[Federal Register Volume 85, Number 183 (Monday, September 21, 2020)]
[Proposed Rules]
[Pages 59234-59254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18896]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 887 and 984

[Docket No. FR-6114-P-01]
RIN 2577-AD09


Streamlining and Implementation of Economic Growth, Regulatory 
Relief, and Consumer Protection Act Changes to Family Self-Sufficiency 
(FSS) Program

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

ACTION: Proposed rule.

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

SUMMARY: The Economic Growth, Regulatory Relief, and Consumer 
Protection Act (``the Economic Growth Act'') was signed into law on May 
24, 2018, amending HUD's Family Self-Sufficiency (FSS) program. Section 
306 of the Act made multiple amendments to the FSS program, including 
changes to the size calculation for the FSS program, expanding the 
definition of eligible family to include tenants of certain privately 
owned multifamily projects subsidized with Project-Based Rental 
Assistance (PBRA), updating the FSS Contract of Participation (CoP), 
reducing burdens on Public Housing Agencies (PHAs) and multifamily 
assisted housing owners, clarifying escrow account requirements, and 
updating the program coordinator and action plan requirements. This 
proposed rule also includes additional changes to reduce burden and 
streamline the program for PHAs, owners, and eligible families.

DATES: Comment due date: November 20, 2020.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule. All communications must refer to the above docket 
number and title. There are two methods for submitting public comments.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, U.S. 
Department of Housing and Urban Development, 451 7th Street SW, Room 
10276, Washington, DC 20410-0500.
    2. 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. All 
submissions must refer to the docket number and title of the rule.
    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 advance appointment to review the public comments must be 
scheduled 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 toll-free Federal Relay 
Service at 800-877-8339. Copies of all comments submitted are available 
for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For Public Housing FSS contact Anice 
S. Chenault, Office of Public and Indian Housing, U.S. Department of 
Housing and Urban Development, 451 7th Street SW, Room 4120, 
Washington, DC 20410; telephone number 502-618-6163 (this is not a 
toll-free number); and for Multifamily FSS contact Carissa L. Janis, 
Office of Multifamily Housing Programs, U.S. Department of Housing and 
Urban Development, 451 7th Street SW, Room 6152, Washington, DC 20410; 
telephone number 202-402-2487 (this is not a toll-free number). The 
public is encouraged to email questions to [email protected]. Persons with 
hearing or speech impairments may access this number through TTY by 
calling the toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    In 1990, section 554 of the Cranston Gonzalez National Affordable 
Housing Act (Pub. L. 101-625, approved November 28, 1990) amended the 
United States Housing Act of 1937 by adding a new Section 23 (42 U.S.C. 
1437u) to create the FSS program. The FSS program requires that PHAs) 
and Indian Housing Authorities (IHAs) \1\ use Public and Indian Housing 
assistance and Section 8 Housing assistance rental voucher programs, 
together with public and private resources, to provide supportive 
services, case management, and an escrow account to participating 
families, with the intent to help families achieve economic 
independence and self-sufficiency. The goal of the program is to enable 
participating low-income families to increase their earned income and 
reduce their dependency on welfare assistance and rental subsidies. FSS 
program coordinators create plans with participating families to 
achieve goals and connect them with services that will assist the 
family in making progress toward economic security. As the family's 
earnings increase, the difference between the original rent and the 
rent that increases due to increased earned income is credited to an 
interest-bearing escrow account on behalf of the family. Families that 
meet program requirements and successfully complete the FSS program 
receive their accrued FSS escrow funds, plus interest. No formal 
restrictions exist on the use of the escrowed funds, but many families 
use the funds to help with the purchase of a home, debt reduction, 
post-secondary education, or to start a new business.
---------------------------------------------------------------------------

    \1\ The Native American Housing Assistance and Self 
Determination Act of 1996 (25 U.S.C. 4101 et seq.) (NAHASDA) removed 
the application of the FSS program to IHAs.
---------------------------------------------------------------------------

    In September 1991, HUD initially implemented the FSS program by 
notice \2\ and the following year made several additional changes to 
the FSS program to implement amendments made by the Housing and 
Community Development Act of 1992 (Pub. L. 102-550), approved October 
28, 1992 (the 1992 Act). (See section 106 of the 1992 Act.) On May 27, 
1993, HUD issued an interim final rule implementing the FSS program in 
its Indian Housing program at 24 CFR part 905, Public Housing program 
regulations at 24 CFR part 962, and Section 8 program regulations at 24 
CFR part 984. 56 FR 49588. On March 5, 1996, HUD streamlined the FSS 
program by consolidating the Public

[[Page 59235]]

Housing and the Section 8 FSS regulations and by eliminating redundant 
or otherwise unnecessary provisions into 24 CFR part 984. 61 FR 8814.
---------------------------------------------------------------------------

    \2\ ``Notice of FSS Program Guidelines'' September 30, 1991 at 
56 FR 49592.
---------------------------------------------------------------------------

    On October 26, 1996, the Native American Housing Assistance and 
Self-Determination Act of 1996 (NAHASDA) (25 U.S.C. 4101 et seq.) 
amended the United States Housing Act of 1937 by removing the language 
applying the FSS program to IHAs. HUD subsequently removed the FSS 
regulations applicable to the Indian Housing program. 63 FR 12334. 
Lastly, on March 29, 2000, HUD implemented changes to the FSS program 
made by the Quality Housing and Work Responsibility Act of 1998 (title 
V of the FY 1999 HUD Appropriations Act, Pub. L. 105-276, 112 Stat. 
2518, approved October 21, 1998), which amended the United States 
Housing Act of 1937 (42 U.S.C. 1437, et seq.) by changing the 
definition of welfare assistance, the minimum program size, action 
plan, and portability. 65 FR 16691.
    More recently, the 2015 Consolidated Appropriations Act (Pub. L. 
113-235), approved December 26, 2014, authorized a demonstration of the 
FSS program for multifamily assisted housing owners. In August 2016, 
HUD provided the requirements for multifamily assisted housing owners 
seeking to implement a voluntary FSS program by notice. See Family 
Self-Sufficiency Program in Multifamily, Housing Notice: H-2016-08, 
August 26, 2016. The notice incorporated many of the definitions and 
requirements that are found in 24 CFR part 984 and applied them to the 
voluntary FSS program for multifamily owners.
    On May 24, 2018, the Economic Growth, Regulatory Relief, and 
Consumer Protection Act (the ``Economic Growth Act'') was signed into 
law (Pub. L. 115-174), and section 306 of title III, Protection for 
Veterans, Consumers and Homeowners, amended the United States Housing 
Act of 1937 (42 U.S.C. 1437, et seq.), FSS program. The changes include 
updating the mandatory size of a PHA's required FSS program and 
available exceptions; updating definition of eligible families; 
allowing family members other than the Head of Household to sign the 
Contract of Participation (CoP) and to meet the employment obligation; 
amending the process for providing supportive services; expanding the 
time period for participating in the FSS program; amending the 
requirements pertaining to the management of the escrow account, 
including the requirements for forfeiture of the escrow funds; amending 
the Program Coordinating Committee (PCC) functions; and, establishing 
new reporting requirements. Also, the Economic Growth Act provided new 
provisions for private owners of multifamily assisted housing to set up 
their own FSS program or enter into a Cooperative Agreement with 
another private owner or PHA to offer an FSS program to the owner's 
assisted residents.

II. This Proposed Rule--Summary of Changes

    This proposed rule implements changes and streamlines the FSS 
program, removes any reference to the certificate program and updates 
definitions, as required by the Economic Growth Act. HUD makes changes 
to the existing FSS regulations at 24 CFR part 984 and adds a new 24 
CFR part 887 to address the FSS program for owners of multifamily 
assisted housing. HUD also updates references to PHAs and owners and 
clarifies the provisions that would apply to both when operating an FSS 
program. Owners would be subject to the requirements only if they are 
operating a voluntary program pursuant to cross-references in 24 CFR 
part 887. The following describes the significant changes to the 
regulation:

The Public Housing FSS Program

Sec.  984.101 Purpose, Applicability, Scope
    The purpose and applicability in Sec.  984.101 has minor technical 
changes. The scope of the regulations, paragraph (c), is amended by 
removing subsections (1), (2), (3)(i), and (3)(ii) and by adding a 
generic reference to Sec.  984.105, which provides that PHAs must 
continue an FSS program if they were required to have one as of May 24, 
2018. Therefore, the citation to specific fiscal year (FY) funding is 
removed and replaced by a general requirement that PHAs receiving 
funding under section 8(o) and section 9 are required to comply with 
Sec.  984.105. A non-participation paragraph is also added to this 
section, to clarify that a family's rental assistance shall not be 
delayed or terminated by reason of a family electing not to participate 
in an FSS program.
Sec.  984.102 Program Objectives
    HUD makes a minor amendment to this section, including a change 
clarifying that HUD will evaluate the performance of a local FSS 
program using a scoring system that measures graduation from the 
program, increased earned income, program participation, and similar 
factors, as provided by HUD through a Federal Register notice.
Sec.  984.103 Definitions
    The proposed rule streamlines and adds clarity to the definition of 
eligible families. The term ``eligible families'' is defined under the 
proposed rule as current Public Housing residents and families 
receiving tenant-based or project-based assistance under section 8(o). 
This means that participants in the Housing Choice Voucher (HCV) 
homeownership program (under section 8(y) of the U.S. Housing Act of 
1937) are not eligible to participate in the FSS program. However, 
participants in the Project Based Voucher (PBV) program (under section 
8(o)(13) of the U.S. Housing Act of 1937) are eligible to participate. 
The proposed regulations include definitions for ``owner'' and 
``multifamily assisted housing'' to clarify the newly expanded 
applicability of regulations for owners of multifamily assisted housing 
(also known as Project-Based Rental Assistance (PBRA)) under section 8 
of the 1937 Act.
    Similarly, the following terms have been added to provide clarity 
to the process of calculating an FSS family's escrow: ``baseline annual 
earned income''; ``baseline monthly rent''; ``current annual earned 
income''; and ``current monthly rent.'' In the definition of baseline 
annual earned income, the proposed rule instructs PHAs and owners to 
add back any disregard of earned income associated with self-
sufficiency initiatives that may be applicable in the determination of 
family income. This will help ensure that escrow amounts are the result 
of increases in earned income while the family is in the FSS program 
(as opposed to credit for progress made before entering the FSS 
program). Additionally, the definitions of ``baseline monthly rent'' 
and ``current monthly rent'' take into account the use of flat rents 
and ceiling rents for Public Housing families. This ensures that 
families paying a flat rent or ceiling rent that is less than their 
income-based rent will escrow only up to the amount of rent that they 
are actually paying (flat/ceiling rent). A definition for the term 
``FSS family in good standing'' has been added because this term is 
used in Sec.  984.305(c)(1) and (f)(2) of the proposed rule.
    Section 306 of the Economic Growth Act changes the requirement that 
a PHA directly deliver supportive services, to requiring that a PHA or 
owner must only coordinate the availability of supportive services but 
not directly deliver. Also, section 306 makes slight changes to the 
list of supportive services that may be coordinated through the FSS 
program. The proposed rule revises

[[Page 59236]]

