[Federal Register Volume 84, Number 83 (Tuesday, April 30, 2019)]
[Notices]
[Pages 18307-18309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08746]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6040-N-01]


Housing Notice for Revitalization Area Designation Criteria; 
Solicitation of Comment

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

ACTION: Notice; Solicitation of Comment.

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

SUMMARY: Section 204(h) of the National Housing Act authorizes HUD to 
make HUD-held single family homes and formerly insured mortgages on 
Single Family properties, referred to as ``eligible assets,'' available 
for sale in a manner that promotes revitalization, through expanded 
homeownership opportunities, in ``revitalization areas.'' Section 
204(h) also sets forth general statutory criteria that HUD must use to 
designate such revitalization areas. In this notice, HUD seeks public 
comment on more detailed criteria for designating revitalization areas, 
which clarify the general statutory criteria, and which HUD plans to 
incorporate into a future Housing Notice.

DATES: Comment Due Date: May 30, 2019.

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

FOR FURTHER INFORMATION CONTACT:  Ivery Himes, Office of Single Family 
Asset Management, Office of Housing, Department of Housing and Urban 
Development, 451 7th Street SW, Room 4130, Washington, DC 20410, 202-
708-1672, ext. 5628 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION:  As part of HUD's policy of promoting the 
revitalization of certain communities through providing expanded 
homeownership opportunities, HUD is seeking public comment on 
designating Revitalization Areas under Section 204(h) of the National 
Housing Act (NHA). Separately, the Department of Treasury and the 
Internal Revenue Service (IRS), under the Tax Cuts and Jobs Act (Pub. 
Law. 115-97), announced the designation of similar areas, called 
Opportunity Zones, for all 50 states, the District of Columbia, and 
five U.S. possessions.\1\ Opportunity Zones are eligible for tax 
benefits to encourage revitalization by attracting private investment 
in low-income communities. Opportunity Zones may or may not overlap 
areas designated by HUD as revitalization areas. Individuals interested 
in obtaining more information regarding Opportunity Zones should 
contact the Department of Treasury and the IRS. Member of the public 
interested in providing comment on HUD's designated Revitalization 
Areas should, however, follow the instructions provided in the section 
above entitled, ADDRESSES.
---------------------------------------------------------------------------

    \1\ See https://home.treasury.gov/news/press-releases/sm0414.
---------------------------------------------------------------------------

I. Background

    Section 204(h) of the NHA, 12 U.S.C. 1710(h), authorizes HUD to 
make HUD-held Single Family homes and formerly insured mortgages on 
Single Family properties, referred to as ``eligible assets,'' 
``available for sale in a manner that promotes the revitalization, 
through expanded homeownership opportunities, of revitalization 
areas.''
    Properties located in revitalization areas are offered for sale at 
a discount through discount sales programs, such as the Asset Control 
Area and Good Neighbor Next Door programs, and to certain governments 
and nonprofits. All properties involved are HUD-held; that is, they 
were subject to a mortgage insured by HUD and are now owned by HUD 
pursuant to the payment of insurance benefits under the NHA and the 
implementing regulations for the NHA programs that are codified in 
Chapter II of Title 24 of the Code of Federal Regulations (CFR).
    Under section 204(h)(3) of the NHA, HUD is required to designate 
``revitalization areas,'' which must meet one of the statutory criteria 
for designation. Such criteria include whether the area is:
    (1) A ``[v]ery-low income area;''
    (2) an area with a ``[h]igh concentration of eligible assets;'' or
    (3) an area with a ``[l]ow homeownership rate.''

[[Page 18308]]

    In addition to setting each of the three eligible criteria, the 
statute also provides a limited definition for each criterion.

Criterion #1--Very-Low Income Area

    Under statute, for an area to be ``Very-low income,'' the median 
household income for the area must be less than 60 percent of the 
median household income for its metropolitan area, or in the case of 
any area not located within a metropolitan area, the State in which the 
area is located.

