpart. When children under age 6 
reside in or are expected to reside in supportive housing for the 
elderly under this subpart, such housing must abide by the requirements 
under the LSHR. When children under age 6 do not reside in nor are 
expected to reside in supportive housing for the elderly under this 
subpart, such housing is not required to abide by the requirements 
under the LSHR. HUD will determine, on a case-by-case basis, whether 
supportive housing for the elderly under this subpart must abide by the 
requirements under the LSHR.
Additional Project Eligibility (Sec.  892.315)
    This section provides that, in addition to the criteria for 
eligible housing projects as defined under Sec.  892.105, projects 
receiving Assisted Living Conversion Program (ALCP) funds must also 
meet certain criteria as provided under section 202b(b) of the Housing 
Act of 1959 (12 U.S.C. 1701q-2(b)). The project must be owned by a 
private nonprofit organization, as defined under section 202 of the 
Housing Act of 1959 (12 U.S.C. 1701q). The project must be designated 
primarily for occupancy by elderly persons, and the project may be 
unused or underutilized commercial property, except that HUD may not 
provide grants under this section for more than three such properties.
Notice of Funding Availability (Sec.  892.320)
    This section provides that HUD will issue a separate notice of 
funding availability (NOFA) for the Assisted Living Conversion program. 
The NOFA will contain specific information on how and when to apply for 
the grant authority, the contents of the application, and the selection 
process.
    As authorized under section 202b(c) of the Housing Act of 1959 (12 
U.S.C. 1701q-2(c)), HUD has broad discretion to set the requirements 
for applications for assistance under this subpart. This section 
provides that an application for assistance under this subpart must 
contain certain requirements, in addition to the requirements outlined 
in the NOFA. The application must contain a description of the 
substantial capital repairs or the proposed conversion activities for 
either an assisted living facility or service-enriched housing for 
which a grant under this subpart is requested. The application must 
contain the amount of the grant requested to complete the substantial 
capital repairs or conversion activities, and a description of the 
resources that are expected to be made available, if any, in 
conjunction with the requested funding.
Requirements for Services (Sec.  892.325)
    HUD will ensure that assistance under this subpart provides firm 
commitments for the funding of services to be provided in the assisted 
living facility or service-enriched housing as described in section 
202b(d)(1) of the Housing Act of 1959 (12 U.S.C. 1701q-2(d)(1)). In 
addition, HUD will require evidence that each recipient of a grant for 
service-enriched housing provide relevant and timely disclosure of 
information to

[[Page 60613]]

residents or potential residents as described in section 202b(d)(2) of 
the Housing Act of 1959 (12 U.S.C. 1701q-2(d)(2)).
Section 8 Project-Based Assistance (Sec.  892.330)
    This section provides that multifamily projects, which include one 
or more dwelling units that have been converted to assisted living 
facilities or service-enriched housing using funding made under this 
subpart, are eligible for project-based assistance under section 8 of 
the United States Housing Act of 1937 (42 U.S.C. 1437f). Such project-
based assistance is provided in the same manner in which the project 
would be eligible for such assistance, but for the assisted living 
facilities or service-enriched housing in the project. The maximum 
monthly rent of a dwelling unit that is an assisted living facility or 
service-enriched housing that receives section 8 assistance under this 
section(Sec.  892.330) must not include charges attributable to 
services relating to assisted living.
Vacancy Payment (Sec.  892.335)
    A vacancy payment, under the Assisted Living Conversion program, is 
limited to 30 days after a conversion to an assisted living facility.

IV. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget (OMB) in accordance with the requirements of the order. 
Executive Order 13563 (Improving Regulations and Regulatory Review) 
directs executive agencies to analyze regulations that are outmoded, 
ineffective, insufficient, or excessively burdensome, and to modify, 
streamline, expand, or repeal them in accordance with what has been 
learned. Executive Order 13563 also directs that, where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, agencies are to identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public. This rule was determined to be a ``significant 
regulatory action'' as defined in section 3(f) of the order (although 
not an economically significant regulatory action under the order). 
Consistent with Executive Order 13563, this rule revises the existing 
part 891 regulations for the supportive housing programs for the 
elderly and persons with disabilities to implement not only new 
flexible provisions required by the legislation signed into law on 
January 4, 2011, but from HUD's own review of the existing regulations 
and where improvements could be made based on experience.
    The costs and benefits of this rule are discussed in detail in the 
regulatory impact analysis (RIA) and a summary of the costs and 
benefits are found in the executive summary in this preamble.
    The rule and the RIA are available for public inspection on 
www.regulations.gov. These documents are also available for public 
inspection in the Regulations Division, Office of the General Counsel, 
Room 10276, 451 7th Street SW., Washington, DC 20410-0500. Due to 
security measures at the HUD Headquarters building, please schedule an 
appointment to review the docket file by calling the Regulations 
Division at 202-402-3055 (this is not a toll-free number). Individuals 
with speech or hearing impairments may access this number via TTY by 
calling the Federal Relay Service, at toll-free, 800-877-8339.

Information Collection Requirements

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

                            Reporting and Recordkeeping Burden for Parts 891 and 892
----------------------------------------------------------------------------------------------------------------
                                                     Response
        Section reference            Number of       frequency     Total annual    Burden hours    Total annual
                                    respondents      (average)       responses     per response        hours
----------------------------------------------------------------------------------------------------------------
Sec.   891.190--documentation to             100               1             100              20           2,000
 support approval of ePRAC......
Sec.   891.308(b)(2)(ii)--                    20               1              20             0.5              10
 application for waiver.........
Sec.   891.335--documentation to              10               1              10              16             160
 support conversion.............
Sec.   891.410--documentation of              30               1              30               2              60
 elderly individuals who can
 support having functional
 limitations....................
Sec.   891.430--notification to              300               1             300               1             300
 tenant of termination of
 tenancy........................
Sec.   891.530--documentation                280               1             280               2             560
 necessary to approve prepayment
Sec.   891.700--documentation                280               1             280               2             560
 necessary to approve prepayment
Sec.   891.800--information to                15               1              15              20             300
 be included in RAC.............
Sec.   891.882--information                   15               1              15               1              15
 required by agreement; MOU,
 plan of participating agencies.
Sec.   892.210(a)--information                50               1              50               2             100
 required for project income use
Sec.   892.210(b)--information              1700               1            1700               2           3,400
 required for renewals..........
Sec.   892.210(b)--information               200               1             200              40           8,000
 required for grant funding.....
Sec.   892.315--information                   50               1              50              40           2,000
 required for funding...........
                                 -------------------------------------------------------------------------------
    Total:......................  ..............  ..............  ..............           148.5          17,465
----------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the

[[Page 60614]]

functions of the agency, including whether the information will have 
practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond; including through the use of appropriate automated 
collection techniques or other forms of information technology; e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Comments must refer 
to the proposal by name and docket number (FR-5576-P-01) and must be 
sent to:
HUD Desk Officer
Office of Management and Budget
New Executive Office Building
Washington, DC 20503
Fax number: 202-395-6947
and
Reports Liaison Officer
Office of Housing
Department of Housing and Urban Development
451 Seventh Street SW. Room 9116
Washington, DC 20410-8000
    Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at http://www.regulations.gov. HUD strongly encourages 
commenters to submit comments electronically. Electronic submission of 
comments allows the commenter maximum time to prepare and submit a 
comment, ensures timely receipt by HUD, and enables HUD to make them 
immediately available to the public. Comments submitted electronically 
through the http://www.regulations.gov Web site can be viewed by other 
commenters and interested members of the public. Commenters should 
follow the instructions provided on that site to submit comments 
electronically.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made for this proposed rule in accordance with HUD 
regulations at 24 CFR part 50, which implement section 102(2)(C) of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The 
FONSI is available for public inspection between 8 a.m. and 5 p.m., 
weekdays, in the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington DC 20410-0500. Due to security measures at the HUD 
Headquarters Building, an advance appointment to review the FONSI must 
be scheduled by calling the Regulations Division at 202-708-3055 (not a 
toll free number).

Unfunded Mandates Reform Act

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

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires an agency to conduct a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities.
    As has been discussed in this preamble, this proposed rule is 
largely directed to: Establishing the requirements and procedures for 
the use of new project rental assistance for supportive housing for 
persons with disabilities; implementing an enhanced project rental 
assistance contract; providing for an allowance of a set-aside for a 
number of units for elderly individuals with functional limitations or 
other category of elderly individuals as defined in the NOFA; revising 
the requirements for the prepayment of certain loans for supportive 
housing for the elderly; implementing a new form of rental assistance 
called senior preservation rental assistance contracts (SPRACs); 
modernizing the capital advance for supportive housing for persons with 
disabilities; and establishing the requirements that will be applicable 
to grant assistance for applicants without sufficient capital to 
prepare a site for a funding competition.
    This rule also proposes to establish the regulations for the 
Service Coordinator in Multifamily Housing program and Assisted Living 
Conversion program, long-term grant programs for which there have not 
been regulations promulgated to date.
    The statutory changes to the Section 202 program and Section 811 
program, for which this rule proposes regulations, increase flexibility 
with respect to use of funds and administration of these programs. This 
flexibility benefits all participants in these programs, small and 
large entities. In addition to the statutory changes that increase 
flexibility to these programs, HUD proposes, administratively, 
regulatory changes to the Section 202 program and Section 811 program 
that would further increase administrative flexibility.
    Given the proposed rule's goal to reduce burden and increase 
flexibility in the programs covered by this rule, HUD has determined 
that it would not have a significant economic impact on a substantial 
number of small entities. Notwithstanding HUD's determination that this 
rule will not have a significant effect on a substantial number of 
small entities, HUD specifically invites comments regarding any less 
burdensome alternatives to this rule that will meet HUD's objectives as 
described in this preamble.

Executive Order 13132, Federalism

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

List of Subjects in

24 CFR Part 891

    Capital advances, Persons with disabilities, Project rental 
assistance, Supportive housing for persons with disabilities, 
Supportive services.

24 CFR Part 892

    Service Coordinator, Assisted Living Conversion, Elderly Persons, 
Persons with Disabilities, and Supportive Services.
    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 891 and add a new part 892 to read as 
follows:

PART 891--SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH 
DISABILITIES

0
1. The authority citation for 24 CFR part 891 continues to read as 
follows:

    Authority:  12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.

[[Page 60615]]

0
2. In Sec.  891.100, revise paragraph (a) to read as follows:


Sec.  891.100  Purpose and policy.

    (a) Purpose. The Section 202 Program of Supportive Housing for the 
Elderly and the Section 811 Program of Supportive Housing for Persons 
with Disabilities provide Federal capital advances and project rental 
assistance under section 202 of the Housing Act of 1959 (12 U.S.C. 
1701q) (section 202) and section 811 of the National Affordable Housing 
Act (42 U.S.C. 8013) (section 811), respectively, for housing projects 
serving elderly households and persons with disabilities. Section 202 
projects shall provide a range of voluntary services that are tailored 
to the needs of the residents. Owners of Section 811 projects shall 
ensure that the residents are offered, but are not required to accept, 
any necessary supportive services that address their individual needs.
* * * * *
0
3. Section 891.105 is revised by amending the introductory paragraph; 
revising the definitions of ``family,'' ``operating costs,'' ``project 
rental assistance contract,'' and ``project rental assistance 
payment''; and adding, in alphabetical order, the definition of 
``enhanced project rental assistance contract;'' to read as follows:


Sec.  891.105  Definitions.

    The following definitions apply, as appropriate, throughout this 
part. Other terms with definitions unique to the particular program are 
defined in Sec. Sec.  891.205, 891.305, 891.505, 891.805, 891.872, and 
891.892, as applicable.
* * * * *
    Enhanced project rental assistance contract (ePRAC) means the 
contract entered into by the nonprofit organization and HUD setting 
forth the rights and duties of the parties with respect to the project 
and the payments under the ePRAC. An enhanced project rental assistance 
contract is made available for:
    (1) Sponsors submitting a new application under section 811 of the 
Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013) or 
under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q) and who 
are accessing private capital, to fund the construction or provide 
permanent financing for supportive housing units for the elderly or 
persons with disabilities:
    (2) Owners of existing 202 and 811 capital advance properties. Such 
contract would allow for the inclusion of debt service as an eligible 
expense for the units covered by the contract.
* * * * *
    Family(ies) means an Elderly Family as defined in Sec.  891.505, 
and may include a ``Disabled Family,'' as defined in Sec.  891.505, 
pursuant to the terms and conditions of an applicant's original Section 
202 loan.
* * * * *
    Operating costs means HUD-approved expenses related to the 
provision of housing and includes:
    (1) Administrative expenses, including salary and management 
expenses related to the provision of shelter and, in the case of the 
Section 202 Program, the coordination of services;
    (2) Maintenance expenses, including routine and minor repairs and 
groundskeeping;
    (3) Security expenses;
    (4) Utilities expenses, including gas, oil, electricity, water, 
sewer, trash removal, and extermination services;
    (5) Taxes and insurance;
    (6) Allowances for reserves;
    (7) Allowances for services (in the Section 202 Program only); and
    (8) Allowances for debt service only for units in new or existing 
202 and 811 capital advance properties covered by an ePRAC in 
accordance with the requirements in Sec.  891.190.
    Project rental assistance contract (PRAC) means the contract 
entered into by the Owner and HUD setting forth the rights and duties 
of the parties with respect to the project and the payments under the 
PRAC, except for project rental assistance provided under subpart G and 
units covered by ePRACs under Sec.  891.190 in subpart A.
    Project rental assistance payment means the payment made by HUD to 
the Owner for assisted units as provided in the PRAC or ePRAC, except 
for project rental assistance provided under subpart G. The payment is 
the difference between the total tenant payment and the HUD-approved 
per-unit operating expenses except for expenses related to items not 
eligible under design and cost provisions. An additional payment is 
made to a household occupying an assisted unit when the utility 
allowance is greater than the total tenant payment. A project rental 
assistance payment, known as a ``vacancy payment,'' may be made to the 
Owner when an assisted unit is vacant, in accordance with the terms of 
the PRAC or ePRAC.
* * * * *
0
4. Redesignate Sec.  891.140 as Sec.  891.208.
0
5. Remove Sec.  891.145.
0
6. Sec.  891.150 is revised to read as follows:


Sec.  891.150  Operating cost standards.

