[Federal Register Volume 81, Number 45 (Tuesday, March 8, 2016)]
[Rules and Regulations]
[Pages 12354-12377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04901]



[[Page 12353]]

Vol. 81

Tuesday,

No. 45

March 8, 2016

Part III





Department of Housing and Urban Development





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24 CFR Parts 5, 880, 884, et al.





Streamlining Administrative Regulations for Public Housing, Housing 
Choice Voucher, Multifamily Housing, and Community Planning and 
Development Programs; Final Rule

  Federal Register / Vol. 81 , No. 45 / Tuesday, March 8, 2016 / Rules 
and Regulations  

[[Page 12354]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 880, 884, 886, 891, 903, 960, 966, 982, 983, 990

[Docket No. FR 5743-F-03]
RIN 2577-AC92


Streamlining Administrative Regulations for Public Housing, 
Housing Choice Voucher, Multifamily Housing, and Community Planning and 
Development Programs

AGENCY: Office of the Deputy Secretary, HUD.

ACTION: Final rule.

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SUMMARY: The Department of Housing and Urban Development Appropriations 
Act, 2014 (2014 Appropriations Act), made several changes to the United 
States Housing Act of 1937 (1937 Act). Section 243 of the 2014 
Appropriations Act authorized HUD to implement these changes through 
notice, followed by notice-and-comment rulemaking. Notices implementing 
the changes were published on May 19, 2014, and June 25, 2014. HUD 
issued a proposed rule on January 6, 2015, to codify these changes in 
regulation. In addition, the January 2015 rule proposed changes to 
streamline regulatory requirements pertaining to certain elements of 
the Housing Choice Voucher (HCV), Public Housing (PH), and various 
multifamily housing (MFH) rental assistance programs; to reduce the 
administrative burden on public housing agencies (PHAs) and MFH owners; 
and to align, where feasible, requirements across programs, including 
the Housing Opportunities for Persons with AIDS (HOPWA) and HOME 
Investment Partnerships (HOME), which are administered by HUD's Office 
of Community Planning and Development (CPD). HUD also issued an interim 
rule on September 8, 2015, implementing changes to flat rents in the 
Public Housing program made by the Department of Housing and Urban 
Development Appropriations Act, 2015 (2015 Appropriations Act).
    This final rule makes changes to the regulatory text as presented 
in the January 2015 proposed rule, including additional changes in 
response to public comment as well as further consideration by HUD of 
changes proposed in January 2015, and finalizes the regulatory changes 
contained in the September 2015 interim rule.

DATES: Effective Date: April 7, 2016.

FOR FURTHER INFORMATION CONTACT: For questions regarding programs 
operated by HUD's Office of Community Planning and Development, contact 
Henrietta Owusu, Director, Program Policy Division, Office of 
Affordable Housing Programs, at 202-402-4998. For the HCV program, 
contact Becky Primeaux, Director, Housing Voucher Management and 
Operations Division, at 202-402-6050. For questions regarding the 
Multifamily Housing programs, contact Katherine Nzive, Director, 
Program Administration Office, Asset Management and Portfolio 
Oversight, at 202-708-3000. For the Public Housing program, contact 
Todd Thomas, Program Analyst, Public Housing Management and Occupancy 
Division, at 678-732-2056. None of the phone numbers included is toll-
free. Persons with hearing or speech impairments may access these 
numbers through TTY by calling the toll-free Federal Relay Service at 
800-877-8339. Any of the above-listed contacts may also be reached via 
postal mail at the following address: Department of Housing and Urban 
Development, 451 7th Street SW., Washington, DC 20410.

SUPPLEMENTARY INFORMATION: 

I. Background

    The 2014 Appropriations Act made changes to certain provisions of 
the 1937 Act, such as allowing for biennial physical inspections of 
certain assisted properties and permitting alternative inspection 
methods to be used in certain circumstances, codifying in statute the 
definition of ``extremely low-income,'' and capping utility allowances 
at the lesser of the unit size on the voucher or the size of the unit 
leased by the family. These changes were implemented by notice; \1\ a 
proposed rule to codify the changes in regulation was published on 
January 6, 2015, at 80 FR 423.
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    \1\ Notice PIH 2014-12, published May 19, 2014, implemented the 
changes to flat rents; 79 FR 35940, ``HUD Implementation of Fiscal 
Year 2014 Appropriations Provisions on Public Housing Agency 
Consortia, Biennial Inspections, Extremely Low-Income Definition, 
and Utility Allowances'' (June 25, 2014), implemented all other 
changes.
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    In addition, HUD has solicited recommendations in recent years on 
how to streamline program operations to reduce costs and enhance 
efficiency while still maintaining HUD's core program oversight 
functions. The January 2015 proposed rule included programmatic changes 
to implement many of these suggestions. A detailed description of all 
proposed amendments, including technical corrections also proposed, and 
the reasons for the amendments can be found in the preamble to the 
January 6, 2015 proposed rule at 80 FR 424 to 428.
    As further discussed below, portions of this final rule affect the 
PH program, the HCV program, the CPD programs mentioned above,\2\ and 
the following MFH programs: \3\
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    \2\ The only provision in this final regulation that applies 
directly to the CPD programs is the earned income disregard. Other 
provisions that apply do so indirectly, either because of references 
in program-specific regulations or due to particular eligible 
activities that follow the requirements of the Housing Choice 
Voucher program. The parenthetical statements at the end of each 
subpart of section II.A, exclude mention of CPD programs.
    \3\ In the January 6, 2015 proposed rule, HUD inadvertently 
included reference to FHA's Section 235 Homeownership program, but 
as provided in a final rule published on April 3, 2015, this program 
is no longer active and the regulations were removed by the April 3, 
2015 final rule. See http://www.gpo.gov/fdsys/pkg/FR-2015-04-03/pdf/2015-07597.pdf.
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     Project-Based Section 8 (New Construction, State Agency-
Financed, Substantial Rehabilitation, Rural Housing Services, Loan 
Management Set-Aside, and Property Disposition Set-Aside).
     Section 8 Moderate Rehabilitation.
     Rent Supplement Program.
     Section 202 Supportive Housing for the Elderly (including 
Project Assistance Contract and Project Rental Assistance Contract 
(PRAC)).
     Section 811 Supportive Housing for Persons with 
Disabilities (including PRAC and Project Rental Assistance).
     Section 236 Interest Reduction Payments Program.
     Rental Assistance Payment (RAP) Program.
     Sections 221(d)(3) and (d)(5)--FHA Insurance Programs for 
New Construction or Substantially Rehabilitated Multifamily Rental 
Housing.
    Some of the new flexibilities will require a PHA to make changes to 
the PHA's Admissions and Continued Occupancy Policy, Administrative 
Plan, or PHA plan in order for the PHA to adopt the new authorities. 
HUD encourages all PHAs adopting such flexibilities to make all 
required amendments as expeditiously as possible.
    The 2015 Appropriations Act amended section 3 of the 1937 Act to 
allow for additional flexibility to the requirement that the flat 
rental amount be set at no less than 80 percent of the applicable FMR, 
as established under 8(c) of the 1937 Act. HUD may allow a PHA to 
establish a flat rent based on an FMR that is based on an area 
geographically smaller than would otherwise be used, if HUD determines 
that the resulting FMR more accurately reflects local market 
conditions. In addition, a PHA may apply to HUD for an exception 
allowing a flat rental amount that is lower than the amount otherwise 
determined under the two

[[Page 12355]]

allowable FMRs, if HUD determines that the two FMRs do not reflect the 
market value of the property and the lower flat rental amount is based 
on a market analysis of the applicable market. In either case, the 
alternative flat rent must not create a disincentive for families 
seeking to become economically self-sufficient to continue to reside in 
public housing.
    On September 8, 2015, at 80 FR 53709, HUD published an interim rule 
to amend HUD's regulations implementing the 2014 Appropriations Act 
language on flat rents to allow PHAs the opportunity to take advantage 
of the 2015 Appropriations Act authority that provides PHAs with more 
flexibility in setting flat rents. HUD advised that the interim rule 
superseded the portion of the January 2015 proposed rule year that 
addressed the issue of setting flat rents in public housing. Although 
HUD issued the September 2015 rule as an interim rule for effect, HUD 
sought public comment for a period of 60 days. By the end of the 
comment period on November 9, 2015, HUD received seven comments.

II. Changes Made at the Final Rule Stage

    In response to public comment and as a result of further 
consideration of certain issues by HUD, this final rule makes the 
following revisions to the January 2015 proposed rule. With respect to 
changes made in response to public comment, the issues raised by the 
commenter and HUD's basis for responding to the comments are addressed 
in Section IV of this preamble. No changes are made to the September 
2015 interim rule on flat rents.

A. HCV, MFH, and PH Program Regulations

1. Verification of Social Security Numbers (Sec.  5.216)
    The use of the phrase ``date of admission'' appeared twice in the 
proposed rule, first to identify the endpoint of the 6-month period 
during which a family member under the age of 6 years who lacks a 
Social Security Number (SSN) may have been added to an applicant 
family, and then again to identify the starting point for the 90-day 
period allotted to such a family to obtain an SSN for the newly added 
child. Commenters stated that, in the HCV program, the ``date of 
admission'' is typically the date of lease-up (i.e., the effective date 
of the Housing Assistance Payment (HAP) contract). Prior to lease-up, 
however, a PHA may have expended considerable time and resources 
pulling a family from the waiting list, obtaining the necessary 
verifications, procuring a Housing Quality Standards (HQS) inspection, 
and performing a rent reasonableness determination. Lease-up could 
ultimately occur more than 6 months from the date the child was added 
the household, which would result in the household being ineligible for 
admission to the program. To obviate such a scenario, HUD has, in this 
final rule, adopted two separate ``dates of admission'' for the HCV 
program for purposes of this provision: The date of voucher issuance 
and the date of lease-up. Specifically, the endpoint of the 6-month 
period during which a family member under the age of 6 years may be 
added to the household is the date of voucher issuance; the 90-day 
clock does not start ticking until the date of lease-up. (This 
provision applies to the HCV/Project-Based Voucher (PBV), Rent 
Supplement, Section 8, Sections 221(d)(3) and (d)(5), Section 236, 202/
811, and PH programs.)
2. Definition of Extremely Low-Income Families (Sec. Sec.  5.603, 
903.7, 960.102)
    The definition of an extremely low-income family in the final rule 
is revised to include the phrase ``a very low-income family,'' which is 
included in the statutory definition and was inadvertently omitted from 
the proposed rule. (This provision applies to the HCV/PBV, Section 8, 
and PH programs. It does not apply to the Rent Supplement, Section 235, 
Section 236, Sections 221(d)(3) or (d)(5) programs.)
3. Use of Actual Past Income (Sec.  5.609)
    For the reasons presented below, HUD has decided against pursuing 
the regulatory changes included in the proposed rule.
4. Exclusion of Mandatory Education Fees From Income (Sec.  
5.609(b)(9))
    There is no change from the proposed rule. The final rule includes 
fees within the definition of tuition. (This provision applies to the 
HCV/PBV, Section 8, and PH programs. It does not apply to the Rent 
Supplement, Section 236, Sections 221(d)(3) or (d)(5) programs.)
5. Streamlined Annual Reexamination for Fixed Incomes (Sec. Sec.  
5.657, 880.603, 884.218, 886.124, 886.324, 891.410, 891.610, 891.750, 
960.257, 982.516)
    Based on comments submitted, this provision was revised 
substantially from the proposed rule, which would have provided for a 
streamlined annual reexamination of family income for any family whose 
income consists solely of fixed sources. The final rule provides for a 
streamlined income determination for any fixed source of income, even 
if a person or a family with a fixed source of income also has a non-
fixed source of income. The final rule requires that, upon admission to 
a program, third-party verification of all income amounts must be 
obtained for all family members, and a full reexamination and 
redetermination of income must likewise be performed every 3 years. In 
the interim, a streamlined income determination may be performed for a 
family member with a fixed source of income by applying to a previously 
determined or verified source of income a cost of living adjustment 
(COLA) or interest rate adjustment specific to each source of fixed 
income. The COLA or current interest rate applicable to each source of 
fixed income must be obtained either from a public source or from 
tenant-provided, third-party generated documentation. In the absence of 
such verification for any source of fixed income, third-party 
verification of income amounts must be obtained.
    While the final rule amends more regulatory provisions than the 
proposed rule, the policy has not changed. Instead, there are cross-
references to 24 CFR 5.657(d), pertaining to the reexamination of 
family income and composition in Section 8 project-based assistance 
programs, inserted in various MFH regulations herein to avoid confusion 
and ensure the policy is included in the regulations for all programs 
this provision is intended to affect. (This provision applies to the 
HCV/PBV, Section 8 (other than Moderate Rehabilitation), 202/811, and 
PH programs. It does not apply to the Rent Supplement, Section 236, 
Sections 221(d)(3) or (d)(5) programs.)
    HUD recognizes that prior to the issuance of this final rule, the 
Fixing America's Surface Transportation Act, or FAST Act, was signed 
into law.\4\ Section 78001 of that Act modified the 1937 Act to allow 
PHAs and owners to undergo full income recertification for families 
with 90 percent or more of their income from fixed-income sources every 
three years instead of annually. HUD believes that while the FAST Act 
provisions and the provisions contained in this rule are very similar, 
they offer different benefits; therefore, HUD is retaining the 
flexibilities in this final rule and will issue implementation 
regulations for the FAST Act separately.
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    \4\ Public Law 114-94, signed December 4, 2015.
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6. Earned Income Disregard (EID) (Sec. Sec.  5.617, 960.255)
    The proposed rule included a requirement that families maintain 
continual employment in order to

[[Page 12356]]

obtain EID benefits over a straight 24-month period, and it allowed 
families who received the full EID benefit and then subsequently 
requalified for the benefit to obtain it again (i.e., the proposed rule 
eliminated the maximum lifetime disallowance). The proposed rule also 
included a carve-out for the HOPWA program, which retained the 
provision unchanged.
    In the final rule, all HUD programs to which the EID applies 
(including the HOPWA program) are aligned, the lifetime disallowance is 
retained, and the requirement to maintain continual employment is 
dropped. Ultimately, the only change to the existing regulation adopted 
in the final rule is that the benefit now applies for a straight 24-
month period, with a clear start date and end date, irrespective of 
whether a family maintains continual employment during the 24-month 
period. PHAs and grantees are no longer obliged to track employment 
starts and stops, but only the start date, the 12-month date (on which 
the amount of the disregard may change from 100 percent to not less 
than 50 percent of earned income), and the 24-month (end) date.
    For families enrolled and participating in EID prior to the 
effective date of this regulation, the previous requirements will 
continue to apply. (This provision applies to the HCV/PBV, HOME, HOPWA, 
and PH programs. It does not apply to the MFH programs.) HUD intends to 
publish a notice describing the changes and the administrative 
requirements prospectively. For current recipients of the EID, HUD will 
reiterate that regulations in effect immediately prior to this rule 
will continue to apply until the benefit period expires for these 
families.

B. HCV and PH Program Regulations

1. Family Declaration of Assets Under $5,000 (Sec. Sec.  960.259, 
982.516)
    Upon further consideration and in light of comments received, HUD 
made a modest change to this provision from the proposed to the final 
rule. The proposed rule would have authorized a PHA to rely on a 
family's declaration starting with the first reexamination and going 
forward indefinitely. In the final rule, a PHA must obtain third-party 
documentation of assets every 3 years. The Office of Multifamily 
Housing Programs in HUD's Office of Housing noted support for expansion 
of this provision to its rental assistance programs and is issuing an 
interim final rule to do just that.
2. Utility Reimbursements (Sec. Sec.  960.253, 982.514)
    The proposed rule provides a PHA with the option of making utility 
reimbursement payments ``quarterly,'' for reimbursements totaling $20 
or less per quarter. For the final rule, this provision is modified 
somewhat. The amount is raised to $45 or less per quarter. If the PHA 
opts to make the payments on a quarterly basis, the PHA must institute 
a hardship policy for the tenants if such payments would create a 
financial hardship for them. Based on a request for clarification, this 
provision was modified slightly for this final rule to make clear that 
reimbursements must occur no less frequently than once every calendar-
year quarter. Additionally, HUD is issuing an interim final rule to 
expand this provision to MFH programs.

C. PH Program Regulations

1. Public Housing Rents for Mixed Families (Sec.  5.520(d))
    There is no change from the proposed rule. The final rule requires 
PHAs to use the established flat rent applicable to the unit to 
calculate rents for mixed families. The final rule also requires that a 
mixed family's payment be equivalent to their total tenant payment 
(TTP) when their TTP exceeds the flat rent.
2. Tenant Self-Certification for Community Service Requirements 
(Sec. Sec.  960.605, 960.607)
    Just as in the proposed rule, the final rule permits PHAs to accept 
a tenant's signed self-certification of compliance with the community 
service requirement. However, to better ensure compliance with the 
community service requirement, HUD is requiring PHAs to review a sample 
of self-certifications and validate their accuracy with the third-party 
verification procedures currently in place. The PHA will also need to 
notify tenants that any self-certification may be subject to such 
validation.
3. Public Housing Grievance Procedures (Sec. Sec.  966.4 and 966.52 
Through 966.57)
    Upon further consideration and in light of comments received, HUD 
has decided against pursuing regulatory changes pertaining to the 
requirement that a PHA prepare a summary of any informal settlement. 
HUD has also decided against pursuing changes related to the ability of 
either party to a grievance to request, at their own expense, that a 
transcript of a grievance hearing be prepared. Further, in light of 
comments received, HUD has provided a clarification regarding the 
Limited English Proficiency requirements related to grievance 
procedures.
    This final rule maintains the elimination of the requirement that 
PHAs consult resident organizations before appointing a hearing 
officer. However, in light of comments that residents should have input 
into the selection process, HUD is requiring that PHAs include their 
policies regarding the selection process in the tenant lease form, 
which is subject to a 30-day comment period. Finally, the final rule 
also maintains the elimination of the requirement that PHAs retain a 
redacted copy of each hearing decision to be made available to 
prospective complainants, and in the place of that requirement, 
requires PHAs to maintain a log of hearing officer decisions as 
described through HUD guidance.
4. Limited Vacancies (Sec.  990.150)
    There is no change from the proposed rule. The final rule clarifies 
that the number of vacant units eligible for operating subsidy must be 
not more than 3 percent of the total units, on a project-by-project 
basis.