Criterion #2--High Concentration of Eligible Assets

    Under statute, for an area to have a ``High concentration of 
eligible assets,'' a high rate of default or foreclosure for insured 
Single Family mortgages has resulted, or may result, in the area having 
a disproportionately high concentration of eligible assets, in 
comparison with the concentration of such assets in surrounding areas 
or being detrimentally impacted by eligible assets in the vicinity of 
the area.

Criterion #3--Low Homeownership Rate

    Under statute, for an area to have a ``Low homeownership rate,'' 
the rate for homeownership of Single Family Homes in the area must be 
substantially below the rate for homeownership in the metropolitan 
area.
    When HUD implemented the statute, HUD determined that the statutory 
criteria for designating revitalization areas required a greater level 
of detail for effective implementation by Home Ownership Center (HOC) 
Directors, who are responsible for reviewing revitalization area 
requests from stakeholders and making revitalization area designation 
determinations. In order to provide clearer and more usable criteria 
for HOC Directors, HUD issued Notice H 2011-02 (Jan. 24, 2011), which 
provided more granular criteria and procedures for evaluating and 
designating revitalization areas than were prescribed under statute. 
The 2011 Notice expired January 31, 2012.

II. Proposed Revitalization Area Evaluation Criteria

    HUD is now seeking comments for developing new guidance. Through 
new guidance, HUD seeks to establish a clearer and more usable 
framework for designating revitalization areas, with the goal of 
simplifying the task of applying the relevant statutory criteria. HUD 
intends to include the detailed criteria as part of a future Housing 
Notice for HOC Directors to use in evaluating and designating 
revitalization areas. HUD seeks to clarify statutory criteria for 
revitalization area designation in a way that balances its mission of 
promoting homeownership and community revitalization with the need to 
maximize recoveries on distressed assets to ensure the viability of the 
Mutual Mortgage Insurance Fund. HUD seeks comments on the following 
clarifications:

Criterion #1--Very-Low Income Area

    HUD proposes the continued use of Census block groups to identify 
``very low-income areas'' as defined in the National Housing Act. 
Census block groups are the smallest level of geography that the Census 
uses to disseminate data on household income, which affords local 
jurisdictions and HUD the most precise unit of geography with which to 
identify neighborhoods in need of revitalization. In addition, local 
jurisdictions are experienced in using Census block group and income 
data required to administer the Community Development Block Grant 
(CDBG) program. The familiarity and availability of these data to local 
jurisdictions reduces the burden on stakeholders seeking revitalization 
area designation under this criterion.
    HUD proposes to keep the existing definition of ``very-low income 
area'' as established in the National Housing Act which states ``for an 
area to be very-low income, the median household income must be less 
than 60 percent of the median household income for its metropolitan 
area, or in the case of any area not located within a metropolitan 
area, the State in which the area is located.'' For a proposed 
Revitalization Area to be eligible based on the ``very-low income 
area'' criteria, each individual block group in the proposed area must 
meet the very-low income definition described above.
    HUD proposes to use the median household income data published in 
the American Community Survey (ACS) 5-year estimates \2\ beginning with 
the ACS 2011-2015 estimates to evaluate proposed Revitalization Areas. 
HUD proposes that the income data used in its evaluation be updated 
every 5 years. So, for example, the Department would use the ACS 2011-
2015 estimate until the ACS 2016-2020 estimate becomes available. This 
frequency of data updates is consistent with the update frequency for 
the Low to Moderate Income and Consolidated Plan data sets that are 
used in the CDBG program. HUD has adopted a 5-year data update policy 
(as opposed to annual updates) for its use of ACS data in response to 
annual fluctuations in the estimates that often cause certain block 
groups to bounce back and forth between eligible and non-eligible 
status. Annual fluctuations in the estimate often occur within the 
estimate's margin of error, which at the block group level can be quite 
wide, making it difficult to ascertain whether an increase or decrease 
in the estimated value is indicative of a meaningful change. By 
updating the ACS data every 5-years, both HUD and local jurisdictions 
have a more stable baseline from which to propose and evaluate 
Revitalization Areas. An update to the ACS data every year would place 
an undue burden on both HUD and local jurisdictions to re-evaluate 
existing Revitalization Area designations on an annual basis.
---------------------------------------------------------------------------