    (a) Applicability. The requirements under this section apply only 
to PRACs, as defined under Sec.  891.105.
    (b) Standard. HUD shall establish operating cost standards based on 
the average annual operating cost of comparable housing for the elderly 
or for persons with disabilities in each field office, and shall adjust 
the standard annually based on appropriate indices of increases in 
housing costs, such as the Consumer Price Index. The operating cost 
standards shall be developed based on the number of units. However, for 
the Section 811 Program and for projects funded under Sec. Sec.  
891.655 through 891.790, the operating cost standard for group homes 
shall be based on the number of residents. HUD may adjust the operating 
cost standard applicable to an approved project to reflect such factors 
as differences in costs based on location within the field office 
jurisdiction. The operating cost standard will be used to determine the 
amount of the project assistance initially reserved for a project.
0
7. In Sec.  891.155, the introductory text, paragraph (b), paragraphs 
(d)(1) and (2) are revised to read as follows:


Sec.  891.155  Other Federal requirements.

    In addition to the requirements set forth in 24 CFR part 5, the 
following requirements in this Sec.  891.155 apply to the Section 202 
and Section 811 Programs, projects funded under Sec. Sec.  891.655 
through 891.790, and prepayments under Sec. Sec.  891.530 and 891.700. 
Other requirements unique to a particular program are described in 
subparts B, C, G, and H of this part, as applicable.
* * * * *
    (b) Environmental requirements. Except for the program under 
subpart G, the National Environmental Policy Act of 1969, and HUD's 
implementing regulations at 24 CFR part 50, including the related 
authorities described in 24 CFR 50.4, apply. Environmental reviews 
under Sec.  891.530 and 891.700 shall consider the use of a senior 
preservation rental assistance contract under subpart H of this part, 
regardless of whether an application for such contract has been made at 
the time of review. For the environmental requirements for the program 
under subpart G (see Sec. Sec.  891.882(e) and (f)). For the purposes 
of Executive Order No. 11988, Floodplain Management (42 FR 26951, 3 
CFR, 1977 Comp., p. 117); as amended by Executive Order 12148 (44 FR 
43239, 3 CFR, 1979 Comp., p. 412), and implementing regulations in 24 
CFR part 55, all applications for intermediate

[[Page 60616]]

care facilities for persons with developmental disabilities shall be 
treated as critical actions requiring consideration of the 500-year 
floodplain.
* * * * *
    (d) Labor standards. (1) All laborers and mechanics (other than 
volunteers under the conditions set out in 24 CFR part 70) employed by 
contractors and subcontractors in the construction (including 
rehabilitation) of housing with 12 or more units assisted under this 
part (other than under subpart H) shall be paid wages at rates not less 
than those prevailing in the locality, as determined by the Secretary 
of Labor in accordance with the Davis-Bacon Act (40 U.S.C. 3141 et 
seq.). A group home for persons with disabilities is not covered by the 
labor standards.
    (2) Contracts involving employment of laborers and mechanics shall 
be subject to the provisions of the Contract Work Hours and Safety 
Standards Act (40 U.S.C. 3701 et seq.).
* * * * *
0
8. Sec.  891.160 is revised to read as follows:


Sec.  891.160  Audit requirements.

    Nonprofits receiving assistance under this part are subject to the 
audit requirements in the notice of funding availability (NOFA).
0
9. In Sec.  891.165, paragraph (b) is revised to read as follows:


Sec.  891.165  Duration of capital advance.

* * * * *
    (b) The duration of the fund reservation for projects that elect 
not to receive any capital advance before construction completion is 24 
months from the date of initial closing to the start of construction. 
This duration can be up to 36 months, as approved by HUD on a case-by-
case basis.
0
10. Revise Sec.  891.175 to read as follows:


Sec.  891.175  Technical assistance.

    For purposes of the Section 202 Program and the Section 811 
Program, HUD shall make available appropriate technical assistance.
    (a) Assistance under this section must ensure that applicants 
having limited resources, particularly minority applicants, are able to 
participate more fully in the programs.
    (b) HUD may offer competitive grants under this section in order to 
bolster an applicant's capacity to engage in preliminary work required 
in the development of supportive housing under the Section 202 Program 
or the Section 811 program.
    (1) Assistance under paragraph (b) of this section is available 
only if:
    (i) The applicant is eligible under the NOFA for the Section 202 
Program or the Section 811 Program;
    (ii) The applicant has site control; and
    (iii) The applicant lacks access to capital to undertake initial 
efforts to confirm site feasibility, pursue initial site funding, and 
undertake the preparatory steps necessary to compete in the NOFA for 
the Section 202 Program or the Section 811 Program, as applicable.
    (2) Competitive grants provided under paragraph (b) of this section 
may be used to cover initial costs of necessary architectural and 
engineering work, site control, and other activities related to the 
development of supportive housing for the elderly and persons with 
disabilities.
0
11. Section 891.190 is added to read as follows:


Sec.  891.190  Enhanced project rental assistance contracts (ePRACs).

    (a) In general. The ePRACs are available to applicants under this 
section in accordance with paragraph (b) of this section.
    (b) Requirements. The following requirements apply to ePRACs:
    (1) Eligible applicants. Applicants eligible for ePRACs are only 
nonprofit organizations, as defined under Sec. Sec.  891.205, 891.305, 
and 891.805, with:
    (i) Sponsors accessing private capital to fund the construction or 
provide permanent financing for supportive new housing units; or
    (ii) Owners of existing properties accessing private capital and 
where debt service results in ongoing operating cost savings in an 
amount greater than the cost of debt service.
    (2) Eligible expenses. Eligible expenses must include debt service 
covering the private financing obtained for the supportive housing 
units covered by the contract. Debt service for non-section 202 or non-
section 811 units must not be included.
    (3) Rent setting. (i) Initial rent levels, as well as the rent 
levels at the beginning of each 5-year term of the multiyear contract, 
must be based on the project's operating expenses that include private 
long-term debt service and must not exceed market rents (which may take 
the provision of a service coordinator into consideration); or
    (ii) Rents during the 5-year term of the multiyear contract will be 
adjusted using the operating cost adjustment factor (OCAF).
    (4) Vacancy payments for assisted units. Vacancy payments for units 
under the ePRAC will be in the amount of 80 percent of the per-unit 
operating expenses that include debt service for the first 60 days of 
vacancy if the conditions for receipt of these project rental 
assistance payments under Sec.  891.445 are fulfilled.
    (5) Operating cost savings. HUD may retain a percentage of the 
ongoing operating cost savings. HUD will advise of the percentage of 
savings to be retained through notice.
    (6) Other requirements. Except as provided under this section, 
ePRACs must follow the requirements provided under this subpart as well 
as under subparts D and F of part 891.
0
12. In Sec.  891.205, the definition for ``activities of daily living'' 
is revised, and definitions for ``functional limitations'' and 
``instrumental activities of daily living'' are added in alphabetical 
order to read as follows:


Sec.  891.205  Definitions.

    Activities of daily living (ADL) means eating, dressing, bathing, 
grooming, and transferring, as further described below:
    (1) Eating--May need assistance with cooking, preparing, or serving 
food, but must be able to feed self;
    (2) Bathing--May need assistance in getting in and out of the 
shower or tub, but must be able to wash self;
    (3) Grooming--May need assistance in washing hair, but must be able 
to take care of personal appearance;
    (4) Dressing--Must be able to dress self, but may need occasional 
assistance;
    (5) Transferring--Actions such as going from a seated to standing 
position and getting in and out of bed; and
    (6) Other such activities as HUD deems essential for maintaining 
independent living.
* * * * *
    Functional limitations means the restriction or loss of ability to 
perform or complete ADL/IADL tasks. An elderly person with functional 
limitations requires assistance with three ADLs or one ADL and some 
combination of Instrumental Activities of Daily Living (IADLs) and/or 
other thresholds as established by HUD through publication of notice. 
An assessment of ADL/IADLs is a useful tool for tailoring services to 
meet the needs of elderly persons to allow for such persons to age in 
place and live independently. Assessment of functional limitations must 
be performed by a qualified professional and is generally documented by 
an individual's service provider or health care provider.
* * * * *
    Instrumental Activities of Daily Living (IADLs) means activities 
that are more

[[Page 60617]]

complex than those needed for the ADLs, they include but are not 
limited to handling personal finances, meal preparation, shopping, 
traveling, doing housework, using the telephone, taking or managing 
medications, or other such activities as HUD deems essential for 
maintaining independent living.
* * * * *
0
13. In Sec.  891.225, paragraph (b) is revised to read as follows:


Sec.  891.225  Provision of services.

* * * * *
    (b)(1) HUD shall ensure that Owners have the managerial capacity to 
perform the coordination of services described in section 202(g)(2) of 
the Housing Act of 1959 (12 U.S.C. 1701q(g)(2)).
    (2) Sponsors of projects may set aside a percentage, as determined 
by HUD in a NOFA, of units for elderly individuals with functional 
limitations or other category of elderly individuals as defined in the 
NOFA. Tenants of these set-aside units must be eligible for long-term 
services and support from home and community-based service providers. 
Such set-aside units must abide by the requirements under Sec.  
891.410(c)(3).
    (3) Any cost associated with the employment of a service 
coordinator shall also be an eligible cost, except if the project is 
receiving congregate housing services assistance under section 802 of 
the National Affordable Housing Act (42 U.S.C. 8011). The HUD-approved 
service costs will be an eligible expense to be paid from project 
rental assistance, not to exceed $15 per unit per month; or such other 
amount as determined by HUD. The balance of service costs shall be 
provided from other sources, which may include co-payment by the tenant 
receiving the service. Such co-payment shall not be included in the 
Total Tenant Payment. The limit of $15 per unit, per month, or such 
other amount as determined by HUD, pertains only to the cost of 
supportive services and not to costs associated with the employment of 
a service coordinator.
0
14. Remove Sec.  891.230.
0
15. Section Sec.  891.235 is added to read as follows:


Sec.  891.235  Owner deposit (minimum capital investment).

    Under the Section 202 Program, if an Owner has a National Sponsor 
or a National Co-Sponsor, the Minimum Capital Investment shall be one-
half of one percent (0.5 percent) of the HUD-approved capital advance, 
not to exceed $25,000. Such amount must be used only to cover operating 
deficits during the first 3 years of operations, and must not be used 
to cover construction shortfalls or inadequate initial project rental 
assistance amounts.
0
16. In Sec.  891.305, the definition of ``disabled household'' is 
revised to read as follows:


Sec.  891.305  Definitions.

* * * * *
    Disabled household means a household composed of:
    (1) One or more persons at least one of whom is an adult (18 years 
of age or older and less than 62 years of age), and who has a 
disability;
    (2) Two or more persons with disabilities living together, or one 
or more such persons living with another person who is determined by 
HUD, based upon a certification from an appropriate professional (e.g., 
a rehabilitation counselor, social worker, or licensed physician) to be 
important to their care or well being; or
    (3) The surviving member or members of any household, described in 
paragraph (1) of this definition, who were living in a unit as a lawful 
tenant assisted under this part, with the deceased member of the 
household at the time of his or her death.
* * * * *
0
17. Section Sec.  891.308 is added to read as follows:


Sec.  891.308  Cost limits.

    (a) Group homes. (1) HUD shall use the development cost limits, 
established by notice in the Federal Register and adjusted by locality, 
to calculate the fund reservation amount of the capital advance to be 
made available to individual owners of group homes, as defined under 
section 811(k)(1) of the National Affordable Housing Act (42 U.S.C. 
8013(k)). Owners that incur actual development costs that are less than 
the amount of the initial fund reservation shall be entitled to retain 
50 percent of the savings in a Replacement Reserve Account. Such 
percentage shall be increased to 75 percent for owners that add energy 
efficiency features.
    (2) The Replacement Reserve Account established under paragraph 
(a)(1) of this section must only be used for repairs, replacements, and 
capital improvements to the project.
    (b) HOME program cost limitations. (1) In general. Except for the 
cost limitations under paragraph (a) of this section, the provisions of 
section 212(e) of the National Affordable Housing Act (42 U.S.C. 
12742(e)) and the cost limits established by HUD pursuant to section 
212(e) for the HOME Investment Partnerships program under subtitle A of 
title II of such Act, apply on a per-unit basis to supportive housing 
for persons with disabilities assisted with a capital advance.
    (2) Waivers. (i) HUD may provide for the waiver of the cost limits 
under paragraph (b)(1) of this section. HUD may provide a waiver in 
such cases in which the cost limits established pursuant to section 
212(e) of the National Affordable Housing Act may be waived under the 
HOME Investment Partnerships program, and to provide for:
    (A) The cost of special design features to make the housing 
accessible to persons with disabilities;
    (B) The cost of special design features necessary to make 
individual dwelling units meet the special needs of persons with 
disabilities; and
    (C) The cost of providing the housing in a location that is 
accessible to public transportation and community organizations that 
provide supportive services to persons with disabilities.
    (ii) The applicant will not receive a waiver in excess of 110 
percent of the applicable HOME Investment Partnerships program cost 
limitations under paragraph (b)(1) of this section.
    (3) Reserve account. HUD shall use the cost limits as established 
by paragraph (b)(1) of this section to calculate the maximum fund 
reservation amount of the capital advance to be made available to 
individual owners.
    (i) Owners may elect to request an amount less than the amount 
determined under the development cost limits if such amount still 
allows for the project's financial feasibility.
    (ii) Owners must not decline a capital advance amount.
0
18. In Sec.  891.310, the introductory text of paragraph (b), 
paragraphs (b)(1), (b)(2), and (b)(3) are revised, paragraph (b)(4) is 
redesignated as paragraph (b)(5) and a new paragraph (b)(4) is added, 
to read as follows:


Sec.  891.310  Special project standards.

* * * * *
    (b) Additional accessibility requirements. In addition to the 
accessibility requirements in Sec.  891.120(b), the following 
requirements apply to group homes as defined under section 811(k)(1) of 
the National Affordable Housing Act, independent living facilities, and 
to projects funded under Sec. Sec.  891.655 through 891.790:
    (1) All entrances, common areas, units to be occupied by resident 
staff, and amenities must be readily accessible to and usable by 
persons with disabilities.
    (2) All dwelling units in an independent living facility (or all 
bedrooms and bathrooms in a group home) involving new construction must 
be designed to be accessible or

[[Page 60618]]

adaptable for persons with physical disabilities.
    (3) In a project for chronically mentally ill individuals, 
involving new construction, a minimum of 10 percent of all dwelling 
units in an independent living facility (or 10 percent of all bedrooms 
and bathrooms in a group home) must be designed to be accessible or 
adaptable for persons with physical disabilities.
    (4) A project involving acquisition and/or rehabilitation may 
provide less than full accessibility if:
    (i) The project complies with the requirements of 24 CFR 8.23;
    (ii) The cost of providing full accessibility makes the project 
financially infeasible;
    (iii) Fewer than one-half of the intended occupants have mobility 
impairments; and
    (iv) The accessibility requirement will be met through existing 
properties that serve persons with disabilities.
* * * * *
0
19. In subpart C, new Sec. Sec.  891.330, 891.335, 891.340, 891.345, 
and 891.350 are added to read as follows:


Sec.  891.330  Project rental assistance.