the definition of supportive services to conform to these statutory 
changes.
    The following terms have been revised to conform to changes 
described later in this preamble: ``FSS family,'' ``FSS slots,'' ``head 
of the FSS family,'' and ``Individual Training and Services Plan'' 
(ITSP). In addition, the following terms have been removed because they 
refer to obsolete programs that are no longer referenced in the 
regulation: Job Opportunities and Basic Skills Training (JOBS) and Jobs 
Training and Partnership Act (JTPA) programs. The Economic Growth Act 
changed the term of the FSS contract so an FSS family will be required 
to fulfill their obligations under the CoP no later than 5 years after 
the first recertification of income after the execution date of the 
contract. HUD is revising the definition of the effective date of the 
CoP from the first day of the month following the month in which the 
parties executed the contract to the date the parties execute (sign) 
the contract.
    Question 1: HUD requests feedback on how the proposed rule defines 
the effective date of the CoP. Specifically, are there rent or other 
implications which would cause the proposed definition to be an issue?
Sec.  984.104 Basic Requirements of the FSS Program
    The proposed rule revises Sec.  984.104 to add reference to the 
regulatory citations for the program.
Sec.  984.105 Minimum Program Size
    Some PHAs are statutorily required to operate an FSS program as a 
result of accepting increased funding for vouchers and Public Housing 
between the inception of the FSS program in 1990 and the Quality 
Housing and Work Responsibility Act in 1998. Current regulation 
addresses the minimum program size separately for the Public Housing 
FSS and the Section 8 FSS programs; however, FSS funding streams have 
been combined since the Consolidated Appropriations Act, 2014, Public 
Law 113-76, 128 Stat. 5, enacted January 17, 2014. This unification of 
the FSS program is further reflected in section 306 of the Economic 
Growth Act. The proposed rule revises the provisions concerning the 
determination of the minimum program size to conform to the unified FSS 
program. Specifically, the proposed rule clarifies that when 
determining the minimum program size (i.e., the minimum number of 
families that a PHA must serve in its FSS program), the relevant figure 
is the total number of Public Housing units plus the total number of 
Section 8 units. The provisions concerning how to calculate the 
reduction in the total number of Public Housing units and Section 8 
units over time, as used to determine the minimum FSS program size, 
remain the same. Therefore, the proposed rule replaces the complex 
formula for determining a PHA's program size with the language from the 
statute indicating that a PHA's program size must equal the total 
number of families required to be served as of May 24, 2018, as a 
starting point.
    PHAs should continue to use the formula that HUD issued in its 
final rule on March 5, 1996, 61 FR 8815, consistent with the statutory 
requirement that as of October 1, 1992, the Secretary shall require 
PHAs that administer assistance under subsection (b) or (o) of 42 
U.S.C. 1437f or makes available new public housing dwelling units, to 
carry out a local FSS program.
    The proposed rule maintains reference to the reduction of the 
minimum program size in Sec.  984.105(b)(2). Specifically, the proposed 
rule revises that paragraph to allow for a reduction of the minimum 
program size by one slot for each family that graduates from the FSS 
program, from either rental assistance program (Public Housing or 
Section 8) by fulfilling its FSS CoP on or after October 21, 1998. This 
change conforms to section 306 and to HUD's implementation of FSS 
alternative requirements in the Waivers and Alternative Requirements 
for the FSS Program Federal Register Notice (79 FR 78100, December 29, 
2014).
    The proposed rule also conforms to the list of local circumstances 
that make it unfeasible for a PHA to operate an FSS program and for 
which the PHA may get HUD approval for an exception to program 
operation or an exception to operate a smaller program. HUD has taken 
this opportunity to change the duration of any HUD-approved exception 
from 3three years to five years. HUD proposes that an increase of HUD-
approved exceptions to five years is a more reasonable timeframe and 
provides for PHAs at the end of such period, to restart the exception 
approval process (if seeking to continue the exception). Additionally, 
if circumstances change within those five years, PHAs are not required 
to carry through the exception for the full five years.
    Question 2: HUD welcomes feedback regarding this change. 
Specifically, do commenters agree that five years is a more reasonable 
duration for a HUD-approved exception? Or is there another timeframe 
that would more accurately balance changes in circumstances and the 
PHA's administrative responsibilities at the end of the exception?
Sec.  984.106 Cooperative Agreements
    Section 306 of the Economic Growth Act provides that a PHA may 
enter into a Cooperative Agreement with one or more owners of 
multifamily properties to voluntarily make an FSS program available to 
the owner's assisted tenants. The PHA would manage the service 
coordination for eligible families that are covered under the 
Cooperative Agreement. This new section would provide that in addition 
to complying with the rest of part 984, the PHA administering the FSS 
program must do so in accordance with the requirements in this section. 
Those requirements are as follows: (1) FSS program waiting lists must 
be open to all eligible families residing in the multifamily properties 
covered by the Cooperative Agreement; (2) escrow amounts must be 
managed by each owner, including calculating and tracking of the escrow 
must be done in accordance with Sec.  984.305; (3) an owner's assisted 
families covered by the Cooperative Agreement may be part of the 
calculation of the FSS award under Sec. Sec.  984.107 and 984.302; (4) 
FSS funds awarded to the PHA may be used by the PHA to serve an owner's 
assisted families covered by the Cooperative Agreement; and (5) the 
Cooperative Agreement must clearly specify the terms and conditions of 
such agreement.
    Question 3: HUD specifically requests comments on whether this list 
is comprehensive or if other items should be required of PHAs and 
owners entering into a Cooperative Agreement.
Sec.  984.107 FSS Award Funds Formula
    Section 306 of the Economic Growth Act provides the Secretary the 
authority to award funds by formula and set forth new procedures and 
processes. This section incorporates the statutory language providing 
that the Secretary may establish a formula by which funds for 
administration of the FSS program are awarded and indicating any 
changes to such formula, as permitted by statute, are accomplished by 
notice in the Federal Register.
Sec.  984.201 Action Plan
    Technical revisions to the list of parties who should be consulted 
in developing an action plan and the contents of the plan are included 
in this section of the proposed rule, to conform with the slight 
changes under section 306 of the Economic Growth Act. Additionally, 
since all PHAs would have already submitted an FSS Action Plan, HUD has 
taken this opportunity to

[[Page 59237]]

remove the reference to the initial submission of an FSS Action Plan 
for PHAs with mandatory programs. The section also indicates that 
owners operating a voluntary FSS program would be required to have an 
approved FSS Action Plan but distinguishes the level of consultation 
required of PHAs versus owners. This distinction, on FSS requirements 
for owners in 24 CFR part 887, is discussed further below.
Sec.  984.202 Program Coordinating Committee (PCC)
    HUD takes this opportunity to revise the provisions concerning 
required PCC membership to streamline, simplify, and unify such 
provisions. Specifically, the proposed rule would continue to require 
representatives from the participating PHA to be members of the PCC and 
require an FSS Coordinator or Coordinators to be PCC members as well. 
Additionally, the proposed rule would require that at least one 
resident participant from each HUD-assisted program served by FSS is a 
member of the PCC. PHAs would no longer be required to formally solicit 
such participants from the resident groups identified in the 
regulation. Rather, PHAs may seek such group's assistance, if needed, 
to identify such participants.
    The provisions concerning recommended membership in Sec.  
984.202(b)(2) and alternative committees in Sec.  984.202(c) have also 
been revised to conform to changes made in section 306 of the Economic 
Growth Act. Specifically, reference to the JOBS and JTPA programs have 
been replaced with reference to programs under the Workforce Innovation 
and Opportunity Act. In addition, at least one participant of each HUD-
assisted program served by FSS must be consulted in determining whether 
to use an existing entity as the PCC.
Sec.  984.302 FSS Funds
    This rule adds that a PHA or owner may use FSS funds for costs 
associated with families who are enrolled in an FSS program under this 
part, including through a Cooperative Agreement with an owner of 
multifamily assisted housing in accordance with Sec.  984.106.
Sec.  984.303 Contract of Participation
    The Economic Growth Act revises the requirement that the Head of 
Household (for rental assistance purposes) must be the person to 
execute the Contract of Participation (CoP). Instead, it allows any 
adult member of the FSS family to execute the CoP. The proposed rule 
revises paragraph (a) to incorporate this change and clarifies that an 
adult family member, as designated by the FSS family in consultation 
with the PHA or owner, is eligible to execute the contract.
    Question 4: While HUD has carefully considered all areas of the 
regulation that are impacted by this change, and revised them 
accordingly, HUD requests comment on whether there are other places 
that such clarification should be included.
    The proposed rule revises the amount of time a family must be 
independent from welfare assistance prior to expiration of the CoP, in 
Sec.  984.303 (b)(2). Currently, one of the required goals for a family 
is that it must be independent from welfare assistance for 12 months 
before the expiration of the FSS CoP. In this proposed rule, a family 
must be independent from welfare at the time of graduation from FSS but 
not independent for a specified time period prior to graduating from 
the FSS program. This change would ensure that an FSS family's 
successful graduation, and access to escrow funds, is not jeopardized 
if they do not meet the 12-month time period, if the family has worked 
successfully towards all the other goals. It also provides some 
administrative relief to PHAs and owners who would no longer have to 
ensure that families have met the 12-month time period. HUD welcomes 
feedback regarding this change. Specifically:
    Question 5: Would commenters recommend giving PHAs the discretion 
to set a specified time period (up to a maximum)? Is 12 months a 
reasonable maximum? What are some of the benefits and challenges PHAs 
face with the current 12-month time period?
    Question 6: How would requiring families to be independent from 
welfare for a specified time period link with Temporary Assistance for 
Needy Families (TANF) requirements? How would it enhance or obstruct 
such requirements?
    Question X: Would removing the 12-month requirement decrease the 
incentive for participants to permanently stay off welfare?
    HUD adds language in paragraph (b)(2) that the FSS family goals 
must comply with the parameters of the FSS terms and conditions as 
prescribed by HUD, and the PHA or owner may not modify or add 
additional required activities that must be completed by every 
participant. Specifically, HUD requires that the CoP represent an 
individualized training and service plan, and, thus, PHAs and owners 
should not require a certain number of hours, rate of pay, or other 
mandatory requirements that apply to all participants across the board.
    Consistent with the change to paragraph (a), paragraph (b)(4) is 
changed to reflect that employment must be maintained by the head of 
the FSS family, not the Head of Household, consistent with the 
statutory change permitting participation in the FSS program by any 
adult member of the family. Also, as required by the Economic Growth 
Act, HUD is deleting Sec.  984.303(b)(5)(iii), which currently 
indicates that the PHA could terminate or withhold the family's Section 
8 assistance for non-compliance with the COP. Eliminating the ability 
of a PHA to terminate or withhold assistance is expected to incentivize 
greater participation in the FSS program. With respect to 984.303(d), 
HUD proposes to expand the definition of ``good cause'' for a contract 
extension in paragraph (d), to include the active pursuit of a goal 
that will further self-sufficiency, such as a college degree or credit 
repair program. Additionally, any extension of the contract must be 
made pursuant to a current or additional stated goal for the FSS 
family.
    Question 7: HUD requests comments on whether this definition should 
be clarified to include additional circumstances, like serious illness 
or involuntary loss of employment, which are already causes for 
extension.
    Paragraph (g) is amended to remove the provision that automatically 
completes the FSS contract when thirty percent (30%) of the family's 
adjusted monthly income equals or exceeds the Fair Market Rent (FMR). 
HUD believes that the thirty percent (30%) provision no longer aligns 
effectively with current HCV requirements and creates confusion among 
FSS coordinators and partners. Removal of this provision would allow 
FSS families to use the FSS program to its full potential.
    Question 8: HUD requests comments on the removal of this automatic 
completion provision; and, whether there are circumstances where an FSS 
contract should be automatically completed.
    The section has a new paragraph (k) that discusses the 
nullification of a CoP. Nullification would occur when the PHA or owner 
determines that services integral to an FSS family's advancement 
towards self-sufficiency are unavailable or when the head of the FSS 
family becomes permanently disabled and unable to work or dies during 
the period of the contract, unless the PHA or owner and the FSS family 
determine that it is possible to modify the contract to designate a new 
head of the FSS family. The new paragraph describes the management of 
the escrow funds in the case of nullification.

[[Page 59238]]

    Question 9: HUD requests comments about the language added 
regarding the handling of escrow funds in the case of nullification.
Sec.  984.304 Amount of Rent Paid by FSS Family and Increases in Family 
Income
    The proposed rule revises the provision concerning increases in 
family income. Prior to the Economic Growth Act, an FSS family's 
increases in earned income during their participation in FSS could not 
be considered as income or a resource for eligibility for other 
benefits, or amount of benefits payable to the family, under any HUD 
program, unless the family income equaled or exceeded 80 percent of the 
area median income. The Economic Growth Act removes this last provision 
and allows an FSS family's increases in earned income during their 
participation in FSS to be excluded as income or a resource regardless 
of whether the family income equals or exceeds 80 percent of the area 
median income. Additionally, HUD streamlines this section by removing a 
reference to the calculation of rent for the rental certificate 
participants because the certificate program is obsolete and adds the 
regulatory citations for calculation of rent for the PBV program.
Sec.  984.305 FSS Account
    Section 984.305(a)(2)(i) of the current regulation requires that, 
during the term of the FSS contract, the PHA credits the escrow amount 
to each family's FSS account periodically but not less than annually. 
The proposed rule revises and clarifies the requirement by 
differentiating between ``determining the FSS escrow amount'' and 
``crediting that FSS escrow amount'' to a family's FSS account. Under 
the proposed change, during the term of the CoP, the PHA must determine 
the monthly escrow credit amount at each reexamination of income 
occurring after the effective date of the CoP. That amount is then 
deposited (i.e., credited) every month into each family's FSS account. 
This change aligns the calculation of the FSS escrow amount with the 
timing of the family's reexamination of income and provides the ability 
to report real-time information on a family's FSS account. The 
requirement to provide an FSS escrow account report to the family, at 
least annually, has not changed; however, a family may inquire about 
their FSS escrow balance at any time.
    Question 10: Is the proposed frequency of depositing escrow amounts 
to a family's FSS account reasonable? Should HUD consider another 
frequency, and why?
    Question 11: Current regulations do not address whether escrow 
should be credited to a family's FSS account if the family does not pay 
rent on time. HUD requests comments on whether the family's FSS account 
should be credited for late payments. Please provide comments both on 
regulation and on how the regulation could be implemented, especially 
in the case of the voucher programs where rent is paid to landlords and 
not directly to the PHAs.
    The proposed rule revises the provision concerning reduction of 
amounts due by the FSS family under paragraph (a)(2)(iii) of this 
section. Under current regulation, the balance on a family's FSS escrow 
account must be reduced before prorating the interest income, by 
amounts not paid by the family for rent, or any other amounts due by 
the family under the applicable housing program. Such amounts are also 
reduced from a family's FSS escrow balance at the time of final escrow 
disbursement. The proposed rule no longer requires that the balance on 
a family's escrow account be reduced by these amounts each time 
interest income is prorated. Instead, the total balance on a family's 
FSS escrow account (including interest accrued over the life of the 
escrow account) is reduced by such amounts only at the time of final 
escrow disbursement in accordance with Sec.  984.305(c). HUD believes 
that the regulation appropriately addresses amounts due by the family 
by adjusting the family's FSS escrow balance only at the time of final 
escrow disbursement. This change also streamlines management of the FSS 
escrow account and provides administrative relief to FSS PHAs and 
owners.
    HUD is proposing to address the requirements concerning updating 
income information prior to the execution of an FSS CoP. Current FSS 
regulations do not address this requirement; however, the FSS CoP (form 
HUD-52650) requires PHAs to conduct an income recertification if more 
than 120 days have passed between the effective date of the last income 
recertification and the effective date of the CoP. HUD believes this is 
best left to PHA/owner discretion and is adding language to Sec.  
984.305(b)(1) to explicitly afford PHAs and owners discretion to decide 
whether to conduct a new income recertification if more time than the 
period specified by the PHA or owner has passed between the effective 
date of the last income recertification and the effective date of the 
CoP.
    Question 12: While HUD recognizes that owners would not have the 
same flexibility that PHAs have for this type of income 
recertification, HUD requests comments from the public as to whether 
this should be available to multifamily owners as it is for PHAs.
    Pursuant to the Economic Growth Act, Sec.  984.305(b) is revised to 
update the calculation of the escrow amount and to remove any language 
that does not conform with the Act. Specifically, the statute, and the 
proposed rule, removes any difference in the calculation of escrow 
between very low-income and low-income families. HUD has also taken the 
opportunity to further update and streamline the escrow calculation. 
The proposed rule no longer differentiates in how family rent is 
defined for the Public Housing and the HCV programs. Instead, the 
proposed rule adds a new set of definitions, as described in Sec.  
984.103 of this preamble, to provide further clarity to the process of 
calculating the escrow credit. The proposed rule changes the 
calculation of escrow to the lower of: (i) Thirty (30) percent of one-
twelfth (1/12) (i.e., two and a half (2.5) percent) of the amount by 
which the family's current annual earned income exceeds the family's 
baseline annual earned income; or (ii) the amount by which the family's 
rent has increased. This calculation ensures that the FSS escrow credit 
is limited to increases in the amount of rent paid by the family that 
is attributable to increases in earned income. In the first part of the 
calculation, one-twelfth is used to calculate the growth in monthly, 
instead of annual, earned income, and 30 percent is used because that's 
the percentage of adjusted income generally used to determine the 
family's monthly rent.
    The second part of the calculation, which looks at increases in the 
family's rent, uses the lower of: (A) The amount by which the family's 
current monthly rent exceeds the family's baseline monthly rent; (B) 
for HCV families, the difference between the baseline monthly rent and 
the current gross rent (i.e., rent to owner plus any utility allowance) 
or the payment standard, whichever is lower; or (C) for PBV families, 
the difference between the baseline monthly rent and the current gross 
rent (i.e., rent to owner plus any utility allowance). This ensures 
that families are not escrowing more than the current gross rent for 
the unit (i.e., rent to owner plus any utility allowance) or the 
payment standard (for HCV families). And, it more accurately applies 
HCV and PBV rent rules to the calculation of escrow.

