[Federal Register Volume 81, Number 244 (Tuesday, December 20, 2016)]
[Notices]
[Pages 92836-92839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30622]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5958-N-01]


Request for Comments and Recommendations on a Revised Methodology 
To Track the Extent to Which Moving to Work Agencies Continue To Serve 
Substantially the Same Number of Eligible Families

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

ACTION: Notice.

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SUMMARY: This Notice solicits comments and recommendations on 
developing a revised methodology to be used to track the extent to 
which Public Housing Agencies (PHAs) in the Moving to Work (MTW) 
Demonstration Program are meeting the statutory requirement in Section 
204 of the Omnibus Consolidated Rescissions and Appropriations Act of 
1996, (1996 MTW Statute) to serve substantially the same number of 
families had they not combined their funds under the MTW Demonstration 
Program. This statutory requirement is further reinforced in the 
Standard MTW Agreements for all 39 current MTW PHAs.

DATES: Comments Due Date: February 21, 2017.

ADDRESSES: Interested persons are invited to submit comments and 
recommendations to the Moving to Work Office, Office of Public and 
Indian Housing, Department of Housing and Urban Development, 451 
Seventh Street SW., Room 4130, Washington, DC 20410-0001 or email at 
[email protected]. HUD strongly encourages commenters to submit comments 
electronically. Communications must refer to the above docket number 
and title and should contain the information specified in the ``Request 
for Public Comments'' section.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. A summary of comments 
received by HUD will be made available on HUD's Web site at: http://www.hud.gov/mtw.

FOR FURTHER INFORMATION CONTACT: Questions concerning this Notice 
should be directed to the Moving to Work Office, Office of Public and 
Indian Housing, Department of Housing and Urban Development at: [email protected]. Communications must refer to the above docket number and 
title.

SUPPLEMENTARY INFORMATION: 

I. Background

    The purpose of the MTW Demonstration Program, as provided in the 
1996 MTW Statute (Pub. L. 104-134; 42 U.S.C. 1437f note), is to give 
PHAs and HUD the flexibility to design and test various approaches for 
providing and administering housing assistance that:
     Reduce cost and achieve greater cost effectiveness in 
federal expenditures;
     give incentives to families with children where the head 
of household is working; is seeking work; or is preparing for work by 
participating in job training, educational programs, or

[[Page 92837]]

programs that assist people to obtain employment and become 
economically self-sufficient; and
     increase housing choices for eligible low-income families.
    In addition to the ability to request statutory and regulatory 
flexibility from certain public housing and Housing Choice Voucher 
(HCV) program rules under the U.S. Housing Act of 1937, as amended, 42 
U.S.C. 1437, et seq, (1937 Act) \1\ MTW PHAs combine public housing 
operating, public housing capital, and HCV assistance into a single 
agency-wide funding source referred to as the ``MTW Block Grant.'' \2\
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    \1\ For more information about the MTW Demonstration Program and 
the specific programs of current MTW PHAs, please refer to the MTW 
Web site at: http://www.hud.gov/mtw.
    \2\ Funds awarded under Sections 8(o), 9(d), and 9(e) of the 
1937 Act are eligible for inclusion in the MTW Block Grant, with the 
exception of funds provided for specific non-MTW HCV sub-programs.
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    Throughout participation in the MTW Demonstration Program, MTW PHAs 
must continue to meet five statutory requirements. These five statutory 
requirements, also provided in the 1996 MTW Statute, are:
     Statutory Requirement #1: To ensure at least 75% of 
families assisted are very low-income as defined in Section 3(b)(2) of 
the 1937 Act;
     Statutory Requirement #2: To establish a reasonable rent 
policy that is designed to encourage employment and self-sufficiency;
     Statutory Requirement #3: To continue to assist 
substantially the same total number of eligible low-income families as 
would have been served had funds not been combined (herein after, the 
``STS requirement'');
     Statutory Requirement #4: To maintain a comparable mix of 
families (by family size) as would have been provided had the funds not 
been used under the MTW Demonstration Program; and
     Statutory Requirement #5: To ensure housing assisted under 
the MTW Demonstration Program meets housing quality standards 
established or approved by the Secretary.
    HUD has processes in place to effectively monitor statutory 
requirements numbers 1, 2, 4, and 5. In 2013, HUD published PIH Notice 
2013-02, detailing a process for monitoring and quantifying compliance 
with the STS Requirement, which was previously verified with only an 
annual certification by the MTW PHA. Since publishing PIH Notice 2013-
02, HUD has determined that its methodology requires revision in order 
to more accurately ensure that an MTW PHA is serving substantially the 
same number of families as would have been served had it not combined 
its funds under the MTW Demonstration Program.
    PIH Notice 2013-02 currently utilizes a ratio that compares the 
number of families served annually by each MTW PHA (the numerator) to 
an approximation of how many families the MTW PHA would have served 
absent participation in the MTW Demonstration Program (the 
denominator). HUD then analyzes that ratio, represented as a 
percentage, and makes an annual determination of whether each MTW PHA 
is meeting the statutory requirement to serve substantially the same 
number of families. Through this Notice, HUD seeks to maintain the 
overall structure of the methodology described in PIH Notice 2013-02, 
but requests public feedback in revising some of the variables and how 
they are calculated in order to address areas identified as needing 
improvement.
    Throughout calendar year 2015, HUD had numerous conversations with 
the existing 39 MTW PHAs on potential changes to improve the tracking 
of the STS Requirement. At that time, many points of agreement between 
HUD and the 39 MTW PHAs were reached, including: Any tracking of the 
STS Requirement should be based on a combined look at public housing 
and HCV programs to account for an MTW PHA's available fungibility 
between these two programs; at a minimum, all families housed by an MTW 
PHA with Section 8 and Section 9 funds should be counted towards the 
STS Requirement in some way; and the statutory language of 
``substantially'' indicates some flexibility below the full number of 
families to be served.
    From these conversations between HUD and the existing 39 MTW PHAs, 
the following areas of feedback were developed. Specifically, the areas 
are:
     Connecting the number of families an MTW PHA must serve to 
funding received;
     Addressing the varied subsidy levels at which MTW PHAs 
serve families;
     Accounting for the development of affordable units with 
the MTW Block Grant that are outside of the public housing and HCV 
programs;
     Setting reasonable levels and categories of compliance;
     Adjusting for changes to the capacity of an MTW PHA to 
serve families and unforeseen effects; and
     Ensuring predictability under the STS Requirement for 
current and future MTW PHAs.