    (a) Renewals and increases in contract amounts. (1) Upon the 
expiration of each contract term, subject to the availability of 
appropriations, HUD will adjust the annual contract amount to provide 
for reasonable project operating costs, including adequate reserves and 
service coordinators.
    (2) Any contract amounts not used by a project during a contract 
term will not be available for such adjustments upon renewal.
    (b) Emergency situations. For emergencies that are outside the 
control of the owner, HUD will increase the annual contract amount, 
subject to HUD's review and restrictions, as may be prescribed by HUD.
    (1) Increases in contract amounts will be no greater than either 10 
percent above the most recently approved budget-based rent, or 110 
percent of FMR for market-based rents.
    (2) Such increases will be solely for repaying loans or equity that 
was used for addressing emergency repairs to the building that are:
    (i) Beyond normal repair and maintenance;
    (ii) Are not attributable to deferred maintenance; and
    (iii) Caused by matters outside the control of the owner for which 
sufficient insurance proceeds are not available.


Sec.  891.335  Conversions.

    (a) In general. An owner may request to convert some or all units 
from supportive housing for very low-income persons with disabilities 
to very low-income persons if:
    (1) The state agency responsible for administering the Medicaid 
program and/or the state health and human services agency indicates in 
writing that the need for supportive housing for very low-income 
persons with disabilities no longer exists or that the affordable 
supportive housing for very low-income persons with disabilities will 
be replicated in a more integrated setting;
    (2) The project has had persistent vacancy, despite a reasonable 
effort to lease such units as determined by HUD; and
    (3) A demonstrated need exists for the households that would 
benefit from such conversion.
    (b) Reservation. In granting a conversion, HUD may reserve the 
right to request a change in management or require a conversion only 
for a certain period.


Sec.  891.340  Limitation on use of funds.

    Section 811 funds may not be used to replace other state or local 
funds previously used or designated for use for persons with 
disabilities.


Sec.  891.345  Multifamily housing projects.

    (a) Restriction. The total number of dwelling units in any 
multifamily housing project (including any condominium or cooperative 
housing project) containing any unit for which assistance is provided 
under this part for supportive housing for persons with disabilities, 
or with any occupancy preference for persons with disabilities, may not 
exceed 25 percent of such total.
    (b) Exception. The restriction under paragraph (a) of this section 
shall not apply to any project that is a group home or independent 
living facility.


Sec.  891.350  Voluntary supportive services.

    (a) In general. For Section 811 projects funded under this subpart, 
supportive services must be offered to, but are not required to be 
accepted, by persons with disabilities.
    (b) Supportive service plan. A supportive service plan for housing 
for Section 811 projects must permit each resident to choose and 
acquire services, to receive any supportive services made available 
directly or indirectly by the owner of such housing or by others, or to 
not receive any supportive services.
0
20. In Sec.  891.410, paragraph (c)(2)(ii) is revised and paragraph 
(c)(3) is added to read as follows:


Sec.  891.410  Determination of eligibility and selection of tenants.

* * * * *
    (c) * * *
    (2) * * *
    (ii) Owners shall make selections in a nondiscriminatory manner 
without regard to considerations such as race, religion, color, sex, 
national origin, familial status, or disability. An owner may, with the 
approval of HUD, limit occupancy within the housing to persons with 
disabilities who can benefit from the supportive services, including 
the accessibility features, offered in connection with the housing.
    (3) Under the Section 202 Program:
    (i) In order to be eligible for admission, the applicant must also 
meet any project occupancy requirements approved by HUD.
    (ii) Owners must lease units set aside under Sec.  891.225(b)(2) to 
elderly individuals who can provide evidence of functional limitations 
or other category as defined in the NOFA. Evidence can consist of a 
doctor's or nurse's written evaluation or a letter from the AAA or 
Aging and Disability Resource Center (ADRC) or other like social 
service agencies. Examples of service providers include, but are not 
limited to, Medicaid home and community-based service providers or 
Programs for All-Inclusive Care for the Elderly (PACE) providers 
(including co-location of PACE programs on site). Provider 
organizations must have the capacity to bill Medicaid or be affiliated 
with AAA.
    (iii) Owners will continue to lease units not set aside for elderly 
individuals with functional limitations or other category of elderly 
persons as defined in the NOFA to any applicant determined to be 
eligible for the project. Owners will make selections in a 
nondiscriminatory manner without regard to considerations of race, 
religion, color, sex, national origin, familial status, or disability. 
Owners must also make selections without regard to actual or perceived 
sexual orientation, gender identity, or marital status, in accordance 
with 24 CFR 5.105(a).
    (iv) Set aside units must be distributed throughout the project and 
must not be segregated to one area of a building or the project. A 
specified number of units, rather than specific units (e.g., units 101, 
201, etc.), may be set aside for this purpose.
* * * * *
0
21. Revise Sec.  891.430 to read as follows:


Sec.  891.430  Denial of admission, termination of tenancy, and 
modification of lease.

    (a) In general. (1) The provisions of 24 CFR part 5, subpart I, 
apply to Section 202 and Section 811 capital advance projects.

[[Page 60619]]

    (2) The provisions of 24 CFR part 247 apply to all decisions by an 
owner to terminate the tenancy or modify the lease of a household 
residing in a unit (or residential space in a group home), except as 
provided under paragraph (b) of this section.
    (b) Section 811 projects. An owner may not terminate the tenancy or 
refuse to renew the lease of a tenant of a rental dwelling unit 
assisted with funds under Section 811 except:
    (1) For serious or repeated violation of the terms and conditions 
of the lease, for violation of applicable Federal, State, or local law, 
or for other good cause; and
    (2) The tenant must receive, no less than 30 days before such 
termination or refusal to renew, a written notice specifying the 
grounds for such action.

Subpart E--Loans for Housing for the Elderly and Persons With 
Disabilities

0
22. In Subpart E:
0
a. Revise the undesignated heading, ``Section 202 Projects for the 
Elderly or Handicapped--Section 8 Assistance,'' to read ``Section 202 
Projects for the Elderly or Persons with Disabilities--Section 8 
Assistance.''
0
b. Revise the undesignated heading, ``Section for the Nonelderly 
Handicapped Families and Individuals--Section 162 Assistance'' to read 
``Section for the Nonelderly Disabled Families and Individuals--Section 
162 Assistance.''


Sec.  891.500  [Amended].

0
23. In Sec.  891.500, replace the term ``handicapped'' with the term 
``disabled'' every place the term ``handicapped'' appears in this 
section.


Sec.  891.505  [Amended].

0
24. In Sec.  891.505, the definitions of ``borrower'' is amended by 
replacing the term ``handicapped'' with the term ``disabled''; the 
definition of ``handicapped family'' is amended by replacing the term 
``handicapped'' with ``disabled'' wherever the term ``handicapped'' 
appears in the definition; the definition of ``handicapped person or 
individual'' is amended by replacing the defined term with the words 
``person with disabilities''; and the definitions of ``housing and 
related facilities'' and ``nonelderly handicapped family'' are amended 
by replacing the term ``handicapped'' with the term ``disabled'' 
wherever the term ``handicapped'' appears in these two definitions.


Sec.  891.510  [Amended].

0
25. In Sec.  891.510(e), remove the term ``handicap'' in the last 
sentence of paragraph (e) and replace with the term ``disability.''


Sec.  891.520  [Amended].

0
26. In Sec.  891.520, replace the term ``handicapped'' with the term 
``disabled'' every place the term ``handicapped'' appears in this 
section.
0
27. Revise Sec.  891.530 to read as follows:


Sec.  891.530  Prepayment privileges.

    (a) Prepayment prohibition. The prepayment (whether in whole or in 
part) or the assignment or transfer of physical and financial assets of 
any Section 202 project is prohibited, unless HUD gives prior written 
approval.
    (b) HUD-approved prepayment. HUD may not grant approval unless HUD 
has determined that the prepayment or transfer of the loan is part of a 
transaction that will ensure the continued operation of the project, 
until at least 20 years following the maturity date of the original 
Section 202 loan, in a manner that will provide rental housing for the 
elderly and persons with disabilities on terms at least as advantageous 
to existing and future tenants as the terms required by the original 
Section 202 loan agreement and any project-based rental assistance 
payment contract related to the project.
    (c) Refinancing. The prepayment may involve refinancing of the loan 
if such refinancing results in:
    (1) A lower interest rate on the principal of the Section 202 loan 
for the project and in reductions in debt service related to such loan; 
or
    (2) An increase in debt service for a project requesting prepayment 
of a Section 202 loan carrying an interest rate of 6 percent or lower, 
which must abide by the following:
    (i) The project owner proposing the refinance must address the 
physical needs of the project;
    (ii) The transaction may not result in an increase in rents for 
unassisted families residing in the project;
    (iii) The transaction must address the capital needs of the project 
and ensure its physical viability for the term of the new financing;
    (iv) The overall cost for providing any rental assistance under 
section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) 
for the project must not increase, except upon approval by HUD to:
    (A) Mark-up-to-market contracts pursuant to section 524(a)(3) of 
the Multifamily Assisted Housing Reform and Affordability Act (42 
U.S.C. 1437f note) for properties owned by nonprofit organizations; or
    (B) Mark-up-to-budget contracts pursuant to section 524(a)(4) of 
the Multifamily Assisted Housing Reform and Affordability Act (42 
U.S.C. 1437f note), for properties owned by eligible owners (as such 
term is defined in section 202(k) of the Housing Act of 1959 (12 U.S.C. 
1701q(k)); and
    (v) If HUD determines that the transaction would not be feasible 
without a rent increase for unassisted families, such unassisted 
families may be eligible to receive assistance under a senior 
preservation rental assistance contract (SPRAC) pursuant to part 891, 
subpart H;
    (A) HUD may make rental assistance available to unassisted 
households in other forms as authorized under section 8 of the United 
States Housing Act of 1937 to meet the requirement under this paragraph 
(c)(2)(v) of this section;
    (B) Subject to the availability of appropriations for such 
assistance, HUD may set priorities for the consideration of prepayment 
approvals that require the provision of a SPRAC; and
    (C) SPRACs shall only be provided for units occupied by unassisted, 
income-eligible families at the time of closing of the refinance of the 
Section 202 Direct Loan. Such families must meet the low-income 
eligibility guidelines under section 8 of the United States Housing Act 
of 1937.
    (d) HUD must approve the use of loan proceeds resulting from the 
refinance of the project to ensure such proceeds are used in a manner 
advantageous to the tenants of the Section 202 Direct Loan project.
    (e) Loan proceeds must be expended within 5 years of the closing of 
the Direct Loan refinance, except for approved ongoing social service 
programs. Use of proceeds may include, but are not limited to:
    (1) No more than 15 percent of the cost for increasing the 
availability or provision of supportive services, which may include the 
financing of service coordinators and congregate services;
    (2) Rehabilitation, modernization, accessibility modifications or 
retrofits of the project, including reducing the number of units by 
reconfiguring units that are functionally obsolete, unmarketable, or 
not economically viable;
    (3) Construction of an addition or another facility in the project, 
including assisted living facilities;
    (4) Rent reduction of unassisted tenants residing in the project;
    (5) Rehabilitation of the project to ensure long-term viability; or

[[Page 60620]]

    (6) The payment to the project owner, sponsor, or third party 
developer of a developer's fee in an amount not to exceed or duplicate:
    (i) In the case of a project refinanced through a low-income 
housing tax credit program, the fee permitted by the low-income housing 
tax credit program; or
    (ii) In the case of a project refinanced through any other source 
of refinancing, 15 percent of the acceptable development cost, which 
includes the cost of acquisition, rehabilitation, loan prepayment, 
initial reserve deposits, and transaction costs.
    (f) HUD may approve the use of proceeds from the refinancing of the 
Section 202 Direct Loan for the provision of affordable housing and 
related social services for elderly persons who are tenants of other 
HUD-assisted senior housing.
    (1) Such housing must be owned by the same private nonprofit 
organization that is the project owner, the project sponsor, or the 
private developer as the Section 202 project being refinanced. This 
includes limited partnerships for which the general partner is a 
private nonprofit organization, a corporation wholly owned and 
controlled by one or more nonprofit organizations, or a limited 
liability company wholly owned and controlled by one or more nonprofit 
organizations.
    (2) The use of proceeds in other HUD-assisted senior housing must 
be approved by HUD.
    (3) The use of proceeds in other HUD-assisted housing projects will 
be approved only if the proposed Section 202 Direct Loan refinancing 
will address all physical and financial needs of the project.
    (4) The other HUD-assisted senior housing must be designated as 
senior housing serving only those residents 62 years of age and older, 
and must have an active program in place to provide social services for 
elderly residents.
    (5) At the time of the application for prepayment of the 202 Direct 
Loan, the level of affordability of the project(s) receiving proceeds 
from the refinance must be at least as affordable as the Section 202 
Direct Loan project being refinanced.
    (6) All project(s) to receive proceeds from the refinance must have 
or put in place a Use or Regulatory Agreement requiring operation of 
the project as affordable senior housing for a period at least 10 years 
beyond the date of closing of the Section 202 refinance, or the date of 
termination of the existing Use or Regulatory Agreement, whichever is 
later.
    (7) The other HUD-assisted senior housing may include Section 202 
Direct Loan and Section 202 Capital Advance properties, or may include 
affordable senior projects that receive HUD assistance including but 
not limited to project-based rental assistance, FHA mortgage insurance, 
Project-Based Vouchers, HOME Investment Partnerships (HOME), or 
Community Development Block Grant (CDBG) assistance.


Sec.  891.575  [Amended].

0
28. In Sec.  891.575, replace the term ``handicapped'' with the term 
``disabled'' every place the term ``handicapped'' appears in this 
section.


Sec.  891.610  Selection and admission of tenants.

0
29. In Sec.  891.610:
0
a. In paragraph (a), replace the term ``handicapped persons'' with 
``persons with disabilities.''
0
b. In paragraph (b), replace the term ``handicapped family'' with 
``disabled family.''
0
c. In paragraph (f), replace the term ``handicap status'' with 
``disability status.''


Sec.  891.655  [Amended].

