[Federal Register Volume 82, Number 12 (Thursday, January 19, 2017)]
[Notices]
[Pages 6615-6617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-01246]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5630-N-09]


Rental Assistance Demonstration: Revised Program Notice

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

ACTION: Notice.

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SUMMARY: On July 26, 2012, HUD announced through notice in the Federal 
Register the implementation of the statutorily authorized Rental 
Assistance Demonstration (RAD), which provides the opportunity to test 
the conversion of public housing and other HUD-assisted properties to 
long-term, project-based Section 8 rental assistance. The July 26, 
2012, Federal Register notice also announced the availability of the 
program notice (PIH 2012-32), providing program instruction on HUD's 
Web site. On July 2, 2013, HUD issued a revised program notice (PIH 
2012-32, REV-1). On April 26, 2015, HUD issued a further revised 
program notice (PIH 2012-32, REV-2). This Federal Register notice 
announces further revisions to RAD and solicits public comment on 
changed eligibility and selection criteria. It also announces the 
posting of a further revised program notice (Revised Program Notice, 
PIH 2012-32/H 2017-03, REV-3). As provided by the RAD Statute, this 
notice addresses the requirement that the demonstration may proceed 
after publication of notice of its terms in the Federal Register. This 
notice summarizes the key changes made to PIH 2012-32/H 2017-03, REV-3. 
This notice also meets the RAD statutory requirement to publish at 
least 10 days before they may take effect, waivers and alternative 
requirements authorized by the statute, which does not prevent the 
demonstration, as modified, from proceeding immediately.

DATES: Comment Due Date: February 21, 2017.
    Effective Dates: The Revised Program Notice, PIH 2012-32/H 2017-03, 
REV-3, other than those items listed as subject to notice and comment 
or new statutory or regulatory waivers or alternative requirements 
specified in this notice, is effective January 19, 2017.
    The new statutory and regulatory waivers and alternative 
requirements are effective January 30, 2017.
    The items listed as subject to notice and comment will be effective 
upon February 21, 2017. If HUD receives adverse comment that leads to 
reconsideration, HUD will notify the public in a new notice immediately 
upon the expiration of the comment period.

ADDRESSES: Interested persons are invited to submit comments 
electronically to [email protected] no later than the comment due date.

FOR FURTHER INFORMATION CONTACT: To assure a timely response, please 
direct requests for further information electronically to the email 
address [email protected]. Written requests may also be directed to the 
following address: Office of Public and Indian Housing--RAD Program; 
Department of Housing and Urban Development; 451 7th Street SW., Room 
2000; Washington, DC 20410.

SUPPLEMENTARY INFORMATION: 

I. Background

    RAD, authorized by the Consolidated and Further Continuing 
Appropriations Act, 2012 (Pub. L. 122-55, signed November 18, 2011) 
(2012 Appropriations Act), allows for the conversion of assistance 
under the public housing, Rent Supplement (Rent Supp), Rental 
Assistance (RAP), Moderate Rehabilitation (Mod Rehab), and Mod Rehab 
Single Room Occupancy (SRO) programs (collectively, ``covered 
programs'') to long-term, renewable assistance under Section 8.\1\ The 
most recent version of the RAD program notice is PIH 2012-32, REV-2, 
located at https://portal.hud.gov/hudportal/documents/huddoc?id=PIHNotice_2012-32_062015.pdf.
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    \1\ The RAD statutory requirements were amended by the 
Consolidated Appropriations Act, 2014 (Pub. L. 113-76, signed 
January 17, 2014) (2014 Appropriations Act), the Consolidated and 
Further Continuing Appropriations Act, 2015 (Pub. L. 113-235, signed 
December 16, 2014) (2015 Appropriations Act), and the Consolidated 
Appropriations Act, 2016 (Pub. L. 114-113, signed December 18, 2015) 
(2016 Appropriations Act). The statutory provisions of the 2012 
Appropriations Act pertaining to RAD, as amended, are referred to as 
the RAD Statute in this notice.
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II. Key Changes Made to RAD

    The following highlights key changes to the RAD program that are 
included in the Revised Program Notice:

 First Component (Public Housing Conversions)

