[Federal Register Volume 85, Number 39 (Thursday, February 27, 2020)]
[Notices]
[Pages 11381-11384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04004]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6115-N-02]


Economic Growth, Regulatory Relief, and Consumer Protection Act: 
Initial Guidance on Property Inspections and Environmental Reviews

AGENCY: Office of the Assistant Secretary for Public and Indian Housing 
(PIH), Department of Housing and Urban Development (HUD).

ACTION: Notice.

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SUMMARY: Section 209 of the Economic Growth, Regulatory Relief, and 
Consumer Protection Act (the ``Economic Growth Act'') added section 38 
to the United States Housing Act of 1937 and makes several amendments 
pertaining to small public housing agencies (PHAs). This notice 
explains how HUD designates small PHAs and implements section 209 
provisions that reduce regulatory burden on small PHAs by reducing the 
number of inspections required for units with section 8(o) voucher 
assistance, and providing an exemption from environmental review 
requirements for development and modernization projects that have a 
total cost of not more than $100,000. This notice also identifies the 
small PHAs that are eligible for this section 209 regulatory relief.

DATES: February 27, 2020.

FOR FURTHER INFORMATION CONTACT: If you have any questions, please 
contact the following people in HUD's Office of Public and Indian 
Housing (none of the phone numbers are toll-free): Harold Katsura, 
(202) 402-3042, for general questions; and Justin Gray, (202) 402-3721, 
for questions regarding the environmental review exemption. The address 
for both individuals is: Department of Housing and Urban Development, 
451 7th Street SW, Washington, DC 20410. Persons with hearing or speech 
impairments may access these numbers through TTY by calling the Federal 
Relay at 800-877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    On May 24, 2018, President Trump signed into law the Economic 
Growth Act (Pub. L. 115-174, 132 Stat. 1296).\1\ The purpose of the 
Economic Growth Act is to promote economic growth, provide tailored 
regulatory relief, and enhance consumer protections. Section 209 of the 
Economic Growth Act added section 38 to the United States Housing Act 
of 1937 (42 U.S.C. 1437 et seq.) and made several amendments pertaining 
to small PHAs, which for the purposes of section 38, are PHAs that 
administer 550 or fewer combined public housing units and vouchers 
under section 8(o), and predominantly operate in a rural area as 
described in 12 CFR 1026.35(b)(2)(iv)(A). These provisions streamline 
certain requirements related to program inspections and evaluations, 
corrective action requirements, environmental reviews, and energy 
conservation funding and financing requirements. Certain statutory 
amendments made by section 209 became effective 60 days after enactment 
(July 23, 2018). However, while effective, some of the provisions 
require rulemaking or guidance for implementation.
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    \1\ The text of the Economic Growth Act, along with a summary 
prepared by the Congressional Research Service, can be found at 
https://www.congress.gov/bill/115th-congress/senate-bill/2155.
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    HUD published a notice in the Federal Register on February 14, 
2019, entitled ``Section 209 of the Economic Growth, Regulatory Relief, 
and Consumer Protection Act: Initial Guidance'' which, read together 
with the statutory language, was intended to aid HUD program 
participants and the public in understanding the reasons for deferred 
action with respect to specific statutory provisions. See 84 FR 4097. 
HUD also used the notice as an opportunity to seek public comment on 
the implementation of the section 209 provisions, including the 
definition of a small PHA.