D. HCV Program Regulations

1. Start of Assisted Tenancy (Sec.  982.309)
    For the reasons presented below, HUD has decided against pursuing 
the regulatory changes included in the proposed rule.
2. Biennial Inspections and the Use of Alternative Inspection Methods 
(Sec. Sec.  982.405, 982.406, 983.103)
    Upon further consideration, HUD made a change to this provision to 
clarify that if an alternative inspection method employs sampling, the 
PHA may rely upon that method only if HCV units are included in the 
population of units forming the basis of the sample. In addition, in 
response to public comments, HUD is requiring PHAs wishing to rely upon 
inspection methods other than those conducted pursuant to the Low-
Income Housing Tax Credit (LIHTC) or HOME programs, or inspections 
performed by HUD, to submit to HUD the protocol for the inspection 
method they wish to use along with the PHA's analysis showing that the 
desired protocol meets or exceeds HQS. A PHA must submit these 
materials to HUD for approval and may not rely upon such alternative 
inspection methods until such approval has been granted.
3. Housing Quality Standards (HQS) Reinspection Fees (Sec.  982.405)
    The Department made modest changes to this provision based on 
comments expressing concern about the

[[Page 12357]]

broad nature of this authority and requests for clarity about the 
treatment of fees. The proposed rule would have authorized a PHA to 
charge a reasonable fee if a cited deficiency remained upon 
reinspection. The final rule states that the fee may be charged only if 
an owner stated that a deficiency had been fixed and the deficiency is 
found during reinspection to persist or if a reinspection conducted 
after the expiration of the timeframe for repairs reveals that the 
deficiency persists. With respect to the fee, the final rule makes 
clear that any fees collected may be used only for activities related 
to the provision of tenant-based assistance.
4. Exception Payment Standards for Providing Reasonable Accommodations 
(Sec. Sec.  982.503, 982.505)
    There is no change from the proposed rule. The final rule allows a 
PHA to approve a payment standard of not more than 120 percent of the 
FMR without HUD approval if required as a reasonable accommodation for 
a family that includes a person with a disability.
5. Family Income and Composition: Regular and Interim Examinations 
(Sec.  982.516(c)-(e))
    There is no change from the proposed rule. The final rule 
eliminates the requirement that a voucher agency conduct a 
reexamination of income whenever a new family member is added, aligning 
the voucher and PH regulations.
6. Utility Payment Schedules (Sec.  982.517)
    For the reasons presented below, HUD has decided against pursuing 
the regulatory changes included in the proposed rule that would have 
authorized a PHA to define ``unit type'' as simply ``attached'' or 
``detached.''

III. Discussion of Public Comments and HUD's Responses

    The public comment period on the proposed rule closed on March 9, 
2015, and 92 public comments were received in response to HUD's January 
6, 2015, proposed rule. Comments were submitted by individual members 
of the public, Fair Housing advocacy groups, housing associations, and 
PHAs. The following presents the significant issues and questions 
related to the proposed rule raised by the commenters, and HUD's 
responses to these issues and questions.

A. CPD, HCV, MFH, and PH Program Regulations

1. Verification of Social Security Numbers (Sec.  5.216)
    Issue: Proposal Expansion. Commenters had several suggestions for 
HUD to expand the proposed relief, including allowing relief if there 
is a newly added family member over the age of six. Others suggested 
that HUD simply establish a maximum time period during which a family 
may receive a subsidy without providing a missing SSN instead of 
allowing for two extension periods or that HUD should allow families to 
self-certify as to having obtained SSNs. Commenters also stated that 
the waiver should be allowed only if any enforcement action is 
consistent with the Administrative and Continued Occupancy Policy 
(ACOP) and/or the Administrative Plan and/or Tenant Selection Plan 
(TSP).
    HUD Response: Existing regulations permit a participant household 
to add a new household member under the age of 6 years, even if that 
household member lacks an SSN at the time of admission. The participant 
household then has 90 days to obtain and provide documentation 
necessary to verify the SSN of the new household member; the processing 
entity may grant the household an additional 90-day extension. HUD's 
intent in proposing changes to the regulations governing applicants is 
to align the requirements for applicants with those that govern 
participants, including with respect to enforcement. The changes 
proposed above either go beyond the current requirements for 
participant households or vary from those requirements. As such, they 
are contrary to HUD's intent, and HUD declines to adopt them.
    Issue: Expansion to Homeless Programs. Commenters asked HUD to 
expand the proposal by providing waivers to allow PHAs to house 
homeless individuals who are unable to provide documentation of their 
SSN by giving the families 90 days to provide the information.
    HUD Response: HUD agrees that adopting similar flexibility with 
respect to homeless individuals who lack SSNs would facilitate HUD's 
efforts to serve homeless families. However, HUD is unable to adopt 
this recommended change at this time, because it is beyond the scope of 
this rulemaking.
    Issue: Timing of Waiver. Commenters asked HUD to use the date of 
voucher issuance instead of the date of admission, as the date of 
admission usually means the date of lease-up and does not account for 
time for finding a unit and inspections.
    HUD Response: HUD agrees with this comment and has adopted it in 
this final rule.
    Issue: Objections. Some commenters objected to the proposal, 
stating that it would actually increase burden on PHAs. Others asked 
HUD to modify its systems to properly accept a delayed certification 
when there is a new child in the family or when a foster agency refuses 
to provide the SSN. Commenters also asked HUD to allow the use of other 
forms of identification, such as Individual Taxpayer Identification 
Numbers.
    HUD Response: Several of the comments provided pertain only 
indirectly to the changes proposed by HUD and are therefore beyond the 
scope of this rulemaking. With respect to the assertion that this 
change may result in additional tracking and monitoring, HUD notes 
that, for processing entities that typically request waivers in order 
to house such families, the change reduces burden. In addition, the 
change creates benefits that offset any modest burden. Specifically, 
they eliminate a barrier that could otherwise prevent families from 
being housed, requiring no greater monitoring and tracking than is 
performed for participant households.
2. Definition of Extremely Low-Income (ELI) Families (Sec. Sec.  5.603, 
903.7, 960.102)
    Issue: Low-Income Families. Commenters stated that the proposed 
change should not exclude households from meeting ELI eligibility who 
are between 30 percent and 50 percent of area median income (AMI).
    HUD Response: HUD agrees with the comment and has added ``very low-
income'' language to the final rule.
    Issue: Requested Changes. Commenters stated that because the new 
definition of ELI has delayed the release of income limits, the 
proposal should not be finalized. Similarly, it was suggested that HUD 
remove income targeting completely.
    HUD Response: The final rule codifies the definition of ELI in 
HUD's 2014 Appropriations Act. The FY 2014 Appropriations Act defines 
``extremely low-income family'' to mean a very low-income family whose 
income does not exceed the higher of 30 percent of AMI or the poverty 
level. It would be contrary to the statutory change to delay in 
proceeding with issuance of this final rule.
    Income targeting is a statutory requirement of section 16 of the 
1937 Act and cannot be removed through rulemaking without statutory 
authority.

[[Page 12358]]

3. Use of Actual Past Income (Sec.  5.609)
    Issue: Objections to the Proposed Change. Many commenters objected 
to the proposal's requirement that a PHA use one definition of annual 
income (either actual past income or projected income) for all families 
in a program. Also, many commenters objected to the prohibition against 
using both the past income provision and the provision authorizing a 
streamlined annual reexamination for fixed-income families. Commenters 
stated that these restrictions limit PHA discretion and therefore fail 
to provide administrative savings to PHAs.
    Additionally, commenters stated that the provision did nothing to 
alleviate the burden associated with performing interim income 
reexaminations. The commenters stated that many families experience 
fluctuations in income over the course of a year, and that each time 
this happens, a housing provider must calculate income based on 
projected income, rather than past income. The commenters stated that 
furthermore, the proposal required housing providers that adopted a 
definition based on actual past income to calculate expenses for such 
things as child care and medical care during the same 12-month period, 
and it is difficult to have the same timeframes for all sources of 
income.
    Other commenters stated that using past income was not an accurate 
way to set rent.
    HUD Response: HUD agrees that the proposal provided minimal, if 
any, streamlining benefit, and required impractical actions on the part 
of housing providers in using the same time frames for income and 
deductions. Given the concerns raised about the proposal, HUD has 
decided not to adopt the use of actual past income in the final rule.
4. Exclusion of Mandatory Education Fees From Income (Sec.  
5.609(b)(9))
    Issue: Requests for Clarification. Some commenters supported the 
change, but expressed doubt that this provided streamlining relief and 
perhaps, instead, added to a PHA's burden, particularly in determining 
the amount of fees charged and then verifying those fees. Others asked 
for additional guidance on what fees would fall under this new policy.
    HUD Response: HUD notes that this provision is included in the 
rule, not as administrative relief, but to codify in regulation 
language included in recent appropriations acts that has excluded from 
income those amounts needed to pay mandatory student fees.\5\ 
Additional guidance from HUD regarding what constitutes such fees is 
forthcoming in the form of a notice that relies on the Department of 
Education definitions of tuition and fees. For example, a mandatory 
education fee would include student service fees. That same notice will 
provide guidance on how to verify fee information. (Note: Such fees are 
already excluded for purposes of the PH program, pursuant to Sec.  
5.609(b)(9).)
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    \5\ See section 213 of the Transportation, Housing and Urban 
Development, and Related Agencies Appropriations Act, 2015 (Pub. L. 
113-235, approved Dec. 16, 2014).
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5. Streamlined Annual Reexamination for Fixed Incomes (Sec. Sec.  
5.657, 960.257, 982.516)
    Issue: Clarifications and Minor Changes. Commenters supported 
streamlining reexaminations for families with fixed income, but asked 
that HUD make some small changes. In addition to the many requests that 
HUD permit both fixed-income streamlining and the use of actual past 
income, commenters asked that HUD allow for streamlined reexaminations 
even when the family does not have all of its income from fixed-income 
sources or when some family members have a variable income and others 
have a fixed income. Commenters also asked that either the regulatory 
definition of ``fixed'' income be made more flexible or HUD grant PHAs 
flexibility to establish their own definition.
    HUD Response: As explained above, HUD has dropped the provision 
that would have authorized PHAs and owners to define annual income as 
``actual past income.'' At the same time, in response to comments, HUD 
has revised this streamlined annual reexamination measure to provide 
PHAs and owners with the option of conducting a streamlined income 
redetermination for any fixed-income source, irrespective of whether an 
individual or a family also has a non-fixed source of income. This 
means that the regulation no longer requires a family to have 100 
percent of its income from fixed sources, which resolves a number of 
the concerns expressed by commenters. The final rule also adopts an 
expanded list of fixed sources of income. With respect to income from 
annuities or other retirement benefit programs, insurance policies, 
disability or death benefits, or other similar types of periodic 
receipts, if a family member receives income from any of these sources 
and the income consists solely of periodic payments at reasonably 
predictable levels, then the income source may be considered to be 
``fixed.'' HUD believes that these changes respond to a number of the 
comments received and will provide substantial relief to PHAs and 
owners.
    Issue: Objections and Significant Changes. Some commenters stated 
that the proposal did not provide any streamlining benefit, and, to 
fully streamline, HUD should eliminate or modify the medical expense 
through methods like a standard deduction or self-certification of 
medical expenses. Commenters expressed concern that allowing 
streamlined recertification for fixed income families would allow such 
families to overlook sources of income. Some stated that HUD should 
still require annual income verifications, because some families would 
have some members with fixed income and others with variable income.
    HUD Response: While HUD is amenable to adopting several of the 
suggestions made by commenters, HUD will not eliminate certain 
requirements, such as the requirement to verify medical expenses and 
otherwise calculate adjustments to annual income for fixed-income 
families. For ongoing medical expenses, PHAs and owners already have 
the option to determine anticipated expenses by calculating expenses 
paid by the family in the 12 months preceding recertification. For past 
one-time, nonrecurring medical expenses that have been paid in full, 
PHAs and owners already have the option of including these expenses at 
an initial, interim, or annual recertification; if such an expense has 
not been paid in full but is instead being paid subject to a payment 
plan, then the expense would be counted as anticipated either at the 
time it occurs, through an interim recertification, or at an upcoming 
annual recertification. Further, HUD will not adopt the use of self-
certification of medical expenses and other deductions, due to the risk 
of improper payment. Along the same lines, the final rule makes clear 
that a full examination of family income must be conducted upon 
admission to a program. Also, for PHAs and owners that choose to adopt 
the streamlined income redetermination, a full examination of family 
income must be performed at least every 3 years.
6. Earned Income Disregard (Sec. Sec.  5.617, 960.255)
    Issue: Definition of ``continually employed'' and effect on 
employment. Several commenters requested that HUD modify the proposal 
by clarifying the requirement that the family remain continually 
employed.

[[Page 12359]]

    In contrast to these commenters, other commenters suggested that 
this change should not be made, because residents eligible for EID 
would not be able to be continually employed for 24 months. Others 
objected to allowing residents to re-qualify for EID, either because it 
would create an additional burden on PHAs or because it could create an 
incentive for individuals to leave jobs when the EID expires. Some 
commenters expressed concern that a family losing the EID during the 
24-month period would be able to qualify for a new EID period 
immediately, allowing for an infinite time frame to receive the EID. 
Commenters also suggested that HUD allow PHAs the option to allow the 
EID time clock to run during periods of unemployment but disregard any 
unemployment benefits an individual receives.
    HUD Response: HUD has determined to drop the continuous employment 
requirement from this rulemaking. For all HUD programs that require an 
EID, HUD is retaining the ability of these residents to start and stop 
employment and still retain the benefit of the EID. However, these 
residents may only receive the benefit for up to 24 consecutive months 
from the date of initial increase in annual income. If an individual 
becomes eligible to receive the EID, the 24-month period will not stop 
if the circumstance that triggered the EID ceases; however, if the 
individual experiences an event that would again provide an EID benefit 
during the 24-month period, then the individual will be provided the 
rent incentive. This change eliminates the burdensome process of 
tracking EID starts and stops over a 48-month time period, but still 
provides some flexibility to tenants to receive the EID if they again 
obtain employment.
    HUD will retain the one-time EID eligibility. Specifically, after 
the expiration of the 24-month period, individuals will be ineligible 
to receive subsequent EID benefits. HUD believes that these changes 
maintain the balance that HUD seeks to incentivize employment among 
residents while reducing the burden of administering the benefit.
    Issue: Exclusion in the second 12 months. Commenters asked that HUD 
make the income exclusion 100 percent for the first year and 50 percent 
for the second 12 months.
    HUD Response: HUD disagrees with this suggestion. The statutory 
language at section 3(d) of the 1937 Act requires PHAs to disregard 100 
percent of any increase in income for the first 12 months. However, for 
the second 12 months, PHAs must disregard not less than 50 percent of 
any increase in income. PHAs have discretion during the second 12-month 
period to disregard more than 50 percent of any increase in income. 
Therefore, HUD will not adopt this suggested change.
    Issue: Limiting the availability of EID. Commenters suggested that 
HUD align the EID effective date with a family's annual reexamination 
date. Others suggested that HUD should allow for income to be 
calculated using actual past earned income for everyone in lieu of EID, 
or that EID should be available only for individuals with disabilities. 
Commenters also suggested that HUD should allow PHAs to implement EID 
on their own reporting cycle.
    HUD Response: HUD's intent in this rulemaking, with respect to EID, 
is to streamline the EID tracking process by reducing the time during 
which a program participant may be eligible to receive the benefit of 
the EID. HUD believes the changes in this rulemaking also more closely 
align to the statute that governs the EID. The changes suggested above 
are inconsistent either with the statute or with HUD's intent in this 
rulemaking. As a result, HUD will not adopt the suggested changes.
    Issue: Additional guidance. HUD was asked for specific guidance for 
families that have already started EID under the previous regulations.
    HUD Response: HUD agrees with this comment and has revised the 
final regulation to make clear that the previous regulations apply to 
such families.
    Issue: HOPWA carve-out. Some commenters stated that allowing HOPWA 
to have an EID policy different from other programs with tenant 
populations that have disabilities is unfair to the tenants in those 
non-HOPWA programs.
    HUD Response: HUD agrees with this recommendation and has 
eliminated the HOPWA program carve-out in this final rule. The final 
rule applies the EID uniformly to all families eligible for the 
benefit.
    Issue: Elimination of EID. Some commenters suggested HUD should 
eliminate EID entirely, either because it clashes with PH's minimum 
rent requirement or because the family self-sufficiency program is 
better. Others stated that the EID should not be extended to the 
Shelter Plus Care and Moderate Rehabilitation/Single-Room Occupancy 
(SRO) programs. Some suggested that the EID time period should be 
limited to only three months to discourage individuals from quitting 
jobs at the expiration of the EID time period to avoid rent increases 
or that the EID time period should be expanded to 48 months to allow 
for more gradual rent increases.
    HUD Response: As noted in response to an earlier comment, HUD's 
intent in this rulemaking, with respect to EID, is to streamline the 
EID tracking process by reducing the time during which a program 
participant may be eligible to receive the benefit of the EID. HUD 
believes the changes in this rulemaking more closely align to the 
statute that governs the EID. The changes suggested above are 
inconsistent either with the statute or with HUD's intent in this 
rulemaking. As a result, HUD will not adopt the suggested changes.

