[Federal Register Volume 82, Number 134 (Friday, July 14, 2017)]
[Rules and Regulations]
[Pages 32461-32463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14631]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 982 and 983

[Docket No. FR-5976-C-06]


Housing Opportunity Through Modernization Act of 2016: 
Implementation of Various Section 8 Voucher Provisions; Correction

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

ACTION: Implementation and request for comments; correction.

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SUMMARY: On January 18, 2017, HUD published a document in the Federal 
Register making several Housing Choice Voucher (HCV) provisions of the 
Housing Opportunity Through Modernization Act of 2016 (HOTMA) effective 
and requesting comment. This document makes technical corrections to 
the January 18, 2017, document.

DATES: Effective date: The effective date for the implementation 
guidance of April 18, 2017 is unchanged.

FOR FURTHER INFORMATION CONTACT: With respect to this supplementary 
document, contact Ariel Pereira, Associate General Counsel for 
Legislation and Regulations, Department of Housing and Urban 
Development, 451 7th Street SW., Room 10238, Washington, DC 20410; 
telephone number 202-708-1793 (this is not a toll-free number). Persons 
with hearing or speech impairments may access this number through TTY 
by calling the toll-free Federal Relay Service at 800-877-8339.
    Please direct all questions about the January 18, 2017 document to 
[email protected].

SUPPLEMENTARY INFORMATION

I. Background Information

    On July 29, 2016, HOTMA was signed into law (Pub. L. 114-201, 130 
Stat. 782). HOTMA made numerous changes to statutes that govern HUD 
programs, including section 8 of the United States Housing Act of 1937 
(1937 Act) (42 U.S.C. 1437f). HUD issued a notice on October 24, 2016, 
at 81 FR 73030, announcing to the public which of the statutory changes 
made by HOTMA could be implemented immediately, and which statutory 
changes required further guidance from HUD before owners, public 
housing agencies (PHAs), or other grantees may use the new statutory 
provisions.
    On January 18, 2017, HUD published a second document at 82 FR 5458, 
making multiple HOTMA provisions impacting the HCV program effective 
and requesting comments. Several of the comments pointed out the need 
for technical corrections or clarifications to the January 18, 2017, 
implementation document. This document makes several technical 
corrections and clarifications to the January 18, 2017, implementation 
document, in part based on the public comments. HUD also received 
comments recommending changes that were not technical corrections or 
clarifications, but rather suggested alternative approaches to 
implementing the HOTMA provisions. HUD will take those comments under 
consideration.

II. Explanation of Corrections

A. Units Owned by a PHA (HOTMA Sec.  105)--Controlling Interest

    HOTMA amended section 8(o) of the 1937 Act to provide a statutory 
definition of units owned by a PHA, overriding the regulatory 
definitions at 24 CFR 983.3 and 24 CFR 982.352. HOTMA establishes three 
categories under which a project is PHA-owned. A project is PHA-owned 
when the project is: (1) Owned by the PHA; (2) owned by an entity 
wholly controlled by the PHA; or (3) owned by a limited liability 
company (LLC) or limited partnership in which the PHA (or an entity 
wholly controlled by the PHA) holds a controlling interest in the 
managing member or general partner. The January 18, 2017, 
implementation document (page 5463, section B), used the phrase ``50 
percent or more'' to define a level of control that constitutes a 
controlling interest and would thus indicate PHA ownership. The 
threshold for control should be ``more than 50 percent'' rather than 
``50 percent or more.''
    This document also corrects a typographical error contained in the 
January 18, 2017, implementation document in the definition of 
``controlling interest'' for purposes of establishing PHA ownership. 
Specifically, the implementation document incorrectly refers to 
equivalent levels of control in other ``organizational'' structures. 
This document corrects the definition to refer to ``ownership'' 
structures.