0
30. In Sec.  891.655:
0
a. In the definition of ``family (eligible family),'' replace the term 
``handicapped family'' with ``disabled family''.
0
b. In the definition of ``group home,'' replace the term ``handicapped 
individuals'' with ``persons with disabilities.''
0
c. In the definition of ``housing for handicapped families'' replace 
the term ``handicapped families'' with ``disabled families'' every 
place the term ``handicapped families'' appears in this definition.
0
d. In the definition of ``independent living complex,'' replace the 
term ``nonelderly handicapped families'' with the term ``nonelderly 
disabled families.''


Sec.  891.665  [Amended].

0
31. In Sec.  891.665, in the definition of ``independent living 
complexes for handicapped families'' replace the term ``handicapped 
families'' with ``disabled families'' every place the term 
``handicapped families'' appears in the definition; replace the term 
``physically handicapped'' with the term ``physically disabled'' every 
place the term ``physically handicapped'' appears in the definition; 
replace the term ``handicap family'' with the term ``disabled family;'' 
replace the term ``handicapped individuals'' with the term ``persons 
with disabilities;'' replace the term ``handicapped person'' with the 
term ``person with disabilities;'' and replace the term ``handicapped 
person's well being'' with the term ``person with disabilities' well 
being''.


Sec.  891.680  [Amended].

0
32. In Sec.  891.680(b), replace the term ``handicapped persons'' with 
``persons with disabilities'' every place the term ``handicapped 
persons'' appears in paragraph (b).
0
33. Revise Sec.  891.700 to read as follows:


Sec.  891.700  Prepayment of loans.

    The requirements of Sec.  891.530 apply to all prepayments for 202/
162 projects.
0
34. Remove Sec.  891.710.


Sec.  891.720  [Amended].

0
35. In Sec.  891.720(d), replace the term ``handicapped'' with 
``disabled.''


Sec.  891.750  [Amended].

0
36. In Sec.  891.750:
0
a. In paragraph (b), replace the term ``handicapped family'' with the 
term ``disabled family.''
0
b. In paragraph (b)(3), replace the term ``handicap'' with 
``disability.''
0
37. Sec.  891.810 is revised to read as follows:


Sec.  891.810  Project rental assistance.

    (a) Project rental assistance contract and Project rental 
assistance payment are defined in Sec.  891.105. Project rental 
assistance payment is provided for operating costs, not covered by 
tenant contributions, attributable to the number of units funded by 
capital advances under the Section 202 Program and the Section 811 
Program, subject to the provisions of Sec.  891.445.
    (b) The sponsor of a mixed-finance development must obtain the 
necessary funds from a source other than project rental assistance 
funds for operating costs related to non-Section 202 or non-Section 811 
units.


Sec.  891.830  [Amended].

0
38. In Sec.  891.830, paragraph (c)(5) is removed, and, at the end of 
paragraph (c)(4), the semicolon and the word ``and'' are removed and a 
period is inserted.
0
39. In Sec.  891.835 paragraph (b)(1) is revised to read as follows:


Sec.  891.835  Eligible uses of project rental assistance.

* * * * *
    (b) * * *
    (1) Debt service on construction or permanent financing, or any 
refinancing thereof, for any units in the development, including the 
Section 202 or Section 811 supportive housing units, except for units 
under an ePRAC whereby debt service may be included as an eligible 
expense under Sec.  891.190;
* * * * *

[[Page 60621]]

0
40. Revise Sec.  891.853 to read as follows:


Sec.  891.853  Development cost limits.

    The Development Cost Limits for development activities, as 
established at Sec.  891.208 for Section 202 supportive housing units 
and at Sec.  891.308 for Section 811 supportive housing units, apply in 
mixed-finance developments under this subpart.
0
41. Subparts G and H are added to read as follows:
Subpart G--Section 811 Project Rental Assistance Program
Sec.
891.870 Applicability.
891.872 Definitions.
891.874 Allocation of funds.
891.876 Eligible projects.
891.878 Eligible tenants.
891.880 Terms and conditions of project rental assistance financing.
891.882 Responsibilities of participating agencies.


Sec.  891.870  Applicability.

    The requirements in this subpart G apply only to project rental 
assistance provided to projects without capital advances under the 
Section 811 Program.


Sec.  891.872  Definitions.

    In addition to the applicable definitions in Sec. Sec.  891.105 and 
891.305, the following definitions are applicable to the use of project 
rental assistance in the Section 811 program, as provided in this 
subpart:
    Admission means the point-in-time the applicant and owner execute 
the lease agreement, and where occupancy is imminent.
    Eligible applicant means any state housing agency currently 
allocating low-income housing tax credits under section 42 of the 
Internal Revenue Code of 1986 (26 U.S.C. 42), or any state housing or 
state community development agency that is currently allocating and 
overseeing assistance under the HOME Investment Partnerships (HOME) 
program as authorized by title II of the Cranston-Gonzalez National 
Affordable Housing Act (42 U.S.C. 12701 et seq.), or under section 8 of 
the United States Housing Act of 1937 (42 U.S.C. 1437f), or other 
similar Federal or state program, and the agency is determined to be in 
good standing by HUD in its administration of assistance. An eligible 
applicant may also be a state, regional, or local housing agency or 
agencies; or a partnership or collaboration of state housing agencies 
and/or state and local/regional housing agencies. To be eligible, the 
agency must have a formal partnership with the state health and human 
services agency and the state agency designated to administer or 
supervise the administration of the State plan for medical assistance 
under title XIX of the Social Security Act.
    Extremely low-income family has the same meaning as defined in 24 
CFR 5.603.
    Housing agency means a state, regional, or local housing agency.
    Inter-agency Partnership Agreement means the agreement entered into 
between the eligible applicant and the state health and human services 
agency, and the applicable state Medicaid agency, if different 
entities. An eligible project must abide by such agreement in order to 
provide new project rental assistance under this subpart.
    Nonelderly adult means a person who is 18 years of age or older and 
less than 62 years of age.
    Participating agencies means the eligible applicant awarded project 
rental assistance funds, the state agency responsible for health and 
human services programs, and the state agency designated to administer 
or supervise the administration of the state plan for medical 
assistance under the Medicaid program.
    Project rental assistance means funding made available by HUD to 
eligible applicants for purposes of providing long-term rental 
assistance for supportive housing for nonelderly, extremely low-income 
persons with disabilities and for extremely low-income households that 
include at least one nonelderly person with a disability.
    Rental assistance contract (RAC) means contracts authorized under 
section 811(b)(3) of the National Affordable Housing Act (42 U.S.C. 
8013(b)(3)) between the approved housing agency, as defined under this 
subpart, and the multifamily property owner to provide project rental 
assistance under this subpart.


Sec.  891.874  Allocation of funds.

    HUD may allocate funds made available in any fiscal year for 
project rental assistance under this subpart by competition or in 
accordance with the formula allocation provided under 24 CFR part 791. 
In determining the method of allocation, HUD shall take into account 
such factors as the amount of funds available, the number and types of 
eligible applicants, the period of funding availability, and 
administrative efficiency.


Sec.  891.876  Eligible projects.

    (a) In general. Any new or existing multifamily project is eligible 
for project rental assistance under this section if:
    (1) Such project's development costs are paid with resources from 
other public and/or private sources, such as low-income housing tax 
credits as authorized under section 42 of the Internal Revenue Code (26 
U.S.C. 42), equity, private debt, or HOME program funds as authorized 
under title II of the National Affordable Housing Act (42 U.S.C. 12701 
et seq.);
    (2) The project is not otherwise receiving assistance under the 
Section 811 program; and
    (3) A commitment must be made by a Federal, state or local 
government agency.
    (b) Existing projects. (1) Existing multifamily housing projects 
may only receive project rental assistance under this section if the 
assisted units have no existing contractual obligation to serve persons 
with disabilities, such as a recorded use agreement.
    (2) Existing units receiving any form of operating housing subsidy, 
such as assistance under section 8 of the United States Housing Act of 
1937 (42 U.S.C. 1437f), are ineligible to receive project rental 
assistance under this section.


Sec.  891.878  Eligible tenants.

    (a) Project rental assistance provided under this section may only 
be provided for dwelling units that are set aside for extremely low-
income disabled households. The person with the disability must be 18 
years of age or older and less than 62 years of age at the time of 
admission.
    (b) A person with a disability assisted under this subpart must be 
eligible for community-based, long-term services and supports as 
provided through Medicaid waivers, Medicaid state plan options, state 
funded services, or other appropriate services (provided by state, 
local, nonprofit, or other entities) related to the target populations 
identified under the Interagency Partnership Agreement.
    (c) The Interagency Partnership Agreement must include the target 
population to be served that shall benefit from the assisted units 
under this subpart and available services.
    (d) Participation in community-based, long-term services and 
supports is voluntary and shall not be required as a condition of 
tenancy.


Sec.  891.880  Terms and conditions of project rental assistance 
financing.

    (a) In general. Approved housing agencies receiving project rental 
assistance under this subpart must comply with the requirements of this 
section, and all the terms and conditions of the rental assistance 
contract.

[[Page 60622]]

    (b) Rental assistance contract (RAC). (1) The RAC will provide the 
housing assistance payments to the owner for eligible tenants, as 
determined under Sec.  891.878, residing in units that have been set 
aside by the owner as supportive housing for persons with disabilities.
    (2) The approved housing agency administering the project rental 
assistance under this subpart must enter into a RAC with the owner of 
the project, as defined in the NOFA.
    (c) Term. (1) The initial term of RACs under this section between 
the approved housing agency administering the project rental assistance 
under this subpart and the owner of the multifamily housing project 
must be for a minimum of 20 years.
    (2) RACs under this section may be renewed if all parties agree to 
such renewal, subject to the availability of project rental assistance 
funds.
    (d) Use restrictions. (1) Any unit assisted with project rental 
assistance under this subpart must be subject to a recorded 30-year 
minimum use agreement for nonelderly, extremely low-income persons with 
disabilities.
    (2) If a RAC is renewed under this subpart, the corresponding use 
agreement must be extended for the duration of the renewal.
    (e) Projects must meet the accessibility requirements of section 
504 of the Rehabilitation Act of 1973 and titles II and III of the 
Americans with Disabilities Act, as applicable. Covered multifamily 
dwellings must also meet the design and construction requirements of 
the Fair Housing Act.
    (f) Limitation on units assisted. (1) In any multifamily housing 
project receiving project rental assistance under this section, no more 
than 25 percent of the total number of dwelling units in the project 
may be set aside for supportive housing for persons with disabilities 
or apply any occupancy preference for persons with disabilities, and no 
unit may have any preexisting occupancy preference requirement for 
persons with disabilities associated with such unit.
    (2) These units must be distributed throughout the project, must 
not be segregated to one area of a building or the project (such as on 
a particular floor, part of a floor in a building, or certain sections 
within a project), and can consist of both accessible and nonaccessible 
units. Owners may designate unit types (e.g., accessible, one-bedroom, 
etc.) rather than designating specific units (e.g., units 101, 201, 
etc.) to be set aside for supportive housing for persons with 
disabilities.


Sec.  891.882  Responsibilities of participating agencies.

    (a) Required agreement. (1) Participating agencies must develop an 
Interagency Partnership Agreement, which is a formalized agreement for 
collaboration (such as a memorandum of understanding (MOU), joint 
letter, or other document) that includes the eligible applicant and the 
state health and human services agency, and the applicable state 
Medicaid agency, if different entities.
    (i) In states where health and human service functions have been 
separated, both agencies' participation must be evidenced in the 
collaboration.
    (ii) Project rental assistance under this subpart may only be 
provided for eligible projects that conform to the Interagency 
Partnership Agreement.
    (2) Such agreement must:
    (i) Identify the target populations to be served by the project;
    (ii) Set forth methods for outreach and referral; and
    (iii) Describe the services to be made available to the tenants of 
the project.
    (3) Target populations. The Interagency Partnership Agreement must 
include the target populations to be served that will benefit from the 
assisted units under this subpart and available services. In addition 
to being extremely low-income, the person with disabilities as defined 
in Sec.  891.305, must have a disability appropriate to the services to 
be provided in the community under such agreement. In the Interagency 
Partnership Agreement, states must identify the available state-funded 
services and other appropriate services (provided by state, local, 
nonprofit, or other entities), and describe how such services will be 
made available to the tenants.
    (b) Program requirements. (1) Participating agencies must provide a 
plan detailing the process by which the availability of units receiving 
project rental assistance under this subpart and waiting lists will be 
managed, including:
    (i) A consideration of training; and
    (ii) Costs, authority, and/or sources for establishing the 
infrastructure and process for establishing such a system if no process 
or system currently exists.
    (2) Participating agencies must describe how the process of 
referring eligible persons with disabilities to the assisted 
multifamily housing projects will be carried out, describe how 
households will be tracked, and provide a list of people who property 
owners can contact if there are any problems.
    (3) This system and framework must be incorporated into the 
Interagency Partnership Agreement between the participating agencies as 
required under this section.
    (c) Administrative cost. Participating agencies may use a 
percentage, as defined by HUD in a NOFA, of their total project rental 
assistance award under this section for initial and administrative 
costs relating to the administration of the project rental assistance 
program under this subpart. Such costs may include costs of hiring 
ongoing staff, training, contract assistance, infrastructure costs, and 
information technology. No charges relating to the administration of 
the program may be charged to the tenants.
    (d) Fair housing and equal opportunity requirements. Approved 
housing agencies must ensure that the following fair housing and equal 
opportunity requirements are met.
    (1)(i) Affirmative fair housing marketing. Participating agencies 
must adopt affirmative marketing procedures for their project rental 
assistance program funded under this subpart. Affirmative marketing 
procedures consist of actions to provide information and otherwise 
attract eligible persons to the program regardless of race, color, 
national origin, religion, sex, disability, or familial status, who are 
not likely to apply to the program without special outreach. 
Participating agencies must annually assess the success of their 
affirmative marketing activities and make any necessary changes to 
their affirmative marketing procedures as a result of the evaluation. 
Participating agencies must keep records describing actions taken to 
affirmatively market the program and records to assess the results of 
these actions. Eligible applicants must describe their methods of 
outreach and referral and waiting list policies in their applications, 
as prescribed in the NOFA. All methods of outreach and referral and 
management of the waiting list must be consistent with fair housing and 
civil rights laws and regulations and affirmative marketing 
requirements.
    (ii) Full disclosure of available housing. Participating agencies 
must adopt a process for providing full disclosure to each applicant of 
any option available to the applicant in the selection of the 
development in which to reside, including basic information about 
available sites (e.g., location, number and size of accessible units, 
access to transportation and commercial facilities) and an estimate of 
the period of time the applicant would likely have to wait to be 
admitted to units of different sizes and types (e.g., regular or 
accessible) at each site.
    (2) Civil rights recordkeeping. Participating agencies must require