II. Request for Public Comments

    HUD requests public comments and recommendations on how to revise 
the methodology to determine compliance with the STS Requirement in 
order to strengthen the areas identified for improvement. MTW and non-
MTW PHAs, HUD-assisted housing residents, resident advocacy 
organizations, researchers, and HUD stakeholders are encouraged to 
submit comments. While all comments are welcome, HUD specifically 
requests comments in the following areas:

A. Connecting the Number of Families an MTW PHA Must Serve to Funding 
Received

    The current methodology contained in PIH Notice 2013-02 relies on a 
historic snapshot of public housing occupancy and HCV utilization rates 
in order to set the number of families an MTW PHA is obligated to serve 
(the denominator of the ratio). In collecting these figures, issues 
related to availability and accuracy of historic data and anomalies 
associated with a ``point-in-time'' approach have arisen. Subsequent 
inventory adjustments affecting the denominator also rely on historic 
data, compounding these concerns. Further, historic public housing 
occupancy and HCV utilization figures do not necessarily correlate to 
the funding resources that MTW PHAs receive today.
    Connecting the number of families an MTW PHA must serve to the MTW 
Block Grant funding it receives ensures equity between MTW PHAs that 
entered the MTW Demonstration Program at differing levels of public 
housing occupancy and HCV utilization and ensures that the data upon 
which the STS Requirement methodology relies is accurate and verifiable 
by HUD systems. While the denominator will still be set as a snapshot 
at a point in time that is then adjusted up or down according to 
incremental changes in inventory, connecting the denominator to funding 
more directly ties the STS Requirement to an MTW PHA's capacity to 
house families (regardless of participation in the MTW Demonstration 
Program).
(1) HCV Denominator of STS Requirement Ratio
    To connect the number of families an MTW PHA must serve to the 
funding it receives in the HCV program, HUD is considering starting 
with a snapshot of HCV funds received by the MTW PHA in the first 
calendar year the revised methodology is effective (excluding 
Administrative Fees and, to the extent feasible, funds provided for 
specific

[[Page 92838]]