B. Units Not Subject to Project-Based Voucher (PBV) Program Unit 
Limitation (HOTMA Sec.  106(a)(2)) and Projects Not Subject to Project 
Cap (HOTMA Sec.  106(a)(3))--Flexible Subsidy Projects

    HOTMA amended the 1937 Act to except certain units from both the 
PHA program unit percentage limitation at section 8(o)(13)(B) and the 
income-mixing requirement at section 8(o)(13)(D). Specifically, HOTMA 
excepts units of project-based assistance that ``are attached to units 
previously subject to federally required rent restrictions or receiving 
another type of long-term subsidy or project-based assistance provided 
by the Secretary.'' The January 18, 2017, implementation document (page 
5465, section C.2.C, and page 5467, section C.3.D, respectively) 
inadvertently excluded from the list of excepted units those units that 
have received assistance under section 201 of the Housing and Community 
Development Amendments of 1978. Therefore, HUD is correcting the 
January 18, 2017, implementation document to add the Flexible Subsidy 
Program in both lists.

C. Units Not Subject to PBV Program Unit Limitation (HOTMA Sec.  
106(a)(2))--Replacement Housing

    In discussing the units that are not subject to the PBV program 
unit limitation, the January 18, 2017, implementation document 
describes the circumstances under which PBV new construction units will 
qualify as replacement housing for the covered units and likewise are 
exempt from the program limitation (page 5465, section C.2.C(2)). One 
of the requirements is that the newly constructed unit is located on 
the same site as the unit it is replacing. In describing this 
requirement, the January 18 2017, implementation document inadvertently 
referred to the ``site of the original public housing development'' 
instead of ``site of the original development.'' To avoid any 
indication that this requirement is only applicable to former public 
housing units as opposed to all the covered forms of HUD assistance 
listed earlier in the January 18, 2017, implementation document, 
C.2.C(2)(b) is revised to strike ``public housing'' from the paragraph.

D. Changes to Income-Mixing Requirements for a Project (Project Cap) 
(HOTMA Sec.  106(a)(3))--Supportive Services Exception

    HOTMA amends the 1937 Act with respect to the threshold for 
exemption from the income-mixing requirement. The income mixing 
requirement

[[Page 32462]]

exception for supportive services now applies to dwelling units 
assisted under the contract that are exclusively made available to 
``households eligible for supportive services that are made available 
to the assisted residents of the project, according to the standards 
for such services the Secretary may establish.'' HOTMA requires that 
families must be ``eligible'' for the supportive services, rather than 
``receiving'' the supportive services, for the units made available to 
such families to be excluded from the income-mixing requirement. As 
clarified in the January 18, 2017, implementation document (page 5467, 
section C.3.B(2)), this HOTMA change means that a PHA may not require 
family participation in the supportive services as a condition of 
living in an excepted unit. Therefore, a PHA may not rely solely on a 
supportive services program that would require a family to engage in 
the supportive services once the family enrolls in the program, such as 
Family Self-Sufficiency (FSS), for the unit to meet the supportive 
services exception.
    The January 18, 2017, implementation document states that ``if the 
FSS family fails to successfully complete the FSS contract of 
participation or supportive services objective and consequently is no 
longer eligible for the supportive services, the family must vacate the 
unit . . . and the PHA shall cease paying housing assistance payments 
on behalf of the ineligible family.'' Upon further consideration, HUD 
is concerned that the sentence may be misinterpreted to imply that a 
PHA could, under HOTMA, establish a supportive services exception based 
exclusively on participation in FSS (where participation in the 
supportive services is required as opposed to voluntary), rather than 
in combination with another supportive services option where 
participation in the supportive services is voluntary. Additionally, 
HUD has determined that this provision could be wrongly construed in a 
way that conflicts with current FSS requirements, which do not allow 
termination from the housing assistance program for failure to complete 
the FSS contract of participation. See the Federal Register notice 
entitled, ``Waivers and Alternative Requirements for the Family Self-
Sufficiency Program'', published on December 29, 2014, at 79 FR 78100.
    Therefore, HUD is correcting the language on page 5467 to remove 
the ambiguities and better express the requirements of the HOTMA 
changes.