II. Public Comments Regarding the Small PHA Definition

    Clarification of ``predominantly operates in a rural area.'' 
Commenters responded to several options. A PHA could be deemed to 
predominantly operate in a rural area if one or more of the following 
conditions apply: (1) The physical address of the PHA's main 
administrative office is in a rural area (a PHA-based definition); (2) 
more than 50 percent of the buildings occupied by voucher beneficiaries 
and public housing residents are in rural areas (a building-based 
definition); or (3) more than 50 percent of the tenants served live in 
rural areas (a household-based definition). One commenter recommended 
that the term be interpreted to mean an agency where at least 50 
percent of households assisted through public housing and voucher 
programs live in rural areas. The commenter preferred this household-
based definition because a PHA-based definition would conflict with the 
meaning of ``predominantly operates'' and a building-based definition 
would give the same weight to a building regardless of whether it 
contained one or many voucher holders.
    Two commenters stated that HUD should interpret this statement as 
broadly as possible and utilize all three definitions, so that as many 
PHAs as possible can take advantage of administrative streamlining. One 
of these commenters continued by stating that if HUD could not 
implement this definition, it should adopt a definition using the 
location of an agency's address, which would be easy to implement and 
would not change frequently.
    Response. HUD's interpretation of the statutory language is 
consistent with the commenters' desire for an expansive definition that 
considers both the physical location of the agency's administrative 
office (a PHA-based definition) and the location of the tenants it 
serves (a household-based definition).
    Unit Counts. One commenter recommended that HUD should exclude 
special purpose vouchers in the unit count, as well as units converted 
to Project-Based Rental Assistance (PBRA) through the Rental Assistance 
Demonstration (RAD) program.
    Response. HUD agrees that units that have converted to section 8 
PBRA through the RAD program should not be included because this 
assistance is not covered by section 8(o) of the United States Housing 
Act of 1937. However, HUD is including special purpose vouchers in the 
unit count as they are funded under the tenant-based rental

[[Page 11382]]

assistance account and are generally governed by section 8(o) 
requirements.
    Periodic reassessment of a PHA's small PHA status. One commenter 
noted that reassessments need to be balanced, stating that if they are 
too frequent, they would be disruptive, while failing to make 
reassessments frequently enough could lead to widely inaccurate 
designations. The commenter suggested conducting reassessments every 
five years.
    Another commenter suggested that HUD reassess the rural nature of 
each PHA regularly and reasonably based on how often the national data 
is updated, and that PHAs should be allowed to reassess the status of 
their own agencies based on updated data from the Office of Management 
and Budget, the U.S. Census Bureau, the U.S. Department of 
Agriculture's Economic Research Service, as well as updated unit data 
at the individual agency level.
    Two commenters further suggested that PHAs which gain ``small 
agency'' status should be able to retain that definition indefinitely, 
so that the number of small agencies would only increase at each 
reassessment, never decrease. One of these commenters stated that 
alternatively the designations should be reassessed every ten years. 
This commenter also proposed sample regulatory language that would base 
the small PHA designation on all three criteria that were offered as 
examples in the notice and make the designations permanent.
    Response. HUD appreciates the public's input on this topic. The 
method for reassessing a PHA's small PHA status will be determined 
through rulemaking. The small PHA designations announced in this notice 
will remain in effect until a reassessment procedure is implemented.
    General comment. One commenter stated that HUD should consider 
consistency among similarly sized nearby agencies rather than strict 
adherence to meeting the rural requirement when determining small PHA 
eligibility. Doing so would ensure that similarly sized nearby agencies 
would receive consistent treatment and significantly expand the 
streamlining provisions to many more agencies.
    Response. HUD understands that the size of a PHA's operations can 
be more significant than the rural nature of the PHA's operations as 
this relates to the need for burden relief. Congress, however, decided 
to not extend relief based on program size alone and, instead, produced 
statutory language requiring a focus on rural areas.