non-MTW HCV subprograms) and dividing that figure by the average agency 
cost to house a family in the HCV program.
    One way to capture the average agency cost to house a family in the 
HCV program would be to take an annualized payment standard amount 
based on the MTW PHA's HUD-published Fair Market Rent \3\ and subtract 
an annualized average tenant contribution. This average cost to serve a 
family in the HCV program would need to be calculated and weighted to 
account for the different household sizes in each MTW PHA's locality.
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    \3\ Fair Market Rents are calculated by HUD annually and 
available at: www.huduser.gov/portal/datasets/fmr.html.
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    (a) How should the average agency cost to house a family in the HCV 
program for MTW PHAs be established to ensure it: Is unaffected by MTW 
flexibilities already in place, is accurately weighted by household 
size, and reflects local market costs and factors?
    (b) If payment standards are utilized in determining the average 
cost to house a family in the HCV program for MTW PHAs, what level of 
payment standard should be used? \4\
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    \4\ Non-MTW PHAs may set payment standards between 90-110% of 
HUD-published Fair Market Rents. For non- MTW PHAs payment standards 
outside of this basic range must be approved by HUD.
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    (c) What other factors should HUD consider in establishing the 
number of families an MTW PHA must serve with HCV funds?
(2) Public Housing Denominator of STS Requirement Ratio
    To connect the number of families an MTW PHA must serve to the 
funding it receives in the public housing program, HUD is considering 
starting with a snapshot of public housing operating funds received by 
the MTW PHA in the first calendar year the revised methodology is 
effective and dividing that figure by the average agency cost to 
operate a public housing unit.
    One way to capture the average agency cost to operate a public 
housing unit would be to approximate the amount of public housing 
operating subsidy the MTW PHA would receive per unit under regulation 
for the MTW PHA's existing inventory of public housing units.
    HUD seeks suggestions on other approaches that establish a public 
housing denominator that encourages the use of existing public housing 
units and ensures accountability for MTW PHAs that receive more public 
housing operating subsidy than other MTW and non-MTW PHAs.\5\
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    \5\ While the public housing operating subsidy is calculated 
differently for some MTW PHAs, all MTW PHAs receive public housing 
capital funds in accordance with regulation (24 CFR part 905 or its 
successor).
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    (a) How should the average agency cost to operate a public housing 
unit for MTW PHAs be established to ensure it: Is unaffected by MTW 
flexibilities already in place, accounts for local market costs and 
factors, and ensures accountability for MTW PHAs that receive higher 
levels of public housing operating subsidy?
    (b) What other factors should HUD consider in establishing the 
number of families an MTW PHA must serve with public housing funds?

B. Addressing the Varied Subsidy Levels at Which MTW PHAs Serve 
Families

    The MTW Demonstration Program allows MTW PHAs to design local 
programs that serve eligible families in unique ways to address local 
issues and needs. This may result in an MTW PHA creating a rental 
assistance structure that offers a lower level of subsidy than would be 
available to non-MTW PHAs in the traditional HCV and public housing 
programs. For example, an MTW PHA may lower its share of housing 
assistance, increasing the tenant share, to serve a larger number of 
families that do not require a high level of housing assistance. Such 
local programs in the MTW Demonstration Program are often referred to 
as ``Shallow Subsidies.'' In order to maintain the integrity of the STS 
Requirement and avoid allowing Shallow Subsidies to artificially 
inflate the numerator of the ratio, it is necessary to include families 
served in this manner, but also to count them in a modified way.
    HUD is considering approaching Shallow Subsidies by identifying 
families receiving assistance from the MTW PHA with a rent burden of 
50% or greater and counting those families with half a credit in the 
numerator of a ratio. For example, two households with a rent burden of 
50% or greater would count as one full family served in the numerator 
of the ratio.
    (1) How should HUD define and address Shallow Subsidies in the STS 
Requirement methodology?
    (2) If the rent burden of the family receiving assistance is 
utilized in defining Shallow Subsidies, what level of rent burden 
should be used? How should the households meeting that level of rent 
burden be counted in the numerator of the STS Requirement methodology?
    (3) If the rent burden of the family receiving assistance is 
utilized in defining Shallow Subsides, should certain exceptions be 
made for households paying minimum rent, zero income households, and/or 
households opting for a unit in an area of opportunity that is above 
the standard affordability threshold? Are there other households that 
should be included as exceptions, therefore receiving a full credit 
despite rent burden?
    (4) What other factors should HUD consider in addressing Shallow 
Subsidies?

C. Accounting for the Development of Affordable Units With the MTW 
Block Grant That Are Outside of the Public Housing and HCV Programs

    The MTW Demonstration Program allows MTW PHAs to use the MTW Block 
Grant to develop affordable housing units that are outside of the 
public housing and HCV programs. Such development allows for the 
creation of important affordable housing resources, but must be 
balanced with the existing and immediate needs of families waiting for 
housing assistance. It is therefore necessary to relate the amount of 
the MTW PHA's MTW Block Grant investment to the number of affordable 
units developed.
    One way to accomplish this is to divide the MTW Block Grant 
investment in the development of affordable housing units outside the 
public housing and HCV programs by the HUD-published Total Development 
Cost (TDC).\6\ This number of units would then be credited annually in 
the numerator of the MTW PHA's STS Requirement calculation for the 
length of time the units remained affordable. There would be no effect 
on the denominator.
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    \6\ Total Development Costs are calculated by HUD annually and 
available at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/capfund. HUD would 
use these and not any locally defined Total Development Costs, in 
this analysis.
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    (1) Does the MTW Block Grant investment amount divided by TDC 
approach appropriately capture this type of MTW flexibility?
    (2) Are there other suggestions for how the development of 
affordable housing units outside of the public housing and HCV programs 
can be included in the numerator of the ratio?

