[Federal Register Volume 85, Number 196 (Thursday, October 8, 2020)]
[Proposed Rules]
[Pages 63664-63724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21400]



[[Page 63663]]

Vol. 85

Thursday,

No. 196

October 8, 2020

Part II





 Department of Housing and Urban Development





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24 CFR Parts 888, 982, 983 et al.





Housing Opportunity Through Modernization Act of 2016--Housing Choice 
Voucher (HCV) and Project-Based Voucher Implementation; Additional 
Streamlining Changes; Proposed Rule

  Federal Register / Vol. 85 , No. 196 / Thursday, October 8, 2020 / 
Proposed Rules  

[[Page 63664]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 888, 982, 983, and 985

[Docket No. FR-6092-P-01]
RIN 2577-AD06


Housing Opportunity Through Modernization Act of 2016--Housing 
Choice Voucher (HCV) and Project-Based Voucher Implementation; 
Additional Streamlining Changes

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

ACTION: Proposed rule.

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SUMMARY: The Housing Opportunity Through Modernization Act of 2016 
(HOTMA) was signed into law on July 29, 2016. HOTMA made numerous 
changes that affect either the Housing Choice Voucher (HCV) tenant-
based program or the Project-Based Voucher (PBV) program, or both. 
Among other changes, HOTMA established alternatives to HUD's housing 
quality standard inspection requirements, it established a statutory 
definition of public housing agency (PHA)-owned housing, and it amended 
several elements of both the HCV and PBV programs, in the latter case 
ranging from owner proposal selection procedures to how participants 
are selected. In addition to implementing these HOTMA provisions, HUD 
has included regulatory changes in this proposed rule that are intended 
to reduce the burden on public housing agencies, by either modifying 
requirements or simplifying and clarifying existing regulatory 
language.

DATES: Comment Due Date: December 7, 2020.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule. Copies of all comments submitted are available for 
inspection and downloading at www.regulations.gov. To receive 
consideration as public comments, comments must be submitted through 
one of two methods, specified below. All submissions must refer to the 
above docket number and title.
    1. 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 them 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.
    2. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW, Room 10276, 
Washington, DC 20410-0500.

FOR FURTHER INFORMATION CONTACT: Email [email protected] with your 
questions about this proposed rule.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 29, 2016, HOTMA was signed into law (Pub. L. 114-201, 130 
Stat. 782). HOTMA makes numerous changes to statutes that govern HUD 
programs, including section 8 of the United States Housing Act of 1937 
(1937 Act) (42 U.S.C. 1437f). HUD issued a notice in the Federal 
Register on October 24, 2016, at 81 FR 73030, announcing to the public 
which of the statutory changes made by HOTMA could be implemented 
immediately and which statutory changes required further guidance from 
HUD before owners, PHAs, or other grantees may use the new statutory 
provisions.
    On January 18, 2017, at 82 FR 5458, HUD published a second notice, 
making multiple HOTMA provisions effective and requesting comments. 
Several of the comments pointed out the need for technical corrections 
or clarifications to the January 18, 2017, implementation document. HUD 
published a document on July 14, 2017, at 82 FR 32461, making several 
technical corrections and clarifications. HUD also received comments 
recommending changes that were not technical corrections or 
clarifications, but rather suggested alternative approaches to 
implementing the HOTMA provisions. The January 18, 2017, FR notice, as 
amended by the July 14, 2017, FR notice, is referred to as the ``FR 
Implementation Notice'' throughout the preamble of this proposed rule.
    In the fall of 2017, HUD published three notices (Notices PIH 2017-
18, PIH 2017-20, and PIH 2017-21) that provide guidance on HCV 
provisions included in the FR Implementation Notice. Notice PIH 2017-18 
provides guidance on the HOTMA provision related to the housing 
assistance payment calculation for manufactured home space rentals, 
while Notices PIH 2017-20 and 2017-21 cover the implemented HOTMA 
Housing Quality Standard (HQS) inspection and PBV provisions, 
respectively.
    This proposed rule does a number of things. First, it proposes 
codification of the HOTMA provisions that have been implemented via 
notices published in the Federal Register as described above, taking 
into account public comments received in response to HUD's January 18, 
2017, notice. Second, it proposes to implement several HOTMA provisions 
that have not yet been implemented. Third, it contains several proposed 
changes to regulatory provisions unrelated to HOTMA, in order to reduce 
the regulatory burden on PHAs and owners by clarifying, simplifying, 
and, in some instances, eliminating HUD-imposed requirements. Finally, 
the rule also proposes elimination of obsolete regulatory provisions.