III. Definition of Small Public Housing Agencies

    Section 38 defines the term ``small public housing agency'' as a 
public housing agency ``for which the sum of the number of public 
housing dwelling units administered by the agency and the number of 
vouchers under section 8(o) administered by the agency is 550 or 
fewer'' and ``that predominantly operates in a rural area, as described 
in section 1026.35(b)(2)(iv)(A) of title 12, Code of Federal 
Regulations.'' After consideration of the public comments discussed 
above, HUD is interpreting ``predominantly operates in a rural area'' 
to mean a small PHA that:
    (1) Has a primary administrative building with a physical address 
in a rural area as described in 12 CFR 1026.35(b)(2)(iv)(A); or
    (2) more than 50 percent of its combined public housing units and 
voucher units under section 8(o) are in rural areas as described in 12 
CFR 1026.35(b)(2)(iv)(A). HUD also clarifies that voucher units under 
section 8(o) include those in the tenant-based Housing Choice Voucher 
(HCV) program and the Project-Based Voucher (PBV) program.
    To avoid confusion with other small PHA definitions that HUD uses, 
small PHAs for purposes of section 38 will be referred to as ``small 
rural PHAs'' in the remainder of this notice. HUD will post a list of 
PHAs meeting the small rural PHA definition at: https://www.hud.gov/program_offices/public_indian_housing/pha/lists. The list is based on 
data that was available to HUD on January 14, 2020.
    Small rural PHAs may receive the inspection and environmental 
review administrative relief provided by section 38.\2\ As noted in its 
February 14, 2019 Federal Register notice, HUD will be undertaking 
rulemaking for the full implementation of section 38. Included in that 
rulemaking will be the definition of small rural PHA.
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    \2\ The burden-reducing provisions covering the frequency of 
inspections for units with voucher housing assistance as described 
in section 38(c)(2), and the exemption from environmental review 
requirements as described in section 38(d)(1), are self-implementing 
in nature. The statutory language covering inspection frequency 
(i.e., at least once every 3 years for voucher units) does not 
provide HUD with discretion. Congress explicitly stated the need for 
rulemaking for section 38(d)(2) which establishes streamlined 
procedures for environmental reviews of development and 
modernization projects having a total cost of more than $100,000. In 
contrast, Congress did not state there was a need for rulemaking for 
section 38(d)(1), which provides an exemption from environmental 
review requirements for development or modernization projects having 
a total cost of not more than $100,000. HUD believes this difference 
in statutory language makes section 38(d)(1) self-implementing.
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IV. Small Rural PHA Designation Methodology

    The process for identifying small rural PHAs consists of two main 
steps: (1) Identifying the number of PHAs that meet the size criteria 
based on the number of public housing units and the number of vouchers 
they administer; and (2) applying the rural definition to this 
population. Small rural PHAs are PHAs that administer 550 or fewer 
combined public housing units and vouchers under section 8(o), and 
predominantly operate in a rural area. A small rural PHA may be a 
public housing-only PHA or a voucher-only PHA so long as it does not 
administer more than a total of 550 units.
    HUD determined the size of a small rural PHA using the same 
methodology that it uses to identify unit counts for a ``qualified 
public housing agency'' under the Housing and Economic Recovery Act of 
2008 (HERA).\3\ Like a small rural PHA, a qualified PHA under HERA is a 
PHA that administers 550 or fewer combined public housing units and 
vouchers under section 8(o). The public housing and voucher unit counts 
come from HUD's Inventory Management System/PIH Information Center 
(IMS/PIC).
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    \3\ For the purposes of section 5A(b)(3) of the United States 
Housing Act of 1937, section 2702 of the Housing and Economic 
Recovery Act of 2008 (Pub. L. 110-289) defined a ``qualified public 
housing agency'' as a public housing agency that meets the following 
requirements: (1) The sum of the number of public housing dwelling 
units administered by the agency and the number of vouchers under 
section 8(o) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(o)) administered by the agency, is 550 or fewer; and (2) the 
agency is not designated under section 6(j)(2) as a troubled PHA, 
and does not have a failing score under the section 8 Management 
Assessment Program (SEMAP) during the prior 12 months. The small PHA 
definition for section 38 does not use the second part of the 
qualified PHA definition pertaining to troubled status or having a 
failing SEMAP score.
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    The Economic Growth Act directs HUD to use an existing definition 
for a rural area. This definition is contained in the regulations 
governing the Consumer Financial Protection Bureau (CFPB) at 12 CFR 
1026.35(b)(2)(iv)(A). An area is considered rural during a calendar 
year if it is:
    (1) A county that is neither in a metropolitan statistical area nor 
in a micropolitan statistical area that is adjacent to a metropolitan 
statistical area, as those terms are defined by the U.S. Office of 
Management and Budget and as they are applied under currently 
applicable Urban Influence Codes (UICs), established by the United 
States

[[Page 11383]]