[[Page 60623]]

projects receiving project rental assistance under this subpart to 
maintain records on the race, ethnicity, sex, and place of previous 
residency for applicants and approved eligible households. The owner 
must submit such reports to the housing agency to demonstrate 
compliance with applicable civil rights and equal opportunity 
requirements.
    (e) Environmental requirements and environmental assurance. (1) 
General. As HUD does not approve program funding for specific 
activities or projects of the eligible applicants, HUD will not perform 
environmental reviews on such activities or projects. However, to 
ensure that the tenets of HUD environmental policy and the requirements 
of applicable statutes and authorities are met, eligible applicants 
selected for funding will be required to implement the analyses and 
determinations as set forth in this paragraph (e), for specific program 
activities and projects. The eligible applicant's signature on the 
application shall constitute an assurance that the applicant, if 
selected, will perform such implementation.
    (i) The environmental tenets apply to both existing and new 
projects per the requirements below. Existing properties that are 
currently HUD-assisted or HUD-insured and that will not engage in 
activities with physical impacts or changes beyond routine maintenance 
activities or minimal repairs are not required to comply with the 
environmental tenets.
    (ii) If, at the time that a project applies for Project Rental 
Assistance (PRA), the project is under construction or being 
rehabilitated, the project shall be subject to the environmental review 
requirements applicable to new construction or rehabilitation if the 
work has not progressed beyond a stage of construction where 
modifications can be undertaken to avoid the adverse environmental 
impacts addressed by the requirement.
    (iii) Citations to authorities in the following paragraphs of this 
paragraph (3) are for reference only; to the extent that property 
standards or restrictions on the use of properties stated in the 
following paragraphs are more stringent than provisions of the 
authorities cited, the requirements stated in the following paragraphs 
shall control:
    (2) Site Contamination (24 CFR 50.3(i)). It is HUD policy that all 
properties for use in HUD-assisted housing be free of hazardous 
materials, contamination, toxic chemicals and gases, and radioactive 
substances, where a hazard could affect the health and safety of 
occupants or conflict with the intended utilization of the property (24 
CFR 50.3(i)(1)). Therefore, projects applying for assistance must:
    (i) Assess whether the site:
    (A) Is listed on an Environmental Protection Agency (EPA) Superfund 
National Priorities or Comprehensive Environmental Response, 
Compensation, and Liability Act (CERCLA) list or equivalent State list;
    (B) Is located within 3,000 feet of a toxic or solid waste landfill 
site;
    (C) Has an underground storage tank other than a residential fuel 
tank; or
    (D) Is known or suspected to be contaminated by toxic chemicals or 
radioactive materials. If none of these conditions exist, a letter of 
finding certifying these findings must be submitted and maintained in 
the site's environmental record. If any of these conditions exist, an 
American National Standards Institute (ASTM) Phase I Environmental Site 
Assessment (ESA), in accordance with ASTM E 1527-013 (or the most 
recent edition), must be provided; OR
    (ii) Provide a Phase I ESA in accordance with ASTM E 1527-13 (or 
the most recent edition).
    (A) An ASTM Phase I ESA that was prepared within the Phase I ESA 
continuing viability timeframe for the acquisition of the property or a 
real estate transaction (construction, rehabilitation, or refinancing) 
for the property and complies with ASTM E1527-05 or a more recent 
edition shall be deemed acceptable.
    (B) If a Phase I ESA is conducted and the Phase I ESA identifies 
Recognized Environmental Conditions, a Phase II ESA in accordance with 
ASTM E 1903-11 (or the most recent edition) shall be performed. Any 
hazardous substances and/or petroleum products that are identified at 
levels that would require clean-up under state policy shall be so 
cleaned up in accordance with the state's clean-up policy. Risk-Based 
Corrective Actions are permitted if allowed for under a state's clean-
up policy.
    (3) Historic Preservation (16 U.S.C. 470 et seq.). (i) As the 
various states, territories, tribes, and municipalities have 
established historic preservation programs to protect historic 
properties within their jurisdiction, all work on properties identified 
as historic by the State, territory, tribe, or municipality, as 
applicable, must comply with all applicable state, territorial, and 
tribal historic preservation laws and requirements, and, for projects 
affecting locally designated historic landmarks or districts, local 
historic preservation ordinance and permit conditions.
    (ii) In addition, all work on properties listed on the National 
Register of Historic Places, or which the eligible applicant knows are 
eligible for such listing, must comply with ``The Secretary of the 
Interior's Standards for Rehabilitation.'' Complete demolition of such 
properties would not meet the standards and is prohibited.
    (iii) On-site discoveries. If archaeological resources and/or human 
remains are discovered on the project site during construction, the 
recipient must comply with applicable state, tribal, or territory law, 
and/or local ordinance (e.g., state unmarked burial law).
    (4) Noise (24 CFR part 51, subpart B--Noise Abatement and Control). 
All activities and projects involving new construction shall be 
developed to ensure an interior noise level of 45 decibels (dB) or 
less. In this regard, and using the day-night average sound level 
(Ldn), sites not exceeding 65 dB of environmental noise are deemed to 
be acceptable; sites above 65 dB require sound attenuation in the 
building shell to 45 dB; and sites above 75 dB shall not have noise 
sensitive outdoor uses (e.g., picnic areas, tot lots, balconies, or 
patios) situated in areas exposed to such noise levels.
    (5) Airport Clear Zones (24 CFR part 51, subpart D--Siting of HUD 
Assisted Projects in Runway Clear Zones at Civil Airports and Clear 
Zones and Accident Potential Zones at Military Airfields). No 
activities or projects shall be permitted within the ``clear zones'' or 
the ``accident potential zones'' of military airfields or the ``runway 
protection zones'' of civilian airports.
    (6) Coastal Barrier Zone Management Act (16 U.S.C. 1451 et seq.). 
Activities and projects shall be consistent with the appropriate state 
coastal zone management plan. Plans are available from the local 
coastal zone management agency.
    (7) Floodplains (Executive Order 11988; Flood Disaster Protection 
Act(42 U.S.C. 4001-4128). No new construction activities or projects 
shall be located in the mapped 500 year floodplain or in the 100-year 
floodplain according to the best available data of the Federal 
Emergency Management Agency (FEMA), which may be Advisory Base Flood 
Elevations (ABFEs), Preliminary Flood Insurance Rate Maps (P-FIRMs), or 
Flood Insurance Rate Maps (FIRM). Existing structures may be assisted 
in these areas, except for sites located in coastal high hazard areas 
(V Zones) or regulatory floodways, but must meet the following 
requirements:
    (i) The existing structures must be flood-proofed or must have the 
lowest

[[Page 60624]]

habitable floor and utilities elevated above both the 500-year 
floodplain and the 100-year floodplain according to FEMA's best 
available data.
    (ii) The project must have an early warning system and evacuation 
plan that includes evacuation routing to areas outside of the 
applicable floodplains.
    (iii) Project structures in the 100-year floodplain must obtain 
flood insurance under the National Flood Insurance Program.
    (8) Wetlands (Executive Order 11990). No new construction shall be 
performed in wetlands. No rehabilitation of existing properties shall 
be allowed that expands the footprint such that additional wetlands are 
destroyed. New construction includes draining, dredging, channelizing, 
filling, diking, impounding, and related grading activities. The term 
wetland is intended to be consistent with the definition used by the 
U.S. Fish and Wildlife Service in Classification of Wetlands and Deep 
Water Habitats of the United States (Cowardin, et al., 1977). This 
definition includes those wetland areas separated from their natural 
supply of water as a result of activities such as the construction of 
structural flood protection methods or solid-fill road beds and 
activities such as mineral extraction and navigation improvements.
    (9) Siting of Projects and Activities Near Hazardous Operations 
Handling Conventional Fuels or Chemicals of an Explosive or Flammable 
Nature (24 CFR part 51, subpart C). Unshielded or unprotected new 
construction sites shall be allowed only if they meet the standards of 
blast overpressure (0.5psi-buildings and outdoor unprotected 
facilities) and thermal radiation (450 BTU/ft\2\--hr--people, 10,000 
BTU/ft\2\--hr--buildings) from facilities that store, handle, or 
process substances of an explosive or fire-prone nature in stationary, 
above ground tanks/containers.
    (10) Endangered Species Act of 1973 (16 U.S.C. 1531 et seq). New 
construction shall not be permitted if it would result in a taking of 
endangered plant or animal species as listed under the Endangered 
Species Act of 1973. Taking includes not only direct harm and killing 
but also modification of habitat.
    (11) Farmland Protection (7 USC 4201 et seq). New construction 
shall not result in the conversion of unique, prime, or otherwise 
productive agricultural properties to urban uses.
    (12) Sole Source Aquifers (Section 1424(e) of the Safe Drinking 
Water Act of 1974 (42 U.S.C. 201, 300 et seq., and 21 U.S.C. 349)). Any 
new construction activities and projects located in federally 
designated sole source aquifer areas (SSAs) shall require consultation 
and review with the U.S. Environmental Protection Agency (EPA).
    (13) The Coastal Barrier Resources Act of 1982 (16 U.S.C. 3501). 
Eligible applicants must comply with the Coastal Barrier Resources Act, 
which prohibits activities or projects in Coastal Barrier Resource 
System (CBRS) units.
    (f) Flood Insurance (Flood Disaster Protection Act of 1973 (42 
U.S.C. 4106)). Project structures in the 100-year floodplain must 
obtain flood insurance under the National Flood Insurance Program. No 
activities or projects located within the 100-year floodplain may be 
assisted in a community that is not participating in or that has been 
suspended from the National Flood Insurance Program.
Subpart H--Senior Preservation Rental Assistance
Sec.
891.900 Applicability.
891.902 Definitions.
891.904 Contract execution.
891.905 Project rents.
891.906 Contract term.
891.908 Distributions and replacement reserves.
891.910 Leasing to eligible families.
891.912 Applicability of other part 891 regulations.
891.914 Default by owner.
891.916 SPRAC extension or renewal.
891.918 Denial of admission, termination of tenancy, and 
modification of the lease.
891.920 Security deposits.
891.922 Labor standards.


Sec.  891.900  Applicability.

    The requirements set forth in this subpart H apply only in 
connection with a prepayment plan for a project approved by HUD under 
Sec. Sec.  891.530 or 891.700 to prevent displacement of elderly 
residents of the project in the case of refinancing or 
recapitalization, and the project is provided project-based rental 
assistance under a senior preservation rental assistance contract, as 
defined under Sec.  891.902.


Sec.  891.902  Definitions.

    In addition to the applicable definitions in Sec. Sec.  891.105, 
891.205, and 891.505, the following definitions are applicable to 
senior preservation rental assistance contracts as provided in this 
subpart:
    Family(ies) means an Elderly Family as defined by 24 CFR 891.505, 
and may include a ``Disabled Family,'' as defined in 24 CFR 891.505, 
pursuant to the terms and conditions of an applicant's original Section 
202 loan.
    Low-income family has the same meaning as defined in 24 CFR 5.603.
    Operational Cost Adjustment Factor (OCAF) has the same meaning as 
defined in 24 CFR 402.2(c), and as otherwise prescribed by HUD.
    Senior preservation rental assistance contract (SPRAC) means a 
contract for project-based rental assistance made available to a 
private nonprofit organization owner for a term of at least 20 years, 
subject to annual appropriations, and governed by the regulations of 
this subpart. Such contract is subject to a use agreement having a term 
of the SPRAC or such term as is required by the new financing, 
whichever is longer.
    Very low-income family has the same meaning as defined in 24 CFR 
5.603.
    Utility Allowance has the same meaning as defined in 24 CFR 5.603.


Sec.  891.904  Contract execution.

    (a) In general. A SPRAC sets forth the rights and duties of the 
owner and HUD with respect to the project and the senior preservation 
rental assistance payments.
    (b) SPRAC execution. (1) Upon the closing of the refinancing for 
the project, and following the approval of the prepayment of the 
Section 202 Direct Loan, the owner and HUD must execute a SPRAC on a 
form prescribed by HUD.
    (2) The effective date of the SPRAC is the date of closing of the 
refinancing.
    (c) Payments to owners. The eligible SPRAC payments consist of the 
following:
    (1) Assistance to eligible families leasing assisted units. The 
amount of the housing assistance payment (HAP) made to the owner for an 
assisted unit leased to an eligible family is equal to the difference 
between the contract rent for the unit and the tenant rent payable by 
the family.
    (2) Vacancy payments. SPRAC payments can be made to owners for 
vacant assisted units. The amount of and conditions for vacancy 
payments are described in Sec.  891.912(k).
    (i) Vacancy payments only apply to units that were initially 
occupied at the time the SPRAC was executed, in the case that those 
units are later unoccupied during the term of the contract. The unit 
must be in a decent, safe, and sanitary condition during the vacancy 
period for which payment is claimed.
    (ii) SPRAC payments are made monthly by HUD upon proper requisition 
by the owner. If a SPRAC unit remains vacant for more than 60 
consecutive days upon tenant turnover, the owner shall not be eligible 
to receive further SPRAC payments for that SPRAC Unit.

[[Page 60625]]

    (d) Utility reimbursement. As applicable, a utility reimbursement 
will be paid to a family occupying an assisted unit if the utility 
allowance (for tenant-paid utilities) exceeds the amount of the total 
tenant payment (see 24 CFR 5.628):
    (1) The SPRAC will provide that the owner must make this payment on 
behalf of HUD. Funds will be paid to the owner in trust solely for the 
purpose of making the additional payment.
    (2) The owner may pay the utility reimbursement jointly to the 
family and the utility company, or if the family and utility company 
consent, directly to the utility company.


Sec.  891.905  Project rents.