    \2\ HUD proposes to source median household income data from ACS 
Table B19013--Median Household Income in the Past 12 Months (in 2017 
inflation-adjusted dollars).
---------------------------------------------------------------------------

    This familiarity and data availability reduce the burden on 
stakeholders seeking revitalization area designation under this 
criterion.

Criterion #2--High Concentration of Eligible Assets

    HUD proposes to define ``High concentration of eligible assets'' to 
mean an area, defined by one or more block groups, in which: (i) There 
are at least 100 FHA-insured Single Family home loans within the set of 
Census block group boundaries to be designated; and (ii) at least 10 
percent of the FHA-insured Single Family loans have been foreclosed 
upon within the past 12 months.

Criterion #3--Low Homeownership Rate

    HUD proposes the continued use of Census block groups to identify 
areas with a low home ownership rate to remain consistent with the use 
of block groups to identify very-low income areas as described in 
Criterion #1 above. HUD proposes to define ``homeownership rate''--for 
purposes of establishing whether an area has a ``Low homeownership 
rate''--as ``the proportion of owner-occupied Single Family housing 
units \3\ compared to all occupied Single Family housing units,'' 
computed by dividing the number of owner-occupied housing units in a 
given geographic area by the total number of occupied ``housing units'' 
in the same geographic area, and then multiplying by 100 to create a 
percentage.
---------------------------------------------------------------------------

    \3\ HUD defines a single-family housing unit as a structure with 
four or fewer units. HUD proposes to source data to calculate 
single-family homeownership rates from ACS Table B25032--Tenure by 
Units in Structure.
---------------------------------------------------------------------------

    HUD also proposes to define a ``substantially low'' homeownership 
rate as one that is less than 60 percent of the rate found in the 
metropolitan

[[Page 18309]]

area, or in the case of any block group not located within a 
metropolitan area, the rate found in the State in which the block group 
is located. For a proposed Revitalization Area to be eligible based on 
the low homeownership criterion, each individual block group in the 
proposed area must meet the definition for substantially low 
homeownership rate as described above.
    The proposed method for calculating the low homeownership rate is 
the standard method defined in all known literature concerning 
homeownership rates. The method for defining ``substantially low 
homeownership rate'' as 60 percent of the homeownership rate for the 
metropolitan areas ensures that revitalization areas will have lower 
homeownership rates relative to the market area, even where the overall 
market homeownership rates are low.
    For example, if the homeownership rate for the State is 65 percent, 
then a nonmetropolitan block group being evaluated must have a 
homeownership rate at or below 39 percent to qualify as a 
revitalization area based on a low homeownership rate; i.e., if the 
nonmetropolitan block group has 50 households/homes, for the 
nonmetropolitan block group to qualify as a revitalization area, then 
19 or fewer households/homes would have to be owner-occupied.
    Finally, HUD proposes that revitalization areas must have an 
average HUD REO sales price of $200,000 or less, as determined by 
calculating the average sales price of HUD REO properties within the 
identified area that reached closed/settlement sale status in the 
previous 12 months. This provision would ensure that revitalization 
areas are restricted to places most in need, that is, where the average 
HUD REO sales price is well below the national median existing home 
sales price of $269,600 in July of 2018, as reported by the National 
Association of Realtors.

III. Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made 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 FONSI will be available 
for public inspection on www.regulations.gov.

    Dated: April 17, 2019.
John Garvin,
General Deputy Assistant Secretary for Housing.
[FR Doc. 2019-08746 Filed 4-29-19; 8:45 am]
 BILLING CODE 4210-67-P