II. This Proposed Rule--Summary of Changes

General Summary

    The proposed rule would codify the following HOTMA provisions that 
have already implemented through the FR Implementation Notice. Please 
refer to the identified subsection for preamble discussion related to 
the codification of these HOTMA provisions.

 Initial inspection options--non-life-threatening deficiencies 
and alternative inspections (HOTMA section 101(a)(1))--subsection 5
 Definition of life-threatening deficiencies (HOTMA section 
101(a)(1))--subsection 5
 PHA-owned unit definition (HOTMA section 105)--subsection 2 
(and related preamble discussion sections identified in subsection 2)
 Manufactured home space rent calculation (HOTMA section 112)--
subsection 10
 PBV Program Cap (HOTMA section 106(a)(2))--subsection 16
 PBV Project Cap (HOTMA section 106(a)(3))--subsection 23
 PBV units not subject to project cap or program cap (HOTMA 
sections 106(a)(2) and (3))--subsection 28
 PBV initial term of HAP contract and extension of term (HOTMA 
sections 106(4) and (5))--subsection 40
 PBV priority of assistance contracts--insufficient funding 
(HOTMA section 106(a)(4))--subsection 41
 PBV adding units to HAP contract without competition (HOTMA 
section 106(a)(4))--subsection 42
 PBV additional contract conditions/tenant-based assistance for 
families at termination/expiration without renewal of PBV HAP contract

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(HOTMA section 106(a)(4))--subsection 41
 PBV preference for voluntary services (HOTMA section 
106(a)(7))--subsection 46
 Attaching PBVs to projects where the PHA has an ownership 
interest (HOTMA section 106(a)(9))--subsection 20

    Through the FR Implementation Notice, HUD also previously 
implemented the HOTMA provision at section 106(a)(9) that authorizes 
PHAs to project-base Veterans Affairs Supportive Housing (VASH) 
vouchers and Family Unification Program (FUP) vouchers without 
requiring additional HUD approval. HUD has determined that no 
modifications are needed to 24 CFR part 983 to codify these statutory 
changes. Any VASH vouchers and FUP vouchers project-based pursuant to 
this authority must comply with the requirements of 24 CFR part 983.
    HOTMA further provides that no PHA is required to reduce the 
payment standard applied to a family as a result of a reduction in the 
fair market rent (FMR). This provision was implemented in HUD's Small 
Area FMR (SAFMR) Final Rule \1\ at Sec.  982.505(c)(3).
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    \1\ ``Establishing a More Effective Fair Market Rent System; 
Using Small Area Fair Market Rents in the Housing Choice Voucher 
Program Instead of the Current 50th Percentile FMRs,'' published 
November 16, 2016, at 81 FR 80567.
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    HUD also proposes to implement the HOTMA HCV provisions that have 
not yet been implemented as part of this rule. Please see the 
identified preamble subsection for information on the proposed 
implementation of the following HOTMA provisions.