B. HCV and PH Program Regulations

1. Family Declaration of Assets Under $5,000 (Sec. Sec.  960.259, 
982.516)
    Issue: Increasing Threshold. Many commenters asked that HUD 
increase the maximum amount of assets that can be self-certified to 
$10,000.
    HUD Response: The final rule has not adopted this suggestion. The 
$5,000 amount is consistent with other policies. Existing regulations 
require housing providers to calculate the imputed income for assets 
over $5,000. Also, the Internal Revenue Service permits housing credit 
agencies and owners to accept a certification from families of assets 
under $5,000. Commenters stated that there are few residents with 
assets greater than $5,000.
    Issue: Expansion to Admission. Some commenters asked that HUD 
modify the proposal to allow families to use self-certification at both 
admission and reexamination.
    HUD Response: The final rule clarifies in the preamble that this 
provision applies to families at reexamination. At admission, all 
assets of a family will be verified as is the current practice. Also, 
the final rule requires a PHA to obtain third-party documentation of 
all family assets every three years.
    Issue: Method of Certification. Commenters asked that HUD allow 
families to certify to total assets instead of requiring declaration of 
each separate asset.
    HUD Response: A family's declaration of total assets may be 
included on a single form with each asset listed. HUD will issue 
further guidance about this provision of the final rule.
    Issue: Expansion to Multifamily. Commenters asked that HUD allow 
this provision to apply to multifamily housing as well.
    HUD Response: The Office of Multifamily Housing Programs, which 
operates various rental assistance programs, is issuing an interim 
final rule to accomplish this expansion.

[[Page 12360]]

    Issue: Larger Changes to the Proposal. Some commenters asked that 
HUD eliminate the consideration of assets when determining income, as 
income from assets usually has little, if any, effect on the amount of 
rent paid by a family. Other commenters state that self-certification 
does not actually reduce burden on PHAs and may actually increase work 
for PHA staff.
    HUD Response: Totally eliminating consideration of assets when 
determining income is outside the scope of this rulemaking. HUD will 
keep the suggestion in mind as it examines other opportunities to 
streamline program requirements.
    Additionally, this provision is optional for PHAs. A PHA may 
continue to verify such assets at both admission and annual 
reexaminations.
2. Utility Reimbursements (Sec. Sec.  960.253, 982.514)
    Issue: Optional Nature of Provision. Commenters asked that HUD make 
this policy optional or allow PHAs to determine the frequency with 
which they make utility reimbursement payments. For example, some 
commenters requested that HUD permit annual reimbursements.
    HUD Response: The changes in this rulemaking are optional, and PHAs 
that do not believe this provision is beneficial to their program 
administration may continue to provide utility reimbursements monthly. 
Nothing in this rulemaking permits a PHA not to provide a utility 
reimbursement if such a reimbursement is due. Nor does the rulemaking 
offer PHAs the option of making such payments less frequently than 
quarterly.
    Issue: Frequency of Payments. Commenters asked whether the 
quarterly reimbursement period would be based on the calendar year or 
when the family moves in. Others asked for clarification on whether the 
payments are reimbursements or future payments.
    HUD Response: The final rule has been modified to clarify that the 
quarterly periods are to be based on the calendar year, not the move-in 
date. However, HUD is not amending other policies governing when 
utility reimbursements are sent.
    Issue: Hardship Exemption. Commenters stated that HUD should not 
allow any hardship exemption.
    HUD Response: While the proposed rule did not contain a hardship 
exemption, HUD has decided for some families, waiting for a quarterly 
reimbursement amount may be untenable. Therefore, the final rule now 
requires that if PHAs make quarterly reimbursements, the PHA must have 
a hardship policy in place for tenants.
    Issue: Quarterly Reimbursement Threshold Amount. Commenters 
requested that HUD increase to $50 the maximum amount of reimbursements 
that may be sent quarterly.
    HUD Response: HUD agrees that raising the threshold for quarterly 
reimbursements will increase the number of families under this 
provision and expand the streamlining efforts. While not raising the 
amount to $50 per quarter, HUD has raised the threshold to $45 per 
quarter ($15 per month). Any burden placed on families due to this 
higher amount is now offset by the requirement that PHAs opting to 
issue quarterly utility reimbursements must include a hardship 
exemption policy if the quarterly payments impose a financial hardship 
on families.
    Issue: Alternative Reimbursement Methods. Commenters asked that HUD 
support options other than checks for making utility reimbursement 
payments.
    Some commenters suggested that quarterly reimbursements would not 
help PHAs that use automatic deposits onto a debit card.
    HUD Response: HUD supports the use of alternative utility 
reimbursement methods, including debit cards. PHAs that choose to use 
such alternative methods should ensure that such reimbursement methods 
do not generate fees that must be paid by the tenant.
    The use of quarterly reimbursement may benefit PHAs that use 
automatic deposits. If it does not, then HUD expects that such PHAs 
will not exercise this option.
    Issue: Elimination of Low Reimbursement Amounts. Commenters asked 
that HUD eliminate utility reimbursements that are less than $10 per 
month or eliminate reimbursements entirely.
    HUD Response: HUD does not agree that utility reimbursements for 
amounts less than $10 per month should be eliminated. The elimination 
of such reimbursements would violate sections 3 and 8 of the 1937 Act 
(42 U.S.C. 1437a and 1437f), which require that families pay no more 
than 30 percent of their annual gross income in rent for their assisted 
housing. HUD has determined that such rental payments are for housing 
and reasonable utilities costs. Therefore, eliminating a utility 
reimbursement of any amount would result in some program participants 
paying more than the maximum amount of rent that the family should pay. 
HUD will not adopt the suggested change.
    Issue: Setting Rents by Income Bands. Commenters stated that the 
reimbursement burden would be completely eliminated if rents were 
solely determined by income bands.
    HUD Response: HUD does not have the statutory authority to permit 
the use of rents based on income bands in the PH or HCV programs. 
Therefore, HUD will not adopt this suggestion.
    Issue: Direct Payments. Commenters stated that owners should be 
able to submit utility payments directly to utility providers.
    HUD Response: This rulemaking does not eliminate the option 
available to PHAs to make direct payments to utility providers in lieu 
of making utility reimbursement payments to tenants.
    Issue: Prorated Reimbursements. Commenters stated that owners 
should be given the option to prorate the utility allowance payment 
based on any projected move out date; if a payment has already been 
disbursed when a tenant moves out, the owner should be allowed to 
offset the difference by using the security deposit, charging the 
resident for the difference, or adjusting the voucher payment amount.
    HUD Response: This rulemaking requires PHAs to make a prorated 
utility reimbursement payment in the case of a family that moves out in 
advance of the next scheduled quarterly reimbursement. Likewise, if a 
family leaves the program with an outstanding credit from the PHA for a 
utility reimbursement, the PHA must reconcile the credit with the 
family prior to the expiration of the lease, in the case of PH, or when 
the HAP contract terminates or shortly thereafter, in the case of the 
HCV program.

C. PH Program Regulations

1. Public Housing Rents for Mixed Families (Sec.  5.520(d))
    The comments received on this proposal were all positive and did 
not urge any changes. Therefore HUD is adopting the proposal, unchanged 
in the final rulemaking.
2. Tenant Self-Certification for Community Service and Self-Sufficiency 
Requirement (Sec. Sec.  960.605, 960.607)
    Issue: Review of Certifications. Several commenters stated that HUD 
should not require PHAs to obtain third-party verification when 
reviewing the self-certifications or should limit the times when a PHA 
should follow up with a third party in the review of certifications.
    HUD Response: HUD agrees that it would be unnecessarily burdensome 
on PHAs to obtain additional third-party verification when reviewing 
each self-

[[Page 12361]]

certification. HUD is not, therefore, mandating such a process when 
reviewing tenant self-certifications. PHAs must, however, review the 
self-certifications to ensure that they are complete and provide 
sufficient information in order to follow up as necessary. Further, HUD 
strongly encourages PHAs to investigate community service compliance 
when there are questions of accuracy. Finally, in a change from the 
proposed rule, HUD is requiring PHAs to validate a sample of self-
certifications and notify residents that their self-certifications may 
be subject to such validation in order to ensure that residents remain 
compliant with the community service and self-sufficiency requirement 
(CSSR).
    Issue: Objections to Self-Certification. Several commenters 
objected to the proposal to allow self-certification, stating that it 
would reduce compliance with the CSSR.
    HUD Response: While HUD understands the concerns that some 
residents may attempt to submit fraudulent self-certifications, the 
changes permit, but do not require, PHAs to accept a tenant self-
certification of compliance with the CSSR in lieu of obtaining 
independent third-party verification. PHAs that are concerned about the 
potential for fraudulent self-certifications may continue to require 
third-party verification of compliance for each eligible resident.
    Issue: Elimination of Community Service Requirement. Several 
commenters suggested that it would be better if HUD eliminated the 
community service requirement for PH entirely.
    HUD Response: The CSSR is mandated by section 12(c) of the 1937 Act 
(42 U.S.C. 1437j(c)). HUD is therefore unable to eliminate the CSSR.
3. Public Housing Grievance Procedures (Sec. Sec.  966.4 and 966.52 
Through 966.57)
    Issue: Alignment. Commenters suggested that all grievance 
procedures should be aligned across PH, Section 8, and MFH programs. 
This would allow for only one administrative hearing for any action. 
Other commenters suggested applying the revised definition of ``hearing 
officer'' to the HCV program, as well.
    HUD Response: In general, this streamlining rule aligns program 
requirements where possible to simplify administration of HUD programs. 
In the case of the PH program, which in some cases requires grievance 
procedures that are beyond what is required under state/local law, it 
would be impractical for HUD to seek to fully align the PH program with 
other HUD rental assistance programs.
    Issue: Hearing Postponements. Many commenters objected to language 
in Sec.  966.56(c), which would limit the timing of any hearing 
postponements to five days. The commenters stated that the provision 
places unnecessary time restrictions, and timeframes should remain at 
the discretion of PHAs on a case-by-case basis.
    HUD Response: HUD's intent in this provision is to clarify, through 
the use of plain language, the flexibility afforded to the hearing 
officer regarding the length of time for which a hearing may be 
postponed. The regulatory language was changed from ``not to exceed,'' 
to ``no more than.'' The change is not substantive, does not reduce the 
flexibility afforded to the PHA, and is not disadvantageous to the 
complainant. The final rule is unchanged from the proposed rule.
    Issue: Limited English Proficiency (LEP) Requirements. Several 
commenters expressed concern with the newly included LEP requirements 
in Sec.  955.56. The commenters asked whether a PHA must provide 
materials in multiple languages, and stated that PHAs should be allowed 
to use common sense when providing LEP materials to complainants.
    Other commenters asked that HUD expand the LEP requirements beyond 
written materials to include providing translators at various 
conferences and meetings and materials in other languages for any 
notice related to a proposed adverse action. Some commenters stated 
that written materials may be inappropriate, as some residents may be 
illiterate in their spoken language.
    Some commenters also disagreed with HUD's placement of the LEP 
requirements under a heading of accommodations for persons with 
disabilities, as limited English proficiency is not a disability.
    HUD Response: HUD's intent in this provision is to clarify in the 
regulations the LEP requirements already in place for the PH program. 
On January 22, 2007,\6\ HUD published final guidance in the Federal 
Register. This rulemaking does not introduce requirements that are 
beyond what is included in HUD's final LEP guidance. The final rule has 
been amended to clarify PHA obligations.
---------------------------------------------------------------------------

    \6\ See http://www.gpo.gov/fdsys/pkg/FR-2007-01-22/pdf/07-217.pdf.
---------------------------------------------------------------------------

    HUD agrees with the comments regarding the placement of the 
language, and has moved the requirement to Sec.  966.56(g).
    Issue: Due Process. Commenters suggested methods to assure due 
process rights for complainants, including relying exclusively on local 
courts or limiting the streamlined process only for drug activity. Some 
commenters stated that PHAs should be required to set forth a basic 
schedule, including witness lists and supporting documents and limiting 
the types of testimony a PHA may introduce without allowing cross-
examination of witnesses. Commenters also asked that HUD provide 
additional guidance on how flexible a PHA may be with certain 
procedures, in order to reduce the exposure of PHAs to legal 
challenges.
    HUD Response: HUD's intent in this rulemaking is to remove overly 
prescriptive process requirements for PH grievances, where those 
requirements are not mandated by statute. The changes proposed above 
either attempt to maintain or add to existing requirements. The changes 
are not consistent with HUD's intent in this rulemaking; therefore, HUD 
will not adopt these suggested changes.
    Issue: Consultation with Residents in Appointing Hearing Officers. 
Some commenters expressed concern that the proposal eliminates the 
requirement for PHAs to consult with residents in appointing hearing 
officers, stating that it damages residents' rights to impartial 
hearings.
    HUD Response: Requiring a process to consult with residents over 
the selection of a hearing officer when PHAs ultimately have the final 
say about whom to select would be an unnecessarily burdensome process 
requirement, and therefore contrary to the intent of this rulemaking 
which is to reduce burden. Further, PHAs still may, but are no longer 
required to, consult with residents about the hearing officer. This 
suggestion would maintain the current burdensome process and is 
inconsistent with HUD's intent in this rulemaking. HUD will not adopt 
this suggestion.
    However, in light of these comments, HUD agrees that tenant input 
into hearing officer selection process can be valuable. Therefore, HUD 
is requiring that PHAs include their policies for selection of hearing 
officers in the dwelling lease, which is subject to a 30-day comment 
period before any changes can be made.
    Issue: Informal Settlements. Commenters asked that HUD continue to 
require the summary of informal settlements, stating that HUD could 
provide a template in order to reduce administrative burden.
    HUD Response: HUD agrees that there is value in the preparation of 
the

[[Page 12362]]