E. Changes to Income-Mixing Requirements for a Project (Project Cap) 
(HOTMA Sec.  106(a)(3))--Units in Low-Poverty Census Tract Exception

    HOTMA amended the 1937 Act with respect to the types of units that 
are exempt from the income-mixing requirement. The January 18, 2017, 
implementation document (page 5467, section C.3.B(3)), noted that 
``projects that are in a census tract with a poverty rate of 20 percent 
or less'' are excluded from the cap. However, the January 18, 2017, 
implementation document should have clarified that while PBV projects 
located in a census tract with a poverty rate of 20 percent or less are 
excluded from the 25 percent unit cap, those projects are subject to an 
alternative income mixing requirement that is the greater of 25 units 
or 40 percent of the units. HUD is adding a sentence to this section as 
a clarification.

F. Changes to Income Mixing Requirements for a Project (Project Cap) 
(HOTMA Sec.  106(a)(3))--Grandfathering of Certain Properties

    There are two typographical errors in the last sentence of section 
C.3.C on page 5467. The word ``contact'' should be ``contract'' and the 
last word of the sentence should be ``project'' and not ``unit''.

G. Projects Not Subject to a Project Cap (HOTMA Sec.  106(a)(3))--
Replacement Housing

    HOTMA amended the language in section 8(o)(13)(D) to exempt certain 
types of units receiving PBV assistance from having a project cap 
entirely. These are PBV units that were previously subject to certain 
federal rent restrictions or receiving another type of long-term 
housing subsidy provided by HUD. The January 18, 2017, implementation 
document (page 5468, section C.3.D(2)), provided an incorrect 
definition of new construction units that qualify for the exception as 
replacement housing. The definition in section C.3.D(2)(b) was supposed 
to match the definition provided on page 5465, section C.2.C(2)(b).

H. Attaching PBVs to Structures Owned by PHAs (HOTMA Sec.  106(a)(9))

    HOTMA amended the 1937 Act to add a new section 8(o)(13)(N), which 
allows a PHA that is engaged in an initiative to improve, develop, or 
replace a public housing property or site to attach PBVs to projects in 
which the PHA has an ownership or controlling interest, without 
following a competitive process. In the January 18, 2017, 
implementation document (page 5471, section C.6), HUD stated that, in 
order to avail itself of this exemption from the competitive award of 
PBVs, a PHA must ``be planning rehabilitation or construction on the 
project with a minimum of $25,000 per unit in hard costs.'' However, 
this minimum per unit cost would not be applicable in a situation where 
a PHA is replacing a public housing property or site with existing 
housing owned or controlled by the PHA.
    Accordingly, in FR Doc. 2017-0091, beginning on page 5458 of the 
Federal Register of Wednesday, January 18, 2017, the following 
corrections are made:
    1. On page 5463, in the first column, the final sentence of 
paragraph (3) is corrected to read as follows:

    A ``controlling interest'' is--
    (A) holding more than 50 percent of the stock of any 
corporation;
    (B) having the power to appoint more than 50 percent of the 
members of the board of directors of a non-stock corporation (such 
as a non-profit corporation);
    (C) where more than 50 percent of the members of the board of 
directors of any corporation also serve as directors, officers, or 
employees of the PHA;
    (D) holding more than 50 percent of all managing member 
interests in an LLC;
    (E) holding more than 50 percent of all general partner 
interests in a partnership; or
    (F) equivalent levels of control in other ownership structures.

    2. On page 5465, beginning in the first column, paragraph 
C(1)(b)(i) is corrected by adding at the end a new paragraph, to read 
as follows:

    (VII) Flexible Subsidy Program (section 201 of the Housing and 
Community Development Amendments of 1978).