 Enforcement of Housing Quality Standards (HQS) (HOTMA section 
101(a)(3))--subsection 5
 Manufactured home space rental--PHA option to make single 
assistance payment to family instead of owner (HOTMA section 112)--
subsection 10
 Entering into a PBV HAP Contract for rehabilitation and new 
construction projects without an Agreement to Enter a HAP Contract 
(HOTMA section 106(a)(4))--subsection 34
 Providing rent adjustments using an operating cost adjustment 
factor (OCAF) (HOTMA section 106(a)(6)--subsection 55
 Owner-maintained site-based waiting lists (HOTMA section 
106(a)(7)--subsection 46
 Environmental requirements for existing housing (HOTMA section 
106(a)(8)--subsection 25

    In addition to the HOTMA changes, HUD is also proposing numerous 
non-HOTMA related changes. In some cases, these changes are to better 
clarify existing regulatory requirements. In other circumstances, HUD 
is seeking to improve the administration of the program, simplify 
program rules, or reduce administrative burden and cost. For example, 
in this rule HUD is proposing to change the current requirements to 
reflect a determination that PBV existing housing is not subject to 
Davis-Bacon wage requirements (see the discussion in subsection 44 of 
this preamble). In addition, in certain sections, HUD is inserting 
references to obligations under Section 504 and the Americans with 
Disabilities Act, as appropriate, as a helpful tool for entities 
implementing HOTMA who are also covered by those laws. Such references 
do not constitute all Section 504 or ADA requirements, and covered 
entities should consult the relevant regulations to fully understand 
their Section 504 and ADA obligations.
    Furthmermore, HUD is replacing ``disabled person'' to ``person with 
disabilities,'' the terms ``person with disabilities'' and ``person 
with a disability'' are sometimes used interchangeably in program 
regulations. A person with a disability is a qualified individual with 
a disability if the individual meets the definition of ``disability'' 
under the ADA Amendments Act, which is also the relevant definition for 
purposes of Section 504. See 42 U.S.C. 12102; 28 CFR 35.108.
    A description and discussion of the proposed changes for each 
regulatory section of this proposed rule (including in certain sections 
specific questions soliciting input from the commenters) follows.

Section-by-Section Summary

1. Fair Market Rents for Existing Housing: Methodology (Sec.  888.113)
    HUD proposes to clarify in the regulatory text that a PHA that 
wishes to voluntarily opt in to SAFMRs must request and receive HUD 
approval prior to adopting SAFMRs. This proposed change is unrelated to 
HOTMA.
2. Definitions (Sec.  982.4)
    The proposed rule would revise part 982 definitions to define the 
terms abatement, independent entity, PHA-owned units, Request for 
Tenancy Approval, Section 8 Management Assessment Program (SEMAP), and 
withholding, terms that were previously used but not formally defined 
in the definitions section of the regulation.
    The term independent entity would conform to current HUD guidance 
and would provide that the independent entity cannot be connected to 
the PHA legally, financially (except regarding compensation for 
services performed for PHA-owned units), or in any other manner that 
could cause the PHA to improperly influence the independent entity. 
However, HUD is proposing to adopt a modified definition, such that if 
the independent entity is a unit of general local government or an 
agency of such government, the unit of general local government or 
government agency may perform the functions of the independent entity 
without prior HUD approval. If the independent entity is not a unit of 
general local government or an agency of such government, then the 
independent agency would have to be approved by HUD. (Under current 
regulations at Sec.  982.352(iv)(B), the independent entity must always 
be approved by HUD. HUD is proposing this change to reduce 
administrative burden and reporting requirements on PHAs.)
    The proposed rule would also add the terms Section 8 Management 
Assessment Program (SEMAP) and Small Area Fair Market Rents (SAFMRs), 
terms that are defined elsewhere and referenced in Part 982, and define 
the terms authorized voucher units and tenant-paid utilities, which, 
though generally understood, merit specific definition.
    HOTMA defined units owned by a PHA, which overrides the definition 
of a PHA-owned unit previously established in regulation. HUD first 
implemented the HOTMA definition in the FR Implementation Notice. A few 
commenters to that notice commented that the definition as implemented 
by HUD was adequate. Others commented that the definition should be 
revised to include situations in which the PHA is the ground lessor or 
participates in the owner entity in any capacity, or when the PHA 
provides a loan and has a security interest in the property. The HOTMA 
definition explicitly provides, however, that none of these three 
situations constitutes PHA ownership. Therefore, HUD is proposing to 
conform the HCV and the PBV regulations (at Sec. Sec.  982.4 and 983.3, 
respectively) to the final FR Implementation Notice without any changes 
and incorporate this definition as needed throughout the regulations. 
In addition to these HOTMA changes, HUD is proposing to make other 
changes to the requirements for PHA-owned units. Please see the related 
preamble discussion at Sec. Sec.  982.352(b), 982.451, 983.57, and 
983.204.
    Question 1. HUD is specifically requesting comment on the proposed 
definition of a PHA-owned unit. In