    (a) The initial project rents shall not exceed the lesser of 
either:
    (1) Comparable market rents for the market area as specified under 
the recipient's rent comparability study (RCS), and approved by HUD; or
    (2) A reasonable percentage of the fair market rents, as defined by 
HUD.
    (b) After initial rent setting, existing rents shall be adjusted by 
an Operating Cost Adjustment Factor (OCAF), as defined in Sec.  
402.2(c), on the anniversary of each executed SPRAC. Section 514(e)(2) 
of Multifamily Assisted Housing Reform and Affordability Act (MAHRA) 
(42 U.S.C. 1437f note) requires HUD to establish guidelines for rent 
adjustments based on an OCAF. HUD has therefore developed a single 
factor to be applied uniformly to all projects utilizing OCAFs as the 
method by which renewal rents are established or adjusted. Under this 
subpart, the contract administrator shall conduct annual project rent 
adjustments according to the OCAF methodology prescribed under this 
notice.
    (c) Comparability adjustments. (1) At the expiration of each 5-year 
period of the SPRAC, the contract administrator shall compare existing 
contract rents with comparable market rents for the market area. At 
such contract anniversary, the contract administrator will make any 
adjustment necessary in the monthly contract rents necessary to set the 
contract rents for all unit sizes at comparable market rents. Such 
adjustments may result in a negative adjustment (decrease) or positive 
adjustment (increase) of the contract rents for one or more unit sizes.
    (2) To assist in the redetermination of contract rents, the 
contract administrator may require that the owner submit to the 
contract administrator a rent comparability study prepared at the 
owner's expense.


Sec.  891.906  Contract term.

    (a) The minimum term of the SPRAC for assisted units under this 
subpart shall be 20 years.
    (b) Any projects for which a SPRAC is provided shall be subject to 
a use agreement to ensure continued project affordability having a term 
of the longer of the term of the SPRAC, or such term as is required by 
the new financing.


Sec.  891.908  Distributions and replacement reserves.

    (a) Limitations on distributions. (1) Nonprofit owners are not 
entitled to distributions of project funds.
    (2) For the life of the SPRAC, project funds may only be 
distributed to profit-motivated owners at the end of each fiscal year 
of project operation following the effective date of the SPRAC after 
all project expenses have been paid, or funds have been set aside for 
payment, and all reserve requirements have been met. The first year's 
distribution may not be made until cost certification, where 
applicable, is completed. Distributions may not exceed the following 
maximum returns:
    (i) For projects receiving SPRAC assistance, the first year's 
distribution will be limited to 6 percent on equity resulting from the 
refinance of the property's mortgage for purposes of Section 202 
prepayment and recapitalization. HUD may provide for increases in 
subsequent years' distributions on an annual or other basis, and in 
accordance with all HUD and other Federal regulations and requirements. 
Any such adjustment will be made by notice in the Federal Register.
    (ii) If the Section 202 project is/will be owned by a for-profit 
limited partnership (meeting the statutory requirements in AHEO, as 
amended) and the Section 202 project has a Section 8 HAP contract that 
imposes no percentage cap on distributions, then, upon refinance/
prepayment, the for-profit limited partnership may continue receiving 
the benefit of not having a percentage cap on distributions.
    (3) Any short-fall in return may be made up from surplus project 
funds in future years.
    (4) If HUD determines at any time throughout the term of the SPRAC 
that project funds exceed the amount needed for project operations, 
reserve requirements, and distributions permitted under this subpart, 
HUD may require the owner to deposit these residual receipts in an 
account to be used to reduce SPRAC payments or for other project 
purposes. Upon termination of the SPRAC, any excess funds that remain 
in this residual receipts account must be remitted to HUD.
    (5) In the case of HUD-insured projects, the provisions of this 
section will apply instead of the otherwise applicable mortgage 
insurance program regulations, except in the case of small, partially 
assisted, or previously HUD-owned, insured projects that are and shall 
remain subject to the applicable mortgage insurance regulations.
    (b) Replacement reserves account. (1) A replacement reserve must be 
established and maintained in an interest-bearing account to aid in 
funding extraordinary maintenance and repair and replacement of capital 
items.
    (i) Under this subpart project owners will deposit an amount 
equivalent to 0.006 of the cost of total structures, including main 
buildings, accessory buildings, garages, and other buildings, or any 
higher rate as required by HUD from time to time, in the replacement 
reserve, annually. This amount will be adjusted each year by the amount 
of the applicable OCAF, as determined by HUD.
    (ii) The reserve must be built up to and maintained at a level 
determined by HUD to be sufficient to meet projected requirements. 
Should the reserve achieve that level, the rate of deposit to the 
reserve may be reduced with the approval of HUD.
    (iii) All earnings including interest on the reserve must be added 
to the reserve.
    (iv) Funds will be held by the mortgagee, and may be drawn from the 
reserve and used only in accordance with HUD guidelines and with the 
approval of, or as directed by, HUD.
    (2) In the case of HUD-insured projects, the provisions of this 
section will apply instead of the otherwise applicable mortgage 
insurance provisions.


Sec.  891.910  Leasing to eligible families.

    (a) Availability of assisted units for occupancy by eligible 
families. (1) Eligible families must meet the income guidelines 
established for a low-income family in accordance with title II of the 
Section 202 Act of 2010. In the renting of the SPRAC units, the owner 
must comply with the income eligibility requirements of the SPRAC 
program. See Sec.  891.903 for definitions of Low-Income and Very Low-
Income.
    (2) During the term of the SPRAC, an owner shall make available for 
occupancy by eligible families the total number of units for which 
assistance is committed under the SPRAC. For purposes of this section, 
making units available for occupancy by eligible families means that 
the owner:

[[Page 60626]]

    (i) Is conducting marketing in accordance with Sec.  891.912(c);
    (ii) Has leased or is making good faith efforts to lease the units 
to eligible families, including taking all feasible actions to fill 
vacancies by renting to such families; and
    (iii) Has not rejected any eligible applicant family, except for 
reasons acceptable to HUD.
    (3) If the owner is temporarily unable to lease to eligible 
families all units for which assistance is committed under the SPRAC, 
one or more units may, with the prior approval of HUD, be leased to 
otherwise eligible families that do not meet the income eligibility 
requirements under paragraph (a)(1) of this section. Those over-income 
families must pay 30 percent of their income towards rent, up to the 
contract rent level.
    (4) Failure on the part of the owner to comply with the 
requirements under this section is a violation of the SPRAC and grounds 
for all available legal remedies, including specific performance of the 
SPRAC, suspension or debarment from HUD programs, and reduction of the 
number of units under the SPRAC as set forth in paragraph (b) of this 
section.
    (b) Reduction of number of units covered by the SPRAC. HUD may 
reduce the number of units covered by the SPRAC to the number of units 
available for occupancy by eligible families if:
    (1) The owner fails to comply with the requirements of paragraph 
(a) of this section; or
    (2) Notwithstanding any prior approval by HUD, HUD determines that 
the inability to lease units to eligible families is not a temporary 
issue.
    (c) Restoration. An amendment to the SPRAC will be authorized by 
HUD to provide for the subsequent restoration of the reduction made 
under paragraph (b) of this section if:
    (1) HUD determines that the restoration is justified by demand;
    (2) The owner has a record of compliance with the owner's 
obligations under the SPRAC; and
    (3) Contract and budget authority is available.
    (d) Occupancy by nonelderly or nondisabled families. (1) HUD may 
permit SPRAC units in the project to be leased to nonelderly or 
nondisabled families if:
    (i) The owner has made reasonable efforts to lease assisted and 
unassisted units to eligible families;
    (ii) The owner has been granted HUD approval under paragraph (a) of 
this section; and
    (iii) The owner is temporarily unable to achieve or maintain a 
level of occupancy sufficient to prevent financial default and 
foreclosure.
    (2) HUD approval under paragraph (d)(1) of this section will be of 
limited duration. If there is a HUD-insured mortgage on the project, 
HUD may impose terms and conditions for this approval that are 
consistent with the program objectives, and necessary to protect its 
interest under the FHA-insured loan.
    (e) HUD's regulations in 24 CFR part 5, subpart L, apply to the 
admission and occupancy of eligible families in cases where there is 
incident of, or claimed to be incident of, or criminal activity related 
to, domestic violence, dating violence, or stalking.


Sec.  891.912  Applicability of other Part 891 regulations.

    (a) SPRAC administration. HUD is responsible for the administration 
of the SPRAC.
    (b) Notice upon SPRAC expiration. The owner is responsible for all 
of the HAP notice requirements under Sec.  891.590.
    (c) Responsibilities of the owner. The owner is responsible for all 
requirements that pertain to responsibilities of the borrower under 
Sec.  891.600, except for Sec.  891.600(a)(1) and (a)(3).
    (d) Selection and admission of tenants. The owner must comply with 
the requirements under Sec.  891.610, which pertain to selection and 
admission of tenants, with the exception of Sec.  891.610(c). The 
applicant must meet the low-income guidelines under section 8 of the 
United States Housing Act of 1937 in order to be eligible under this 
subpart.
    (e) Obligations of the family. The obligations of the family are 
provided under Sec.  891.415.
    (f) Overcrowded and underoccupied units. The owner must comply with 
the requirements under Sec.  891.650, except Sec.  891.650(b) does not 
apply.
    (g) Lease requirements. The lease requirements are provided in 
Sec.  891.425.
    (h) Adjustment of rents. The owner must comply with the 
requirements under Sec.  891.6.905(b).
    (i) Adjustment of utility allowances. In connection with 
adjustments of contract rents as provided in Sec.  891.640(a), the 
requirements for the adjustment of utility allowances provided in Sec.  
891.440 apply.
    (j) Conditions for receipt of vacancy payments for assisted units. 
The owner must comply with the requirements under Sec.  891.650, except 
Sec.  891.650(b) does not apply.


Sec.  891.914  Default by owner.

    (a) If HUD determines that the owner is in default under the SPRAC, 
HUD will notify the owner in writing of the actions required to cure 
the default and of the remedies that must be satisfied, including an 
action for specific performance under the SPRAC, and a reduction or 
suspension of senior preservation rental assistance payments and 
recovery of overpayments or inappropriate payments, where appropriate; 
and
    (b) If HUD determines that the owner is in default of any of the 
terms and requirements of the SPRAC, HUD will notify the owner in 
writing of the nature of the default, the actions required to cure the 
default, and the time within which the default must be cured. The 
notice will also identify the remedies that HUD may impose if the 
default is not cured within the applicable time. These may include 
termination of the SPRAC, reduction or suspension of payments under the 
SPRAC, and recovery of overpayments or inappropriate payments, where 
appropriate.


Sec.  891.916  SPRAC extension or renewal.

    (a) A Section 202 owner shall agree in writing that upon expiration 
of each annual increment of a given SPRAC, the owner shall accept each 
offer of annual increment renewal during the period of the Use 
Agreement.
    (1) Each such offer of a renewal and the renewals themselves are 
subject to the availability of appropriations and further subject to 
the requirements of this part.
    (2) The number of assisted units under the renewed SPRAC must equal 
the number of assisted units under the original SPRAC, subject to the 
availability of appropriations, except that HUD and the owner may agree 
to reduce the number of assisted units by the number of assisted units 
that are not occupied by eligible families at the time of the renewal.
    (3) With respect to Section 202 Direct Loan prepayments with 
approved SPRAC units, each owner shall agree to enter into a Section 
202 Use Agreement, which will expire at either 20 years beyond the 
maturity date of the original Section 202 Direct Loan or, the term of 
new financing, whichever is longer.
    (4) Upon expiration of the term of the SPRAC and at HUD's sole 
discretion, the term of the SPRAC may be renewed or extended (subject 
to available funds) pursuant to the terms and conditions of the SPRAC 
and the Use Agreement.
    (5) Each owner shall agree in writing to operate the assisted 
Section 202 project for the full term specified under

[[Page 60627]]

the executed SPRAC and for each renewal term in accordance with all 
statutory, regulatory, and administrative requirements of the SPRAC 
program.
    (b) The number of assisted units under the extended or renewed 
SPRAC must equal the number of assisted units under the original SPRAC, 
subject to the availability of appropriations, except that HUD and the 
owner may agree to reduce the number of assisted units by the number of 
assisted units that are not occupied by eligible families at the time 
of the extension or renewal.


Sec.  891.918  Denial of admission, termination of tenancy, and 
modification of the lease.

    (a) HUD's regulations in 24 CFR part 5, subpart I, apply to 
projects previously financed with Section 202 direct loans.
    (b) HUD's regulations in 24 CFR part 247 apply to all decisions by 
an owner to terminate the tenancy or modify the lease of a family 
residing in a unit.
    (c) In actions or potential actions to terminate tenancy, the owner 
must follow HUD's regulations in 24 CFR part 5, subpart L, in all cases 
where domestic violence, dating violence, stalking, or criminal 
activity directly related to domestic violence, dating violence, or 
stalking is involved or claimed to be involved.


Sec.  891.920  Security deposits.

    (a) The general requirements for security deposits on assisted 
units are provided under Sec.  891.435, with additional requirements 
under Sec.  891.635.
    (b) For purposes of this subpart, additional requirements apply:
    (1) The owner must maintain a record of the amount in the 
segregated interest-bearing account that is attributable to each family 
in residence in the project.
    (2) Annually for all families, and when computing the amount 
available for disbursement under Sec.  891.435(b)(3), the owner must 
allocate to the family's balance the interest accrued on the balance 
during the year.
    (3) Unless prohibited by state or local law, the owner may deduct 
for the family, from the accrued interest for the year, the 
administrative cost of computing the allocation to the family's 
balance. The amount of the administrative cost adjustment must not 
exceed the accrued interest allocated to the family's balance for the 
year.


Sec.  891.922  Labor standards.

    (a) All laborers and mechanics (other than volunteers under the 
conditions set out in 24 CFR part 70) employed by contractors and 
subcontractors in construction, rehabilitation, or repair performed in 
connection with the provision of assistance under this subpart to nine 
or more units of housing in a project where the total cost of such 
repair, replacement, or capital improvement is in excess of $500,000 
shall be paid wages at rates not less than those prevailing in the 
locality, as determined by the Secretary of Labor in accordance with 
the Davis-Bacon Act (40 U.S.C. 3141 et seq.).
    (b) Contracts involving employment of laborers and mechanics shall 
be subject to the provisions of the Contract Work Hours and Safety 
Standards Act (40 U.S.C. 3701 et seq.).
    (c) Sponsors, owners, contractors, and subcontractors must comply 
with related rules, regulations, and requirements as directed by HUD.
0
42. A new part 892 is added to read as follows:

PART 892--SERVICE COORDINATOR IN MULTIFAMILY HOUSING AND ASSISTED 
LIVING CONVERSION PROGRAMS

Subpart A--General Program Requirements
Sec.
892.100 Applicability and scope.
892.105 Definitions.
892.110 Eligible funding recipients.
892.115 Nondiscrimination and equal opportunity requirements.
892.120 Environmental requirements.
Subpart B--Service Coordinator in Multifamily Housing Program
892.200 Purpose and applicability.
892.205 Definitions.
892.210 Sources of funding.
892.215 Application and selection.
892.220 Duties.
892.225 Qualifications.
892.230 Form of employment or retention.
892.235 Training.
892.240 Administrative requirements.
892.245 Confidentiality.
892.250 Program costs.
892.255 Services for low-income elderly or persons with 
disabilities.
892.260 Limitations.
892.265 Sanctions.
Subpart C--Assisted Living Conversion Program
892.300 Purpose and applicability.
892.305 Definitions.
892.310 Other Federal requirements.
892.315 Additional project eligibility.
892.320 Notice of funding availability.
892.325 Requirements for services.
892.330 Section 8 project-based assistance.
892.335 Vacancy payment.