    3. On page 5465, beginning in the second column, paragraph (b) is 
corrected by removing ``public housing'' in the second sentence.
    4. On page 5467, in the second column, the last two paragraphs of 
paragraph B(2) are corrected to read as follows:

    A PHA may not require participation in the supportive services 
as a condition of living in an excepted unit, although the family 
must be eligible to receive the supportive services, and the 
supportive services must be offered to the family. As such, a PHA 
may not rely solely on a supportive services program that would 
require the family to engage in the services once enrolled, such as 
FSS, for the unit to qualify for the supportive services exception. 
In the case of a family that chooses to participate in the 
supportive services, as described by the PHA in the administrative 
plan, and successfully completes the supportive services objective, 
the unit continues to be an excepted unit for as long as the family 
resides in the unit even though the family is no longer eligible for 
the service.

[[Page 32463]]

    However, if a family becomes ineligible for the supportive 
services during their tenancy (for reasons other than successfully 
completing the supportive services objective), the unit will no 
longer be considered an excepted unit under this category. If the 
PHA does not want to reduce the number of excepted units in their 
project-based portfolio, the PHA may: (i) Substitute the excepted 
unit for a non-excepted unit if it is possible to do so in 
accordance with 24 CFR 983.207(a), so that the unit does not lose 
its excepted status, or (ii) temporarily remove the unit from the 
PBV HAP contract and provide the family with tenant-based 
assistance. Note that the family would have to be ineligible for all 
the supportive services made available for the unit to lose its 
excepted status. For example, consider a project where the 
supportive services made available to assisted families in the 
project include both FSS supportive services (for families that 
voluntarily join the FSS program) and non-FSS supportive services 
(where, unlike FSS, participation in supportive services is not 
mandatory). If a family joined the FSS program but later dropped out 
of the FSS program, the unit would continue to be an exception unit 
provided the family is eligible for the non-FSS supportive services.

    5. On page 5467, in the second column, paragraph B(3) is corrected 
by adding a new sentence at the end, to read as follows:

    ``For these projects, the project cap is the greater of 25 units 
or 40 percent (instead of 25 percent) of the units in the project.''

    6. On page 5467, in the third column, the last sentence of 
paragraph (C) is corrected to read as follows:

    The PBV HAP contract may not be changed to the HOTMA requirement 
if the change would jeopardize an assisted family's eligibility for 
continued assistance at the project (e.g., excepted units at the 
project included units designated for the disabled, and changing to 
the HOTMA standard would result in those units no longer being 
eligible as an excepted unit unless the owner will make supportive 
services available to all assisted families in the project.

    7. On page 5467, beginning in the third column, paragraph 
D(1)(b)(i) is corrected by adding at the end a new paragraph, to read 
as follows:

    (VII) Flexible Subsidy Program (section 201 of the Housing and 
Community Development Amendments of 1978).

    8. On page 5468, in the second column, the second sentence of 
paragraph (b) is corrected by removing the parentheses and correcting 
it to read as follows:

    An expansion of or modification to the prior project's site 
boundaries as a result of the design of the new construction project 
is acceptable as long as a majority of the replacement units are 
built back on the site of the original development and any units 
that are not built on the existing site share a common border with, 
are across a public right of way from, or touch that site.

    9. On page 5471, in the third column, the second paragraph of 
section 6 is corrected to read as follows:

    In order to be subject to this non-competitive exception, the 
PHA must be planning: (A) rehabilitation or construction of the 
project or site with a minimum of $25,000 per unit in hard costs; or 
(B) replacement of the project or site with existing housing that 
substantially complies with HUD's housing quality standards. The PHA 
must detail in its administrative plan how it intends to use PBVs to 
improve, develop, or replace any public housing property or site, 
and, if applicable, must detail what works it plans to do on the 
property or site and how many units of PBV it is planning an adding 
to the site.

    Dated: June 28, 2017.
Jemine A. Bryon,
General Deputy Assistant, Secretary for Public and Indian Housing.
[FR Doc. 2017-14631 Filed 7-13-17; 8:45 am]
 BILLING CODE 4210-67-P