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addition, the proposed rule specifies in the definition of independent 
entity that the independent entity cannot be connected to the PHA 
legally, financially (except regarding compensation for services 
performed for PHA-owned units), or in any other manner that could cause 
the PHA to improperly influence the independent entity. Is this 
standard too broad, particularly as it relates to an existing financial 
relationship? Under what circumstances could the PHA and the 
independent entity be connected financially where the independent 
entity would still retain sufficient independence to perform its 
administrative responsibilities for PHA owned units?
3. Administrative Plan (Sec.  982.54)
    This rule would update Sec.  982.54 by adding new Administrative 
Plan requirements for the tenant-based program regarding PHA 
policymaking authority with respect to programmatic concerns such as 
payment standards and inspections. These changes reflect options made 
available to the PHA by HOTMA and as otherwise proposed in this 
rulemaking. (HUD proposes to add a new Sec.  983.10, which identifies 
areas in which PHAs have policymaking discretion specific to the PBV 
program.) The list proposed in this proposed rule is not intended to be 
an all-inclusive list; instead, the list would highlight the major 
policy areas where the PHA has some administrative discretion.
    Question 2. Are there areas other than those specified in the new 
Sec.  983.10 where HUD could provide greater discretion to PHAs to 
support their efforts to operate their programs effectively?
4. Information When Family Is Selected (Sec.  982.301)
    HUD proposes to correct the regulation at Sec.  982.301(b) to 
reinstate the requirement that the briefing packet to the family 
include information regarding when the PHA is required to provide a 
program participant with the opportunity for an informal hearing, 
including how the participant may request a hearing. The September 1, 
2015, technical correction to the streamlining portability rule, 
published at 80 FR 52619, inadvertently deleted this requirement.
    In addition to this correction, HUD is proposing several changes 
related to the oral briefing the PHA gives the family to explain 
additional disability-related obligations that exist under other 
regulations. This includes: (1) Citing 28 CFR part 35 (Title II), 
Subpart E and 28 CFR part 36 (Title III) along with 24 CFR 8.6 as 
additional, relevant regulations that require the PHA to take 
appropriate steps to ensure effective communication with persons with 
disabilities; (2) adding that when briefing the family on when the PHA 
will consider granting exceptions to the subsidy standards, the PHA 
must discuss reasonable accommodations that may be required for a 
person with disabilities; (3) specifying that the oral briefing must 
include contact information for the Section 504 coordinator and 
information on how to request a reasonable accommodation or 
modification under Section 504, the Fair Housing Act, or the ADA, as 
applicable; and (4) specifyingthat if the family includes a person with 
disabilities, the PHA must provide not only notice that the family may 
request a current listing of accessible units known to the PHA that may 
be available but also, if necessary, other assistance in locating an 
available accessible unit in accordance with Sec.  8.28(a)(3).
    HUD is also proposing to add a new subsection (c) regarding 
information for persons with limited English proficiency. Specifically, 
PHAs would need to take reasonable steps to ensure meaningful access by 
persons with limited English proficiency in accordance with Title VI of 
the Civil Rights Act of 1964, Executive Order 13166, and HUD's LEP 
Guidance (see 72 FR 2732 (2007)).
5. Inspection of Dwelling Units (Sec. Sec.  982.305, 982.401, 982.404, 
982.405, 982.406, 983.103, 983.208)
    Section 101 of HOTMA made significant changes to the unit 
inspection requirements for the HCV program (both tenant-based and 
project-based assistance). In general, a PHA may not execute a HAP 
contract until the PHA has inspected the unit and determined that it 
meets the Housing Quality Standards of the HCV program. HUD previously 
implemented two HQS initial inspection options provided under HOTMA in 
the FR Implementation Notice. The first is in the case of the non-life 
threatening (NLT) option, where the PHA may choose to approve an 
assisted tenancy, execute the HAP contract, and begin making housing 
assistance payments on a unit that fails the initial HQS inspection, 
provided the unit's failure to meet HQS is the result only of non-life-
threatening conditions. The second is the alternative inspection 
option, where the PHA may approve the tenancy and execute the HAP 
contract prior to inspecting the unit if the property has in the 
previous 24 months passed an alternative inspection (i.e., an 
inspection conducted for another housing program). The PHA cannot make 
a payment to the owner until the PHA has inspected the unit and found 
it to meet HQS standards, at which point the PHA makes the assistance 
payments retroactively back to the effective date of the HAP contract. 
This rule proposes changes to conform the HCV program regulations to 
account for these two previously implemented options.
    HOTMA also contains specific requirements for (1) the withholding 
of assistance payments from the owner during the HQS deficiency 
correction period, (2) the abatement of payments and the termination of 
the HAP contract for units that fail to comply with HQS, and (3) the 
relocation of families where the HAP contract will be terminated due to 
the failure to comply with HQS. Under HOTMA, the family must be given 
90 days or longer to lease a new unit upon termination of the HAP 
contract. In addition, the family must be given a preference for public 
housing if the family fails to find a new unit with their voucher. The 
PHA may also use up to two months of the assistance payments that were 
withheld or abated under the family's terminated HAP contract for cost 
directly associated with the relocation of the family, which includes 
security deposits and reimbursements for moving expenses. HOTMA further 
provides that these new HQS enforcement and family relocation 
requirements must be implemented by regulation, and this proposed rule 
initiates the rule-making process for those provisions.
    In addition to the HOTMA-related changes, as an administrative 
streamlining measure HUD is also proposing adding a new subsection to 
Sec.  982.405 on the verification methods that may be used by the PHA 
to confirm an HQS deficiency has been corrected.
    Specifically, HUD is proposing the following changes with respect 
to the HOTMA inspection requirements. (HUD has included proposed 
definitions of abatement and withholding in Sec.  982.4, as discussed 
above.)
a. Approval of Assisted Tenancy (982.305)
    The existing regulations at Sec.  982.305 contain the PHA 
requirements that must be met to approve an assisted tenancy. This 
proposed rule would update Sec.  982.305 to reflect that a HAP contract 
may, in certain cases, be executed prior to a dwelling unit meeting HQS 
when the PHA adopts either the initial HQS inspection NLT option or the 
initial HQS inspection alternative inspection option (discussed in 
detail below at