D. Setting Reasonable Levels and Categories of Compliance

    PIH Notice 2013-02 currently measures compliance of the STS 
Requirement annually based the fiscal year of the MTW PHA. This annual

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assessment is important in ensuring ongoing monitoring, but as HUD 
seeks to connect the methodology of the STS Requirement to annual 
funding received (which is provided based on a calendar year), a 
transition to determinations being made each calendar year for all MTW 
PHAs is necessary.
    In making annual determinations, PIH Notice 2013-02 established 
levels of compliance that allow for small or ``nominal'' dips below 100 
percent and that recognize a variety of scenarios that may cause an MTW 
PHA to have lower percentages in a given year or years. With a revised 
methodology to track the STS Requirement, it is necessary to reexamine 
the levels and categories of compliance.
    (1) How should ``Substantially the Same'' be interpreted under the 
1996 MTW Statute?
    (2) Should there be a percentage below 100% that is considered 
fully compliant with the STS Requirement without further justification 
by the MTW PHA? What should this level be and why?
    (3) Should there be a percentage below 100% that is considered 
fully compliant with the STS Requirement with further justification by 
the MTW PHA and approval by HUD? What should this level be and why? 
What justifications should be allowable?
    (4) What should be considered ``non-compliance'' under the STS 
Requirement? What enforcement actions should be taken by HUD and what 
opportunities for corrective actions should be available to MTW PHAs?

E. Adjusting for Changes to the Capacity of an MTW PHA To Serve 
Families and Unforeseen Effects

    To determine the number of families an MTW PHA must serve under the 
STS Requirement, HUD envisions annually aggregating the HCV and public 
housing denominators (discussed in Section II.A(1) and (2) above) and 
then adjusting that figure up or down according to increases or 
decreases in an MTW PHA's capacity to serve families (incremental 
changes to the MTW PHA's inventory). This approach addresses standard 
inventory changes and is similar to that contained in the existing PIH 
Notice 2013-02.
    In addition to annual adjustments for standard inventory changes, 
there may also be a need for limited adjustments to account for 
unforeseen effects caused by changes in markets and costs. As the 
revised STS methodology will likely rely on variables that include 
market and program costs, an opportunity to account for significant 
changes that occur to those costs after the denominator is established 
may be necessary. This would be separate from any of the standard 
incremental inventory increases or decreases contained in PIH Notice 
2013-02.
    (1) The variables that result in standard, annual incremental 
increases or decreases to an MTW PHA's capacity to serve families are 
listed in PIH Notice 2013-02. Should HUD consider any changes to this 
list?
    (2) Should there be future adjustments of the denominator to 
account for cost changes outside the scope of the MTW Demonstration 
Program? If so should such adjustments be elective for each MTW PHA or 
applied at fixed points to all MTW PHAs? If applied at fixed points, at 
what intervals should such adjustments occur? What types and levels of 
changes to costs should be considered in such potential recalculations?

F. Ensuring Predictability Under the STS Requirement for Current MTW 
PHAs

    If a new methodology for tracking the STS Requirement for current 
MTW PHAs is put in place, sufficient transition and notification of 
such a change would be important. With this in mind:
    (1) What, if any, transition time should be made available to 
current MTW PHAs in moving from the existing methodology in PIH Notice 
2013-02 to the revised methodology?
    (2) What testing and provisional data should be made available to 
MTW PHAs in moving from the existing methodology in PIH Notice 2013-02 
to the revised methodology?
    (3) What are other suggestions to ensure predictability for MTW 
PHAs with regard to the STS Requirement?

G. Other Feedback

    In addition to the specific areas above, the Department welcomes 
any feedback from the public on improvements that could be made to 
improve monitoring of the STS Requirement.
    (1) What are other suggestions to improve monitoring of the STS 
Requirement not covered in other portions of this Notice?
    (2) Should this revised methodology apply to both current MTW PHAs 
and PHAs that will be added to the MTW Demonstration Program through 
the MTW Expansion detailed in the 2016 Consolidated Appropriations Act, 
Public Law 114-113, Sec. 239?

    Dated: December 14, 2016.
Jemine A. Bryon,
General Deputy Assistant, Secretary for Public and Indian Housing.
[FR Doc. 2016-30622 Filed 12-19-16; 8:45 am]
 BILLING CODE 4210-67-P