[[Page 59239]]

    To put it another way: If a family has no change in earned income, 
but rent does go up for whatever reason (flat rent is recalculated, a 
non-income-based rent increase kicks in, an income disregard ends, 
increase in non-earned income, decrease in deductions, etc.), the 
paragraph (i) calculation will be lower. Or, a family has a change in 
earned income, but rent does NOT go up (due to flat rent, ceiling rent, 
income disregard, or some other non-income-based rent model) then the 
paragraph (ii) calculation will be lower.
    HUD will update the current FSS escrow calculation worksheet 
applicable to HCV and Public Housing families to conform with the 
regulatory changes and to provide further clarity. HUD has made 
available a copy of the revised worksheet with this proposed rule in 
Appendix A. To review and test the proposed Sample FSS Escrow 
Calculation Worksheet, please find on the HUD FSS web page: https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/fss. 
Please submit comments on the proposed worksheet using the same process 
as commenting on the Proposed Rule. The Housing office will be creating 
a similar calculation worksheet that reflects any differences in escrow 
calculation in the multifamily program.
    Question 13: Does the streamlined escrow calculation, as reflected 
in the regulation and the revised escrow calculation form, effectively 
simplify the calculation of escrow? Are there elements of the 
calculation that should be done differently? This includes how to 
address alternatives to income-based rents and any other specific 
situations you may encounter at your PHA. If so, why and how? For PBRA 
Owners--please comment on any sections of the escrow calculation 
worksheet that should be modified for PBRA FSS participants. Please 
submit proposed edits to the form if needed.
    Section 984.305(b)(4) is also revised to address the impact on 
escrow for HCV families who are in the process of moving to a new unit, 
in accordance with HCV program requirements, and that are not under a 
lease during that time. Specifically, Sec.  984.305(b)(4) is revised to 
clarify that escrow credits cease during the HCV family's search period 
if the family is not under a lease. Escrow credits resume once the 
family finds a unit and enters into a lease. HUD interprets the FSS 
statute as requiring the payment of rent by a family in calculating the 
amount of the family's escrow credit. Similarly, the FSS statute 
provides that an eligible entity may use funds it controls under 
section 8 for purposes of making the escrow deposit for participating 
families, if those funds are offset by the increase in the amount of 
rent paid by the family. Such an offset would not be possible if the 
family is not under a lease and, consequently, not paying rent.
    Section 984.305(f) currently provides that escrow funds are 
forfeited when the FSS contract is nullified under Sec.  984.303(e), in 
cases where supportive services integral to the FSS family are 
unavailable to the FSS family. HUD proposes to change the policy and 
allow escrow funds to be disbursed to the FSS family in the case of a 
nullified contract. HUD believes that disbursement of escrow funds is 
justified because nullification of the CoP under these circumstances is 
at no fault of the family. Paragraph (c)(3) has been added to address 
this change and paragraph (f) has been modified to remove reference to 
forfeiture of escrow for nullified contracts.
    Paragraph (f) is amended to conform with the statutory change under 
the Economic Growth Act, which provides that forfeited FSS escrow funds 
must be used for the benefit of FSS participants in good standing. The 
section provides the following list of activities for which forfeited 
escrow funds may be used: Support for FSS participants in good 
standing; training for program coordinators; and, other eligible 
activities as determined by the Secretary. A list of ineligible uses 
will be included.
    Question 14: HUD requests comment on what definition should apply 
for ``participants in good standing'' and whether HUD should add items 
to the eligible activities list for which forfeited escrow funds may be 
used?
Sec.  984.306 HCV Portability Requirements
    HUD has taken this opportunity to change several provisions 
concerning FSS families that move with continued HCV assistance from 
the jurisdiction of one PHA to the jurisdiction of another PHA under 
portability. This section of the proposed rule seeks to carefully 
balance the complexities of a portability move, the shared FSS 
responsibilities between PHAs, and giving the FSS family that ports the 
best opportunity to successfully complete the FSS program. In addition 
to the changes described in the following paragraphs, editorial changes 
have been made to this section for clarity.
    Under the current FSS regulation, a receiving PHA may, at its 
discretion, enroll into its FSS program an FSS family that ports into 
its jurisdiction. And, the initial PHA may determine that an FSS family 
that ports may continue to participate in the initial PHA's FSS 
program, if the FSS family demonstrates to the satisfaction of the 
initial PHA that the family will be able to fulfill its 
responsibilities under the FSS contract. The proposed rule revises this 
framework, by instead requiring that the receiving PHA enroll into its 
FSS program FSS families that port, unless the receiving PHA and the 
initial PHA agree to the family's continued participation in the 
initial PHA's FSS program. This change facilitates the continuity of 
services and case management to the family, it facilitates the family's 
move, and it prevents the potential loss of escrow funds. The change 
also recognizes that each PHA retains responsibility for certain FSS 
tasks after a portability move; therefore, receiving PHAs should have 
input on whether the family may continue to participate in the initial 
PHA's FSS program. Additionally, since this change is only applicable 
to families that were already enrolled in FSS prior to the portability 
move, HUD expects that this change will only impact a small number of 
families and PHAs.
    The proposed rule addresses a scenario, not previously addressed in 
the regulation, in which a relocating FSS family moves to a receiving 
PHA that does not administer an FSS program. Under the proposed rule, 
continued FSS participation under this scenario is not possible. The 
proposed rule recognizes that there may be several options (for 
example, modification of the FSS contract to graduate the family, 
termination of the FSS contract and forfeiture of escrow, or locating a 
receiving PHA that administers an FSS program) available to the family 
and requires that the initial PHA discuss those options with the family 
for them to make a fully informed decision. Continued FSS participation 
under these circumstances is not possible because the receiving PHA 
would be responsible for certain FSS tasks after the move (even if the 
family continues to participate in the initial PHA's FSS program), and 
it would be burdensome to require a receiving PHA to manage such tasks 
for a small number of FSS families, especially in light of the 
administrative complexity of a portability move, which would be further 
complicated by the shared FSS responsibilities between PHAs.
    Another situation not previously addressed in the regulation is 
also addressed in the proposed rule. That is, when a family who was not 
enrolled in FSS before the move requests enrollment in the receiving 
PHA's FSS program. The proposed rule states that if the receiving PHA, 
at their discretion,

[[Page 59240]]

absorbs the family into its HCV program, the receiving PHA may, also at 
their discretion, enroll the family into its FSS program. Receiving 
PHAs must consistently apply their existing FSS enrollment policies to 
families who have ported into their jurisdiction and request to enroll 
in the receiving PHA's FSS program. If the receiving PHA will bill the 
initial PHA for the housing assistance payments, the family cannot 
enroll in the receiving PHA's FSS program. This restriction recognizes, 
as mentioned previously, the administrative complexity of a portability 
move may be further complicated by the shared FSS responsibilities 
between PHAs, and the potential inefficiencies in the administration of 
the FSS contract.
    Question 15: HUD requests comment on these proposed changes and 
additions to the FSS portability provisions and whether there are more 
effective ways to address the balance between the administrative 
complexity for the PHA and the family's desire to participate in FSS.
Sec.  984.401 Reporting
    The reporting section is amended to reflect the statutory 
requirement that reports include the number of families enrolled and 
graduated, and the number of established escrow accounts and positive 
escrow balances.

Multifamily Housing FSS Program

    The Multifamily Housing FSS program's new subpart has eight 
sections that mirror the FSS program in 24 CFR part 984. The sections 
are listed as the following:
Sec.  887.101 Purpose, Scope, and Applicability
    This section provides for the purpose, scope, applicability, and 
provision on tenant nonparticipation. Consistent with 24 CFR part 984, 
the purpose of the FSS program for multifamily owners is the same as 
for PHAs, to promote the development of local strategies to coordinate 
the use of HUD assistance with public and private resources and to 
enable families eligible to receive HUD assistance to achieve economic 
independence and self-sufficiency. The new 24 CFR part 887 regulations 
provide the requirements that an owner must follow if the owner decides 
to implement an FSS program independently or by way of a Cooperative 
Agreement with a PHA or another owner. The new 24 CFR part 887 
regulations are not applicable to PHAs that must follow 24 CFR part 
984. Lastly, the section provides that tenant participation in an FSS 
program is voluntary, and an owner must not delay or terminate 
assistance under Section 8 for a family that elects not to participate 
in an FSS program.
Sec.  887.103 Definitions
    The definitions for multifamily assisted housing are the same as 
those for PHAs in Sec.  984.103, except that eligible families in 24 
CFR part 887 means tenants of multifamily assisted housing.
Sec.  887.105 Basic Requirements for FSS Program
    HUD implemented a voluntary FSS program for multifamily assisted 
housing through notice H 2016-08; the notice incorporated many of the 
provisions of 24 CFR part 984. For consistency among voluntary FSS 
programs, HUD proposes to make the FSS program requirements for 
multifamily assisted housing consistent with PHA requirements. These 
requirements will apply to both existing and new FSS programs. 
Specifically, an FSS program would be required to operate in conformity 
with the regulations of 24 CFR part 887 and other Section 8 
regulations, as applicable. Those 24 CFR part 984 requirements are as 
follows: (1) Coordination of supportive services as defined in Sec.  
984.103; (2) creation of an approved Action Plan, as described in Sec.  
984.201, before operating an FSS program; (3) handling FSS funds 
consistent with Sec.  984.302; (4) entering into a CoP with eligible 
families, Sec.  984.303; (5) management of escrow accounts, as 
described in Sec.  984.305; reporting information pursuant to Sec.  
984.401; and (6) operated in compliance with the nondiscrimination and 
equal opportunity requirements set forth in 24 CFR part 5. This section 
provides as follows: (1) Owners are permitted to make available and 
utilize onsite facilities, as set forth in Sec.  984.204; and (2) 
owners may employ appropriate staff, including a program coordinator to 
administer its FSS program, and may contract with an appropriate 
organization to establish and administer parts of the FSS program as 
provided by Sec.  984.305.
    The section requires consultation with a Program Coordinating 
Committee (PCC) in creating an Action Plan, but it does not require the 
creation of a PCC under Sec.  984.202. The multifamily assisted housing 
regulation does not include minimum program size requirements at Sec.  
984.105 since FSS programs are voluntary; the formula award section 
applying only to mandatory programs at Sec.  984.107; the family 
selection process at Sec.  984.203; and the portability requirements at 
Sec.  984.306. All other provisions are adopted either in part or in 
whole in its application to multifamily assisted housing.
    Question 16: HUD specifically asks for comments on whether the 
exclusion or inclusion of certain requirements for the multifamily 
assisted housing regulation is appropriate. Specifically, HUD excluded 
the family selection process at Sec.  984.203 because HUD does not 
believe those requirements would be necessary due to the size of most 
multifamily assisted housing FSS programs. Additionally, HUD excluded 
the creation of a PCC because it was not statutorily required for 
owners in the FSS statute, but HUD does believe that coordination with 
some of the members of a PCC is essential in developing an Action Plan 
and successfully implementing an FSS program.
Sec.  887.107 Cooperative Agreements
    Section 306 of the Economic Growth Act provides that owners may 
enter into Cooperative Agreements with a PHA or other owner to offer an 
FSS program to their tenants. An owner entering into a Cooperative 
Agreement with a PHA must follow the requirements provided in Sec.  
984.106. An owner entering into a Cooperative Agreement with another 
owner must do so in accordance with the requirements in this section. 
The requirements are as follows: (1) Waiting lists must be open to all 
eligible families residing in the properties covered by the Cooperative 
Agreement; (2) provide that escrow amounts are handled by each owner 
and the calculating and tracking of escrow must be done in accordance 
with Sec.  984.305; and (3) the Cooperative Agreement must clearly 
specify the terms and conditions of such agreement.
    Question 17: HUD specifically requests comments on whether this 
list is comprehensive or if other items should be required of owners 
entering into a Cooperative Agreement.
Sec.  887.109 Housing Assistance and Total Tenant Payment and Increases 
in Family Income
    This section mirrors Sec.  984.304 and provides that housing 
assistance payments for FSS families are the same as those provided to 
any other tenant living in the property. Paragraph (b) provides the 
process for determining total tenant payment. Paragraph (c) provides 
that when an FSS family's income increases during its participation in 
an FSS program, the increase may not be considered as income or a 
resource for purposes of eligibility of the FSS family for other 
benefits, or amount of benefits payable