    1. Creating a new way in which public housing agencies (PHAs) can 
increase their RAD rents by relinquishing existing balances of 
replacement housing factor (RHF) funds or demolition and disposition 
transition funding (DDTF) (see section 1.5.A).
    2. Eliminating the cap on the number of project-based voucher (PBV) 
units at a project (see section 1.6.A.2).
    3. Improving the quality of information that must be provided to 
residents of properties undergoing conversion and requiring that PHAs 
submit responses to resident comments in connection with meetings held 
following the issuance of the Commitment to enter into a Housing 
Assistance Payments Contract (CHAP) (see section 1.8).
    4. Extending the prohibition on re-screening to current public 
housing households that will reside in non-RAD PBV or non-RAD project-
based rental assistance (PBRA) units placed in a project that contain 
RAD PBV or RAD PBRA units so as to facilitate the right to return to 
the assisted property (see sections 1.6.C.1 and 1.7.B.1).
    5. Correcting the phase-in of rents for residents who may 
experience a rent increase as a result of conversion, in order to 
ensure a more even distribution across years (see sections 1.6.B.3 and 
1.7.B.3).
    6. Clarifying that a PHA is permitted to receive cash acquisition 
proceeds in excess of any seller take-back financing and that such 
proceeds must be used for Affordable Housing Purposes, a newly defined 
term (see section 1.4.7).
    7. Establishing flexibility for requirements related to the Capital 
Needs Assessments, permitting certain

[[Page 6616]]

exemptions when the assisted units are a small percentage of the total 
project (see section 1.4.A.1).
    8. Requiring title reports to be submitted with the Financing Plan 
to avoid delays in closing (see section 1.15, Attachment 1A).
    9. Modifying the maximum allowable developer fee, by excluding from 
the formula for larger transactions any acquisition payments made to 
the PHA, developer fee, and reserves (see section 1.14).
    10. Establishing greater flexibility to underwrite to new loan 
products that have emerged in the market (see section 1.15, Attachment 
2A).
    11. Providing greater detail on the acceptable forms in which a 
public or non-profit entity can demonstrate ownership or control (see 
section 1.4.A.11).
    12. Providing guidance on owners' responsibilities to treat lead-
based paint hazards in the context of a RAD conversion (see section 
1.4.A.15).
    13. Encouraging PHAs and their partners to grant current workers 
whose employment positions may be eliminated during conversion the 
right of first refusal for new employment openings for which they are 
qualified (see section 1.4.A.16).

Second Component (Mod Rehab, Mod Rehab SRO, Rent Supp, RAP Conversions)

    1. Eliminating the cap on the number of PBV units at a project (see 
section 2.5.C).
    2. Permitting Mod Rehab conversions to PBRA to convert at 
comparable market rents, up to 110 percent of fair market rent (FMR) 
(see sections 2.6.C and D).
    3. For Mod Rehab SRO conversions, authorizing the use of the 
efficiency FMR for SRO units, rather than 75 percent of the efficiency 
FMR, which is the existing SRO standard (see section 2.7).
    4. Allowing all conversions to PBRA to achieve rents between 110 
percent and 120 percent of FMR (up to the statutory maximum), if 
justified by comparable market rents and only in certain circumstances 
where preservation criteria have been meet (see sections 3.6.C and D).
    5. For conversions to PBRA, permitting the use of Small Area FMR 
(SAFMR) in the calculation of contract rent cap, with HUD approval (see 
sections 2.5 and 2.6).

III. Changes Subject to Notice and Comment

    The Revised Program Notice makes changes to some of the selection 
and eligibility criteria for conversions of public housing under the 
First Component. Pursuant to the RAD Statute, these changes must be 
made available for public comment before they are effective. Please 
submit all comments to [email protected]. As indicated above, the following 
changes will be effective on February 21, 2017. If HUD receives adverse 
comment that leads to reconsideration, HUD will notify the public in a 
new notice immediately upon the expiration of the comment period.
    The changes subject to notice and comment are:
    1. Consolidating the selection priority categories for new 
applications into two buckets: (1) High investment applications and (2) 
all other applications (see section 1.11.C).
    2. Allowing PHAs to submit a simple letter of interest, rather than 
an application, when a waiting list has formed. A letter of interest 
would serve to reserve a project or portfolio's position on the waiting 
list subject to future submission of a RAD Application (see section 
1.9).
    3. Making eligible an entire contiguous HOPE VI project that was 
developed in phases as long as the earliest phase is greater than ten 
years old (see section 1.3.H).