summary, as it provides an opportunity for both parties to prepare for 
any forthcoming grievance hearing. As such, HUD will not change the 
previous requirement that a summary be prepared. HUD will explore 
whether a template summary would be useful at reducing administrative 
burden for PHAs.
    Issue: Meeting Recordings and Transcripts. Commenters stated that 
HUD should still require PHAs to allow residents to record a meeting 
and have a transcript made, as elimination of this requirement doesn't 
ease the burden to the PHA, but it eliminates a benefit for future 
proceedings.
    HUD Response: HUD agrees with this comment and this final rule 
reinstates language making clear that any party to a grievance may 
arrange to obtain a hearing transcript, at their own expense.
    Issue: Retention of Hearing Officer Decisions. Commenters expressed 
concern that HUD was eliminating the requirement that PHAs maintain 
copies of decisions of hearing officers. Commenters stated that the 
records are important to maintaining transparency for PHAs; the 
commenters stated that electronic records would reduce burdens for 
keeping the records.
    HUD Response: HUD's regulation at 24 CFR 966.56(b)(1) requires that 
tenants be afforded a hearing based on relevant facts related to the 
specific grievance. HUD disagrees that prior decisions are necessarily 
relevant to the individual facts related to a specific grievance 
hearing. Further, the retention of such documents is time-consuming and 
costly for PHAs. The suggested change is inconsistent with HUD's intent 
in this rulemaking, which is to reduce administrative burden and 
program costs. Therefore, HUD will not adopt the suggested change.
    However, HUD agrees that basic information related to past hearing 
decisions could be useful for HUD oversight and for ensuring 
transparency in the process. Therefore, in lieu of the requirement to 
maintain redacted hearing decisions and making such decisions available 
to the public, HUD is requiring that PHAs maintain a simple log, as 
described in forthcoming HUD guidance, that provides basic information 
on past hearing decisions.
    Issue: Informal Hearings. Commenters stated that HUD should 
reinstate informal hearings prior to a formal grievance in order to 
avoid more costly formal hearings whenever possible.
    HUD Response: This final rulemaking did not eliminate the informal 
hearing (i.e., informal settlement of grievance) prior to a formal 
grievance hearing, as initially proposed. Requirements related to the 
informal hearing are contained in 24 CFR 966.54.
4. Limited Vacancies (Sec.  990.150)
    Issue: Consistency with local vacancy rates. Commenters stated that 
PHAs should be allowed to maintain vacancy rates that are comparable 
with that of the jurisdiction. Others asked HUD to set the allowed 
vacancy rate at not less than 5 percent, as permitted in the LIHTC and 
Project-Based Rental Assistance (PBRA) programs.
    HUD Response: The limited vacancy provision allows for funding for 
vacancies of up to 3 percent. Five other types of approved vacancies 
are included in the existing regulation related to particular project 
circumstances such as modernization, special uses, litigation, 
disasters, and casualty losses as well as an appeal provision for 
vacancies due to changing market conditions.
    Issue: Effect on small agencies. Some commenters objected to new 
language that the commenters stated would reduce subsidies to PHAs and 
could destabilize small agencies. Others stated that the proposal does 
not allow for consideration of market conditions or specific local 
conditions for small PHAs, which would hurt struggling agencies.
    HUD Response: The proposed language retains the special 
consideration for PHAs with 100 units or less. HUD's Public Housing 
Operating Fund (Operating Fund) regulations continue to allow for 
appeals for changing market conditions and specific local condition.
    Issue: Basis for calculation. Commenters asked that vacancies be 
judged on a PHA-wide basis to permit balance of high-demand areas with 
others where there is a low demand, because one or two vacancies could 
cause a vacancy rate over 3 percent. The commenters stated that PHAs 
should be allowed to manage their portfolio as a single program, 
similar to the way the private sector would do so.
    HUD Response: This clarification of the limited vacancy rule 
retains the approach that funding is both determined and provided at a 
project level. The foundation of the transition to asset management, 
which was adopted by both PHAs and HUD at the time of promulgation of 
the new Operating Fund rule, was for certain PHAs to migrate away from 
PHA-level management and funding for those that converted to asset 
management. Instead, funding, budgeting, accounting, and management are 
all conducted at the project level. HUD recognizes each PHA's 
discretion as a property and financial manager of real estate to group 
buildings to optimize efficient property management and financial 
viability. The Operating Fund regulations and HUD systems currently 
allow PHAs to group buildings into a project(s) to best serve the 
interests of the property and residents.
    Issue: Lag time. Commenters objected to the change because 
occupancy numbers being used are 12-18 months in the past, requiring 
PHAs to operate on non-applicable past information.
    HUD Response: The Operating Fund formula in 24 CFR part 990 is 
based on use of historical performance data as a basis to fund current 
year needs. The clarification of the limited vacancy language does not 
modify the tenure of performance data used to calculate Operating 
Subsidy eligibility.
    Issue: Negotiated rulemaking. Some commenters stated that HUD 
should stand by agreements reached through the negotiated rulemaking 
process that established the current operating fund formula.
    HUD Response: The clarification of the limited vacancies provision 
is consistent with the negotiated rulemaking process.
5. Flat Rents (Sec.  960.253)
    Issue: Phase-in of rent increases less than 35 percent. Commenters 
asked that HUD reinstate an earlier policy that would allow PHAs to use 
discretion in implementing any higher flat rents. This would have 
allowed PHAs to phase in small flat rent increases--those below 35 
percent--over a three-year period.
    HUD Response: The initial discretion for phasing in small increases 
was due to the fact that the changes in the 2014 Appropriations Act set 
all flat rents at 80 percent of FMR, with no possibilities for 
exceptions to that amount. HUD received indications that this might be 
softened in a future year, permitting PHAs to set flat rents using more 
localized market data. As a result, HUD used its discretion to limit 
the impact of flat rent changes on PHAs and tenants by allowing the 
higher rents to be phased in.
    With the passage of the 2015 Appropriations Act, however, HUD 
believes that PHAs have sufficient flexibility to set flat rents that 
reflect the true market value of their units, and therefore the three-
year phase-in for small flat rent increases is unnecessary. However, 
the statutory requirement to phase in increases exceeding 35 percent 
for families already paying flat rents remains in the rule.
    Issue: Deadline for compliance. Commenters asked HUD to extend the

[[Page 12363]]

January 1, 2016 deadline for flat rents to take effect.
    HUD Response: This comment misinterprets the effective date of the 
new flat rent requirements. HUD did not establish a hard deadline of 
January 1, 2016 for new flat rents to take effect. PHAs were already 
required to establish flat rents at no less than 80 percent of the 
applicable FMR as required by PIH Notice 2014-12. That notice clarified 
that PHAs were required to update flat rents no later than 90 days 
after HUD published new, final FMRs. The 90-day effective date of new 
flat rents based on new FMRs was also included in the interim rule and 
the accompanying guidance provided through notice PIH 2015-13. Once HUD 
publishes new final FMRs in any given year, PHAs will be required to 
update flat rents within 90 days of the publication of those FMRs and 
must begin applying them prospectively to new admissions and at family 
annual recertifications. In years where HUD takes longer than 12 months 
between the publication of new FMRs, PHAs are permitted to continue to 
charge flat rents at the current FMR, SAFMR, or approved exception flat 
rent amount until HUD publishes new FMRs and the 90-day effective date 
has taken place.
    Issue: Lowering rents when FMRs or SAFMRs decrease. Commenters 
asked HUD for additional clarity on the requirements for when market 
rents decrease, particularly whether PHAs retain discretion to reduce 
flat rents when FMRs decrease.
    HUD Response: PHAs must set flat rents at no less than 80 percent 
of the FMR or SAFMR, or they may submit an exception request 
establishing flat rents based on a market analysis. There is no such 
requirement limiting a PHA from lowering a flat rent in years where the 
FMR or SAFMR decreases. Therefore, in years where an FMR or SAFMR 
decreases, PHAs have the discretion to lower flat rents, but they may 
not set flat rents at less than 80 percent of the FMR or SAFMR unless 
they submit a new exception request.
    Issue: Rent reasonableness guidance. Commenters suggested that a 
possible explanation for why flat rents have been set incorrectly in 
the past is due to a lack of guidance from HUD on proper rent 
reasonableness assessments.
    HUD Response: While that may be true for some PHAs, HUD has heard 
anecdotally that there were many reasons why flat rents may not have 
been set correctly. However, in an effort to support PHAs when trying 
to determine the market value of their public housing, HUD will publish 
future guidance on rent reasonableness assessments for public housing.
    Issue: Updating rent levels when an exception rent has been 
requested. Commenters asked for additional clarification on what the 
requirements were related to adjusting flat rent levels when the PHA is 
intending to submit a request for exception rents.
    HUD Response: In this initial year, any PHAs that submit exception 
requests prior to the expiration of the 90-day period after the 
publication of new FMRs may continue to charge flat rents at the 
current levels until the PHA is notified of HUD's decision on their 
exception request. However, if a PHA fails to submit an exception 
request prior to the expiration of the 90 day period after the 
publication of new FMRs, that PHA may still submit an exception 
request, but must update flat rents to no less than 80 percent of the 
FMR or SAFMR until such time that HUD notifies the PHA of its decision 
on the exception request.
    Issue: Flat rents and self-sufficiency. Commenters stated that PHAs 
should have the discretion to set flat rents lower than 80 percent of 
market rents in order to encourage families to become self-sufficient.
    HUD Response: Flat rents themselves are intended to encourage self-
sufficiency. They are a maximum amount of rent that a family could be 
charged; once a family begins to pay flat rent, any increases in income 
do not have an effect on their rental payment. Because families have 
the ability to choose between paying an income-based rent or a flat 
rent, families that choose to pay flat rents are inevitably paying a 
lower percentage of income than other public housing households which 
is a self-sufficiency incentive. Therefore, HUD does not believe that 
any additional discretion regarding flat rents is necessary to 
encourage economic self-sufficiency.
    Issue: Reduced exception rent requests. Commenters asked that PHAs 
only be required to submit exception rent requests every three years 
instead of annually.
    HUD Response: HUD is bound by the statutory framework, which 
stipulates that exception requests must be submitted if the applicable 
FMR or SAFMR do not reflect the market value of a property. As such, 
the statute requires a comparison of the FMR or SAFMR to a current 
market study in order to determine whether the market value of a 
property is less than the current FMR or SAFMR. Therefore, HUD does not 
have the authority to permit PHAs to use market studies that are not 
current for exception requests.
    Issue: LIHTC rents and public housing flat rents. Commenters asked 
for additional clarity on how the flat rents regulation impacts the 
LIHTC rents.
    HUD Response: PHAs that manage public housing units that were 
developed or modernized using LIHTC must set maximum rents for such 
units at the required maximum LIHTC rents, even if this is lower than 
the minimum flat rent amount for a particular unit.
    Issue: Opposition. Several commenters objected to the flat rent 
policy entirely, stating that it would increase rent burden, cause 
higher turnover, and negatively impact tenant employment.
    HUD Response: Although HUD recognizes that there are consequences 
to changes in flat rents, HUD believes that the changes included in the 
FY 15 Appropriations Act, which have been included in this rulemaking, 
provide sufficient flexibility to PHAs to set accurate, market-based 
rents. Further, tenants concerned about rent burden are reminded that 
they are provided a safeguard in this rulemaking from large annual 
increases in rent, and they are always able to elect to pay the income-
based rent which is set at 30 percent of income.

D. HCV Program Regulations

1. Start of Assisted Tenancy (Sec.  982.309)
    Issue: Objections. Many commenters objected to this proposal, 
stating that landlords seek to lease units as quickly as possible, and 
this could delay tenants from being able to move into their units. In 
high-demand areas, this could reduce the number of landlords willing to 
participate in the voucher program, limiting choice to voucher holders. 
Many commenters also expressed concern that this would have negative 
consequences for families that need to move immediately or 
alternatively would cause tenants to have to move out of a unit before 
being able to move into a new one. Other commenters stated that this 
would concentrate administrative tasks into a single time of the month 
for PHAs, actually increasing their burden.
    HUD Response: HUD has decided against promulgating this change. 
Several commenters favored the proposed change, but input from groups 
ranging from landlords to tenant advocates suggested that the change 
would have an adverse effect on the ability of HCV-assisted tenants to 
access housing. While the proposed change would have been optional at 
the discretion of the PHA, and HUD estimates that PHAs would choose not 
to adopt any measure that would make

[[Page 12364]]

it more difficult for HCV-assisted tenants to access housing, HUD 
ultimately decided that it could move forward with the change only if 
it also required any PHA opting to implement the provision to also put 
into place an exception policy for certain families (e.g., victims of 
domestic violence) or situations (e.g., HAP terminations due to HQS 
violations). Ultimately, requiring the adoption of an exception policy 
would counter any administrative relief provided by implementing the 
proposed change. Taking all of these factors into consideration, HUD 
declines to include this provision in this final rule.
2. Biennial Inspections and the Use of Alternative Inspection Methods 
(Sec. Sec.  982.405, 983.103)
    Issue: HUD Systems. Commenters suggested ways that HUD could 
improve its inspection procedures. Some commenters suggested that the 
electronic systems be updated for biennial inspections, and others 
asked for a centralized database for inspection reports and data, which 
could then be accessed by PHAs in order to obtain the results of 
alternative inspection methods. Some commenters stated that HUD should 
review inspection protocols with input from PHAs and implement ``best 
practices'' across the board. Commenters also asked for consolidating 
inspection standards between HUD programs and LIHTC.
    HUD Response: While these comments are helpful in that they specify 
improvements to HUD systems that would simplify the inspection process, 
advise of the burden that results from differences in inspection 
protocols and standards, and point out at least one way in which an 
expansion of this provision could bring about further streamlining, 
they are either beyond the scope of this rulemaking or would require 
statutory changes.
    In addition, HUD's information technology investment decisions are 
made enterprise-wide based on available resources as appropriated by 
Congress. HUD will explore ways to move to electronic reporting systems 
with available resources. In particular, HUD is considering the 
creation of a national-level affordable housing database that could be 
utilized in the way described.
    Issue: Keep Proposal Optional. Some commenters stated that PHAs may 
want to inspect properties more frequently for oversight purposes, and 
therefore asked that biennial and alternative inspections remain 
optional for PHAs.
    HUD Response: As authorized by Congress and proposed in this 
rulemaking, the use of biennial inspections is at the discretion of the 
PHA; PHAs will retain the discretion to inspect annually any properties 
that warrant more frequent attention. The same is true of alternative 
inspection methods--their use is entirely at the discretion of the PHA, 
per the statute and this rulemaking. Nothing in this final rule 
requires a PHA to adopt biennial inspections or alternative inspection 
methods.
    Issue: Remediation Protocols. Commenters offered several 
suggestions on how to remediate problems identified by alternative 
inspections. Some stated that HUD should allow PHAs to rely upon the 
remediation protocol of the alternative inspection method; there would 
be no burden relief if PHAs have to conduct HQS inspections anyway for 
units that failed the alternative inspection the first time. Some 
commenters suggested that this could be satisfied by providing HUD with 
a certification from the inspecting agency that the deficiencies have 
been mitigated. Commenters stated that HUD should allow PHAs to decide 
if they will conduct a remedial HQS inspection or rely on the owner to 
provide proof of actions to remedy defects.
    HUD Response: HUD is sympathetic to the suggestion that any 
streamlining benefit of this provision is offset by the requirement 
that a PHA inspect a property using HQS when the property has already 
been inspected using an alternative inspection method and such method 
reveals the existence of violations that would have resulted in a 
``fail'' score under HQS. For an alternative inspection method that 
employs sampling, however, as is the case with inspections of 
properties subsidized with LIHTCs, any cited deficiencies that would 
ultimately be corrected may exist as well in units not included in the 
sample, including units occupied by HCV-assisted households. HUD has an 
obligation to determine whether such deficiencies exist in units 
occupied by such households and, if they do, to assure that the units 
are once again brought into compliance with HUD's housing quality 
standards.
    PHAs are only precluded from relying on an alternative inspection 
method if a property inspected pursuant to the method fails an 
inspection. In all cases where a property passes an inspection, even if 
deficiencies are identified, a PHA may rely upon the alternative 
inspection method to demonstrate compliance with HUD's housing quality 
standards. If a property fails an inspection due to identified 
deficiencies, it may be the case that remedial actions taken pursuant 
to the alternative inspection method fall short of what would be 
required under HUD's housing quality standards.
    In any circumstance in which a PHA is prohibited from relying on an 
alternative inspection method, HUD declines, for the reasons identified 
above, to adopt alternative remediation measures as a substitute for a 
PHA's determination that a unit occupied by an HCV-assisted family 
meets the requirements for occupancy and funding under the HCV program.
    Issue: Reinspection Sampling. In the case of residents with tenant-
based vouchers living in mixed-finance properties, commenters stated 
that HUD should authorize biennial inspection of a random sample of 
units consisting of at least 20 percent of the contract units in each 
building.
    HUD Response: Congress specifically authorized the use of 
alternative inspections, including inspections conducted pursuant to 
requirements under the low-income housing tax credit (LIHTC) program. 
The LIHTC program employs sampling. A PHA may adopt an alternative 
inspection method that is specifically authorized by Congress or 
approved by HUD and employs sampling.
    Issue: Alternative Inspection Standards. Commenters suggested that 
HUD require HUD's Real Estate Assessment Center (REAC) to approve or 
disapprove a PHA's certification that an alternative inspection method 
meets HUD standards prior to allowing the PHA to employ the alternative 
inspection method.
    HUD Response: HUD has adopted this suggestion in this final 
rulemaking.
    Issue: Local Jurisdiction Inspections. Commenters asked that HUD 
allow PHAs to use inspections done for local jurisdictions, even when 
the inspections are done by local agencies.
    HUD Response: The statute authorizes PHAs to rely on inspections 
conducted under a ``Federal, state, or local housing program.'' HUD 
interprets a ``local housing program'' to include a local housing code. 
Subject to the conditions established in this final rule, a PHA may 
rely upon an inspection conducted pursuant to a local housing code to 
meet its obligation to inspect units occupied by HCV-assisted tenants 
during the course of a housing assistance payments contract. In order 
to rely upon such an inspection, a PHA must submit a copy of the local 
housing code to HUD, along with an analysis by the PHA showing that the 
local housing code standard meets or exceeds HQS. Once HUD has reviewed 
these materials, and then only if HUD approves use of the inspection 
method, the PHA may rely upon it. The PHA must certify annually to HUD 
that