[[Page 59241]]

to the FSS family, under any other program administered by HUD. For 
multifamily assisted housing, money that goes into escrow is offset by 
additional housing assistance payment (HAP) to the owner from HUD as a 
positive adjustment to the monthly voucher.
Sec.  887.111 FSS Award Funds Formula
    Section 306 of the Economic Growth Act provides the Secretary the 
authority to award funds by formula and set forth new procedures and 
processes. This section incorporates the statutory language providing 
that the Secretary may establish a formula by which funds for 
administration of the FSS program are awarded and indicating any 
changes to such formula, as permitted by statute, are accomplished by 
notice in the Federal Register. This section mirrors Sec.  984.107.

IV. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health, and safety effects; distributive impacts; and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, reducing costs, harmonizing rules, and promoting 
flexibility.
    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and; therefore, subject to review by the Office of Management and 
Budget (OMB), in accordance with the requirements of the order. This 
rule was determined to be a ``significant regulatory action'' as 
defined in section 3(f) of the Executive Order, but not an economically 
significant regulatory action, as provided under section 3(f)(1) of 
Executive Order 12866. Consistent with Executive Order 13563, this rule 
implements the streamlining requirements of section 306 and provides 
additional flexibility for PHAs and multifamily owners. HUD has 
prepared an initial Regulatory Impact Analysis (RIA) that addresses the 
costs and benefits of the proposed rule. HUD's RIA is part of the 
docket file for this rule.
    The docket file is available for public inspection in the 
Regulations Division, Office of General Counsel, Room 10276, 451 7th 
Street SW, Washington, DC 20410-0500. Due to security measures at the 
HUD Headquarters building, please schedule an appointment to review the 
docket file 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 toll-free 800-877-8339.

Executive Order 13771

    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017. Section 
2(a) of Executive Order 13771 requires an Agency, unless prohibited by 
law, to identify at least two existing regulations to be repealed when 
the Agency publicly proposes for notice and comment or otherwise 
promulgates a new regulation. In furtherance of this requirement, 
section 2(c) of Executive Order 13771 requires that the new incremental 
costs associated with new regulations shall, to the extent permitted by 
law, be offset by the elimination of existing costs associated with at 
least two prior regulations. For the reasons discussed in the 
Regulatory Impact Analysis, this proposed rule has been determined to 
be an Executive Order 13771 deregulatory action.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520), an agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless the 
collection displays a valid control number. The information collection 
requirements contained in this proposed rule have been submitted to the 
Office of Management and Budget (OMB) under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2577-
0178.
    The proposed rule would require changes to the existing approved 
paperwork to include multifamily, addition of a Notice of Funding 
Availability (NOFA) narrative, and the Cooperative Agreement. The 
overall reporting and recordkeeping burden are estimated as  follows:
---------------------------------------------------------------------------

    \3\ Burden hours for forms showing zero burden hours in this 
collection are reflected in the OMB approval number cited or do not 
have a reportable burden.

----------------------------------------------------------------------------------------------------------------
   Description of information        Number of     Responses per   Total annual      Hours per
           collection                responses         year          responses       response       Total hours
----------------------------------------------------------------------------------------------------------------
SF-424--Application for Federal              750               1             750            0.75             563
 Assistance.....................
SF-LLL--Disclosure of Lobbying                40               1              40            0.17               7
 Activities.....................
Form HUD 2880--Applicant,                    800               1             800               0               0
 Recipient, Disclosure, Update
 Form (OMB No. 2510-0011) \3\...
NOFA Narrative..................              20               1              20              10             200
Cooperative Agreements..........              15               1              15               2              30
Form HUD-52755--Sample Contract               20               1              20            0.17               3
 Admin. Partnership Agreement...
Form HUD-2994-A You are Our                   50               1              50               0               0
 Client (Optional Survey) (OMB
 No: 2535-0116).................
Form HUD-52651--FSS Application.             800               1             800             1.5           1,200
Action Plan.....................              73               1              10              10             730
Form HUD-52650--Contract of                1,000              10          10,000             .25           2,500
 Participation..................
Form HUD-52652--Escrow Account               600              90          54,000             .85          45,900
 Credit Worksheet...............
Form HUD-1044--Grant Agreement *             700               1             250             N/A             N/A
Annual Report (Narrative)/                   775               1             775               1             775
 Performance Report.............
Form HUD-50058--Family Report                900              50          45,000               0               0
 (OMB No. 2577-0083)............
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............  ..............           26.69          51,908
----------------------------------------------------------------------------------------------------------------
*HUD-1044, Award/Amendment is completed by HUD staff, signed by the recipient of the grant, and returned to HUD.
  This form is a certification and HUD ascribes no burden to its use.


[[Page 59242]]

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning the 
information collection requirements in the proposed rule regarding:
    (1) Whether the proposed collection of information is necessary for 
the proper performance of the functions of the agency, including 
whether the information will have practical utility;
    (2) The accuracy of the agency's estimate of the burden of the 
proposed collection of information;
    (3) Whether the proposed collection of information enhances the 
quality, utility, and clarity of the information to be collected; and
    (4) Whether the proposed information collection minimizes the 
burden of the collection of information on those who are to respond; 
including through the use of appropriate automated collection 
techniques or other forms of information technology (e.g., permitting 
electronic submission of responses).
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. The proposed 
information collection requirements in this rule have been submitted to 
OMB for review under section 3507(d) of the Paperwork Reduction Act. 
Under the provisions of 5 CFR part 1320, OMB is required to make a 
decision concerning this collection of information between 30 and 60 
days after the publication date. Therefore, a comment on the 
information collection requirements is best assured of having its full 
effect if OMB receives the comment within 30 days of the publication. 
This time frame does not affect the deadline for comments to the agency 
on the proposed rule. Comments must refer to the proposed rule by name 
and docket number (FR-6085) and must be sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Fax number: 202-395-6947

and
Colette Pollard, HUD Reports Liaison Officer, U.S. Department of 
Housing and Urban Development, 451 7th Street SW, Room 2204, 
Washington, DC 20410

    Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at http://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 them 
immediately available to the public. Comments submitted electronically 
through the http://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.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal 
agencies to assess the effects of their regulatory actions on State, 
local, and tribal governments, and on the private sector. This rule 
does not impose any Federal mandates on any State, local, or tribal 
government, or on the private sector, within the meaning of the UMRA.

Environmental Review

    A Finding of No Significant Impact 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 Finding is available for public 
inspection during regular business hours in the Regulations Division, 
Office of General Counsel, U.S. Department of Housing and Urban 
Development, 451 Seventh 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 Information Relay Service at 800-877-
8339.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
As has been discussed in this preamble, this rule proposes to make 
changes to HUD's regulations to implement the Section 306 statutory 
changes and streamline other requirements. HUD believes this rule will 
overall reduce burden, including for small PHAs and multifamily owners. 
The burden reduction anticipated is more fully discussed in the 
accompanying Regulatory Impact Assessment (RIA). For these reasons, HUD 
has determined that this rule would not have a significant economic 
impact on a substantial number of small entities. Notwithstanding HUD's 
determination that this rule will not have a significant effect on a 
substantial number of small entities, HUD specifically invites comments 
regarding any less burdensome alternatives to this rule that will meet 
HUD's objectives as described in this preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either: (1) Imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (2) preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This proposed rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on State and local governments nor preempt State law 
within the meaning of the Executive Order.

List of Subjects

24 CFR Part 887

    Grant programs-housing and community development, Public housing, 
Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 984

    Grant programs-housing and community development, Grant programs-
Indians, Indians, Public housing, Rent subsidies, Reporting and 
recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble, HUD proposes 
to amend 24 CFR chapters VIII and IX as follows:

0
1. Add part 887 to read as follows:

PART 887--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAMS--FAMILY 
SELF-SUFFICIENCY PROGRAM

Sec.
887.101 Purpose, scope, and applicability.
887.103 Definitions.
887.105 Basic requirements of FSS.
887.107 Cooperative agreements.
887.109 Housing assistance and total tenant payments and increases 
in family income.
887.111 FSS Award Funds Formula.

    Authority:  42 U.S.C. 1437u, and 3535(d).

[[Page 59243]]

Sec.  887.101  Purpose, scope, and applicability.

    (a) Purpose. (1) The purpose of the Family Self-Sufficiency (FSS) 
Program is to promote the development of local strategies to coordinate 
the use of HUD assistance with public and private resources, to enable 
families eligible to receive HUD assistance to achieve economic 
independence and self-sufficiency.
    (2) The purpose of this part is to implement the policies and 
procedures applicable to operation of an FSS program under HUD's 
Section 8 Housing assistance payments programs, as established under 
section 23 of the 1937 Act (42 U.S.C. 1437u).
    (b) Scope. Each owner may implement an FSS program independently or 
by way of a Cooperative Agreement with a Public Housing Agency (PHA) or 
another owner. Each owner that administers an FSS program must do so in 
accordance with the requirements of this part.
    (c) Applicability. This part applies to owners of multifamily 
rental housing properties assisted by Section 8 Housing assistance 
payments programs. See part 984 of this title for program regulations 
applicable to PHAs.
    (d) Nonparticipation. Tenant participation in an FSS program is 
voluntary. Assistance under Section 8 Housing assistance payments 
programs for a family that elects not to participate in an FSS program 
shall not be delayed or terminated by reason of such election.


Sec.  887.103   Definitions.

    The definitions in 24 CFR 984.103 apply to this part, except that 
eligible families means tenant families living in multifamily assisted 
housing.


Sec.  887.105   Basic requirements of FSS.

    (a) An FSS program that is voluntarily established under this part 
by an owner must comply with the following requirements:
    (1) Shall be operated in conformity with the regulations of this 
part and other Section 8 regulations, codified in 24 CFR parts 5, 402, 
880, 881, 883, and 884, respectively, and with FSS program objectives, 
as described in Sec.  984.102;
    (2) Shall coordinate supportive services as defined in Sec.  
984.103;
    (3) Shall have an Action Plan approved by HUD, as described in 
Sec.  984.201, before operating an FSS program;
    (4) Shall work with a Program Coordinating Committee (PCC), as 
described in Sec.  984.202, when available;
    (5) May make available and utilize onsite facilities, as described 
in Sec.  984.204;
    (6) Shall comply with the FSS funds provision, as described in 
Sec.  984.302;
    (7) Shall enter into Contracts of Participation with eligible 
families, as described in Sec.  984.303;
    (8) Shall establish and manage FSS accounts as described in Sec.  
984.305;
    (9) Shall report information to HUD as described in Sec.  984.401;
    (10) Shall be operated in compliance with the nondiscrimination and 
equal opportunity requirements set forth in 24 CFR part 5.
    (b) An owner may employ appropriate staff, including a program 
coordinator to administer its FSS program, and may contract with an 
appropriate organization to establish and administer parts of the FSS 
program.


Sec.  887.107   Cooperative agreements.