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Sec. Sec.  982.405 and 982.406 respectively). The purpose of these two 
options would be to provide PHAs with additional flexibility to 
implement policies that assist families to be more competitive in the 
private market and increase their chances of obtaining an affordable 
unit.
    Specifically, in Sec.  982.305(f), HUD proposes codification in the 
regulations of the actions the PHA must take regarding the initial 
inspection of the unit to approve the assisted tenancy, revised to 
include the applicable requirements if the PHA has implemented and 
determined the unit is eligible for either the initial HQS inspection 
options (i.e., the NLT option or the alternative inspection).
    HUD is also proposing a non-HOTMA related change to Sec.  
982.305(c)(4). The paragraph would generally provide that if the HAP 
contract is executed later than 60 calendar days from the beginning of 
the lease term, the contract is void, and the PHA may not pay any 
housing assistance payment to the owner, as is currently the case under 
the current regulations. The proposed regulation provides that if there 
are extenuating circumstances that prevent or prevented the PHA from 
meeting the 60-day deadline, then the PHA may submit a request to HUD 
for an extension. HUD is proposing to allow PHAs to request this 
extension in recognition that there are situations where the PHA may 
need an extension and approving the request would be in the best 
interest of the family. The PHA request would have to include an 
explanation of the extenuating circumstances and any supporting 
documentation.
b. Establishment of Life-Threatening Conditions (Sec.  982.401(o))
    As discussed above in Sec.  982.305, HOTMA provided an exception to 
the generally applicable requirement that units must be inspected and 
must meet Housing Quality Standards before the PHA may make a housing 
assistance payment. Under the initial inspection NLT option, PHAs may 
choose to approve an assisted tenancy, execute the HAP contract, and 
begin making housing assistance payments on a unit that fails to meet 
HQS, provided the unit's failure to meet HQS is the result only of non-
life-threatening conditions, as such conditions are defined by HUD. For 
the purposes of implementing the NLT option in the FR Implementation 
Notice, HUD defined a non-life-threatening condition as any condition 
that would fail to meet the Housing Quality Standards under Sec.  
982.401 and is not a life-threatening condition, and then proposed a 
definition of life-threatening conditions and invited comment. Some 
commenters supported the definition, while others suggested expansion. 
For example, commenters recommended that HUD include mold or conditions 
that could lead to mold. HUD determined that the suggested items do not 
meet the threshold for inclusion in the list of life-threatening 
conditions and made no revisions to the proposed definition. This 
proposed rule would codify the existing list of life-threatening 
deficiencies list (cited in Sec.  982.401(o)). In addition, HUD is 
proposing that the proposed definition of life-threatening deficiencies 
would be applicable to all PHAs. (Under the FR Implementation Notice, 
PHAs were only required to adopt HUD's list of life-threatening 
deficiencies if they implemented the NLT option.) In addition, any 
other condition identified by the PHA as life-threatening would also be 
a life-threatening deficiency, provided the condition was identified as 
such in the PHA administrative plan. All other conditions that would 
cause a failure of HQS are NLT. The list of life-threatening conditions 
would continue to be updated by HUD through notices published in the 
Federal Register. These FR notices would provide for the opportunity 