[[Page 12365]]

the local housing code has not changed; if it has changed, then the PHA 
must again obtain HUD approval to rely upon the standard, submitting a 
copy of the revised code and an analysis showing that the revised 
standard meets or exceeds HQS.
    Issue: Objections. Some commenters expressed dissatisfaction with 
the proposal, particularly with alternative inspections, and stated 
that HUD should not continue with the proposal.
    HUD Response: HUD is required by law to implement biennial 
inspections and inspections via alternative inspection methods.
3. Housing Quality Standards (HQS) Reinspection Fees (Sec.  982.405)
    Issue: Burden on PHAs and Deterrence to Landlords. Some commenters 
objected to the proposal, stating that landlords would be reluctant to 
pay reinspection fees and would therefore be deterred from 
participating in the Section 8 program. Others stated that charging 
fees to landlords would be a burden to PHAs, and therefore should 
remain optional and up to the PHA to decide how to implement.
    HUD Response: The proposed change made it optional for a PHA to 
charge a reinspection fee, and this final rule retains the optional 
nature of the provision. If a PHA has a concern that charging a fee may 
deter landlords from participating in the program or may result in 
additional work (i.e., securing payment of a fee, once assessed), then 
the PHA will want to take these factors into consideration when 
determining whether to impose a reinspection fee. As long as a PHA 
complies with the requirements of this regulation when imposing a 
reinspection fee, nothing in this regulation would constrain a PHA from 
adopting local policies specific to the administration of such a fee. 
For example, a PHA could specify in its Administrative Plan that an 
owner will be charged a reinspection fee only after a second 
reinspection reveals that the defect persists. PHAs will need to 
determine whether and how best to use this reinspection fee authority, 
based upon their local circumstances.
    Issue: Use of Fees and When to Charge. Some commenters suggested 
that the collected fees be added to administrative fee amounts 
available to a PHA.
    HUD Response: Fees will be included in a PHA's administrative fee 
reserve and may be used only for activities related to the provision of 
Section 8 tenant-based assistance.
    Issue: Guidance. Several commenters asked HUD to provide additional 
guidance on what constitutes a ``reasonable'' fee; such guidance will 
be necessary to reduce PHA administrative burden.
    HUD Response: HUD will issue guidance on what constitutes a 
``reasonable'' fee.
    Issue: When Charges May Be Assessed. Commenters asked that HUD 
clarify the proposal to avoid charges for full HQS inspections instead 
of merely for reinspections of previously identified deficiencies. 
Others asked for information on how the proposal would relate to 
special inspections that are not initial or regularly scheduled 
inspections, or what would happen if a landlord or tenant does not 
attend or allow entrance for the inspection. Commenters also asked that 
HUD expand the proposal to allow for the charging of fees even when a 
landlord has not indicated deficiencies have been corrected, when the 
allotted time for repairs has expired but a pre-scheduled reinspection 
reveals the repairs have not been made.
    HUD Response: The final rule makes clear that a fee may be assessed 
under two circumstances: First, if a landlord affirms that a repair has 
been made and a subsequent reinspection shows that it has not and, 
second, when the allotted period of time for making the repair has 
lapsed and a reinspection shows that the repair has not been made, 
whether or not the landlord has affirmed that it was.
    Issue: Expansion of Proposal. Some commenters also suggested that 
HUD expand the proposal to allow for fees for all reinspections. Others 
stated that PHAs should be allowed to redirect funds from abated rents 
to cover the costs of inspections instead of charging fees. Finally, 
commenters stated that HUD should consider other incentives for 
landlords, such as allowing tenants to pay rent into repair escrow 
accounts.
    HUD Response: HUD appreciates these suggestions and observations 
but has declined to adopt them as part of this rulemaking.
4. Exception Payment Standards for Providing Reasonable Accommodations 
(Sec. Sec.  982.503, 982.505)
    Issue: Unit Special Features. Commenters stated that HUD should 
include a consideration of special features of the unit when 
establishing a reasonable rent between 110 percent and 120 percent of 
area fair market rent (FMR).
    HUD Response: There was strong support for retaining this provision 
unchanged, and HUD has done so. A PHA must take special features into 
consideration when there is a reasonable accommodation request. In 
accordance with 24 CFR part 8, a PHA must provide a higher payment 
standard if requested as a reasonable accommodation for a family that 
includes an individual with disabilities. HUD's regulation implementing 
section 504 of the Rehabilitation Act, at 24 CFR part 8, is referenced 
in 24 CFR 982.505(d). In addition, under 24 CFR 8.28(a)(3), PHAs are 
already required, when issuing a voucher to a family that includes an 
individual with disabilities, to assist the family in locating an 
available, accessible dwelling unit. For example, PHAs are required to 
provide a current listing of available units known to the PHA.
    Issue: HAP Funding. Commenters stated that PHAs will be challenged 
to provide higher payment standards when HAP funding is already 
constrained.
    HUD Response: HUD acknowledges the concerns about funding 
constraints. PHAs are nonetheless required to assist families that 
include an individual with disabilities, including by providing a 
higher payment standard as a reasonable accommodation, if the family 
requests such an accommodation and it is necessary in order for the 
family to obtain suitable housing.
5. Family Income and Composition: Regular and Interim Examinations 
(Sec.  982.516(c)-(e))
    Issue: Timing of Interim Examinations. Commenters supported this 
proposal, but also asked that it remain optional for PHAs. Some asked 
for further clarification from HUD regarding whether a PHA is required 
to conduct an interim examination when a family member is added, and at 
what point such an examination might be required. Several commenters 
also pointed out that the new proposed language did not align 
regulations between the PH and Section 8 programs.
    HUD Response: HUD agrees with providing clarity to the proposed 
change to 24 CFR 982.516. With the removal of paragraph (e) (``Family 
member income''), HUD is removing from part 982 the requirement that a 
PHA perform an interim examination whenever a new family member is 
added. The corresponding regulation for the PH program (24 CFR 960.257) 
contains no such requirement. The removal of paragraph (e) from Sec.  
982.516 provides HUD with the opportunity to issue uniform guidance on 
interims--in other words, guidance that will apply to both the PH and 
HCV programs. Having reviewed data on the reasons for which interims 
are requested and considering a number of alternatives, including 
establishing thresholds below which

[[Page 12366]]

PHAs would not be required to conduct interims, HUD determined that the 
greatest potential for streamlining lies in issuing uniform guidance. 
Other options either created their own administrative challenges and/or 
had the potential to have a negative effect on program participants. 
For example, authorizing PHAs to limit interims to circumstances in 
which a change in family income or composition would result in a rent 
increase of some threshold dollar amount would require PHAs to 
determine whether the threshold had been met, which would in itself be 
a burdensome exercise. At the same time, a finding that the threshold 
had not been met, resulting in no change to a family's rent, could 
place a burden on tenants.
    Issue: Discretion and Threshold Amounts. Several commenters 
requested that HUD continue to leave policies regarding 
recertifications up to the discretion of PHAs.
    HUD Response: Nothing in this final rule alters PHA discretion with 
respect to interims.
6. Utility Payment Schedules (Sec.  982.517)
    Issue: Objections to the Proposal. Many commenters objected to the 
proposal to consolidate the utility payment schedules. Some commenters 
stated that the definition of ``attached'' and ``detached'' are 
unclear, and HUD should provide additional information. Other 
commenters stated that consolidating the schedules would penalize 
tenants in certain types of units because energy use is not always 
comparable under such broad categories. Some commenters suggested that 
the proposal could raise fair housing issues by impacting larger 
families in multi-bedroom units. Others stated that the proposed 60-day 
notice was insufficient to protect tenants from decreased utility 
allowances.
    Some commenters stated that, in areas served by more than one PHA, 
perhaps with differing policies on how to define unit types, the 
proposal would create confusion for program applicants and 
participants.
    HUD Response: Considering the totality of the comments submitted on 
the proposal to authorize PHAs to establish utility payment schedules 
that limit ``unit type'' to either ``attached'' or ``detached,'' HUD 
has decided against adopting this provision. HUD acknowledges comments 
that the proposal may have an unintended and inequitable effect on 
certain households, and believes this issue merits additional analysis 
in order to determine the extent to which these outcomes may occur and 
to weigh those outcomes against the benefits of streamlining. In 
addition, comments focused on jurisdictional questions caused HUD to 
realize that the proposal could create confusion--for program 
applicants, especially--in the event PHAs with overlapping 
jurisdictions opted to adopt different definitions of ``unit type'' 
(i.e., one relying on the traditional method and the other choosing to 
define unit type as either ``attached'' or ``detached'').
    Issue: Broader Utility Allowance Changes. Commenters asked HUD to 
consider broader changes to utility allowances. Commenters suggested 
that HUD completely eliminate utility allowance schedules or allow flat 
utility allowances based on average per-bedroom size or household size. 
Others suggested that HUD provide an annual utility cost adjustment 
factor for each locale instead of requiring PHAs to calculate utility 
costs on their own. Finally, some commenters suggested that HUD 
establish a more equitable utility subsidy approach, accounting for 
other forms of assistance, such as utility caps or utility credits.
    HUD Response: Based on comments received, HUD recognizes that 
having a holistic look at utility allowance calculations may be 
merited. Should HUD initiate such a review, these comments will be 
taken into consideration. The suggestions are, however, beyond the 
scope of this rulemaking.

E. Other Comments

    In addition to comments on specific proposals, commenters also 
suggested regulatory and other changes that HUD could make for 
streamlining and other burden-reducing benefits.
1. Enterprise Income Verification (EIV)/Information Verification
    Issue: EIV Reports. Some commenters suggested that certain reports 
(e.g., New Hires, New Move-In, Income Discrepancy) should not be used 
as frequently, if at all. The commenters suggested that, to the extent 
such reports provide useful information, the information could be 
gathered at other times or using other methods.
    HUD Response: HUD appreciates the comments regarding the use of the 
various EIV reports. HUD understands that the information generated 
through some reports may reflect delayed information. However, EIV has 
significantly reduced improper payments in HUD's programs, and these 
reports help PHAs and HUD to monitor program participants and address 
discrepancies in a timely manner. Further, changes to EIV are beyond 
the scope of this rulemaking.
    Issue: EIV Use and Expansion. Many commenters suggested that HUD 
modify the EIV system by adding additional income sources, including 
past income, in the system or allowing verification of SSNs through 
EIV. Other commenters suggested that HUD consider alternatives to EIV, 
such as the Work Number or cooperative agreements with state agencies. 
Finally, commenters asked for more frequent updates to EIV.
    HUD Response: HUD appreciates the comments about how to improve or 
supplement EIV; however, these suggestions are outside of the scope of 
this rulemaking.
2. Income Determinations and Rent Settings
    Issue: Calculation of Income. Commenters offered suggestions on 
ways that they stated would be easier to calculate tenant income and 
rent. Some stated that HUD should base rents on gross income, rather 
than adjusted income. Others suggested that HUD modify the process for 
deducting medical expenses from income by using past expenses or a 
standard deduction. A standard childcare deduction was also proposed. 
One commenter suggested that HUD consider the automation-based process 
for certification and verification incorporated by the Affordable Care 
Act.
    Commenters also asked HUD to allow for less frequent income 
reexaminations, either on a biennial or a triennial basis. This change 
could be authorized based on family type (i.e., elderly, disabled) or 
family income status (i.e., extremely low-income, very low-income).
    Some commenters requested an increase in the minimum rent or that 
HUD reinstate the ``frozen rental income'' regulation provision to 
encourage tenants to have earned income. Others asked that HUD consider 
limiting the inclusion of assets by only including actual income from 
assets or only including assets disposed of for less than fair market 
value for assets over a given threshold. Some stated that HUD should 
count assets disposed of since the two previous annual reexaminations 
instead of the previous two years.
    Commenters stated that HUD should not allow tenants to claim no 
income, but instead should require that all tenants maintain a minimum 
income.
    Finally, commenters stated that PHAs should not be required to 
conduct rent reasonableness determinations when a PHA is using a fair 
market rent determined by HUD or when a proposed rent has already been 
approved by HUD or its administrator.

[[Page 12367]]

    HUD Response: HUD requested comments from the public about other 
opportunities to align requirements across programs, and HUD 
appreciates receiving these additional comments. Some of the 
suggestions are outside the scope of this rulemaking or would require 
statutory change. However, HUD will consider these suggestions for 
future streamlining changes.
    HUD has taken actions on other suggestions. HUD's FY 2016 budget 
proposes three-year recertification of income for fixed income 
families, increasing the threshold for deduction of medical and related 
care expenses, and a Utilities Conservation Pilot that would make it 
easier for PHAs to access energy incentives from energy investments. 
Also, HUD is conducting a rent reform demonstration to compare the 
current rent structure in subsidized housing to an alternate structure 
in terms of impact on household employment, earnings, hardship, 
homelessness, and on simplification and cost of PHA administrative 
processes.
3. Fees and Payments
    Issue: Funding and Improper Payments. Many commenters provided 
suggestions on how to improve and streamline payments to owners and 
PHAs. Several suggested increased funding for administrative fees or 
physical inspections. Other commenters stated that HUD should permit 
voucher HAP reserves to be used for administrative purposes when the 
administrative fee proration is below 90 percent.
    Some commenters requested HUD freeze the rolling utility base to 
allow PHAs to recoup savings from energy conservation methods. Others 
asked HUD to allow expedited implementation of lower payment standards 
in the voucher programs. Several commenters suggested that HUD revise 
its process for determining project expense levels, accounting for the 
age of properties and using the negotiated rulemaking inflation factor. 
One commenter stated that HUD should permit rent increases to owners in 
the HCV program only on a contract anniversary date.
    Commenters also provided suggestions on reforming improper payment 
procedures. A commenter asked that HUD not require owners to provide 
proof of the costs involved in recovering improper payments. Commenters 
also suggested that HUD not specify what makes repayment of improper 
payments ``affordable'' to residents, as the current definition is 
confusing and leads to extra work for staff.
    HUD Response: As is the case on HUD's response to the preceding 
issue, many of the comments are outside the scope of this rulemaking or 
would require action by Congress, but HUD will consider these for 
future streamlining changes. With respect to freezing the rolling base 
to allow PHAs to recoup savings from energy conservation methods, this 
is permitted now when a PHA has entered into an energy performance 
contract.
4. Miscellaneous Suggestions
    Issue: Broader Streamlining and Other Suggestions. Many commenters 
had specific suggestions on how to align requirements and processes 
across programs. Some suggested that HUD use the Public Housing 
Administrative Reform Initiative to find some additional streamlining 
suggestions. Others stated that HUD should have just a single entity 
review grantee compliance with various program requirements instead of 
allowing multiple agencies to have oversight.
    Some commenters asked HUD to modify inspection protocols, including 
by explicitly stating that a physical reinspection of deficiencies is 
not required. Others stated that HUD should not use the Uniform 
Physical Conditions Standards for HCV, but should continue to use the 
HQS. Commenters further asked that HUD reconsider the requirement that 
failed HQS items be reinspected prior to the HAP contract effective 
date, instead allowing families to move in while the owner has 30 days 
to repair the failed items.
    Commenters also stated that HUD should limit requirements under 
section 3 of the 1937 Act to only programs under the Office of Housing. 
Others asked that HUD institute a threshold of activity below which 
Section 3 requirements would not apply.
    Some commenters asked that eligibility and reporting procedures be 
standardized across housing programs both in HUD and across other 
Federal agencies. Others stated that HUD should extend the zero-subsidy 
time limit for voucher holders to align policies between the voucher 
and PBRA programs. Many commenters also stated that HUD should allow 
PHAs the discretion on whether or not to require community service in 
PH, as it is not required in other HUD programs.
    A commenter stated that HUD should incorporate policies from the 
Multifamily Handbook into the PH and voucher programs to provide 
additional information on how a PHA should consider a tenant family's 
circumstances when they fail to recertify in a timely manner.
    Some commenters stated that HUD should allow PHAs to be eligible 
for Housing Trust Fund money for PH rehabilitation. Others asked that 
HUD clarify that PHAs with 250 or more units of PH are still able to 
use operating reserves for capital improvements.
    Commenters also asked for clarity on the HCV Tenancy Addendum and 
on qualifying for the Capital Fund Activity exclusion for environmental 
assessments.
    HUD Response: HUD will take these suggestions into consideration as 
it seeks to identify additional opportunities to reduce the 
administrative burden on PHAs and owners and to align the requirements 
across programs, where feasible. The majority of these suggestions is 
beyond the scope of this rulemaking, or would require statutory change. 
However, for others, HUD can address through administrative guidance. 
With respect to the suggestion that HUD thoroughly review the final 
report of the Public Housing Administrative Reform Initiative, this 
report is among the documents initially reviewed by HUD's streamlining 
working group, which ultimately initiated this rulemaking.
    Issue: Regulatory Relief in Property Assessment. Several commenters 
asked HUD to suspend PHA plan requirements or for a moratorium on the 
Physical Needs Assessment. Commenters asked for waivers of asset 
management regulations affecting funding, such as cash transfers 
between properties, fee caps, and Asset Management Project (AMP) 
configurations. Commenters further asked for broad waivers under 24 CFR 
part 5 and for the Public Housing Assessment System and Section Eight 
Management Assessment Program to be advisory only for non-statutory 
items. Finally, commenters stated that HUD should ensure that PHAs are 
fully trained before any changes go into effect.
    HUD Response: HUD remains interested in identifying opportunities 
to reduce the burden on PHAs, owners, and grantees that administer 
rental assistance. While the suggestions provided here are outside the 
scope of this rulemaking, they are helpful in identifying for HUD areas 
on which to focus attention. HUD will continue to look for 
opportunities to streamline and simplify the administration of its 
programs, and to align the requirements across programs, to the extent 
feasible and reasonable, applying the same lens to future proposals as 
it employed for this rulemaking effort. Specifically, any

[[Page 12368]]

proposal to relieve the administrative burden on PHAs, owners, and 
grantees will need to be balanced against important tenant protections 
and HUD's obligation to provide program oversight. With respect to 
guidance and training, HUD is aware that PHAs, owners, and grantees may 
have questions about how best to implement several of the provisions in 
this rule. HUD will provide opportunities to address those questions, 
through additional written guidance, training, and other means that 
enable HUD to respond to requests for information.
    Issue: Statutory Changes. Commenters requested changes that they 
acknowledged would require congressional action. These proposals 
include an earned income deduction for all families, eliminating 
voucher portability, expanding Moving to Work, the Small Housing 
Authority Reform Proposal, triennial recertification for fixed-income 
families, increasing the flat deduction for elderly families or persons 
with disabilities, increasing the medical expense deduction, or 
eliminating eligibility differences among programs.
    HUD Response: For several of these suggestions, HUD has previously 
sought statutory change. In its FY14 budget proposal, for example, HUD 
included several statutory changes that were ultimately enacted by 
Congress and have now been implemented with the publication of this 
final rule. HUD will continue to look for opportunities to streamline 
and simplify the administration of its programs, and to align the 
requirements across programs, to the extent feasible and reasonable, 
applying the same lens to future proposals as it employed for this 
rulemaking effort. Specifically, any proposal to relieve the 
administrative burden on PHAs and owners will need to be balanced 
against important tenant protections and HUD's obligation to provide 
program oversight.