    (a) An owner may enter into a Cooperative Agreement with:
    (1) A local PHA that operates an FSS program, pursuant to Sec.  
984.106; or
    (2) Another owner that operates an FSS program, pursuant to this 
section.
    (b) Owners that enter into a Cooperative Agreement pursuant to this 
subpart, must:
    (1) Open any FSS waiting lists to all eligible families residing in 
the properties covered by the Cooperative Agreement.
    (2) Provide periodic escrow amounts to the program coordinator for 
FSS families covered by the Cooperative Agreement under this subpart. 
The Cooperative Agreement must provide that each owner is responsible 
for managing the escrow accounts of their participating families, 
including calculating and tracking of escrow in accordance with Sec.  
984.305, and set forth the procedures for the sharing of escrow 
information between the PHA and the owner.
    (3) The Cooperative Agreement must clearly specify the terms and 
conditions of such agreement, including the requirements of this 
subsection.


Sec.  887.109   Housing assistance and total tenant payments and 
increases in family income.

    (a) Housing assistance payment. The housing assistance payment for 
an eligible family participating in the FSS program under this part is 
determined in accordance with the regulations set forth in Sec.  
5.661(e).
    (b) Total tenant payment. The total tenant payment for an FSS 
family participating in the FSS program is determined in accordance 
with Sec.  5.628 of this title.
    (c) Increases in FSS family income. Any increase in the earned 
income of an FSS family during its participation in an FSS program may 
not be considered as income or a resource for purposes of eligibility 
of the FSS family for other benefits, or amount of benefits payable to 
the FSS family, under any other program administered by HUD.


Sec.  887.111   FSS Award Funds Formula.

    The Secretary may establish a formula by which funds for 
administration of the FSS program are awarded consistent with 42 U.S.C. 
1437u(i). Notice of, and changes to, such formula will be published in 
the Federal Register.
0
2. Revise part 984 to read as follows:

PART 984--SECTION 8 AND PUBLIC HOUSING FAMILY SELF-SUFFICIENCY 
PROGRAM

Subpart A--General
Sec.
984.101 Purpose, applicability, and scope.
984.102 Program objectives.
984.103 Definitions.
984.104 Basic requirements of the FSS Program.
984.105 Minimum program size.
984.106 Cooperative agreements.
984.107 FSS Award Funds Formula.
Subpart B--Program Development and Approval Procedures
984.201 Action Plan.
984.202 Program Coordinating Committee (PCC).
984.203 FSS family selection procedures.
984.204 On-site facilities.
Subpart C--Program Operations
984.301 Program implementation.
984.302 FSS funds.
984.303 Contract of Participation (CoP).
984.304 Amount of rent paid by FSS family and increases in family 
income.
984.305 FSS account.
984.306 HCV portability requirements.
Subpart D--Reporting
984.401 Reporting.

    Authority:  42 U.S.C. 1437f, 1437u, and 3535(d).

Subpart A--General


Sec.  984.101   Purpose, applicability, and scope.

    (a) Purpose. (1) The purpose of the Family Self-Sufficiency (FSS) 
Program is to promote the development of local strategies to coordinate 
the use of HUD assistance with public and private resources, to enable 
families eligible to receive HUD assistance to achieve economic 
independence and self-sufficiency.
    (2) The purpose of this part is to implement the policies and 
procedures applicable to operation of an FSS program, as established 
under section 23 of the 1937 Act (42 U.S.C. 1437u), under HUD's public 
housing assistance

[[Page 59244]]

and housing assistance under Section 8(o) programs.
    (b) Applicability. This part applies to PHAs administering either 
or both a public housing program under section 9 and a project-based 
and/or tenant-based assistance program under section 8(o) of the U.S. 
Housing Act of 1937. See 24 CFR part 887 for program regulations 
applicable to owners of multifamily assisted housing.
    (c) Scope. Each PHA that administers an FSS program must do so in 
accordance with the requirements of this part. See Sec.  984.105 for 
more information concerning PHAs that are required to administer an FSS 
program.
    (d) Nonparticipation. Participation in an FSS program is voluntary. 
A family's admission to the public housing or Section 8 programs cannot 
be conditioned on participation in FSS. A family's housing assistance 
cannot be terminated by reason of such election.


Sec.  984.102   Program objectives.

    The objective of the FSS program is to reduce the dependency of 
low-income families on welfare assistance and housing subsidies. Under 
the FSS program, HUD assisted families are provided opportunities for 
education, job training, counseling, and other forms of social service 
assistance, while living in assisted housing, so that they may obtain 
the education, employment, and business and social skills necessary to 
achieve self-sufficiency, as defined in Sec.  984.103. The Department 
will evaluate the performance of a local FSS program using a scoring 
system that measures criteria such as graduation from the program, 
increased earned income and program participation, as provided by HUD 
through a Federal Register notice.


Sec.  984.103   Definitions.

    (a) The terms 1937 Act, Fair Market Rent, HUD, Low income family, 
Public Housing, Public Housing Agency (PHA), Secretary, and Section 8, 
as used in this part, are defined in Part 5 of this title.
    (b) As used in this part:
    Baseline annual earned income means, for purposes of determining 
the FSS credit under Sec.  984.305(b), the FSS family's total annual 
earned income from wages and business income (if any) as of the 
effective date of the FSS contract. In calculating baseline annual 
earned income, all applicable exclusions of income must be applied, 
except for any disregard of earnings associated with self-sufficiency 
incentives that may be applicable to the determination of annual 
income.
    Baseline monthly rent means, for purposes of determining the FSS 
credit under Sec.  984.305(b):
    (i) The FSS family's total tenant payment (TTP), as of the 
effective date of the FSS contract, for families paying an income-based 
rent as of the effective date of the FSS contract; or
    (ii) The amount of the flat or ceiling rent (which includes the 
applicable utility allowance), and including any hardship discounts, as 
of the effective date of the FSS contract, for families paying a flat 
or ceiling rent as of the effective date of the FSS contract.
    Certification means a written assertion based on supporting 
evidence, provided by the FSS family or the PHA or owner, as may be 
required under this part, and which:
    (i) Shall be maintained by the PHA or owner in the case of the 
family's certification, or by HUD in the case of the PHA's or owner's 
certification;
    (ii) Shall be made available for inspection by HUD, the PHA or 
owner, and the public, as appropriate; and,
    (iii) Shall be deemed to be accurate for purposes of this part, 
unless the Secretary or the PHA or owner, as applicable, determines 
otherwise after inspecting the evidence and providing due notice and 
opportunity for comment.
    Chief Executive Officer (CEO). The CEO of a unit of general local 
government means the elected official or the legally designated 
official, who has the primary responsibility for the conduct of that 
entity's governmental affairs.
    Contract of Participation (CoP) means--a contract, in a form 
approved by HUD, entered into between an FSS family and a PHA or owner 
operating an FSS program that sets forth the terms and conditions 
governing participation in the FSS program. The CoP includes all 
Individual Training and Services Plans (ITSPs) entered into between the 
PHA or owner and all members of the family who will participate in the 
FSS program, and which plans are attached to the CoP as exhibits. For 
additional detail, see Sec.  984.303.
    Current annual earned income means, for purposes of determining the 
FSS credit under Sec.  984.305(b), the FSS family's total annual earned 
income from wages and business income (if any) as of the most recent 
reexamination of income which occurs after the effective date of the 
FSS contract. In calculating current annual earnings, all applicable 
exclusions of income will apply, including any disregard of earnings 
associated with self-sufficiency incentives or other alternative rent 
structures that may be applicable to the determination of annual 
income.
    Current monthly rent means, for purposes of determining the FSS 
credit under Sec.  984.305(b):
    (i) The FSS family's TTP as of the most recent reexamination of 
income, which occurs after the effective date of the FSS contract, for 
families paying an income-based rent as of the most recent 
reexamination of income; or
    (ii) The amount of the flat rent, (which includes the applicable 
utility allowance), or ceiling rent and including any hardship 
discounts, as of the most recent reexamination of income which occurs 
after the effective date of the FSS contract, for families paying a 
flat rent or ceiling rent as of the most recent reexamination of 
income.
    Earned income means income or earnings included in annual income 
from wages, tips, salaries, other employee compensation, and self-
employment. Earned income does not include any pension or annuity, 
transfer payments, any cash or in-kind benefits, or funds deposited in 
or accrued interest on the FSS escrow account established by a PHA or 
owner on behalf of a FSS family.
    Effective date of Contract of Participation (CoP)--the day in which 
the FSS family and the PHA or owner execute the CoP.
    Eligible families means current residents of Public Housing 
(section 9) and current Section 8(o) program participants, as defined 
in this section, including those participating in other local self-
sufficiency programs.
    Enrollment means the date that the FSS family entered into the CoP 
with the PHA or owner.
    Family Self-Sufficiency (FSS) Program means the program established 
by a PHA or owner within its jurisdiction to promote self-sufficiency 
among participating families, including the coordination of supportive 
services to these families, as authorized by section 23 of the 1937 
Act.
    FSS account means the FSS escrow account authorized by section 23 
of the 1937 Act, and as provided by Sec.  984.305.
    FSS credit means the amount credited by the PHA or owner to the FSS 
family's FSS account.
    FSS family means a family that resides in Public Housing (section 
9) or receives Section 8(o) assistance, as defined in this section, and 
that elects to participate in the FSS program, and whose designated 
adult member, as determined in accordance with Sec.  984.303(a), has 
signed the CoP.
    FSS family in good standing means, for purposes of this part, an 
FSS family that is not in current eviction proceedings and is otherwise 
in

[[Page 59245]]

compliance with any repayment agreement and the FSS CoP.
    FSS related service program means any program, publicly or 
privately sponsored, that offers the kinds of supportive services 
described in the definition of ``supportive services'' set forth in 
this Sec.  984.103.
    FSS slots refers to the total number of families (as determined in 
the Action Plan and, for mandatory programs, in section 105 of this 
part) that the PHA will serve in its FSS program.
    FY means Federal Fiscal Year (starting October 1 and ending 
September 30, and year designated by the calendar year in which it 
ends).
    Head of FSS family means the adult family member of the FSS family 
who has signed the CoP. The head of the FSS family may, but is not 
required to, be the head of the household for purposes of determining 
income eligibility and rent.
    Individual Training and Services Plan (ITSP) means:
    (i) A written plan that is prepared by the PHA or owner in 
consultation with the family member, and which sets forth:
    (A) The final and interim goals for the participating FSS family 
member;
    (B) The supportive services to be provided to the participating FSS 
family member;
    (C) The activities to be completed by that family member; and,
    (D) The agreed upon completion dates for the goals, services, and 
activities.
    (ii) Each ITSP must be signed by the PHA or owner and the 
participating FSS family member, and is attached to, and incorporated 
as part of the CoP. An ITSP must be prepared for each adult member who 
elects to participate in the FSS program, including the adult family 
member who has signed the CoP.
    Multifamily assisted housing means rental housing assisted by a 
Section 8 Housing Payments Program, pursuant to 24 CFR parts 880, 881, 
883, 884, and 886.
    Owner means the owner of multifamily assisted housing.
    Program Coordinating Committee (PCC) is the committee described in 
Sec.  984.202.
    Section 8(o) means assistance provided under section 8(o) of the 
1937 Act (42 U.S.C. 1437f). Specifically, housing assisted under the 
Housing Choice Voucher (HCV) Program, including Project-Based Vouchers 
(PBV).
    Self-sufficiency means that an FSS family is no longer receiving 
Section 8, Public Housing assistance, or any Federal, State, or local 
rent, homeownership subsidies, or welfare assistance. Achievement of 
self-sufficiency, although an FSS program objective, is not a condition 
for receipt of the FSS account funds.
    Supportive services means those appropriate services that a PHA or 
owner will coordinate on behalf of an FSS family under a CoP, which may 
include, but are not limited to:
    (i) Child care--child care (on an as-needed or ongoing basis) of a 
type that provides sufficient hours of operation and serves an 
appropriate range of ages;
    (ii) Transportation--transportation necessary to enable a 
participating FSS family member to receive available services, or to 
commute to their places of employment;
    (iii) Education--remedial education; education for completion of 
high school or attainment of a high school equivalency certificate; 
education in pursuit of a post-secondary degree or certification;
    (iv) Employment Supports--job training, preparation, and 
counseling; job development and placement; and follow-up assistance 
after job placement and completion of the CoP;
    (v) Personal welfare--substance/alcohol abuse treatment and 
counseling;
    (vi) Household management--training in household management;
    (vii) Homeownership and housing counseling--homeownership education 
and assistance and housing counseling;
    (viii) Financial Empowerment--training in financial literacy, such 
as financial coaching, training in financial management, asset 
building, and money management, including engaging in mainstream 
banking, reviewing and improving credit scores, etc.;
    (ix) Other services--any other services and resources, including 
case management, reasonable accommodations for individuals with 
disabilities, that are determined to be appropriate in assisting FSS 
families to achieve economic independence and self-sufficiency.
    Unit size or size of unit refers to the number of bedrooms in a 
dwelling unit.
    Very low-income family. See definitions in Sec.  813.102.
    Welfare assistance means (for purposes of the FSS program only) 
income assistance from Federal, (i.e., Temporary Assistance for Needy 
Families (TANF) or subsequent program) State, or local welfare programs 
and includes only cash maintenance payments designed to meet a family's 
ongoing basic needs. Welfare assistance does not include:
    (i) Nonrecurrent, short-term benefits that:
    (A) Are designed to deal with a specific crisis or episode of need;
    (B) Are not intended to meet recurrent or ongoing needs; and,
    (C) Will not extend beyond four months.
    (ii) Work subsidies (i.e., payments to employers or third parties 
to help cover the costs of employee wages, benefits, supervision, and 
training);
    (iii) Supportive services such as child care and transportation 
provided to families who are employed;
    (iv) Refundable earned income tax credits;
    (v) Contributions to, and distributions from, Individual 
Development Accounts under Temporary Assistance for Needy Families 
(TANF);
    (vi) Services such as counseling, case management, peer support, 
child care information and referral, financial empowerment, 
transitional services, job retention, job advancement, and other 
employment-related services that do not provide basic income support;
    (vii) Amounts solely directed to meeting housing expenses;
    (viii) Amounts for health care;
    (ix) Supplemental Nutrition Assistance Program and emergency rental 
and utilities assistance;
    (x) Supplemental Security Income, Social Security Disability 
Income, or Social Security; and
    (xi) Child-only or non-needy TANF grants made to or on behalf of a 
dependent child solely on the basis of the child's need and not on the 
need of the child's current non-parental caretaker.