for public comment before any changes to the list of life-threatening 
deficiencies became effective.
    HUD is also proposing to add a new subparagraph (5) to Sec.  
982.401(a) to clarify in this section that all defects that are not 
life-threatening conditions must be remedied within 30 days of the 
owner's receipt of written notice of the defects or a reasonable longer 
period that the PHA establishes.
    Question 3. Is HUD's list of life-threatening conditions 
appropriate? Are there conditions listed that should not be considered 
life-threatening? Are there conditions absent from the list that should 
be considered life-threatening?
c. Enforcement of HQS (Sec. Sec.  982.404, 983.208)
    Section 101 of HOTMA established certain requirements PHAs must 
follow when an owner fails to bring a unit into compliance with HQS. 
These requirements include specific time frames for compliance, after 
which a PHA must first withhold and then abate payments; ultimately, 
HOTMA provides that a PHA must terminate a HAP contract in response to 
continued noncompliance. HOTMA also includes certain protections for 
affected families and requirements related to the relocation of those 
families when the HAP contract is terminated. These same statutory 
provisions apply to both tenant-based units and project-based units. 
For the PBV program, the PHA may take an enforcement action on an 
individual unit that is part of a HAP contract (for example, removing 
the unit from the HAP contract), or it may terminate the HAP contract. 
These HOTMA provisions are set forth in section 8(o)(8)(G) of the 
United States Housing Act of 1937.
    The law provides that these provisions shall apply ``to any 
dwelling unit for which a housing assistance payments contract is 
entered into or renewed after the date of the effectiveness of the 
regulations implementing subparagraph (G).'' For tenant-based HAP 
contracts, HUD is interpreting a contract that is ``renewed'' to mean a 
HAP contract that has continued beyond the end of the initial lease 
term. For PBV, HUD is interpreting a contract that is ``renewed'' to be 
a contract that has been extended beyond the initial term of the 
contract. For contracts that were not entered into or renewed after the 
effective date of the regulations, Sec. Sec.  982.404 and 983.208 as of 
the date before the effective date of the final rule will remain in 
effect. Please see the related PBV discussion in the preamble below at 
Sec.  983.208.
    Specifically, Sec.  982.404(a) would be revised to codify the HOTMA 
requirement that a unit is out of compliance with the Housing Quality 
Standards if either the PHA or an inspector authorized by the State or 
unit of local government (1) determines upon inspection of the unit 
that the unit fails to comply with HQS, (2) notifies the owner in 
writing of the failure, and (3) the defects are not corrected within 
the new statutorily mandated timeframes. These timeframes are 
consistent with the existing regulatory timeframes under the current 
regulations. If the defect is life-threatening, the owner must correct 
the defect within no more than 24 hours after notification. For other 
defects, the owner must correct the defect within no more than 30 days 
after notification (or any PHA-approved extension).
    Under the current regulations at Sec.  982.404(a)(4), the owner is 
not responsible for a breach of the HQS that is not caused by the owner 
and for which the family is responsible. This is not always the case 
under HOTMA. HOTMA provides that if a PHA determines that any damage to 
a unit that results in a HQS deficiency (other than damage resulting 
from ordinary use) was caused by the tenant, any member of the tenant's 
household, or any guest or other person under the tenant's control, the 
PHA may waive the requirement that the owner is responsible for 
correcting the