IV. Findings and Certifications

Executive Orders 12866 and 13563, Regulatory Planning and Review

    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 Regulation 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 Executive Order 12866 
(although not an economically significant regulatory action, as 
provided under section 3(f)(1) of the Executive Order).
    As already discussed in this preamble, the regulatory changes by 
this streamlining rule are designed to reduce administrative burdens on 
PHAs, enable PHAs to better target assistance to families, and reduce 
Federal costs. Some of the changes in this rule are due to statutory 
changes enacted in the FY 2014 Appropriations Act and have specific 
estimates of financial savings that may be expected (specifically the 
change in the definition of ``extremely low-income'' and the cap on the 
utility allowance). Other changes (biennial inspections, streamlining 
income recertifications) may have estimates on savings generated by 
Moving-to-Work (MTW) agencies that already implemented such 
flexibilities. Some provisions of this rule, however, focus solely on 
providing or revising regulatory provisions that reduce administrative 
burdens on PHAs, but that are optional for PHAs to utilize. 
Consequently HUD is unable to quantify costs and benefits for this rule 
overall because of the flexibility provided.
    The rule provides PHAs with the discretion as to whether they will 
implement those regulations that provide alternatives means of 
implementing several required administrative actions. HUD recognized 
that there is a need for greater flexibility for PHAs to operate 
programs that fit their communities and to use savings generated in 
time from these provisions to better focus resources on their 
operational priorities. However, savings are difficult to estimate as 
the changes are not mandatory. HUD's FY2015 budget estimated Federal 
savings for two of the provisions, changing the definition of 
``extremely low-income'' and placing a cap on the utility allowance. 
HUD's budget did not contain savings estimates for other provisions 
which would yield efficiencies for PHAs, not HUD. For the provision 
permitting biennial inspections, savings data comes from Moving-to-Work 
(MTW) agencies experiences and reporting.
    In FY2015, HUD estimated that the revised definition of extremely-
low income will reduce Federal costs by an estimated $155 million. The 
change increases access to HUD rental assistance for working poor 
families, in rural areas in particular. In such areas, median incomes 
are often so low that families with a fulltime worker have incomes that 
exceed 30 percent of AMI, even though the families remain below the 
Federal poverty level. In the voucher program in particular, where 75 
percent of vouchers issued each year must be targeted to ELI families, 
this change will enable more working poor families to qualify for 
voucher assistance.
    Additionally, HUD estimated in its FY2015 budget that limiting the 
utility allowance payment for tenant-based vouchers to the family unit 
size for which the voucher is issued, irrespective of the size of the 
unit rented by the family, will generate estimated savings of $50 
million.
    Permitting biennial inspections for HCV units will reduce the 
administrative and financial burden on PHAs and high-performing 
landlords and enable PHAs to concentrate their inspection resources on 
the more marginal and higher-risk units. Of the 34 MTW agencies, 23 
have adopted or proposed to adopt biennial inspection schedules. The 
Cambridge Housing Authority estimated a net savings of $122,234, or 
more than 3,737 hours of staff time in 2014 compared to 2008. The 
Housing Authority of the County of San Mateo reduced the number of 
inspections to approximately 2,086 annually from 4,172 and reported 
savings of $52,150 in inspection costs. HUD believes that PHAs adopting 
this flexibility will experience similar savings in time and costs.
    Determining the complete amount of financial and time savings for 
this rule is difficult because, as noted, the majority of the 
provisions are discretionary for PHAs, and HUD believes that each PHA 
will evaluate its own circumstances in financing and staffing and adopt 
those provisions that are most cost-effective for them.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
federalism implications and does not impose

[[Page 12369]]

substantial direct compliance costs on state and local governments nor 
preempt state law within the meaning of the Executive Order.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
This rule reduces the administrative burden on PHAs, MFH owners, and 
certain CPD grantees in many aspects of administering assisted housing. 
Such PHAs, MFH owners, and CPD grantees, regardless of size, will 
benefit from the burden reduction proposed by this rule. These 
revisions impose no significant economic impact on a substantial number 
of small entities. As discussed above, many of the new provisions are 
voluntary, and each PHA or MFH owner will be able to adopt the 
streamlining provisions that offer the greatest benefit to them, 
further reducing any negative effects on small entities. Therefore, the 
undersigned certifies that this rule will not have a significant impact 
on a substantial number of small entities.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made on the proposed rule in accordance with HUD regulations in 24 
CFR part 50 that implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding 
remains applicable to this final rule. The Finding is available for 
public inspection during regular business hours in the Regulations 
Division, Office of General Counsel, Department of Housing and Urban 
Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500. 
Due to security measures at the HUD Headquarters building, please 
schedule an appointment to review the Finding by calling the 
Regulations Division at 202-708-3055 (this is not a toll-free number). 
Individuals with speech or hearing impairments may access this number 
via TTY by calling the Federal Information Relay Service at 800-877-
8339.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for federal agencies to assess the effects of 
their regulatory actions on state, local, and tribal governments and 
the private sector. This rule will not impose any federal mandates on 
any state, local, or tribal governments or the private sector within 
the meaning of UMRA.

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB 
control numbers 2577-0220 and 0169. In accordance with the Paperwork 
Reduction Act of 1995, an agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information, 
unless the collection displays a currently valid OMB control number.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers applicable to 
the programs that would be affected by this rule are: 14.103, 14.123, 
14.135, 14.149, 14.157, 14.181, 14.195, 14.235, 14.241, 14.326, 14.850, 
14.871, and 14.872.

List of Subjects

24 CFR Part 5

    Administrative practice and procedure, Aged, Claims, Crime, 
Government contracts, Grant programs--housing and community 
development, Individuals with disabilities, Intergovernmental 
relations, Loan programs--housing and community development, Low and 
moderate income housing, Mortgage insurance, Penalties, Pets, Public 
housing, Rent subsidies, Reporting and recordkeeping requirements, 
Social security, Unemployment compensation.

24 CFR Part 880

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements.

24 CFR Part 884

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements, rural areas.

24 CFR Part 886

    Grant programs--housing and community development, Lead poisoning, 
Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 891

    Aged, Grant programs--housing and community development, 
Individuals with disabilities, Loan programs--housing and community 
development, Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 903

    Administrative practice and procedure, Public housing, Reporting 
and recordkeeping requirements.

24 CFR Part 960

    Aged, Grant programs--housing and community development, 
Individuals with disabilities, Pets, Public housing.

24 CFR Part 966

    Grant programs--housing and community development, Public housing, 
Reporting and recordkeeping requirements.

24 CFR Part 982

    Grant programs--housing and community development, Grant programs--
Indians, Indians, Public housing, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 983

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements.

24 CFR Part 990

    Accounting, Grant programs--housing and community development, 
Public housing, Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble, HUD amends 24 
CFR parts 5, 880, 884, 886, 891, 903, 960, 966, 982, 983, and 990 as 
follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

0
1. The authority citation for part 5 continues to read as follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n, 
3535(d), Sec. 327, Pub. L. 109-115, 119 Stat. 2936, and Sec. 607, 
Pub. L. 109-162, 119 Stat. 3051.


0
2. Amend Sec.  5.216 as follows:
0
a. Designate the second paragraph (g)(1)(ii) as paragraph (g)(1)(iii);
0
b. Revise paragraph (h)(1);
0
c. In paragraph (h)(2), remove the phrase ``paragraph (h)(1)'' and add 
in its place ``paragraph (g)(1)''; and
0
d. Add paragraph (h)(3).
    The revision and addition read as follows:


Sec.  5.216  Disclosure and verification of Social Security and 
Employer Identification Numbers.

* * * * *
    (h) * * *
    (1) Except as provided in paragraphs (h)(2) and (3) of this 
section, if the

[[Page 12370]]

processing entity determines that the assistance applicant is otherwise 
eligible to participate in a program, the assistance applicant may 
retain its place on the waiting list for the program but cannot become 
a participant until it can provide the documentation referred to in 
paragraph (g)(1) of this section to verify the SSN of each member of 
the household.
* * * * *
    (3) If a child under the age of 6 years was added to the assistance 
applicant household within the 6-month period prior to the household's 
date of admission (or, for the HCV program, the date of voucher 
issuance), the assistance applicant may become a participant, so long 
as the documentation required in paragraph (g)(1) of this section is 
provided to the processing entity within 90 calendar days from the date 
of admission into the program (or, for the HCV program, the effective 
date of the Housing Assistance Payment contract). The processing entity 
must grant an extension of one additional 90-day period if the 
processing entity determines that, in its discretion, the assistance 
applicant's failure to comply was due to circumstances that could not 
reasonably have been foreseen and were outside the control of the 
assistance applicant. If the applicant family fails to produce the 
documentation required in paragraph (g)(1) of this section within the 
required time period, the processing entity must follow the provisions 
of Sec.  5.218.
* * * * *

0
3. Amend Sec.  5.520 as follows:
0
a. Revise paragraph (c)(1) introductory text;
0
b. In paragraph (c)(1)(v), remove the comma;
0
c. Revise paragraph (c)(2) introductory text;
0
d. In paragraphs (c)(2)(ii) introductory text and (c)(2)(iii), remove 
the comma;
0
e. Revise paragraph (d); and
0
f. Add paragraph (e).
    The revisions and addition read as follows:


Sec.  5.520  Proration of assistance.

* * * * *
    (c) * * *
    (1) Section 8 assistance other than assistance provided for a 
tenancy under the Section 8 Housing Choice Voucher Program. For Section 
8 assistance other than assistance for a tenancy under the voucher 
program, the PHA must prorate the family's assistance as follows:
* * * * *
    (2) Assistance for a Section 8 voucher tenancy. For a tenancy under 
the voucher program, the PHA must prorate the family's assistance as 
follows:
* * * * *
    (d) Method of prorating assistance for Public Housing covered 
programs. (1) The PHA must prorate the family's assistance as follows:
    (i) Step 1. Determine the total tenant payment in accordance with 
section 5.628. (Annual income includes income of all family members, 
including any family member who has not established eligible 
immigration status.)
    (ii) Step 2. Subtract the total tenant payment from the PHA-
established flat rent applicable to the unit. The result is the maximum 
subsidy for which the family could qualify if all members were eligible 
(``family maximum subsidy'').
    (iii) Step 3. Divide the family maximum subsidy by the number of 
persons in the family (all persons) to determine the maximum subsidy 
per each family member who has citizenship or eligible immigration 
status (``eligible family member''). The subsidy per eligible family 
member is the ``member maximum subsidy.''
    (iv) Step 4. Multiply the member maximum subsidy by the number of 
family members who have citizenship or eligible immigration status 
(``eligible family members'').
    (2) The product of steps 1 through 4 of paragraphs (d)(1)(i) 
through (iv) of this section is the amount of subsidy for which the 
family is eligible (``eligible subsidy''). The family's rent is the 
PHA-established flat rent minus the amount of the eligible subsidy.
    (e) Method of prorating assistance when the mixed family's total 
tenant payment (TTP) is greater than the public housing flat rent. When 
the mixed family's TTP is greater than the flat rent, the PHA must use 
the TTP as the mixed family TTP. The PHA subtracts from the mixed 
family TTP any established utility allowance, and the sum becomes the 
mixed family rent.

0
4. In Sec.  5.603(b), revise the definitions of ``Extremely low income 
family'' and ``Total tenant payment'' to read as follows:


Sec.  5.603  Definitions.

* * * * *
    (b) * * *
    Extremely low-income family. A very low-income family whose annual 
income does not exceed the higher of:
    (1) The poverty guidelines established by the Department of Health 
and Human Services applicable to the family of the size involved 
(except in the case of families living in Puerto Rico or any other 
territory or possession of the United States); or
    (2) Thirty (30) 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 30 
percent of the area median income for the area if HUD finds that such 
variations are necessary because of unusually high or low family 
incomes.
* * * * *
    Total tenant payment. See Sec.  5.628.
* * * * *


Sec.  5.609  [Amended]

0
5. Amend Sec.  5.609(b)(9) by adding the phrase ``and any other 
required fees and charges'' after ``tuition'' in the first sentence.

0
6. Amend Sec.  5.617 as follows:
0
a. Revise paragraph (a);
0
b. In paragraph (b), add the definition of ``baseline income'' in 
alphabetical order; and
0
c. Revise paragraph (c) to read as follows:


Sec.  5.617  Self-sufficiency incentives for persons with 
disabilities--Disallowance of increase in annual income.

    (a) Applicable programs. The disallowance of earned income provided 
by this section is applicable only to the following programs: HOME 
Investment Partnerships Program (24 CFR part 92); Housing Opportunities 
for Persons with AIDS (24 CFR part 574); Supportive Housing Program (24 
CFR part 583); and the Housing Choice Voucher Program (24 CFR part 
982).
    (b) * * *
    Baseline income. The annual income immediately prior to 
implementation of the disallowance described in paragraph (c)(1) of 
this section of a person with disabilities (who is a member of a 
qualified family).
* * * * *
    (c) Disallowance of increase in annual income--(1) Initial 12-month 
exclusion. During the 12-month period beginning on the date a member 
who is a person with disabilities of a qualified family is first 
employed or the family first experiences an increase in annual income 
attributable to employment, the responsible entity must exclude from 
annual income (as defined in the regulations governing the applicable 
program listed in paragraph (a) of this section) of a qualified family 
any increase in income of the family member who is a person with 
disabilities as a result of employment over prior income of that family 
member.
    (2) Second 12-month exclusion and phase-in. Upon the expiration of 
the 12-

[[Page 12371]]

month period defined in paragraph (c)(1) of this section and for the 
subsequent 12-month period, the responsible entity must exclude from 
annual income of a qualified family at least 50 percent of any increase 
in income of such family member as a result of employment over the 
family member's baseline income.
    (3) Maximum 2-year disallowance. The disallowance of increased 
income of an individual family member who is a person with disabilities 
as provided in paragraph (c)(1) or (c)(2) of this section is limited to 
a lifetime 24-month period. The disallowance applies for a maximum of 
12 months for disallowance under paragraph (c)(1) of this section and a 
maximum of 12 months for disallowance under paragraph (c)(2) of this 
section, during the 24- month period starting from the initial 
exclusion under paragraph (c)(1) of this section.
    (4) Effect of changes on currently participating families. Families 
eligible for and participating in the disallowance of earned income 
under this section prior to May 9, 2016 will continue to be governed by 
this section in effect as it existed immediately prior to that date 
(see 24 CFR parts 0 to 199, revised as of April 1, 2016).
* * * * *

0
7. In Sec.  5.657, add paragraph (d) to read as follows:


Sec.  5.657  Section 8 project-based assistance programs: Reexamination 
of family income and composition.

* * * * *
    (d) Streamlined income determination. For any family member with a 
fixed source of income, an owner may elect to determine that family 
member's income, as required by paragraph (b) of this section, by means 
of a streamlined income determination. A streamlined income 
determination must be conducted by applying, for each fixed-income 
source, the verified cost of living adjustment (COLA) or current rate 
of interest to the previously verified or adjusted income amount.
    (1) ``Family member with a fixed source of income'' is defined as a 
family member whose income includes periodic payments at reasonably 
predictable levels from one or more of the following sources:
    (i) Social Security, Supplemental Security Income, Supplemental 
Disability Insurance;
    (ii) Federal, state, local, or private pension plans;
    (iii) Annuities or other retirement benefit programs, insurance 
policies, disability or death benefits, or other similar types of 
periodic receipts; or
    (iv) Any other source of income subject to adjustment by a 
verifiable COLA or current rate of interest.
    (2) An owner must use a COLA or current rate of interest specific 
to the fixed source of income in order to adjust the income amount. The 
owner must verify the appropriate COLA or current rate of interest from 
a public source or through tenant-provided, third party-generated 
documentation. If no such verification is available, then the owner 
must obtain third-party verification of income amounts in order to 
calculate the change in income for the source.
    (3) For any family member whose income is determined pursuant to a 
streamlined income determination, an owner must obtain third-party 
verification of all fixed-income amounts every 3 years. Other income 
for each family member must be determined pursuant to paragraph (b) of 
this section.

PART 880--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW 
CONSTRUCTION

0
8. The authority citation for part 880 continues to read as follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 
13611-13619.


0
9. In Sec.  880.603, add paragraph (c)(4) to read as follows:


Sec.  880.603  Selection and admission of assisted tenants.

* * * * *
    (c) * * *
    (4) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

PART 884--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM, NEW 
CONSTRUCTION SET-ASIDE FOR SECTION 515 RURAL RENTAL HOUSING 
PROJECTS

0
10. The authority citation for part 884 continues to read as follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.


0
11. In Sec.  884.218, add paragraph (d) to read as follows:


Sec.  884.218  Reexamination of family income and composition.

* * * * *
    (d) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

PART 886--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--SPECIAL 
ALLOCATIONS

0
12. The authority citation for part 886 continues to read as follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.


0
13. In Sec.  886.124, add paragraph (d) to read as follows:


Sec.  886.124  Reexamination of family income and composition.

* * * * *
    (d) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

0
14. In Sec.  886.324, add paragraph (d) to read as follows:


Sec.  886.324  Reexamination of family income and composition.

* * * * *
    (d) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

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

0
15. The authority citation for part 891 continues to read as follows:

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


0
16. In Sec.  891.410, add paragraph (g)(4) to read as follows:


Sec.  891.410  Selection and admission of tenants.

* * * * *
    (g) * * *
    (4) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

0
17. In Sec.  891.610, add paragraph (g)(4) to read as follows:


Sec.  891.610  Selection and admission of tenants.