Sec.  984.104   Basic requirements of the FSS Program.

    (a) An FSS Program established under this part shall be operated in 
conformity with the requirements of this part, including the action 
plan at Sec.  984.201; and:
    (1) As applicable to Section 8(o) program participants:
    (i) HCV regulations at 24 CFR part 982, for HCV program 
participants; and
    (ii) PBV regulations at 24 CFR part 983, for PBV program 
participants.
    (2) As applicable to Public Housing program participants, the 
applicable Public Housing regulations, including the regulations in 24 
CFR parts 5, subpart F, 960, and 966; and,
    (3) The nondiscrimination and equal opportunity requirements set 
forth in 24 CFR part 5.
    (b) [Reserved]


Sec.  984.105   Minimum program size.

    (a) FSS program size--(1) Minimum program size requirement. A PHA 
must operate an FSS program of the minimum program size determined in 
accordance with paragraph (b) of this section.

[[Page 59246]]

    (2) Exception to program operation or to operate a smaller 
mandatory program. Paragraph (c) of this section states when HUD may 
grant an exception to the program operation requirement, and paragraph 
(d) states when an exception may be granted to operate a program that 
is smaller than the minimum program size.
    (3) Option to operate larger FSS program. A PHA may choose to 
operate an FSS program of a larger size than the minimum.
    (b) How to determine FSS minimum program size--(1) In general. Each 
PHA that was required to administer an FSS program, shall continue to 
operate such program for, at a minimum, the total number of families 
the PHA was required by statute to serve as of May 24, 2018, subject 
only to the availability of sufficient amounts for housing assistance 
under appropriations acts and the provisions of paragraph (b)(2) of 
this section.
    (2) Reduction of minimum program size. The minimum program size for 
a PHA's FSS program is reduced by one slot for each family from any 
rental assistance program (Public Housing or Section 8, including 
multifamily assisted housing) for which the PHA administers FSS under 
this section and that graduates from the FSS program by fulfilling its 
FSS CoP on or after October 21, 1998. If an FSS slot is vacated by a 
family that has not completed its FSS CoP obligations, the slot must be 
filled by a replacement family which has been selected in accordance 
with the FSS family selection procedures set forth in Sec.  984.203.
    (c) Exception to program operation. (1) Upon approval by HUD, a PHA 
will not be required to carry out an FSS program if the PHA provides to 
HUD a certification, as defined in Sec.  984.103, that the operation of 
such an FSS program is not feasible because of local circumstances, 
which may include, but are not limited to, the following:
    (i) Lack of supportive services accessible to eligible families, 
including insufficient availability of resources for programs under 
title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 
et seq.);
    (ii) Lack of funding for reasonable administrative costs;
    (iii) Lack of cooperation by other units of State or local 
government; or,
    (iv) Lack of interest in participating in the FSS program on the 
part of eligible families.
    (2) An exception will not be granted if HUD determines that local 
circumstances do not preclude the PHA from effectively operating an FSS 
program that is smaller than the minimum program size.
    (d) Exception to operate a smaller mandatory program. Upon approval 
by HUD, a PHA may be permitted to operate an FSS program that is 
smaller than the minimum program size if the PHA provides to HUD a 
certification, as defined in Sec.  984.103, that the operation of an 
FSS program of the minimum program size is not feasible because of 
local circumstances, which may include, but are not limited to:
    (1) Decrease in or lack of supportive services accessible to 
eligible families, including insufficient availability of resources for 
programs under title I of the Workforce Innovation and Opportunity Act 
(29 U.S.C. 3111 et seq.);
    (2) Decrease in or lack of funding for reasonable administrative 
costs;
    (3) Decrease in or lack of cooperation by other units of State or 
local government;
    (4) Decrease in or lack of interest in participating in the FSS 
program on the part of eligible families.
    (e) Expiration of exception. A full or partial exception to the FSS 
minimum program size requirement (approved by HUD in accordance with 
paragraph (c) or (d) of this section) expires five (5) years from the 
date of HUD approval of the exception. If circumstances change and a 
HUD-approved exception is no longer needed, the PHA is not required to 
effectuate the exception for the full term of the exception. If a PHA 
seeks to continue an exception after its expiration, the PHA must 
submit a new request and certification to HUD for consideration.
    (f) Review of Certification Records. HUD reserves the right to 
examine, during its management review of the PHA, or at any time, the 
documentation and data that a PHA relied on in certifying to the 
unfeasibility of its establishing and operating an FSS program, or of 
operating one of less than minimum program size.


Sec.  984.106   Cooperative agreements.

    (a) A PHA may enter into a Cooperative Agreement with one or more 
owners to voluntarily make an FSS program available to the owner's 
multifamily assisted housing tenants.
    (b) A PHA and owner that enter into a Cooperative Agreement to make 
an FSS program available, are subject to this part and the following 
requirements:
    (1) The PHA must open its FSS waiting list to any eligible family 
residing in the multifamily assisted housing covered by the Cooperative 
Agreement.
    (2) The owner must provide, at the request of the PHA, information 
on escrow amounts for participating multifamily assisted housing 
tenants. The Cooperative Agreement must provide that the owner is 
responsible for managing the escrow account, including calculating and 
tracking of escrow in accordance with Sec.  984.305, and set forth the 
procedures that will be in place for the exchange of escrow information 
between the PHA and the owner.
    (3) The PHA may count multifamily assisted housing families served 
by a Cooperative Agreement under this subpart as part of the 
calculation of the FSS award under Sec. Sec.  984.107 and 984.302.
    (4) The PHA may use FSS funds to serve multifamily assisted housing 
tenants subject to a Cooperative Agreement under this section.
    (5) The Cooperative Agreement must clearly specify the terms and 
conditions of such agreement, including the requirements of this 
subsection.


Sec.  984.107   FSS Award Funds Formula.

    The Secretary may establish a formula by which funds for 
administration of the FSS program are awarded consistent with 42 U.S.C. 
1437u(i). Notice of, and changes to, such formula will be published in 
the Federal Register.

Subpart B--Program Development and Approval Procedures


Sec.  984.201   Action Plan.

    (a) Requirement for Action Plan. A PHA or owner must have a HUD-
approved Action Plan that complies with the requirements of this 
section before the PHA or owner operates an FSS program, whether the 
FSS program is a mandatory or voluntary program.
    (b) Development of Action Plan. The Action Plan shall be developed 
by the PHA in consultation with the chief executive officer of the 
applicable unit of general local government and the Program 
Coordinating Committee. Consultation for the Action Plan by the PHA or 
owner shall also include representatives of current and prospective FSS 
program participants, any local agencies responsible for programs under 
title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 
et seq.), other appropriate organizations (such as other local welfare 
and employment or training institutions, child care providers, 
financial empowerment providers, nonprofit service providers, and 
private businesses), and any other public and private service providers 
affected by the operation of the local program.

[[Page 59247]]

    (c) Plan submission--(1) Voluntary program. The PHA or owner must 
submit its Action Plan and obtain HUD approval of the plan before the 
PHA or owner carries out a voluntary FSS program, including a program 
that exceeds the minimum size for a mandatory program, regardless of 
whether the voluntary program receives HUD funding.
    (2) Revision. Following HUD's initial approval of the Action Plan, 
no further approval of the Action Plan is required unless the PHA or 
owner proposes to make policy changes to the Action Plan or increase 
the size of a voluntary program; or HUD requires other changes. In such 
cases, the PHA or owner must submit such changes to the Action Plan to 
HUD for approval.
    (d) Contents of Action Plan. The Action Plan shall describe the 
policies and procedures for the operation of a local FSS program, and 
shall contain, at a minimum, the following information:
    (1) Family demographics. A description of the number, size, 
characteristics, and other demographics (including racial and ethnic 
data), and the supportive service needs of the families expected to 
participate in the FSS program;
    (2) Estimate of participating families. A description of the number 
of eligible FSS families who can reasonably be expected to receive 
supportive services under the FSS program, based on available and 
anticipated Federal, tribal, State, local, and private resources;
    (3) Eligible families from other self-sufficiency programs. If 
applicable, the number of families, by program type, who are 
participating in other local self-sufficiency programs and are expected 
to agree to execute an FSS CoP.
    (4) FSS family selection procedures. A statement indicating the 
procedures to be utilized to select families for participation in the 
FSS program, subject to the requirements governing the selection of FSS 
families, set forth in Sec.  984.203. This statement must include a 
description of how the selection procedures ensure that families will 
be selected without regard to race, color, religion, sex, disability, 
familial status, or national origin.
    (5) Incentives to encourage participation. A description of the 
incentives that will be offered to eligible families to encourage their 
participation in the FSS program (incentives plan). The incentives plan 
shall provide for the establishment of the FSS account in accordance 
with the requirements set forth in Sec.  984.305, and other incentives, 
if any. The incentives plan shall be part of the Action Plan.
    (6) Outreach efforts. A description of:
    (i) The efforts, including notification and outreach efforts, to 
recruit FSS participants from among eligible families; and,
    (ii) The actions to be taken to assure that both minority and non-
minority groups are informed about the FSS program, and how this 
information will be made available.
    (7) FSS activities and supportive services. A description of the 
activities and supportive services to be coordinated on behalf of 
participating FSS families and identification of the public and private 
resources which are expected to provide the supportive services.
    (8) Method for identification of family support needs. A 
description of how the FSS program will identify the needs and 
coordinate the services and activities according to the needs of the 
FSS families;
    (9) Program termination; withholding of services; and available 
grievance procedures. A description of all policies concerning 
termination of participation in the FSS program, or withholding of 
coordination of supportive services, on the basis of a family's failure 
to comply with the requirements of the CoP; and the grievance and 
hearing procedures available for FSS families.
    (10) Assurances of non-interference with rights of non-
participating families. An assurance that a family's election not to 
participate in the FSS program will not affect the family's admission 
to public housing or to the Section 8 program or the family's right to 
occupancy in accordance with its lease.
    (11) Timetable for program implementation. A timetable for 
implementation of the FSS program, as provided in Sec.  984.301(a)(1), 
including the schedule for filling FSS slots with eligible FSS 
families, as provided in Sec.  984.301;
    (12) Certification of coordination. A certification that 
development of the services and activities under the FSS program has 
been coordinated with programs under title I of the Workforce 
Innovation and Opportunity Act (29 U.S.C. 3111 et seq.); and any other 
relevant employment, child care, transportation, training, and 
education programs, and financial empowerment in the applicable area, 
and that implementation will continue to be coordinated, in order to 
avoid duplication of services and activities; and,
    (13) Optional additional information. Such other information that 
would help HUD determine the soundness of the proposed FSS program.
    (e) Eligibility of a combined program. A PHA or owner that wishes 
to operate a joint FSS program with a PHA or owner may combine its 
resources with one or more PHAs or owners to deliver supportive 
services under a joint Action Plan that will provide for the 
coordination of a combined FSS program that meets the requirements of 
this part.
    (f) Single action plan. A PHA or owner may submit one Action Plan 
that covers all applicable rental assistance programs (Section 8 
vouchers, PBRA and public housing) served by the FSS program.


Sec.  984.202   Program Coordinating Committee (PCC).

    (a) General. Each participating PHA must establish a PCC whose 
functions will be to assist the PHA in securing commitments of public 
and private resources for the operation of the FSS program within the 
PHA's jurisdiction, including assistance in developing the Action Plan 
and in operating the program.
    (b) Membership--(1) Required membership. The PCC must include 
representatives of the PHA, including one or more FSS coordinators, and 
one or more participants from each HUD-assisted program served by the 
PHA's FSS program. The PHA may seek assistance from the following 
groups in identifying potential PCC members:
    (i) An area-wide or city-wide resident council, if one exists;
    (ii) If the PHA operates in a specific public housing development, 
the resident council or resident management corporation, if one exists, 
of the public housing development where the public housing FSS program 
is to be carried out;
    (iii) Any other resident group, which the PHA believes is 
interested in the FSS program and would contribute to the development 
and coordination of the FSS program (such as the Resident Advisory 
Board or tenant association, as applicable.).
    (2) Recommended membership. Membership on the PCC may include 
representatives of the unit of general local government served by the 
PHA, local agencies (if any) responsible for carrying out programs 
under title I of the Workforce Innovation and Opportunity Act (29 
U.S.C. 3111 et seq.), and other organizations, such as other State, 
local or tribal welfare and employment agencies, public and private 
primary, secondary, and post-secondary education or training 
institutions, child care providers, financial empowerment 
organizations, nonprofit service providers, private businesses, and any 
other public and

[[Page 59248]]

private service providers with resources to assist the FSS program.
    (c) Alternative committee. The PHA may, in consultation with the 
chief executive officer of the unit of general local government served 
by the PHA and one or more residents of each HUD-assisted program 
served by the FSS program, utilize an existing entity as the PCC if the 
membership of the existing entity consists, or will consist of, the 
individuals identified in paragraph (b)(1) of this section, and also 
includes individuals from the same or similar organizations identified 
in paragraph (b)(2) of this section.