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, and 3535(d).

Subpart A--General Program Requirements


Sec.  892.100  Applicability and scope.

    The requirements set forth in this subpart A apply to the Service 
Coordinator in Multifamily Housing program, as authorized under 
sections 671, 672, 674, 676, and 677 of the Housing and Community 
Development Act of 1992 (Pub. L. 102-550), as amended by section 851 of 
the AHEO (Pub. L. 106-569); and to the Assisted Living Conversion 
program, as authorized under section 202b of the Housing Act of 1959 
(12 U.S.C. 1701q-2).


Sec.  892.105  Definitions.

    The following definitions apply, as appropriate, throughout this 
part. Other terms with definitions unique to the Service Coordinator in 
Multifamily Housing and Assisted Living Conversion programs are defined 
in Sec. Sec.  892.205 and 892.305, as applicable.
    Activities of daily living (ADLs) shall have the same meaning as 
provided under Sec.  891.205.
    Elderly person means a person who is at least 62 years of age.
    Eligible housing project means:
    (1) Housing for which project-based assistance is provided under 
section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f);
    (2) Housing that is assisted under section 202 of the Housing Act 
of 1959 (12 U.S.C. 1701q);
    (3) Housing that is assisted under section 202 of the Housing Act 
of 1959, as such section existed before the enactment of the National 
Affordable Housing Act (Public Law 101-625);
    (4) Housing financed by a loan or mortgage insured under section 
221(d)(3) of the National Housing Act (12 U.S.C. 1715) that bears 
interest at a rate determined under section 221(d)(5) of such Act;
    (5) Section 515 rural housing projects, as authorized under section 
515 of the Housing Act of 1949 (42 U.S.C. 1485), receiving Section 8 
rental assistance;
    (6) Housing insured, assisted, or held by the Secretary, a state, 
or a state agency under section 236 of the National Housing Act (12 
U.S.C. 1715z-1); or
    (7) Housing constructed or substantially rehabilitated pursuant to 
assistance provided under section 8(b)(2) of the United States Housing 
Act of 1937 (42 U.S.C. 1437f), as in effect before October 1, 1983, 
that is assisted under a contract for assistance under such section.
    Frail elderly person means an elderly person who is unable to 
perform at least three of the activities of daily living described in 
this subpart.
    Functional limitations shall have the same meaning as provided 
under Sec.  891.205.
    Housing assistance means, with respect to federally assisted 
housing as

[[Page 60628]]

provided under this part, the grant, contribution, capital advance, 
loan, mortgage insurance, or other assistance provided for an eligible 
housing project, as defined under this section. This term also includes 
any assistance provided for the housing by HUD, including any rental 
assistance for low-income occupants.
    Instrumental activities of daily living (IADLs). Under this part, 
the definition of instrumental activities of daily living has the same 
meaning as in Sec.  891.205.
    Low-income and very low-income family shall have the same meanings 
as provided in section 3(b)(2) of the United States Housing Act of 1937 
(42 U.S.C. 1437a).
    Owner shall have the same meaning as provided under Sec.  891.205.
    Person with disabilities shall have the same meaning as provided 
under Sec.  891.305.
    Private nonprofit organization shall have the same meaning as 
provided under Sec.  891.205.
    Retain means service coordination performed by a partnering agency 
that results in a reduction to the project's cost to hire or contract a 
service coordinator.
    Service coordinator means a social service staff person hired, 
contracted, or retained by the assisted housing owner or its management 
company, who assists residents in identifying, locating, and acquiring 
supportive services necessary for elderly persons and nonelderly 
persons with disabilities to live independently and age in place.
    Supportive services mean health-related services, mental health 
services, services for nonmedical counseling, meals, transportation, 
ADL services, (eating, bathing, grooming, dressing, transferring, and 
other such activities as HUD deems essential for maintaining 
independent living), housekeeping, chore assistance, safety, group and 
socialization activities, assistance with medications (in accordance 
with any applicable state laws), case management, personal emergency 
response, and other appropriate services that are designed to prevent 
hospitalization or institutionalization and permit elderly residents to 
age in place and live independently in a residential setting. The 
supportive services may be provided through any agency of the Federal, 
State or Local Government, or other public or private department, 
agency or organization.
    Service expenses means those costs of providing supportive services 
necessary to permit residents to live independently, age in place, and 
to prevent hospitalization or institutionalization.
    Vicinity of the housing project means the area close enough to the 
eligible housing project to allow for easy access by individuals to the 
service coordinator's office space, and by service coordinators to 
individuals' residences.


Sec.  892.110  Eligible funding recipients.

    Recipients who receive assistance under the Service Coordinator in 
Multifamily Housing and Assisted Living programs must:
    (a) Own an eligible housing project, as defined in Sec.  892.105;
    (b) Comply with any regulatory agreement, HAP contract, or any 
other HUD grant or contract, where applicable;
    (c) Be current in mortgage payments for any FHA-insured loan or 
Section 202 direct loan, unless the entity has signed a work-out 
agreement for the delinquent loan and is current on and in compliance 
with the workout agreement, as applicable; and
    (d) Meet the Physical Condition Standards in 24 CFR part 5, subpart 
G, as evidenced by a satisfactory score in the most recent final 
physical inspection report or by an approved work-out plan for housing 
projects that received a failing score.


Sec.  892.115  Nondiscrimination and equal opportunity requirements.

    (a) In general. Recipients under this part shall comply with all 
applicable nondiscrimination and equal opportunity requirements, 
including HUD's generally applicable nondiscrimination and equal 
opportunity requirements at 24 CFR 5.105(a). This includes, but is not 
limited to, the Fair Housing Act and its implementing regulations at 24 
CFR part 100; title VI of the Civil Rights Act of 1964 and its 
implementing regulations at 24 CFR part 1; section 504 of the 
Rehabilitation Act of 1973 and its implementing regulations at 24 CFR 
part 8; and titles II and III of the Americans with Disabilities Act 
and their implementing regulations at 28 CFR parts 35 and 36.
    (b) Affirmatively furthering fair housing. Recipients under this 
part shall affirmatively further fair housing in their use of funds 
under this part. Specific activities will be detailed in the individual 
program NOFAs.
    (c) Most integrated setting appropriate. Recipients under this part 
shall ensure that programs or activities under this part are 
administered in the most integrated setting appropriate to the needs of 
qualified individuals with disabilities. The most integrated setting is 
defined as a setting that enables individuals with disabilities to 
interact with nondisabled persons to the fullest extent possible. See 
the Home and Community-Based Services regulations of the U.S. 
Department of Health and Human Services at 42 U.S.C. part 441, the 
regulations pertaining to nondiscrimination on the basis of disability 
in HUD programs and activities at 24 CFR 8(d), and the regulations of 
the U.S. Department of Justice pertaining to nondiscrimination on the 
basis of disability in state and local government services at 28 CFR 
35.130(d).


Sec.  892.120  Environmental requirements.

    (a) The National Environmental Policy Act of 1969, and HUD's 
implementing regulations at 24 CFR part 50, including the related 
authorities described in 24 CFR 50.4, apply to this part.
    (b) If funding under subpart B will be used to cover the cost of 
any activities that are not exempt from environmental review 
requirements, such as acquisition, leasing, construction, or building 
rehabilitation, HUD must perform an environmental review to the extent 
required by 24 CFR part 50, prior to grant award.

Subpart B--Service Coordinator in Multifamily Housing Program


Sec.  892.200  Purpose and applicability.

    (a) Purpose. The Service Coordinator in Multifamily Housing program 
allows owners of eligible projects to assist elderly persons and 
nonelderly persons with disabilities living in HUD-assisted housing and 
in the vicinity of the housing project to obtain needed supportive 
services from the community and to continue living as independently as 
possible in their homes. HUD makes funds available to employ and 
support a service coordinator, by awarding grants and by approving 
owners' requests to use certain classes of project funds to pay for the 
costs of providing a service coordinator.
    (b) Applicability. The requirements set forth in this subpart B 
apply only to the Service Coordinator in Multifamily Housing program, 
as authorized under sections 671, 672, 674, 676, and 677 of the Housing 
and Community Development Act of 1992 (Pub. L. 102-550).


Sec.  892.205  Definitions.

    In addition to the definitions under Sec.  892.105, the following 
definitions apply to this subpart:
    At-risk elderly person means an elderly person who is unable to 
perform one or two of the ADLs, as defined under Sec.  892.105.

[[Page 60629]]

    Available funds means funds for supportive services, as approved by 
HUD, and which must not be used to address critical property needs.
    Eligible project includes eligible housing projects as defined 
under Sec.  892.105 and means a project that:
    (1) Has no available project funds as defined under Sec.  892.105 
to pay for a service coordinator; and
    (2) Is designed or designated for the elderly or persons with 
disabilities and continues to operate as such. This includes any 
building within a mixed-use development that was designed for occupancy 
by elderly persons or persons with disabilities at its inception and 
continues to operate as such, or consistent with title VI, subtitle D, 
of the Housing and Community Development Act of 1992 (Public Law 102-
550). If a project was not so designed at its inception for occupancy 
by elderly persons or persons with disabilities, an eligible project 
includes a property in which the owner gives preferences in tenant 
selection (with HUD approval) to eligible elderly persons or nonelderly 
persons with disabilities for all units in that property.


Sec.  892.210  Sources of funding.

    Owners of eligible housing projects may request the use of or apply 
for the following types of funding to cover service coordinator program 
expenses:
    (a) Project rent and other income. Service coordinator expenses, in 
accordance with Sec.  891.250(b), is an eligible project expense. This 
includes funding provided through:
    (1) Section 8 of the United States Housing Act of 1937 (42 U.S.C. 
1437f);
    (2) PRACs, pursuant to section 802 of the National Affordable 
Housing Act (42 U.S.C. 8011); and
    (3) Income generated from programs in paragraphs (a)(1) and (2) of 
this section or from tenant rental payments that exceed operating 
expenses and that may be used only upon approval from HUD.
    (b) Multifamily service coordinator grants, subject to 
appropriations.


Sec.  892.215  Application and selection.

    HUD will provide through a NOFA the form and manner of applications 
for grants under this subpart and for selection of applicants to 
receive such grants.


Sec.  892.220  Duties.

    (a) In general. Service coordinators must perform the following 
duties:
    (1) Perform an initial needs screening, with subsequent annual 
reviews, to identify service needs. If a comprehensive needs assessment 
is required, service coordinators must refer tenant to a qualified 
professional;
    (2) Maintain detailed case files on each resident served;
    (3) Refer and link the residents to supportive services available 
in and provided by trusted partners/resources in the general community. 
Such services may include, but are not limited to, case management, 
personal assistance, homemaker services, meals-on-wheels/congregate 
meal provision, transportation, counseling, visiting nurse, preventive 
health screening/wellness training, and legal advocacy;
    (4) Educate residents on matters such as, but not limited to, 
service availability, application procedures, client rights, etc.;
    (5) Establish linkages with agencies such as, but not limited to, a 
local area agency on aging (AAA)/Aging and Disability Resource Center 
(ADRC) and home and community-based service providers. Perform market 
analysis to determine/develop the best ``deals'' in service pricing, to 
assure individualized, flexible, and creative services for the involved 
resident. Provide advocacy as appropriate;
    (6) Provide case management when such service is not available 
through the general community. This might include evaluation of health, 
psychological and social needs, development of an individually tailored 
case plan for services, periodic reassessment of the residents' 
situations and needs, and assistance identifying, obtaining, and 
completing appropriate documentation in order to secure needed 
services;
    (7) Monitor the ongoing provision of services from community 
agencies. Manage the provision of supportive services where 
appropriate;
    (8) Help the residents build informal support networks with other 
residents, family, and friends;
    (9) Work and consult with tenant organizations and resident 
management corporations. Provide training to the property's residents 
in the obligations of tenancy or coordinate such training;
    (10) Create a directory of service providers for use by both 
housing staff and residents;
    (11) Educate and train other staff of the management team on issues 
related to aging-in-place and service coordination, to help them to 
better work with and assist the residents;
    (12) Provide service coordination to low-income elderly individuals 
or nonelderly persons with disabilities living in the vicinity of an 
eligible property. Community residents should come to your housing site 
to meet with and receive service from the service coordinator, but you 
must make reasonable accommodations for those individuals with 
disabilities unable to travel to the housing site, and have the option 
to make accommodations for other community residents;
    (13) Affirmatively market the service coordinator's services to 
residents of the property and surrounding community who are least 
likely to inquire; find counselors to help tenants with counseling for 
mobility and fair housing choice.
    (b) Prohibited duties. Service coordinators must not perform the 
following activities:
    (1) Act as a recreational or activities director; or
    (2) Provide supportive services directly.


Sec.  892.225  Qualifications.

    Service coordinators must possess the following qualifications:
    (a) A bachelor's degree;
    (b) Experience in social service delivery for the elderly and 
persons with disabilities;
    (c) Demonstrated working knowledge of supportive services and other 
resources available for the elderly and persons with disabilities in 
the area served by the eligible housing project; and
    (d) Demonstrated ability to advocate, organize, problem-solve, and 
provide results for the elderly and persons with disabilities.
    (e) HUD may allow for the substituting of a bachelor's degree based 
on the extent of qualifications in paragraphs (b) through (d) of this 
section and/or other qualifications. The extent of qualifications will 
be determined by HUD through a NOFA.


Sec.  892.230  Form of employment or retention.

    An owner may directly employ a service coordinator or may procure 
by contract the services of a service coordinator. Owners may also 
utilize a service coordinator whose expenses are supported by external 
sources of funding.


Sec.  892.235  Training.

    Service coordinators must receive and document training, at 
minimum, in the following subject areas:
    (a) The aging process;
    (b) Elder and disability services;
    (c) Eligibility for and procedures of Federal and applicable state 
entitlement programs;
    (d) Legal liability issues relating to providing service 
coordination;
    (e) Drug and alcohol use and abuse by the elderly; and
    (f) Mental health issues.