IV. New Waivers and Alternative Requirements

    The RAD Statute provides that waivers and alternative requirements 
authorized under the First Component must be published by notice in the 
Federal Register no later than 10 days before the effective date of 
such notice. Under the Second Component of RAD, HUD is authorized to 
waive or alter the provisions of subparagraphs (C) and (D) of section 
8(o)(13) of the United States Housing Act of 1937 (42 U.S.C. 1437f) 
(the 1937 Act).
    HUD has previously published its waivers and alternative 
requirements for RAD, on July 26, 2012 (77 FR 43850), July 2, 2013 (78 
FR 39759), and June 26, 2015 (80 FR 36830). This notice only includes 
waivers and alternative requirements not previously published or that 
have changed from previous publications. Although waivers or 
alternative requirements under the Second Component are not subject to 
a Federal Register publication requirement, the new Second Component 
waivers and alternative requirements are included in this notice as a 
matter of convenience.
    The new waivers and alternative requirements are:
    1. Cap on PBV Units in a Project. Provisions affected: Section 
8(o)(13)(D) of the Act, and 24 CFR 983.56, 983.257(b), 983.262(a) and 
(d). Alternative requirements: None. The previously imposed alternative 
requirements are waived, effectively eliminating any cap on the number 
of PBV units in a project undergoing conversion.
    2. Eligibility and Targeting of Tenants for Initial Occupancy. 
Provisions affected: 24 CFR 982.201 and 880.603(b). Alternative 
requirements: Pursuant to the RAD Statute, at conversion, current 
households cannot be excluded from occupancy at the Covered Project 
based on any rescreening, income eligibility, or income targeting. 
Therefore, current households admitted into the PBV program following 
conversion of assistance at the property were not subject to the 
application of eligibility criteria for conditions that occurred prior 
to conversion of assistance but were subject to ongoing eligibility 
requirement for actions occurring after conversion. Once the 
grandfathered household moves out, the unit must be leased to an 
eligible family. MTW agencies may not alter this requirement. Further, 
so as to facilitate the right to return to the assisted property, this 
provision shall apply to current public housing residents of the 
Converting Project that will reside in non-RAD PBV units or non-RAD 
PBRA units placed in a project that contain RAD PBV units or RAD PBRA 
units. Such families and such contract units will otherwise be subject 
to all requirements of the applicable program, specifically 24 CFR 983 
for non-RAD PBV units and the PBRA requirements governing the 
applicable contract for non-RAD PBRA units. Accordingly, HUD is waiving 
24 CFR 982.201 and 880.603(b) for current public housing residents of 
the Converting Project that will reside in non-RAD PBV units or non-RAD 
PBRA units placed in a project that contain RAD PBV units or RAD PBRA 
units.
    3. Total Tenant Payment (TTP). Provisions affected: Section 3(a)(1) 
of the Act and 24 CFR 983.3 and 880.201. Alternative requirements: If a 
resident's monthly rent increases by more than the greater of 10 
percent or $25 purely as a result of conversion, the rent increase will 
be phased in over 3 years or 5 years. Eligibility for the phase-in is 
to be determined at the Initial Certification which occurs at the time 
the household is converted to PBRA. A phase-in must not be applied 
after the household's Initial Certification. To implement the phase-in, 
HUD is specifying alternative requirements for section 3(a)(1) of the 
Act, as well as 24 CFR 880.201 (definition of ``total tenant payment''

[[Page 6617]]