* * * * *
    (g) * * *
    (4) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

0
18. In Sec.  891.750, add paragraph (c)(4) to read as follows:


Sec.  891.750  Selection and admission of tenants.

* * * * *
    (c) * * *
    (4) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

[[Page 12372]]

PART 903--PUBLIC HOUSING AGENCY PLANS

0
19. The authority citation for part 903 continues to read as follows:

    Authority: 2 U.S.C. 1437c; 42 U.S.C. 1437c-1; Pub. L. 110-289; 
42 U.S.C. 3535d.


0
20. In Sec.  903.7, revise paragraph (a)(1)(i) to read as follows:


Sec.  903.7  What information must a PHA provide in the Annual Plan?

* * * * *
    (a) * * *
    (1) * * *
    (i) Families meeting the definition of extremely low-income 
families in 24 CFR 5.603.
* * * * *

PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING

0
21. The authority citation for part 960 continues to read as follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, 1437z-3, and 
3535(d).


0
22. In Sec.  960.102, revise paragraph (a) to read as follows:


Sec.  960.102  Definitions.

    (a) Definitions found elsewhere:
    (1) General definitions. The following terms are defined in 24 CFR 
part 5, subpart A: 1937 Act, drug, drug-related criminal activity, 
elderly person, federally assisted housing, guest, household, HUD, MSA, 
premises, public housing, public housing agency (PHA), Section 8, 
violent criminal activity.
    (2) Definitions under the 1937 Act. The following terms are defined 
in 24 CFR part 5, subpart D: annual contributions contract (ACC), 
applicant, elderly family, family, person with disabilities.
    (3) Definitions and explanations concerning income and rent. The 
following terms are defined or explained in 24 CFR part 5, subpart F 
(Sec.  5.603): Annual income, economic self-sufficiency program, 
extremely low-income family, low-income family, tenant rent, total 
tenant payment, utility allowance.
* * * * *

0
23. Amend Sec.  960.253 as follows:
0
a. Revise paragraph (b);
0
b. In paragraph (c)(1), remove the phrase ``PHA's rent policies'' and 
add in its place ``PHA's policies'';
0
c. Remove the last sentence of paragraph (c)(3) and add paragraph 
(c)(4);
0
d. Revise paragraphs (d) and (e)(2);
0
e. Redesignate paragraph (f) as paragraph (g); and
0
f. Add a new paragraph (f).
    The revisions and addition read as follows:


Sec.  960.253  Choice of rent.

* * * * *
    (b) Flat rent. The flat rent is determined annually, based on the 
market rental value of the unit as determined by this paragraph (b).
    (1) The PHA must establish a flat rent for each public housing unit 
that is no less than 80 percent of the applicable Fair Market Rent 
(FMR) as determined under 24 CFR part 888, subpart A; or
    (2) HUD may permit a flat rent of no less than 80 percent of an 
applicable small area FMR (SAFMR) or unadjusted rent, if applicable, as 
determined by HUD, or any successor determination, that more accurately 
reflects local market conditions and is based on an applicable market 
area that is geographically smaller than the applicable market area 
used in paragraph (b)(1) of this section. If HUD has not determined an 
applicable SAFMR or unadjusted rent, the PHA must rely on the 
applicable FMR under paragraph (b)(1) or may apply for an exception 
flat rent under paragraph (b)(3).
    (3) The PHA may request, and HUD may approve, on a case-by-case 
basis, a flat rent that is lower than the amounts in paragraphs (b)(1) 
and (2) of this section, subject to the following requirements:
    (i) The PHA must submit a market analysis of the applicable market.
    (ii) The PHA must demonstrate, based on the market analysis, that 
the proposed flat rent is a reasonable rent in comparison to rent for 
other comparable unassisted units, based on the location, quality, 
size, unit type, and age of the public housing unit and any amenities, 
housing services, maintenance, and utilities to be provided by the PHA 
in accordance with the lease.
    (iii) All requests for exception flat rents under this paragraph 
(b)(3) must be submitted to HUD.
    (4) For units where utilities are tenant-paid, the PHA must adjust 
the flat rent downward by the amount of a utility allowance for which 
the family might otherwise be eligible under 24 CFR part 965, subpart 
E.
    (5) The PHA must revise, if necessary, the flat rent amount for a 
unit no later than 90 days after HUD issues new FMRs.
    (6) If a new flat rent would cause a family's rent to increase by 
more than 35 percent, the family's rent increase must be phased in at 
35 percent annually until such time that the family chooses to pay the 
income-based rent or the family is paying the flat rent established 
pursuant to this paragraph.
    (c) * * *
    (4) The PHA may elect to establish policies regarding the frequency 
of utility reimbursement payments for payments made to the family.
    (i) The PHA will have the option of making utility reimbursement 
payments not less than once per calendar-year quarter, for 
reimbursements totaling $45 or less per quarter. In the event a family 
leaves the program in advance of its next quarterly reimbursement, the 
PHA must reimburse the family for a prorated share of the applicable 
reimbursement. PHAs exercising this option must have a hardship policy 
in place for tenants.
    (ii) If the PHA elects to pay the utility supplier, the PHA must 
notify the family of the amount of utility reimbursement paid to the 
utility supplier.
    (d) Ceiling rent. A PHA using ceiling rents authorized and 
established before October 1, 1999, may continue to use ceiling rents, 
provided such ceiling rents are set at the level required for flat 
rents under this section. PHAs must follow the requirements for 
calculating and adjusting flat rents in paragraph (b) of this section 
when calculating and adjusting ceiling rents.
    (e) * * *
    (2) The dollar amounts of tenant rent for the family under each 
option, following the procedures in paragraph (f) of this section.
    (f) Choice between flat and income-based rents. Families must be 
offered the choice between a flat rental amount and a previously 
calculated income-based rent according to the following:
    (1) For a family that chooses the flat rent option, the PHA must 
conduct a reexamination of family income and composition at least once 
every three years.
    (2) At initial occupancy, or in any year in which a participating 
family is paying the income-based rent, the PHA must:
    (i) Conduct a full examination of family income and composition, 
following the provisions in Sec.  960.257;
    (ii) Inform the family of the flat rental amount and the income-
based rental amount determined by the examination of family income and 
composition;
    (iii) Inform the family of the PHA's policies on switching rent 
types in circumstances of financial hardship; and
    (iv) Apply the family's rent decision at the next lease renewal.
    (3) In any year in which a family chooses the flat rent option but 
the PHA chooses not to conduct a full examination of family income and

[[Page 12373]]

composition for the annual rent option under the authority of paragraph 
(f)(1) of this section, the PHA must:
    (i) Use income information from the examination of family income 
and composition from the first annual rent option;
    (ii) Inform the family of the updated flat rental amount and the 
rental amount determined by the most recent examination of family 
income and composition;
    (iii) Inform the family of the PHA's policies on switching rent 
types in circumstances of financial hardship; and
    (iv) Apply the family's rent decision at the next lease renewal.
* * * * *

0
24. Amend Sec.  960.255 as follows:
0
a. In paragraph (a), add the definition of ``baseline income'' in 
alphabetical order; and
0
b. Revise paragraph (b) to read as follows:


Sec.  960.255  Self-sufficiency incentives--Disallowance of increase in 
annual income.

    (a) * * *
    Baseline income. The annual income immediately prior to 
implementation of the disallowance described in paragraph (c)(1) of 
this section of a person who is a member of a qualified family.
* * * * *
    (b) Disallowance of earned income--(1) Initial 12-month exclusion. 
During the 12-month period beginning on the date on which a member of a 
qualified family is first employed or the family first experiences an 
increase in annual income attributable to employment, the PHA must 
exclude from the annual income (as defined in Sec.  5.609 of this 
title) of a qualified family any increase in the income of the family 
member as a result of employment over the baseline income of that 
family member.
    (2) Phase-in of rent increase. Upon the expiration of the 12-month 
period defined in paragraph (b)(1) of this section and for the 
subsequent 12-month period, the PHA must exclude from the annual income 
of a qualified family at least 50 percent of any increase in income of 
such family member as a result of employment over the family member's 
baseline income.
    (3) Maximum 2-year disallowance. The disallowance of increased 
income of an individual family member as provided in paragraph (b)(1) 
or (b)(2) of this section is limited to a lifetime 24-month period. It 
applies for a maximum of 12 months for disallowance under paragraph 
(b)(1) of this section and a maximum of 12 months for disallowance 
under paragraph (b)(2) of this section, during the 24-month period 
starting from the initial exclusion under paragraph (b)(1) of this 
section.
    (4) Effect of changes on currently participating families. Families 
eligible for and participating in the disallowance of earned income 
under this section prior to May 9, 2016 will continue to be governed by 
this section in effect as it existed immediately prior to that date.
* * * * *

0
25. In Sec.  960.257, revise the section heading and paragraphs (a)(2) 
and (b) to read as follows:


Sec.  960.257  Family income and composition: Annual and interim 
reexaminations.

    (a) * * *
    (2) For families who choose flat rents, the PHA must conduct a 
reexamination of family composition at least annually, and must conduct 
a reexamination of family income at least once every three years in 
accordance with the procedures in Sec.  960.253(f).
* * * * *
    (b) Interim reexaminations. (1) A family may request an interim 
reexamination of family income or composition because of any changes 
since the last determination.
    (2) The PHA must make the interim reexamination within a reasonable 
time after the family request. The PHA must adopt policies prescribing 
when and under what conditions the family must report a change in 
family income or composition.
    (3) Streamlined income determination. For any family member with a 
fixed source of income, a PHA may elect to determine that family 
member's income by means of a streamlined income determination. A 
streamlined income determination must be conducted by applying, for 
each fixed-income source, the verified cost of living adjustment (COLA) 
or current rate of interest to the previously verified or adjusted 
income amount.
    (i) ``Family member with a fixed source of income'' is defined as a 
family member whose income includes periodic payments at reasonably 
predictable levels from one or more of the following sources:
    (A) Social Security, Supplemental Security Income, Supplemental 
Disability Insurance;
    (B) Federal, state, local, or private pension plans;
    (C) Annuities or other retirement benefit programs, insurance 
policies, disability or death benefits, or other similar types of 
periodic receipts; or
    (D) Any other source of income subject to adjustment by a 
verifiable COLA or current rate of interest.
    (ii) A PHA must use a COLA or current rate of interest specific to 
the fixed source of income in order to adjust the income amount. The 
PHA must verify the appropriate COLA or current rate of interest from a 
public source or through tenant-provided, third party-generated 
documentation. If no such verification is available, then the PHA must 
obtain third-party verification of income amounts in order to calculate 
the change in income for the source.
    (iii) For any family member whose income is determined pursuant to 
a streamlined income determination, a PHA must obtain third-party 
verification of all income amounts every 3 years.
* * * * *

0
26. In Sec.  960.259, revise paragraph (c)(1) introductory text, and 
add paragraph (c)(2) to read as follows:


Sec.  960.259  Family information and verification.

* * * * *
    (c) * * *
    (1) Except as provided in paragraph (c)(2) of this section, the PHA 
must obtain and document in the family file third-party verification of 
the following factors, or must document in the file why third-party 
verification was not available:
* * * * *
    (2) For a family with net assets equal to or less than $5,000, a 
PHA may accept, for purposes of recertification of income, a family's 
declaration that it has net assets equal to or less than $5,000, 
without taking additional steps to verify the accuracy of the 
declaration.
    (i) The declaration must state the amount of income the family 
expects to receive from such assets; this amount must be included in 
the family's income.
    (ii) A PHA must obtain third-party verification of all family 
assets every 3 years.

0
27. In Sec.  960.605, revise paragraphs (c)(2) through (5) to read as 
follows:


Sec.  960.605  How PHA administers service requirements.

* * * * *
    (c) * * *
    (2) The PHA must give the family a written description of the 
service requirement, and of the process for claiming status as an 
exempt person and for PHA verification of such status. The PHA must 
also notify the family of its determination identifying the family 
members who are subject to the service requirement, and the family 
members who are exempt persons. The PHA must also notify the family 
that it will be

[[Page 12374]]

validating a sample of self-certifications of completion of the service 
requirement accepted by the PHA under Sec.  960.607(a)(1)(ii).
    (3) The PHA must review family compliance with service requirements 
and must verify such compliance annually at least 30 days before the 
end of the 12-month lease term. If qualifying activities are 
administered by an organization other than the PHA, the PHA may obtain 
verification of family compliance from such third parties or may accept 
a signed certification from the family member that he or she has 
performed such qualifying activities.
    (4) The PHA must retain reasonable documentation of service 
requirement performance or exemption in a participant family's files.
    (5) The PHA must comply with non-discrimination and equal 
opportunity requirements listed at Sec.  5.105(a) of this title and 
affirmatively further fair housing in all their activities in 
accordance with the AFFH Certification as described in Sec.  903.7(o) 
of this chapter.

0
28. In Sec.  960.607, revise paragraph (a) to read as follows:


Sec.  960.607  Assuring resident compliance.

    (a) Acceptable documentation demonstrating compliance. (1) If 
qualifying activities are administered by an organization other than 
the PHA, a family member who is required to fulfill a service 
requirement must provide one of the following:
    (i) A signed certification to the PHA by such other organization 
that the family member has performed such qualifying activities; or
    (ii) A signed self-certification to the PHA by the family member 
that he or she has performed such qualifying activities.
    (2) The signed self-certification must include the following:
    (i) A statement that the tenant contributed at least 8 hours per 
month of community service not including political activities within 
the community in which the adult resides; or participated in an 
economic self-sufficiency program (as that term is defined in 24 CFR 
5.603(b)) for at least 8 hours per month;
    (ii) The name, address, and a contact person at the community 
service provider; or the name, address, and contact person for the 
economic self-sufficiency program;
    (iii) The date(s) during which the tenant completed the community 
service activity, or participated in the economic self-sufficiency 
program;
    (iv) A description of the activity completed; and
    (v) A certification that the tenant's statement is true.
    (3) If a PHA accepts self-certifications under paragraph (a)(1)(ii) 
of this section, the PHA must validate a sample of such self-
certifications using third-party certification described in paragraph 
(a)(1)(i) of this section.
* * * * *

PART 966--PUBLIC HOUSING LEASE AND GRIEVANCE PROCEDURE

0
29. The authority citation for part 966 continues to read as follows:

    Authority: 42 U.S.C. 1437d and 3535(d).


0
30. Revise Sec.  966.4(n) to read as follows:


Sec.  966.4  Lease requirements.

* * * * *
    (n) Grievance procedures. (1) The lease must provide that all 
disputes concerning the obligations of the tenant or the PHA must 
(except as provided in Sec.  966.51(a)(2)) be resolved in accordance 
with the PHA grievance procedures. The grievance procedures must comply 
with subpart B of this part.
    (2) The lease must include a description of the PHA's policies for 
selecting a hearing officer.
* * * * *

0
31. Amend Sec.  966.52 by adding a sentence at the end of paragraph (a) 
and adding paragraph (e), to read as follows:


Sec.  966.52  Requirements.

    (a) * * * A PHA may establish an expedited grievance procedure as 
defined in Sec.  966.53.
* * * * *
    (e) The PHA must not only meet the minimal procedural due process 
requirements contained in this subpart but also satisfy any additional 
requirements required by local, state, or federal law.

0
32. In Sec.  966.53, revise paragraphs (b), (d), and (e) to read as 
follows:


Sec.  966.53  Definitions.

* * * * *
    (b) Complainant shall mean any tenant whose grievance is presented 
to the PHA or at the project management office.
* * * * *
    (d) Expedited grievance means a procedure established by the PHA 
for any grievance concerning a termination of tenancy or eviction that 
involves:
    (1) Any criminal activity that threatens the health, safety, or 
right to peaceful enjoyment of the PHA's public housing premises by 
other residents or employees of the PHA; or
    (2) Any drug-related or violent criminal activity on or off such 
premises.
    (e) Hearing officer means an impartial person or persons selected 
by the PHA, other than the person who made or approved the decision 
under review, or a subordinate of that person. Such individual or 
individuals do not need legal training. PHAs must describe their 
policies for selection of a hearing officer in their lease forms as 
required by Sec.  966.4, changes to which are subject to a 30-day 
comment period as described in Sec.  966.3.
* * * * *


Sec.  966.54  [Amended]

0
33. Amend Sec.  966.54 by removing the phrase ``under Sec.  966.55''.


Sec.  966.55  [Removed]

0
34. Remove Sec.  966.55.

0
35. Amend Sec.  966.56 as follows:
0
a. Revise paragraph (a);
0
b. In paragraph (b)(2), remove the comma;
0
c. Remove paragraphs (c) and (f);
0
d. Redesignate paragraphs (d), (e), (g), and (h) as paragraphs (c), 
(d), (e) and (f), respectively;
0
e. Revise redesignated paragraph (c); and
0
f. Add paragraph (g).
    The revisions and addition read as follows:


Sec.  966.56  Procedures governing the hearing.

    (a) The hearing must be scheduled promptly for a time and place 
reasonably convenient to both the complainant and the PHA and held 
before a hearing officer. A written notification specifying the time, 
place, and the procedures governing the hearing must be delivered to 
the complainant and the appropriate official.
* * * * *
    (c) If the complainant or the PHA fails to appear at a scheduled 
hearing, the hearing officer may make a determination to postpone the 
hearing for no more than 5 business days or may make a determination 
that the party has waived his right to a hearing. Both the complainant 
and the PHA must be notified of the determination by the hearing 
officer. A determination that the complainant has waived the 
complainant's right to a hearing will not constitute a waiver of any 
right the complainant may have to contest the PHA's disposition of the 
grievance in an appropriate judicial proceeding.
* * * * *
    (g) Limited English Proficiency. PHAs must comply with HUD's 
``Final

[[Page 12375]]

Guidance to Federal Financial Assistance Recipients Regarding Title VI 
Prohibition Against National Origin Discrimination Affecting Limited 
English Proficient Persons'' issued on January 22, 2007 and available 
at http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp/promotingfh/lep-faq.