[[Page 60630]]

Sec.  892.240  Administrative requirements.

    (a) Owners must provide on-site private office space for the 
service coordinator to allow for confidential meetings with residents. 
Office space must be accessible to persons with disabilities and meet 
all Federal accessibility standards, including section 504 of the 
Rehabilitation Act of 1973, 24 CFR part 8, and titles II and III of the 
Americans with Disabilities Act of 1990, as applicable.
    (b) Resident files must be kept in a secured location and only be 
accessible to the service coordinator as required under Sec.  892.245, 
unless the residents provide signed consent otherwise. Resident files 
must include documentation that demonstrates the resident's supportive 
service needs, referrals for needed supportive services (both short- 
and long-term) and follow-up from the service coordinator on the types 
and amounts of services residents receive, and any aging-in-place 
statistics or information.
    (c) As directed, owners must submit to HUD performance reports 
completed by the service coordinator and financial reports detailing 
program expenses.


Sec.  892.245  Confidentiality.

    (a) Service coordinators must store in a secure manner all files 
containing information related to the provision of supportive services 
to residents served by the service coordinator. Files must be 
accessible only to the service coordinator.
    (1) A service coordinator may not disclose to any person any 
individually identifiable information that relates to the provision of 
supportive services to a resident, unless and only to the extent the 
resident to whom the information relates has knowingly consented. Any 
such consent must be in writing and be signed by the resident, and must 
clearly identify the parties to whom the information may be disclosed, 
as well as the scope and purpose of the disclosure.
    (2) In the absence of an applicable consent to disclosure in 
accordance with this section, service coordinators may nonetheless 
disclose individually identifiable information that relates to the 
provision of supportive services to a resident, to the extent necessary 
to protect the safety or security of a resident, housing project staff, 
or the housing project.
    (b) These policies must be consistent with maintaining 
confidentiality of information related to any individual as required by 
the Privacy Act of 1974 (5 U.S.C. 552a).


Sec.  892.250  Program costs.

    (a) In general. Funds provided under Sec.  892.210 may be used to 
cover the costs of employing or otherwise retaining the services of one 
or more service coordinators.
    (b) Eligible costs. (1) Eligible program expenses include:
    (i) Salary and fringe benefits;
    (ii) Training;
    (iii) Creating private office space;
    (iv) Purchase of office furniture and equipment; supplies and 
materials; and computer hardware, software, and Internet service; and
    (v) Other related administrative expenses (both direct and indirect 
costs) approved by HUD.
    (2) Eligible costs must be reasonable, necessary, and recognized as 
expenditures in compliance with the uniform government-wide cost 
principles and other grant requirements found in 24 CFR parts 84 and 
85.
    (i) Grant recipients must additionally be subject to allowable cost 
provisions in NOFAs and grant agreements.
    (ii) Owners of eligible housing projects who use a class or classes 
of project funds under this subpart must comply with the requirements 
that are applicable to approved withdrawals or uses of the class or 
classes of project funds under their governing agreements with HUD.
    (c) Ineligible costs. Ineligible program expenses are any costs 
that are not directly related to employing the service coordinator. 
Examples are expenses associated with holiday parties, purchase of 
televisions or exercise equipment, and recreational activities for 
residents.


Sec.  892.255  Services for low-income elderly or persons with 
disabilities.

    A service coordinator funded under Sec.  892.210 may provide 
services to low-income elderly individuals or nonelderly persons with 
disabilities living in the vicinity of an eligible housing project. 
Community residents choosing to seek assistance from a service 
coordinator must come to the eligible housing project to meet with and 
receive assistance from the service coordinator. Service coordinators 
must make reasonable accommodations for those persons with disabilities 
unable to travel to the housing project, and have the option to make 
accommodations for other community residents.


Sec.  892.260  Sanctions.

    (a) If HUD determines that an owner has not complied with the 
requirements in this subpart, then HUD may impose any or a combination 
of the following sanctions:
    (1) Temporarily withhold reimbursements, approvals, extensions, or 
renewals until the owner adequately remedies the deficiency;
    (2) Disallow all or part of the cost attributable to activities 
undertaken not in compliance with applicable requirements, and if 
applicable, require the owner to remit to HUD or to redeposit in the 
source account funds in the amount that has been disallowed;
    (3) Suspend or terminate, in part or in whole, the grant or 
approval to use project funds;
    (4) Place conditions on the awards of grants or approvals of one or 
more classes of project funds so that the deficiency be remedied and 
that adequate steps be taken to prevent future deficiencies; or
    (5) Other sanctions authorized by law or regulation.


b) Reserved.

Subpart C--Assisted Living Conversion Program


Sec.  892.300  Purpose and applicability.

    (a) Purpose. The Assisted Living Conversion program provides grants 
for the conversion of elderly housing to assisted living facilities and 
other purposes. Grants provided under this program must be used for the 
purposes described in section 202b of the Housing Act of 1959 (12 
U.S.C. 1701q-2).
    (b) Applicability. The requirements set forth in this subpart C 
apply only to eligible projects under the Assisted Living Conversion 
program, as authorized under section 202b(b)(1) of the Housing Act of 
1959 (12 U.S.C. 1701q-2).


Sec.  892.305  Definitions.

    In addition to the applicable definitions in Sec.  892.105, the 
following definitions are applicable to the Assisted Living Conversion 
program, as provided in this subpart:
    Assisted living facility (ALF) shall have the same meaning as 
provided under section 232(b) of the National Housing Act (12 U.S.C. 
1715w(b)), which states that an ``assisted living facility'' means a 
public facility, proprietary facility, or facility of a private 
nonprofit corporation that:
    (1) Is licensed and regulated by the state (or if there is no state 
law providing for such licensing and regulation by the state, by the 
municipality or other political subdivision in which the facility is 
located);
    (2) Makes available to residents supportive services to assist the 
residents in carrying out activities of

[[Page 60631]]

daily living, as defined under Sec.  891.205; and
    (3) Provides separate dwelling units for residents, each of which 
contain a full bathroom and may contain a full kitchen, and
    (4) Includes common rooms and other facilities appropriate for the 
provision of supportive services to the residents of the facility.
    Congregate space (hereinafter referred to as community space) shall 
have the same meaning as the definition provided under section 
202(h)(1) of the Housing Act of 1959 (12 U.S.C. 1701q(h)(1)). The term 
``congregate space'' (also referred to as community space) excludes 
halls, mechanical rooms, laundry rooms, parking areas, dwelling units, 
and lobbies. Community space does not include commercial areas.
    Conversion means activities in an eligible project designed to 
convert dwelling units into assisted living facilities. Conversion can 
include unit configuration and related common and service space, and 
any necessary remodeling, consistent with the Uniform Federal 
Accessibility Standards, section 504 of the Rehabilitation Act of 1973, 
and HUD's implementing regulations at 24 CFR part 8, as well as any 
applicable provisions of the Americans with Disabilities Act of 1990 
and applicable Fair Housing Act design and construction requirements 
for all portions of the development physically affected by such 
conversion. Where conversion may involve Medicaid reimbursement, 
conversion should be undertaken in accordance with the Home and 
Community-Based Services regulations of the U.S. Department of Health 
and Human Services (see 42 U.S.C. part 441).
    Eligible project means eligible housing projects as defined under 
Sec.  892.105; eligible projects as described in section 638(2) of the 
Housing and Community Development Act; and section 202 properties, as 
defined under Sec.  891.105; with a PRAC.
    Emergency capital repairs are repairs to a project that correct a 
situation that presents an immediate threat to the life, health, and 
safety of the project tenants and which if left untreated, would result 
in an evacuation of the tenants or long-term tenant displacement.
    Repairs mean substantial and emergency capital repairs to a project 
that are needed to rehabilitate, modernize, or retrofit aging 
structures, common areas, or individual dwelling units.
    Service-enriched activities means activities designed to convert 
dwelling units in the eligible project to service-enriched housing for 
elderly persons.
    Service-enriched housing means housing that:
    (1) Makes available, through licensed or certified third party 
service providers, supportive services to assist the residents in 
carrying out activities of daily living, as defined under Sec.  
891.205;
    (2) Includes the position of a service coordinator;
    (3) Provides separate dwelling units for residents, each of which 
contains a full kitchen and bathroom;
    (4) Includes common rooms and other facilities appropriate for the 
provision of supportive services to the residents of the housing; and
    (5) Provides residents with control over health care and supportive 
services decisions, including the right to accept, decline, or choose 
such services, and to have the choice of a provider.


Sec.  892.310  Other Federal requirements.

    In addition to the requirements set forth in 24 CFR part 5, the 
following requirements in this section apply to the Assisted Living 
Conversion program under this subpart.
    (a) Affirmative fair housing marketing.
    (1) The affirmative fair housing marketing requirements of 24 CFR 
part 200, subpart M, and the implementing regulations at 24 CFR part 
108; and
    (2) The fair housing advertising and poster guidelines at 24 CFR 
parts 109 and 110.
    (b) Environmental requirements. The National Environmental Policy 
Act of 1969; HUD's implementing regulations at 24 CFR part 50, 
including compliance with 24 CFR 50.3(i) and the related authorities 
described in 24 CFR 50.4. For the purposes of Executive Order 11988, 
Floodplain Management (42 FR 26951, 3 CFR, 1977 Comp., p. 117), as 
amended by Executive Order 12148 (44 FR 43239, 3 CFR, 1979 Comp., p. 
412), and implementing regulations in 24 CFR part 55, all actions shall 
be treated as critical actions requiring consideration of the 500-year 
floodplain.
    (c) Flood insurance. The Flood Disaster Protection Act of 1973 (42 
U.S.C. 4001).
    (d) Coastal Barrier Resource Units. The Coastal Barrier Resources 
Act (16 U.S.C. 3501).
    (e) Labor standards. (1) All laborers and mechanics (other than 
volunteers under the conditions set out in 24 CFR part 70) employed by 
contractors and subcontractors in the construction (including 
rehabilitation) of housing with 12 or more units assisted under this 
subpart shall be paid wages at rates not less than those prevailing in 
the locality, as determined by the Secretary of Labor in accordance 
with the Davis-Bacon Act (40 U.S.C. 276a-276a-5). A group home for 
persons with disabilities is not covered by the labor standards under 
this paragraph.
    (2) Contracts involving employment of laborers and mechanics under 
this subpart shall be subject to the provisions of the Contract Work 
Hours and Safety Standards Act (40 U.S.C. 327-333).
    (3) Sponsors, owners, contractors, and subcontractors must comply 
with all rules, regulations, and requirements related to the Davis-
Bacon Act (40 U.S.C. 276a-276a-5).
    (f) Displacement and relocation. (1) Minimizing displacement. 
Consistent with the other goals and objectives of this subpart, 
sponsors and owners (or borrowers, if applicable) shall assure that 
they have taken all reasonable steps to minimize the displacement of 
persons (families, individuals, businesses, nonprofit organizations, or 
farms) as a result of a project assisted under this subpart.
    (2) Relocation assistance for displaced persons. A displaced person 
must be provided relocation assistance at the levels described in, and 
in accordance with the requirements of, the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970, as 
amended (42 U.S.C. 4201-4655), as implemented by 49 CFR part 24.
    (g) Intergovernmental review. The requirements for 
intergovernmental review in Executive Order 12372 (47 FR 30959, 3 CFR, 
1982 Comp., p. 197), as amended by Executive Order 12416 (48 FR 15587, 
3 CFR, 1983 Comp., p. 186), and the implementing regulations at 24 CFR 
part 52 are applicable to this program.
    (h) Lead-based paint. The requirements of 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 part 35, subparts A, B, H, J, and R of this 
title apply to these programs.


Sec.  892.315  Additional project eligibility.

    In addition to the criteria for eligible housing projects as 
defined under Sec.  892.105, projects receiving Assisted Living 
Conversion Programs (ALCP) funds must also meet the following criteria:
    (a) The project must be owned by a private nonprofit organization, 
as defined under section 202 of the Housing Act of 1959 (12 U.S.C. 
1701q);
    (b) The project must be designated primarily for occupancy by 
elderly persons; and

[[Page 60632]]

    (c) The project may be unused or underutilized commercial property, 
except that the Secretary may not provide grants under this section for 
more than three such properties.


Sec.  892.320  Notice of funding availability.

    (a) In general. HUD will issue a separate notice of funding 
availability (NOFA) for the Assisted Living Conversion program. The 
NOFA will contain specific information on how and when to apply for the 
grant authority, the contents of the application, and the selection 
process.
    (b) Application. An application for assistance under this subpart 
must contain the requirements under this section, in addition to the 
requirements outlined in the NOFA:
    (1) A description of the substantial capital repairs or the 
proposed conversion activities for either an assisted living facility 
or service-enriched housing for which a grant under this subpart is 
requested;
    (2) The amount of the grant requested to complete the substantial 
capital repairs or conversion activities; and
    (3) A description of the resources that are expected to be made 
available, if any, in conjunction with the requested funding.


Sec.  892.325  Requirements for services.

    (a) HUD will ensure that assistance under this subpart provides 
firm commitments for the funding of services to be provided in the 
assisted living facility or service-enriched housing as described in 
section 202b(d)(1) of the Housing Act of 1959 (12 U.S.C. 1701q-
2(d)(1)).
    (2) HUD will require evidence that each recipient of a grant for 
service-enriched housing provide relevant and timely disclosure of 
information to residents or potential residents as described in section 
202b(d)(2) of the Housing Act of 1959 (12 U.S.C. 1701q-2(d)(2)).
    (b) Reserved.


Sec.  892.330  Section 8 project-based assistance.

    (a) Eligibility. Multifamily projects, which include one or more 
dwelling units that have been converted to assisted living facilities 
or service-enriched housing using funding made under this subpart, are 
eligible for project-based assistance under section 8 of the United 
State Housing Act of 1937 (42 U.S.C. 1437f). Such project-based 
assistance is provided in the same manner in which the project would be 
eligible for such assistance, but for the assisted living facilities or 
service-enriched housing in the project.
    (b) Calculation of rent. The maximum monthly rent of a dwelling 
unit that is an assisted living facility or service-enriched housing 
with respect to which assistance payments are made under this section 
must not include charges attributable to services relating to assisted 
living.


Sec.  892.335  Vacancy payment.

    A vacancy payment, as related to assistance provided under this 
subpart, is limited to 30 days after a conversion to an assisted living 
facility.

    Dated: September 24, 2014.
Carol J. Galante,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2014-23276 Filed 10-6-14; 8:45 am]
BILLING CODE 4210-67-P