Department of Agriculture's Economic Research Service (USDA-ERS); or
    (2) a census block that is not in an urban area, as defined by the 
U.S. Census Bureau using the latest decennial census of the United 
States.\4\
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    \4\ The CFPB regulations contain a third rural criteria that is 
no longer in effect: ``(3) A county or a census block that has been 
designated as rural by the Bureau pursuant to the application 
process established under section 89002 of the Helping Expand 
Lending Practices in Rural Communities Act, Public Law 114-94, title 
LXXXIX (2015). The provisions of this paragraph (b)(2)(iv)(A)(3) 
shall cease to have any force or effect on December 4, 2017.''
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    CFPB provides an updated list of rural counties on its website each 
year. HUD used this list along with census block data to identify which 
areas are rural.
    To determine which PHAs predominantly operate in rural areas, HUD 
matched geo-coded office locations, geo-coded public housing unit 
locations, and geo-coded addresses of voucher units with the rural 
county and census block data. Based on the definition provided in this 
notice, a PHA predominantly serves rural areas if:
    (1) The physical address of the PHA's primary administrative 
building is in a rural county or census block; or
    (2) the PHA's physical address is in a non-rural county or census 
block, but more than 50 percent of its public housing units and voucher 
units are in rural counties or census blocks.
    The over 50 percent threshold applies to the combined total of 
public housing units and voucher units. The list of PHAs meeting the 
small rural PHA definition is available at: https://www.hud.gov/program_offices/public_indian_housing/pha/lists. HUD is making the 
designations based on the most recent data available on January 14, 
2020.

V. Appeals

    A PHA may appeal its designation or non-designation as a small 
rural PHA. Only appeals for technical reasons are allowed. A technical 
reason involves computation mistakes, missing data, or incorrect data. 
HUD may not consider data that was missing or incorrect due to a PHA's 
lack of compliance with data submission policies, nor will HUD consider 
PHA-submitted data that is different from what HUD used to make the 
designations because the data refers to a different time period. 
Appeals should be submitted to: U.S. Department of Housing and Urban 
Development/PIH/REAC, Attn: Technical Assistance Center, 550 12th 
Street SW, Suite 100, Washington, DC 20410.

VI. Inspection Frequency for Section 8(o) Voucher Units

    As of the effective date of this notice, small rural PHAs 
administering voucher rental assistance under section 8(o) must make 
periodic physical inspections of dwelling units at least once every 
three years.\5\ This flexibility is applicable only to periodic unit 
inspections conducted during the period a participant lives in a unit. 
A PHA is still required to conduct initial and interim inspections in 
accordance with 24 CFR 982.405.\6\ For project-based vouchers, 24 CFR 
983.103 provisions, as modified by the Housing Opportunity Through 
Modernization Act of 2016, continue to apply except that the random 
sample inspection requirement at 24 CFR 983.103(d) applies every three 
years instead of every two years.
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    \5\ This supersedes previous guidance provided in PIH Notice 
2016-5 that allowed biennial inspections. The Section 8 Management 
Assessment Program (SEMAP) module will now accept inspection dates 
up to three years since the last inspection.
    \6\ Interim inspections include those required when a 
participant family or government official reports a condition that 
is life-threatening (where the PHA must inspect the unit within 24 
hours of notification) or not life-threatening (where the PHA must 
inspect the unit within 15 days of notification).
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    Small rural PHAs cannot begin using a three-year inspection 
interval until after the next currently scheduled inspection is carried 
out. For example, if a unit is currently subject to a two-year 
inspection regime, and one year has passed since its last inspection, 
its next inspection will still take place next year. After that 
inspection is completed, the next periodic inspection of the unit may 
occur up to three years in the future.
    HUD or PHAs must continue to conduct lead safety inspections when 
applicable in accordance with the Lead-Based Paint Poisoning Prevention 
Act (42 U.S.C. 4822). These provisions emphasize following existing 
requirements and therefore do not require further action for 
implementation.\7\
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    \7\ Safety inspection requirements under the Lead-Based Paint 
Poisoning Prevention Act can be found at: https://www.gpo.gov/fdsys/pkg/USCODE-2009-title42/html/USCODE-2009-title42-chap63-subchapIII-sec4822.htm.
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VII. Reduction of Administrative Burdens--Environmental Review 
Exemption