Sec.  984.203   FSS family selection procedures.

    (a) Preference in the FSS selection process. A PHA has the option 
of giving a selection preference for up to fifty (50) percent of its 
FSS slots to eligible families, as defined in Sec.  984.103, who have 
one or more family members currently enrolled in an FSS related service 
program or on the waiting list for such a program. The PHA may limit 
the selection preference given to participants in, and applicants for, 
FSS related service programs to one or more eligible FSS related 
service programs. A PHA that chooses to exercise the selection 
preference option must include the following information in its Action 
Plan:
    (1) The percentage of FSS slots, not to exceed fifty (50) percent 
of the total number of FSS slots, for which it will give a selection 
preference;
    (2) The FSS related service programs to which it will give a 
selection preference to the programs' participants and applicants; and
    (3) The method of outreach to, and selection of, families with one 
or more members participating in the identified programs.
    (b) Selection among families with preference. The PHA may use 
either of the following to select among applicants on the FSS waiting 
list with the same preference status:
    (1) Date and time of application to the FSS program; or,
    (2) A drawing or other random choice technique.
    (c) FSS selection without preference. For those FSS slots for which 
a selection preference is not applicable, the FSS slots must be filled 
with eligible families in accordance with an objective selection 
system, such as a lottery, the length of time living in subsidized 
housing, or the date the family expressed an interest in participating 
in the FSS program. The objective system to be used by the PHA must be 
described in the PHA's Action Plan.
    (d) Motivation as a selection factor--(1) General. A PHA may screen 
families for interest, and motivation to participate in the FSS 
program, provided that the factors utilized by the PHA are those which 
solely measure the family's interest, and motivation to participate in 
the FSS program.
    (2) Permissible motivational screening factors. Permitted 
motivational factors include requiring attendance at FSS orientation 
sessions or preselection interviews and assigning certain tasks which 
indicate the family's willingness to undertake the obligations which 
may be imposed by the FSS CoP. Any tasks assigned shall be those which 
may be readily accomplishable by the family, based on the family 
members' educational level, and disabilities, if any. Reasonable 
accommodations must be made for individuals with disabilities, 
including, e.g., mobility, manual, sensory, speech, mental, 
intellectual, or developmental disabilities;
    (3) Prohibited motivational screening factors. Prohibited 
motivational screening factors include the family's educational level, 
educational or standardized motivational test results, previous job 
history or job performance, credit rating, marital status, number of 
children, or other factors, such as sensory or manual skills, and any 
factors which may result in discriminatory practices or treatment 
toward individuals with disabilities or minority or non-minority 
groups.


Sec.  984.204   On-site facilities.

    Each PHA or owner may, subject to the approval of HUD, make 
available and utilize common areas or unoccupied dwelling units in 
properties owned by the entity to provide or coordinate supportive 
services under any FSS program.

Subpart C--Program Operations


Sec.  984.301   Program implementation.

    (a) Voluntary program implementation. Unless otherwise required 
under a funding notice, there is no deadline for implementation of a 
voluntary program. A voluntary program, however, may not be implemented 
before the requirements of Sec.  984.201 have been satisfied.
    (b) Program administration. A PHA may employ appropriate staff, 
including a service coordinator or program coordinator to administer 
its FSS program, and may contract with an appropriate organization to 
establish and administer all or part of the FSS program, including the 
FSS account, as provided by Sec.  984.305.


Sec.  984.302   FSS funds.

    (a) Public housing program. Subject to appropriations by Congress, 
PHAs may use funds provided under section 9 of the 1937 Act to cover 
reasonable and eligible administrative costs incurred by PHAs in 
carrying out the FSS program.
    (b) Section 8(o) program. Subject to appropriations by Congress, 
PHAs may use the administrative fees paid to PHAs for costs associated 
with operation of an FSS program.
    (c) FSS funds. FSS funds associated with operation of an FSS 
program are established by the Congress and subject to appropriations. 
FSS funds may be used by PHAs or owners for costs associated with 
families who are enrolled in an FSS program under this part, including 
through a Cooperative Agreement in accordance with Sec.  984.106.


Sec.  984.303   Contract of Participation (CoP).

    (a) General. Each eligible family that is selected to participate 
in an FSS program must enter into a CoP with the PHA or owner that 
operates the FSS program in which the family will participate. The CoP 
shall be signed by a representative of the PHA or the owner and the 
head of the FSS family, as designated by the family in consultation 
with the PHA or the owner. This head of FSS family does not have to be 
the same as the official Head of Household for rental assistance 
purposes.
    (b) Form and content of contract--(1) General. The CoP, which 
incorporates the ITSP(s), shall set forth the principal terms and 
conditions governing participation in the FSS program. These include 
the rights and responsibilities of the FSS family and of the PHA or 
owner, the services to be provided to, and the activities to be 
completed by, each adult member of the FSS family who elects to 
participate in the program.
    (2) FSS Family goals. The ITSP incorporated in the CoP, shall 
establish specific interim and final goals by which the PHA or owner, 
and the family, may measure the FSS family's progress towards 
fulfilling its obligations under the CoP, and becoming self-sufficient. 
For any FSS family that is a recipient of welfare assistance, the PHA 
or owner must establish as an interim goal for each FSS participant 
that every member of the family become independent from welfare 
assistance before the expiration of the term of the CoP, including any 
extension thereof. Also, see the employment obligation described in 
Sec.  984.303(b)(4) below. Aside from the goals specifically required 
in this section, PHAs or owners must work

[[Page 59249]]

with each participant to establish realistic and individualized goals 
and may not include additional mandatory goals that are applicable to 
every FSS program participant.
    (3) Compliance with lease terms. The CoP shall provide that one of 
the obligations of the FSS family is to comply with the terms and 
conditions of the respective public housing or Section 8 lease. All 
considerations allowed for other assisted residents for repayment 
agreements, etc., shall not be limited for FSS participants due to 
their participation in FSS.
    (4) Employment obligation. (i) Although all members of the FSS 
family may seek and maintain suitable employment during the term of the 
contract, only one adult family member with an ITSP shall be required 
under the CoP to seek and maintain suitable employment during the term 
of the contract and any extension thereof.
    (ii) Seek employment. The obligation to seek employment means 
searching for jobs, applying for employment, attending job interviews, 
and otherwise following through on employment opportunities.
    (iii) Determination of suitable employment. A determination of 
suitable employment shall be made by the PHA or owner based on the 
skills, education, and job training of the household member, and based 
on the available job opportunities within the jurisdiction served by 
the PHA or owner.
    (5) Consequences of noncompliance with the contract. The CoP shall 
specify that if the FSS family fails to comply, without good cause, 
with the terms and conditions of the CoP, including compliance with the 
public housing lease or the Section 8 lease, the PHA or owner may:
    (i) Withhold the coordination of supportive services; or,
    (ii) Terminate the family's participation in the FSS program.
    (c) Contract term. The CoP shall provide that each FSS family will 
be required to fulfill those obligations to which the FSS family has 
committed itself under the CoP no later than 5 years after the first 
recertification of income after the execution date of the CoP.
    (d) Contract extension. The PHA or owner shall, in writing, extend 
the term of the CoP for a period not to exceed two (2) years for any 
FSS family that requests, in writing, an extension of the contract, 
provided that the PHA or owner finds that good cause exists for 
granting the extension. The family's written request for an extension 
must include a description of the need for the extension. As used in 
this paragraph (d) of this section, ``good cause'' means circumstances 
beyond the control of the FSS family, as determined by the PHA or 
owner, such as a serious illness or involuntary loss of employment, or 
active pursuit of a current or additional goal that will result in 
furtherance of self-sufficiency during the period of the extension 
(e.g., completion of a college degree during which the participant is 
unemployed or under-employed, credit repair towards being homeownership 
ready, etc.). Extension of the CoP will entitle the FSS family to 
continue to have amounts credited to the family's FSS account in 
accordance with Sec.  984.304.
    (e) Unavailability of supportive services--(1) Good-faith effort to 
replace unavailable services. If a social service agency fails to 
deliver the supportive services pledged under an FSS family member's 
ITSP, the PHA or owner shall make a good faith effort to obtain these 
services from another agency.
    (2) Assessment of necessity of services. If the PHA or owner is 
unable to obtain the services from another agency, the PHA or owner 
shall reassess the family member's needs and determine whether other 
available services would achieve the same purpose. If other available 
services would not achieve the same purpose, the PHA or owner shall 
determine whether the unavailable services are integral to the FSS 
family's advancement or progress toward self-sufficiency. If the 
unavailable services are:
    (i) Determined not to be integral to the FSS family's advancement 
toward self-sufficiency, the PHA or owner shall revise the ITSP to 
delete these services, and modify the CoP to remove any obligation on 
the part of the FSS family to accept the unavailable services, in 
accordance with paragraph (f) of this section; or,
    (ii) Determined to be integral to the FSS family's advancement 
toward self-sufficiency, the PHA or owner shall declare the CoP null 
and void and follow the requirements in paragraph (k) of this section.
    (f) Modification. The PHA or owner and the FSS family may mutually 
agree to modify the CoP with respect to the ITSP and/or the contract 
term in accordance with paragraph (d) of this section, and/or 
designation of the head of the FSS family. Modifications must be in 
writing.
    (g) Completion of the contract. The CoP is considered to be 
completed, and a family's participation in the FSS program is 
considered to be concluded when the FSS family has fulfilled all of its 
obligations under the CoP, on or before the expiration of the contract 
term, including any extension thereof.
    (h) Termination of the contract. The CoP is automatically 
terminated if the family's housing assistance is terminated in 
accordance with HUD requirements. The CoP may be terminated before the 
expiration of the contract term, and any extension thereof, by:
    (1) Mutual consent of the parties;
    (2) The failure of the FSS family to meet its obligations under the 
CoP without good cause, including, for Section 8(o) participants, 
failure to comply with the contract requirements because the family has 
moved outside the jurisdiction of the PHA or out of multifamily 
assisted housing;
    (3) The family's withdrawal from the FSS program;
    (4) Such other act as is deemed inconsistent with the purpose of 
the FSS program; or
    (5) Operation of law.
    (i) Option to terminate FSS participation and supportive service 
assistance. The PHA or owner may terminate or withhold the coordination 
of supportive services, and the FSS family's participation in the FSS 
program, if the PHA or owner determines, in accordance with the FSS 
Action Plan hearing procedures, that the FSS family has failed to 
comply without good cause with the requirements of the CoP as provided 
in paragraph (b)(5) of this section.
    (j) Transitional supportive service assistance. A PHA or owner may 
continue to offer to a former FSS family that has completed its CoP, 
appropriate coordination of those FSS supportive services needed to 
become self-sufficient (if the family still resides in public housing 
or Section 8 housing), or in remaining self-sufficient (if the family 
no longer resides in public, Section 8, or other assisted housing).
    (k) Nullification. (1) The CoP is considered null and void when:
    (i) Services that the PHA or owner has determined are integral to 
the FSS family's advancement towards self-sufficiency are unavailable, 
as described in paragraph (e) of this section.
    (ii) The head of the FSS family becomes permanently disabled and 
unable to work or dies during the period of the contract, unless the 
PHA or owner and the FSS family determine that it is possible to modify 
the contract to designate a new head of the FSS family.
    (2) Upon nullification of a CoP, escrow funds must be handled 
consistent with Sec.  984.305(b)(3) and (c)(3).

[[Page 59250]]

Sec.  984.304   Amount of rent paid by FSS family and increases in 
family income.

    (a) The amount of rent paid by an FSS family is determined in 
accordance with the requirements of the applicable housing assistance 
program as specified in paragraphs (a)(1) and (2) of this section.
    (1) Public housing program: Calculation of total tenant payment. 
Total tenant payment for an FSS family participating in the FSS program 
is determined in accordance with the regulations set forth in 24 CFR 
part 5, subpart F.
    (2) Section 8(o) programs: Calculation of total tenant payment. (i) 
For the HCV program, rent is determined in accordance with 24 CFR part 
982, subpart K; and
    (ii) For the PBV program, rent is determined in accordance with 24 
CFR part 983, subpart G.
    (b) Increases in FSS family income. Any increase in the earned 
income of an FSS family during its participation in an FSS program may 
not be considered as income or a resource for purposes of eligibility 
of the FSS family for other benefits, or amount of benefits payable to 
the FSS family, under any other program administered by HUD.