0
36. Revise Sec.  966.57 to read as follows:


Sec.  966.57  Decision of the hearing officer.

    (a) The hearing officer must prepare a written decision, including 
the reasons for the PHA's decision within a reasonable time after the 
hearing. A copy of the decision must be sent to the complainant and the 
PHA. The PHA must retain a copy of the decision in the tenant's folder. 
The PHA must maintain a log of all hearing officer decisions and make 
that log available upon request of the hearing officer, a prospective 
complainant, or a prospective complainant's representative.
    (b) The decision of the hearing officer will be binding on the PHA 
unless the PHA Board of Commissioners determines that:
    (1) The grievance does not concern PHA action or failure to act in 
accordance with or involving the complainant's lease on PHA 
regulations, which adversely affects the complainant's rights, duties, 
welfare or status; or
    (2) The decision of the hearing officer is contrary to applicable 
Federal, State or local law, HUD regulations or requirements of the 
annual contributions contract between HUD and the PHA.
    (c) A decision by the hearing officer or Board of Commissioners in 
favor of the PHA or which denies the relief requested by the 
complainant in whole or in part will not constitute a waiver of, nor 
affect in any manner whatever, any rights the complainant may have to a 
trial de novo or judicial review in any judicial proceedings, which may 
thereafter be brought in the matter.

PART 982--SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER 
PROGRAM

0
37. The authority citation for part 982 continues to read as follows:

    Authority: 42 U.S.C. 1437f and 3535(d).

0
38. In Sec.  982.402 add a sentence at the end of paragraph (d)(2) to 
read as follows:


Sec.  982.402  Subsidy standards.

* * * * *
    (d) * * *
    (2) * * * However, utility allowances must follow Sec.  982.517(d).

0
39. Amend Sec.  982.405 as follows:
0
a. In paragraph (a), remove the word ``annually'' and add in its place 
``biennially'';
0
b. Revise paragraph (e); and
0
c. Add paragraphs (f) and (g).
    The revision and addition read as follows:


Sec.  982.405  PHA initial and periodic unit inspection.

* * * * *
    (e) The PHA may not charge the family for an initial inspection or 
reinspection of the unit.
    (f) The PHA may not charge the owner for the inspection of the unit 
prior to the initial term of the lease or for a first inspection during 
assisted occupancy of the unit. The PHA may establish a reasonable fee 
to owners for a reinspection if an owner notifies the PHA that a repair 
has been made or the allotted time for repairs has elapsed and a 
reinspection reveals that any deficiency cited in the previous 
inspection that the owner is responsible for repairing pursuant to 
Sec.  982.404(a) was not corrected. The owner may not pass this fee 
along to the family. Fees collected under this paragraph will be 
included in a PHA's administrative fee reserve and may be used only for 
activities related to the provision of Section 8 Tenant-Based Rental 
Assistance.
    (g) If a participant family or government official reports a 
condition that is life-threatening (i.e., the PHA would require the 
owner to make the repair within no more than 24 hours in accordance 
with Sec.  982.404(a)(3)), then the PHA must inspect the housing unit 
within 24 hours of when the PHA received the notification. If the 
reported condition is not life-threatening (i.e., the PHA would require 
the owner to make the repair within no more than 30 calendar days in 
accordance with Sec.  982.404(a)(3)), then the PHA must inspect the 
unit within 15 days of when the PHA received the notification. In the 
event of extraordinary circumstances, such as if a unit is within a 
Presidentially declared disaster area, HUD may waive the 24-hour or the 
15-day inspection requirement until such time as an inspection is 
feasible.


Sec.  982.406  [Redesignated as Sec.  982.407]

0
40. Redesignate Sec.  982.406 as Sec.  982.407.

0
41. Add a new Sec.  982.406 to read as follows:


Sec.  982.406  Use of alternative inspections.

    (a) In general. (1) A PHA may comply with the inspection 
requirement in Sec.  982.405(a) by relying on an alternative inspection 
(i.e., an inspection conducted for another housing assistance program) 
only if the PHA is able to obtain the results of the alternative 
inspection.
    (2) If an alternative inspection method employs sampling, then a 
PHA may rely on such alternative inspection method to comply with the 
requirement in Sec.  982.405(a) only if HCV units are included in the 
population of units forming the basis of the sample.
    (3) Units in properties that are mixed-finance properties assisted 
with project-based vouchers may be inspected at least triennially 
pursuant to 24 CFR 983.103(g).
    (b) Administrative plans. A PHA relying on an alternative 
inspection to fulfill the requirement in Sec.  982.405(a) must identify 
the alternative inspection method being used in the PHA's 
administrative plan. Such a change may be a significant amendment to 
the plan, in which case the PHA must follow its plan amendment and 
public notice requirements, in addition to meeting the requirements in 
Sec.  982.406(c)(2), if applicable, before using the alternative 
inspection method.
    (c) Eligible inspection methods. (1) A PHA may rely upon 
inspections of housing assisted under the HOME Investment Partnerships 
(HOME) program or housing financed using Low-Income Housing Tax Credits 
(LIHTCs), or inspections performed by HUD, with no action other than 
amending its administrative plan.
    (2) If a PHA wishes to rely on an inspection method other than a 
method listed in paragraph (c)(1) of this section, then, prior to 
amending its administrative plan, the PHA must submit to the Real 
Estate Assessment Center (REAC) a copy of the inspection method it 
wishes to use, along with its analysis of the inspection method that 
shows that the method ``provides the same or greater protection to 
occupants of dwelling units'' as would HQS.
    (i) A PHA may rely upon such alternative inspection method only 
upon receiving approval from REAC to do so.
    (ii) A PHA that uses an alternative inspection method approved 
under this paragraph must monitor changes to the standards and 
requirements applicable to such method. If any change is made to the 
alternative inspection method, then the PHA must submit to REAC a copy 
of the revised standards and requirements, along with a revised 
comparison to HQS. If the PHA or REAC

[[Page 12376]]

determines that the revision would cause the alternative inspection to 
no longer meet or exceed HQS, then the PHA may no longer rely upon the 
alternative inspection method to comply with the inspection requirement 
at Sec.  982.405(a).
    (d) Results of alternative inspection. (1) In order for a PHA to 
rely upon the results of an alternative inspection to comply with the 
requirement at Sec.  982.405(a), a property inspected pursuant to such 
method must meet the standards or requirements regarding housing 
quality or safety applicable to properties assisted under the program 
using the alternative inspection method. To make the determination of 
whether such standards or requirements are met, the PHA must adhere to 
the following procedures:
    (i) If a property is inspected under an alternative inspection 
method, and the property receives a ``pass'' score, then the PHA may 
rely on that inspection to demonstrate compliance with the inspection 
requirement at Sec.  982.405(a).
    (ii) If a property is inspected under an alternative inspection 
method, and the property receives a ``fail'' score, then the PHA may 
not rely on that inspection to demonstrate compliance with the 
inspection requirement at Sec.  982.405(a).
    (iii) If a property is inspected under an alternative inspection 
method that does not employ a pass/fail determination--for example, in 
the case of a program where deficiencies are simply identified--then 
the PHA must review the list of deficiencies to determine whether any 
cited deficiency would have resulted in a ``fail'' score under HQS. If 
no such deficiency exists, then the PHA may rely on the inspection to 
demonstrate compliance with the inspection requirement at Sec.  
982.405(a); if such a deficiency does exist, then the PHA may not rely 
on the inspection to demonstrate such compliance.
    (2) Under any circumstance described above in which a PHA is 
prohibited from relying on an alternative inspection method for a 
property, the PHA must, within a reasonable period of time, conduct an 
HQS inspection of any units in the property occupied by voucher program 
participants and follow HQS procedures to remedy any identified 
deficiencies.
    (e) Records retention. As with all other inspection reports, and as 
required by Sec.  982.158(f)(4), reports for inspections conducted 
pursuant to an alternative inspection method must be obtained by the 
PHA. Such reports must be available for HUD inspection for at least 
three years from the date of the latest inspection.

0
42. Amend Sec.  982.503 as follows:
0
a. Add paragraph (b)(1)(iii);
0
b. Remove the first word in paragraph (b)(2) and in its place add 
``Except as described in paragraph (b)(1)(iii) of this section, the''; 
and
0
c. Revise paragraph (c)(2).
    The revision and addition read as follows:


Sec.  982.503  Payment standard amount and schedule.

* * * * *
    (b) * * *
    (1) * * *
    (iii) The PHA may establish an exception payment standard of not 
more than 120 percent of the published FMR if required as a reasonable 
accommodation in accordance with 24 CFR part 8 for a family that 
includes a person with a disability. Any unit approved under an 
exception payment standard must still meet the reasonable rent 
requirements found at Sec.  982.507.
* * * * *
    (c) * * *
    (2) Above 110 percent of FMR to 120 percent of published FMR. The 
HUD Field Office may approve an exception payment standard amount from 
above 110 percent of the published FMR to not more than 120 percent of 
the published FMR (upper range) if the HUD Field Office determines that 
approval is justified by either the median rent method or the 40th or 
50th percentile rent method as described in paragraph (c)(2)(ii) of 
this section (and that such approval is also supported by an 
appropriate program justification in accordance with paragraph (c)(4) 
of this section).
    (i) Median rent method. In the median rent method, HUD determines 
the exception payment standard amount by multiplying the FMR times a 
fraction of which the numerator is the median gross rent of the 
exception area and the denominator is the median gross rent of the 
entire FMR area. In this method, HUD uses median gross rent data from 
the most recent decennial United States census, and the exception area 
may be any geographic entity within the FMR area (or any combination of 
such entities) for which median gross rent data is provided in 
decennial census products.
    (ii) 40th or 50th percentile rent method. In this method, HUD 
determines that the area exception payment standard amount equals 
either the 40th or 50th percentile of rents for standard quality rental 
housing in the exception area. HUD determines whether the 40th or 50th 
percentile rent applies in accordance with the methodology described in 
Sec.  888.113 of this title for determining FMRs. A PHA must present 
statistically representative rental housing survey data to justify HUD 
approval.
* * * * *

0
43. Revise Sec.  982.505(d) to read as follows:


Sec.  982.505  How to calculate housing assistance payment.

* * * * *
    (d) PHA approval of higher payment standard for the family as a 
reasonable accommodation. If the family includes a person with 
disabilities and requires a payment standard above the basic range, as 
a reasonable accommodation for such person, in accordance with part 8 
of this title, the PHA may establish a payment standard for the family 
of not more than 120 percent of the FMR.

0
44. In Sec.  982.514, add paragraph (c) to read as follows:


Sec.  982.514  Distribution of housing assistance payment.

* * * * *
    (c) The PHA may elect to establish policies regarding the frequency 
of utility reimbursement payments for payments made to the family.
    (1) The PHA will have the option of making utility reimbursement 
payments not less than once per calendar-year quarter, for 
reimbursements totaling $45 or less per quarter. In the event a family 
leaves the program in advance of its next quarterly reimbursement, the 
PHA would be required to reimburse the family for a prorated share of 
the applicable reimbursement. PHAs exercising this option must have a 
hardship policy in place for tenants.
    (2) If the PHA elects to pay the utility supplier directly, the PHA 
must notify the family of the amount paid to the utility supplier.

0
45. Amend Sec.  982.516 as follows:
0
a. Revise the section heading;
0
b. In paragraph (a), revise the introductory text of paragraph (a)(2) 
and add paragraph (a)(3);
0
c. Remove paragraph (e);
0
d. Redesignate paragraphs (b), (c), and (d) as paragraphs (c), (d), and 
(e), respectively;
0
e. Add a new paragraph (b);
0
f. In redesignated paragraph (c), revise the paragraph heading; and
0
g. Revise redesignated paragraph (e)(2).
    The revisions and addition read as follows:


Sec.  982.516  Family income and composition: Annual and interim 
examinations.

    (a) * * *
    (2) Except as provided in paragraph (a)(3) of this section, the PHA 
must

[[Page 12377]]

obtain and document in the tenant file third-party verification of the 
following factors, or must document in the tenant file why third-party 
verification was not available:
* * * * *
    (3) For a family with net assets equal to or less than $5,000, a 
PHA may accept a family's declaration that it has net assets equal to 
or less than $5,000, without taking additional steps to verify the 
accuracy of the declaration.
    (i) The declaration must state the amount of income the family 
expects to receive from such assets; this amount must be included in 
the family's income.
    (ii) A PHA must obtain third-party verification of all family 
assets every 3 years.
    (b) Streamlined income determination. For any family member with a 
fixed source of income, a PHA may elect to determine that family 
member's income by means of a streamlined income determination. A 
streamlined income determination must be conducted by applying, for 
each fixed-income source, the verified cost of living adjustment (COLA) 
or current rate of interest to the previously verified or adjusted 
income amount.
    (1) Family member with a fixed source of income is defined as a 
family member whose income includes periodic payments at reasonably 
predictable levels from one or more of the following sources:
    (i) Social Security, Supplemental Security Income, Supplemental 
Disability Insurance;
    (ii) Federal, state, local, or private pension plans;
    (iii) Annuities or other retirement benefit programs, insurance 
policies, disability or death benefits, or other similar types of 
periodic receipts; or
    (iv) Any other source of income subject to adjustment by a 
verifiable COLA or current rate of interest.
    (2) A PHA must use a COLA or current rate of interest specific to 
the fixed source of income in order to adjust the income amount. The 
PHA must verify the appropriate COLA or current rate of interest from a 
public source or through tenant-provided, third party-generated 
documentation. If no such verification is available, then the PHA must 
obtain third-party verification of income amounts in order to calculate 
the change in income for the source.
    (3) For any family member whose income is determined pursuant to a 
streamlined income determination, a PHA must obtain third-party 
verification of all income amounts every 3 years.
    (c) Interim reexaminations. * * *
* * * * *
    (e) * * *
    (2) At the effective date of a regular or interim reexamination, 
the PHA must make appropriate adjustments in the housing assistance 
payment in accordance with Sec.  982.505.
* * * * *

0
46. Amend Sec.  982.517 as follows:
0
a. Capitalize the first word in paragraph (b)(2)(i); and
0
b. Revise paragraph (d), to read as follows:


Sec.  982.517  Utility allowance schedule.

* * * * *
    (d) Use of utility allowance schedule. The PHA must use the 
appropriate utility allowance for the lesser of the size of dwelling 
unit actually leased by the family or the family unit size as 
determined under the PHA subsidy standards. In cases where the unit 
size leased exceeds the family unit size as determined under the PHA 
subsidy standards as a result of a reasonable accommodation, the PHA 
must use the appropriate utility allowance for the size of the dwelling 
unit actually leased by the family.
* * * * *

PART 983--PROJECT-BASED VOUCHER (PBV) PROGRAM

0
47. The authority citation for part 983 continues to read as follows:

    Authority: 42 U.S.C. 1437f and 3535(d).


Sec.  983.2  [Amended]

0
48. In Sec.  983.2 amend paragraph (c)(4) by removing the citation 
``Sec.  982.406'' and adding in its place ``Sec.  982.407''.

0
49. Amend Sec.  983.103 by revising paragraph (d) and adding paragraph 
(g) to read as follows:


Sec.  983.103  Inspecting units.

* * * * *
    (d) Biennial inspections. (1) At least biennially during the term 
of the HAP contract, the PHA must inspect a random sample, consisting 
of at least 20 percent of the contract units in each building, to 
determine if the contract units and the premises are maintained in 
accordance with the HQS. Turnover inspections pursuant to paragraph (c) 
of this section are not counted toward meeting this inspection 
requirement.
    (2) If more than 20 percent of the sample of inspected contract 
units in a building fail the initial inspection, then the PHA must 
reinspect 100 percent of the contract units in the building.
    (3) A PHA may also use the procedures applicable to HCV units in 24 
CFR 982.406.
* * * * *
    (g) Mixed-finance properties. In the case of a property assisted 
with project-based vouchers (authorized at 42 U.S.C. 1437f(o)(13)) that 
is subject to an alternative inspection, the PHA may rely upon 
inspections conducted at least triennially to demonstrate compliance 
with the inspection requirement of 24 CFR 982.405(a).

PART 990--THE PUBLIC HOUSING OPERATING FUND PROGRAM

0
50. The authority citation for part 990 continues to read as follows:

    Authority: 42 U.S.C. 1437g; 42 U.S.C. 3535(d).

0
51. In Sec.  990.150, revise paragraph (a) to read as follows:


Sec.  990.150  Limited vacancies.

    (a) Operating subsidy for a limited number of vacancies. HUD will 
pay operating subsidy for a limited number of vacant units under an 
ACC. The limited number of vacant units must be equal to or less than 3 
percent of the unit months on a project-by-project basis based on the 
definition of a project under Sec.  990.265 (provided that the number 
of eligible unit months does not exceed 100 percent of the unit months 
for a project).
* * * * *

    Dated: February 29, 2016.
Nani Coloretti,
Deputy Secretary.
[FR Doc. 2016-04901 Filed 3-7-16; 8:45 am]
 BILLING CODE 4210-67-P