(TTP)) to the extent necessary to allow for the phase-in of tenant rent 
increases. A PHA must create a policy setting the length of the phase-
in period at three years, five years, or a combination depending on 
circumstances. For example, a PHA may create a policy that uses a 
three-year phase-in for smaller increases in rent and a five-year 
phase-in for larger increases in rent. This policy must be in place at 
conversion and may not be modified after conversion.
    The method described below explains the set percentage-based phase-
in a Project Owner must follow according to the phase-in period 
established. For purposes of this section ``Calculated Multifamily 
TTP'' refers to the TTP calculated in accordance with regulations at 24 
CFR 5.628 (not capped at Gross Rent) and the ``most recently paid TTP'' 
refers to the TTP recorded on the family's most recent HUD Form 50059. 
If a family in a project converting from Public Housing to PBRA was 
paying a flat rent immediately prior to conversion, the PHA should use 
the flat rent amount to calculate the phase-in amount for Year 1, as 
illustrated below.
    Three-Year Phase-in:
     Year 1: Any recertification (interim or annual) performed 
prior to the second annual recertification after conversion--33 percent 
of difference between most recently paid TTP or flat rent and the 
Calculated Multifamily TTP
     Year 2: Year 2 Annual Recertification (AR) and any Interim 
Recertification (IR) in prior to Year 3 AR--50 percent of difference 
between most recently paid TTP and Calculated Multifamily TTP
     Year 3: Year 3 AR and all subsequent recertifications--
Year 3 AR and any IR in Year 3: Full Calculated Multifamily TTP \2\
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    \2\ For example, where a resident's most recently paid TTP is 
$100, but the Calculated PBV TTP is $200 and remains $200 for the 
period of the resident's occupancy, (i.e. no changes in income) the 
resident would continue to pay the same rent and utilities for which 
it was responsible prior to conversion. At the first recertification 
following conversion, the resident's contribution would increase by 
33% of $100 to $133. At the second AR, the resident's contribution 
would increase by 50% of the $66 differential to the standard TPP, 
increasing to $166. At the third AR, the resident's contribution 
would increase to $200 and the resident would continue to pay the 
Calculated PBV TTP for the duration of their tenancy.
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    Five-Year Phase-in
     Year 1: Any recertification (interim or annual) performed 
prior to the second annual recertification after conversion--20 percent 
of difference between most recently paid TTP or flat rent and the 
Calculated Multifamily TTP
     Year 2: Year 2 AR and any IR prior to Year 3 AR--25 
percent of difference between most recently paid TTP and Calculated 
Multifamily TTP
     Year 3: Year 3 AR and any IR prior to Year 4 AR--33 
percent of difference between most recently paid TTP and Calculated 
Multifamily TTP
     Year 4: Year 4 AR and any IR prior to Year 5 AR--50 
percent of difference between most recently paid TTP and Calculated 
Multifamily TTP
     Year 5 AR and all subsequent recertifications--Full 
Calculated Multifamily TTP
    Please Note: In either the three-year phase-in or the five-year 
phase-in, once Calculated Multifamily TTP is equal to or less than the 
previous TTP, the phase-in ends and tenants will pay full Calculated 
Multifamily TTP from that point forward.
    4. Mod Rehab SRO FMRs. Provision affected: 24 CFR 888.113(f)(2). 
Alternative requirements: The applicable FMR used for SRO units for 
initial and re-determined rents will be the zero bedroom (efficiency) 
FMR. Accordingly, HUD is waiving 24 CFR 888.113(f)(2) for Mod Rehab SRO 
units.
    5. Small Area FMRs for PBRA. Provision affected: 24 CFR 888.113(h). 
Alternative requirements: Projects converting assistance to PBRA under 
the Second Component may use a Small Area FMR for initial contract rent 
setting and when adjusting contract rents. Accordingly, HUD is waiving 
24 CFR 888.113(h) for those projects.

V. Revised Program Notice Availability

    The Revised Program Notice (PIH 2012-32/H 2017-03, REV-3) can be 
found on RAD's Web site, www.hud.gov/RAD.

VI. Environmental Review

    A Finding of No Significant Impact with respect to the environment 
was made in connection with HUD notice PIH 2012-32 issued on March 8, 
2012, and 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 the 
Revised Program Notice and is available for public inspection during 
regular business hours in the Regulations Division, Office of General 
Counsel; Department of Housing and Urban Development; 451 7th Street 
SW., Room 10276; Washington, DC 20410-0500. Due to security measures at 
the HUD Headquarters building, please schedule an appointment to review 
the finding by calling the Regulations Division at 202-402-3055 (this 
is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the Federal Relay 
Service at 800-877-8339.

    Dated: January 12, 2017.
Nani A. Coloretti,
Deputy Secretary.
[FR Doc. 2017-01246 Filed 1-18-17; 8:45 am]
 BILLING CODE 4210-67-P