Sec.  984.305   FSS account.

    (a) Establishment of FSS account--(1) General. The PHA or owner 
shall deposit the FSS account funds of all families participating in an 
FSS program into a single interest-bearing depository account. The PHA 
or owner must deposit the FSS account funds in one or more of the HUD-
approved investments. This account may be part of the PHA's or owner's 
overall accounts, as long as it is in compliance with paragraph (a)(2) 
of this section. During the term of the CoP, the escrow credit amount 
shall be determined in accordance with paragraph (b) of this section at 
each reexamination of income, which occurs after the effective date of 
the CoP. Such escrow credit amount must be deposited each month by the 
PHA or owner to each family's FSS account.
    (2) Accounting for FSS account funds--(i) Accounting records. The 
total of the combined FSS account funds will be supported in the 
accounting records by a subsidiary ledger showing the balance 
applicable to each FSS family.
    (ii) Proration of investment income. The investment income for 
funds in the FSS account will be prorated and credited to each family's 
FSS account based on the balance in each family's FSS account at the 
end of the period for which the investment income is credited.
    (iii) Reduction of amounts due by FSS family. If the FSS family has 
not paid the family contribution towards rent, or other amounts, if 
any, due under the public housing or Section 8-assisted lease, the 
balance in the family's FSS account shall be reduced by that amount (as 
determined by the owner or reported by the owner to the PHA in the 
Section 8(o) programs) at the time of final disbursement of FSS escrow 
funds in accordance with paragraph (c) of this section. If the FSS 
family has been found to have fraudulently under-reported income after 
the escrow calculation baseline was set, the amount credited to the FSS 
account will be based on the income amounts originally reported by the 
FSS family. If the FSS family is found to have fraudulently under-
reported income in the certification used to set the baseline, the 
escrow for the entire period of the CoP will be re-calculated using the 
correct income to set the baseline and then subsequent escrow amounts.
    (3) Reporting on FSS account. Each PHA or owner will be required to 
make a report, at least once annually, to each FSS family on the status 
of the family's FSS account. At a minimum, the report will include:
    (i) The balance at the beginning of the reporting period;
    (ii) The amount of the family's rent payment that was credited to 
the FSS account, during the reporting period;
    (iii) Any deductions made from the account at the time of final 
disbursement of FSS escrow funds (see paragraphs (a)(2)(iii) and (c) of 
this section) for amounts due the PHA or owner;
    (iv) The amount of interest earned on the account during the year; 
and
    (v) The total in the account at the end of the reporting period.
    (b) FSS credit--(1) Determining the family's baseline information. 
When determining the family's baseline annual earned income and the 
baseline monthly rent amounts for purposes of computing the FSS credit, 
the PHA or owner must set a policy to either conduct a new re-
examination of income before the effective date of the FSS contract, or 
to use the amounts on the family's last income reexamination.
    (2) Computation of amount. The FSS credit amount shall be the lower 
of:
    (i) Thirty (30) percent of one-twelfth (1/12) (i.e., two and a half 
(2.5) percent) of the amount by which the family's current annual 
earned income exceeds the family's baseline annual earned income; or
    (ii) The increase in the family's monthly rent. The increase in the 
family's monthly rent shall be the lower of:
    (A) The amount by which the family's current monthly rent exceeds 
the family's baseline monthly rent;
    (B) For HCV families, the difference between the baseline monthly 
rent and the current gross rent (i.e., rent to owner plus any utility 
allowance) or the payment standard, whichever is lower; or
    (C) For PBV families, the difference between the baseline monthly 
rent and the current gross rent (i.e., rent to owner plus any utility 
allowance).
    (3) Ineligibility for FSS credit. FSS families who are not low-
income families (i.e., whose adjusted annual income exceeds eighty (80) 
percent of the area median income) shall not be entitled to any FSS 
credit.
    (4) Cessation of FSS credit. The PHA or owner shall not make 
additional credits to the FSS family's FSS account:
    (i) When the FSS family has completed the CoP, as defined in Sec.  
984.303(g);
    (ii) When the CoP is terminated or otherwise nullified; or
    (iii) During the time a HCV family is in the process of moving to a 
new unit, in accordance with HCV program requirements, and is not under 
a lease.
    (c) Disbursement of FSS account funds--(1) General. The amount in 
an FSS account, in excess of any amount owed to the PHA or owner by the 
FSS family, as provided in paragraph (a)(2)(iii) of this section, shall 
be paid to the head of the FSS family when the CoP has been completed 
as provided in Sec.  984.303(g), and if, at the time of contract 
completion, the head of the FSS family submits to the PHA or owner a 
certification, as defined in Sec.  984.103, that to the best of his or 
her knowledge and belief, no member of the FSS family is a recipient of 
welfare assistance.
    (2) Disbursement before expiration of contract term. (i) If the PHA 
or owner determines that the FSS family has fulfilled its obligations 
under the CoP before the expiration of the contract term, and the head 
of the FSS family submits a certification that, to the best of his or 
her knowledge, no member of the FSS family is a recipient of welfare 
assistance, the amount in the family's FSS account, in excess of any 
amount owed to the PHA or owner by the FSS family, as provided in 
paragraph (a)(2)(iii) of this section, shall be paid to the head of the 
FSS family.
    (ii) If the PHA or owner determines that the FSS family has 
fulfilled certain interim goals established in the CoP and needs a 
portion of the FSS account funds for purposes consistent with the CoP, 
such as completion of higher

[[Page 59251]]

education (i.e., college, graduate school), job training, or to meet 
start-up expenses involved in creation of a small business, the PHA or 
owner may, at the PHA's or owner's sole discretion, disburse a portion 
of the funds from the family's FSS account to assist the family in 
paying those expenses. Unless the interim disbursement was made based 
on fraudulent information from the family, the family is not required 
to repay such interim amounts if the family does not complete the CoP.
    (3) Disbursement under nullified contracts. If the CoP is nullified 
in accordance with Sec.  984.303(k), the PHA or owner must disburse to 
the family, in excess of any amount owed to the PHA or owner by the FSS 
family, as provided in paragraph (a)(2)(iii) of this section, the 
amount of escrow funds accumulated by the family before the effective 
date of the nullification of the contract.
    (4) Verification of family certification. Before disbursement of 
the FSS account funds to the family, the PHA or owner may verify that 
the FSS family is no longer a recipient of welfare assistance by 
requesting copies of any documents which may indicate whether the 
family is receiving any welfare assistance and contacting welfare 
agencies.
    (d) Succession of FSS account. If the head of the FSS family ceases 
to reside with other family members in the public housing or the 
Section 8-assisted unit, the remaining members of the FSS family, after 
consultation with the PHA or owner, shall have the right to designate 
another family member to receive the funds in accordance with paragraph 
(c) of this section.
    (e) Use of FSS account funds for homeownership. An FSS family may 
use its FSS account funds for the purchase of a home, including the 
purchase of a home under one of HUD's homeownership programs, or other 
Federal, State, or local homeownership programs, unless such use is 
prohibited by the statute or regulations governing the particular 
homeownership program.
    (f) Forfeiture of FSS account funds--(1) Conditions for forfeiture. 
Amounts in the FSS account shall be forfeited upon the occurrence of 
the following:
    (i) The CoP is terminated, as provided in Sec.  984.303(h); or,
    (ii) The CoP is completed by the family, as provided in Sec.  
984.303(g), but the FSS family is receiving welfare assistance at the 
time the CoP expires, including any extension thereof.
    (2) Treatment of forfeited FSS account funds. FSS account funds 
forfeited by the FSS family must be used by the PHA or owner for the 
benefit of the FSS program and its participants.
    (i) Specifically, such funds may be used on the following eligible 
activities:
    (A) Support for FSS participants in good standing, including, but 
not limited to, transportation, child care, training, testing fees, and 
employment preparation costs.
    (B) Training for Program Coordinator(s),
    (C) Other eligible activities as determined by the Secretary.
    (ii) Such funds may not be used for salary and fringe benefits of 
FSS program coordinators; for HAP expenses or public housing operating 
funds; or any other activity determined ineligible by the Secretary.


Sec.  984.306   HCV portability requirements.

    (a) Initial occupancy--(1) First 12 months. An HCV family 
participating in the FSS program must lease an HCV-assisted unit, for a 
minimum period of 12 months after the effective date of the CoP, in the 
jurisdiction of the PHA that selected the family for the FSS program. 
However, the initial PHA may approve a family's request to move outside 
of its jurisdiction under portability (in accordance with Sec.  982.353 
of this chapter) during this period.
    (2) After the first 12 months. After the first 12 months of the FSS 
CoP, the FSS family may move outside the initial PHA jurisdiction under 
portability procedures (in accordance with Sec.  982.353 of this 
chapter).
    (b) An FSS family moves to the jurisdiction of a receiving PHA that 
administers an FSS program. Whether the receiving PHA bills the initial 
PHA or absorbs the FSS family into its HCV program, the receiving PHA 
must enroll an FSS family in good standing in its FSS program, unless 
the receiving PHA and the initial PHA agree to the FSS family's 
continued participation in the initial PHA's FSS program if the initial 
PHA determines that the relocating FSS family has demonstrated that, 
notwithstanding the move, it will be able to fulfill its 
responsibilities under the initial or modified CoP at its new place of 
residence. For example, the FSS family may be able to commute to the 
supportive services specified in the CoP, or the family may move to 
obtain employment as specified in the contract.
    (c) An FSS family moves to the jurisdiction of a receiving PHA that 
does not administer an FSS program. If the receiving PHA does not 
administer an FSS program, the FSS family may not continue 
participation in the FSS program. The initial PHA must clearly discuss 
the options that may be available to the family, depending on the 
family's specific circumstances, which may include, but are not limited 
to, modification of the FSS contract, termination of the FSS contract 
and forfeiture of escrow, or locating a receiving PHA that administers 
an FSS program.
    (d) Single FSS account. Regardless of whether the FSS family 
remains in the FSS program of the initial PHA or is enrolled in the FSS 
program of the receiving PHA, there will be a single FSS account which 
will be maintained by the initial PHA if the receiving PHA is billing 
the initial PHA. If an FSS family will be absorbed by the receiving 
PHA, the initial PHA will transfer the family's FSS account to the 
receiving PHA and the receiving PHA will maintain the FSS account.
    (e) FSS program termination; loss of FSS account. (1) If an FSS 
family relocates to another jurisdiction, as provided under this 
section, and is unable to fulfill its obligations under the CoP (or any 
modifications thereto), the PHA, which is a party to the CoP, must 
terminate the FSS family from the FSS program, and the family's FSS 
account will be forfeited. Termination of FSS program participation 
must be used only as a last resort, after the PHA determines, in 
consultation with the family, that the family would be unable to 
fulfill its obligations under the CoP after the move and that the 
current CoP cannot be modified to allow for graduation prior to 
porting. When termination is the only option, the PHA must clearly 
notify the family that the move will result in the loss of escrow 
funds.
    (2) In the event of forfeiture of the family's FSS account, the 
funds in the family's FSS account will revert to the PHA maintaining 
the FSS account for the family.
    (f) Contract of Participation (CoP). (1) If the FSS family enrolls 
in the receiving PHA's FSS program pursuant to this section, the 
receiving PHA will enter into a new CoP with the FSS family for the 
term remaining on the contract with the initial PHA. The initial PHA 
will terminate its CoP with the family;
    (2) If the FSS family remains in the FSS program of the initial 
PHA, pursuant to this section, the original CoP, executed by the 
initial PHA, will remain as the contract in place.
    (g) Enrollment of a non-participant in the receiving PHA's FSS 
program--(1) Billing. If the receiving PHA bills the initial PHA, a 
family that was not an FSS participant at the initial PHA may not 
enroll in the receiving PHA's FSS program.
    (2) Absorption. If the receiving PHA absorbs the family into its 
HCV program, the receiving PHA may, consistent with the receiving PHA's 
FSS

[[Page 59252]]

enrollment policies, enroll a family that was not an FSS participant at 
the initial PHA into its FSS program.

Subpart D--Reporting


Sec.  984.401   Reporting.

    Each PHA or owner that carries out an FSS program shall submit to 
HUD, in the form prescribed by HUD, a report regarding its FSS program. 
The report shall include the following information:
    (a) A description of the activities carried out under the program;
    (b) A description of the effectiveness of the program in assisting 
families to achieve economic independence and self-sufficiency, 
including the number of families enrolled and graduated and the number 
of established escrow accounts and positive escrow balances;
    (c) A description of the effectiveness of the program in 
coordinating resources of communities to assist families to achieve 
economic independence and self-sufficiency; and
    (d) Any recommendations by the PHA or owner or the appropriate 
local Program Coordinating Committee for legislative or administrative 
action that would improve the FSS program and ensure the effectiveness 
of the program.

R. Hunter Kurtz,
Assistant Secretary for Public and Indian Housing.
Dana T. Wade,
Assistant Secretary for Housing--Federal Housing Commissioner.
BILLING CODE 4210-01-P

[[Page 59253]]

[GRAPHIC] [TIFF OMITTED] TP21SE20.007


[[Page 59254]]


[FR Doc. 2020-18896 Filed 9-18-20; 8:45 am]
BILLING CODE 4210-67-C