    The Economic Growth Act creates a new section 38(d)(1) which 
exempts small rural PHAs from any environmental review requirements 
with respect to development or modernization projects costing no more 
than $100,000. As required in section 38(d)(2), HUD will undertake 
rulemaking to establish streamlined procedures for environmental 
reviews for projects costing more than $100,000. This notice implements 
only the section 38(d)(1) statutory exemption from environmental 
review. This statutory exemption from environmental review applies to 
any section 9(d) Capital Fund, section 9(e) Operating Fund or section 
8(o)(13) Project Based Voucher (PBV) eligible work activity by a small 
rural PHA at a project site with a project cost of $100,000 or less.
    Environmental reviews are processed for compliance with the 
National Environmental Policy Act (NEPA) and related laws and 
authorities. The level of review varies depending on the scope of work 
and the conditions of the property. Environmental review requirements 
for PHAs are explained in PIH Notice 2016-22. Many routine activities 
carried out by small rural PHAs are already determined not subject to 
environmental review and did not require environmental review prior to 
this statutory exemption. The tenant-based HCV program and many routine 
administrative and operational activities are already categorically 
excluded not subject to further environmental review.
    When PHA activities require environmental review, the reviews are 
under either 24 CFR part 58 (``Part 58 Reviews'') or under 24 CFR part 
50 (``Part 50 Reviews''). Part 58 applies when a Responsible Entity 
(RE) conducts the environmental review, and Part 50 applies when HUD 
conducts the environmental review. A unit of general local government 
or state that performs environmental reviews is referred to as the RE 
and holds jurisdictional authority for the community in which the PHA 
project site is located. The role of REs and agreements between PHAs 
and REs are explained in PIH Notice 2013-07. PHA activities are 
generally reviewed under Part 58 by an RE. For the section 38(d)(1) 
exempt activities, eligible PHAs may carry out activities without a 
request for an environmental review or determination from an RE or HUD.
    An environmental review is conducted at a project site level. A 
project site consists of buildings or other improvements and parcels of 
land that logically group together as a single and cohesive setting. 
Since environmental conditions vary from one geographic area to the 
next, each separate public housing project site is subject to a 
separate environmental review. An asset management project (AMP) 
development can include a single environmental review project site or 
multiple environmental review project

[[Page 11384]]

sites if the AMP properties do not all logically group together based 
on proximity. Project aggregation and grouping of scattered sites are 
explained in PIH Notice 2016-22 as well as 24 CFR 58.32 and 24 CFR 
50.21. The project cost threshold of $100,000 or less for the exemption 
is measured at the environmental project site level and includes the 
total cost of the project.
    An activity is an action the PHA puts forth as part of an assisted 
or to be assisted project. The most common activities involve section 
9(d) Capital Fund and section 9(e) Operating Fund formula assistance. A 
small portion of the PHAs identified as eligible in this notice operate 
only a Section 8(o) voucher program, and a more limited segment of the 
eligible small and rural PHAs administer a PBV program. For a PHA that 
only operates a tenant-based HCV program, these activities are already 
categorically excluded and not subject to further environmental review, 
and section 38(d) offers no additional regulatory or administrative 
burden relief. PBV activities are the only section 8(o) activities that 
require an environmental review. The environmental review of PBV 
activities is a one-time review required before the PBV housing is 
approved to be placed under a Housing Assistance Payments Contract 
(HAP). After the one-time review for placement of PBV, there is no 
requirement for continued environmental reviews for ongoing activities 
at PBV properties. The section 38(d)(1) exempt PBV activities are 
infrequent and limited to PBV housing placement with a project cost of 
$100,000 or less prior to being placed under a HAP contract.
    Small rural PHAs eligible for the statutory exemption that also 
have less than 250 public housing units have full flexibility of use of 
Capital Funds and Operating Funds as explained in PIH Notice 2016-18. 
The environmental statutory exemption is not based on the funding 
source and applies to all eligible Capital Fund, Operating Fund and PBV 
activities with a total project cost of $100,000 or less.
    The statutory exemption from environmental review applies to any 
section 9(d) Capital Fund, section 9(e) Operating Fund or section 
8(o)(13) PBV eligible work activity by a small rural PHA at a project 
site with a project cost of $100,000 or less. The environmental 
statutory exemption provided by section 38(d)(1) exempts this work 
activity from NEPA and related laws and authorities. The flood 
insurance requirements of the Flood Disaster Protection Act of 1973, as 
amended (42 U.S.C. 4001), and the funding prohibitions of the Coastal 
Barrier Resources Act, as amended (16 U.S.C. 3501), remain applicable. 
The exemption is available as of the effective date of this notice.

    Dated: February 13, 2020.
R. Hunter Kurtz,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2020-04004 Filed 2-26-20; 8:45 am]
BILLING CODE 4210-67-P