[[Page 63668]]

deficiency. If the PHA waives the owner's responsibility to correct the 
deficiency, then the family is responsible for making the repairs. 
Under HOTMA, the PHA must proactively take action to waive the owner's 
responsibility to correct the tenant related HQS deficiency in order 
for that responsibility to be placed on the family. HUD assumes that 
PHAs would want to waive the owner's responsibility in cases where the 
HQS deficiency was caused by the tenant in order not to discourage 
owners from participating in the program, so this change should not 
have much of a practical impact in terms of the responsibility for the 
family to make the necessary repairs. However, the proposed regulation 
at Sec.  982.404(a)(4) would comply with the new HOTMA standard that 
the tenant is not automatically responsible for making the HQS repair 
for tenant caused damage, but rather such responsibility is dependent 
on the PHA waiving the owner's responsibility to correct the deficiency 
in those instances.
    HUD is also proposing to add a new paragraph to Sec.  982.404 to 
implement the HOTMA provisions regarding when a PHA may withhold 
payments and when a PHA must abate payments and terminate the HAP 
contract as the result of HQS deficiencies (Sec.  982.404(d)). If a PHA 
``withholds'' payments, the PHA has stopped making payments to the 
owner but is holding the payments for potential retroactive adjustment 
depending on the action the owner takes. If the PHA ``abates'' 
payments, the PHA has stopped making payments to an owner and there is 
no potential for retroactive payment.
    HOTMA provides that a PHA may choose to withhold payments once the 
PHA has notified the owner in writing of the deficiencies. If the PHA 
withholds the payments and the unit is brought into compliance during 
the applicable cure period (24 hours for life-threatening deficiencies 
and 30 days (or other reasonable period established by the PHA) for NLT 
deficiencies), the PHA must resume payments and provide assistance 
payments to cover the time period for which the assistance payment was 
withheld (Sec.  982.404(d)(1)). This is a significant change from the 
current requirements, where the PHA may not withhold payments from the 
owner during the permitted cure period.
    HOTMA also provides that the PHA must abate the HAP if the owner 
fails to make the repairs within the applicable cure period. 
Furthermore, if the owner fails to make the repairs within 60 days (or 
a reasonable longer period established by the PHA) of the determination 
of noncompliance, the PHA is required to terminate the HAP contract 
(Sec.  982.404(d)(2)). The date of determination of noncompliance would 
be the day following the expiration of the cure period (24 hours for a 
life-threatening deficiency and 30 days (or other reasonable period 
established by the PHA) for non-life-threatening deficiencies).
    Along with the new designated timeframes for abating and then 
terminating the HAP contract, this proposed rule would provide that in 
accordance with HOTMA the PHA must notify the family and the owner that 
the PHA is abating the payments and that if the unit does not meet HQS 
within 60 days after the determination of noncompliance (or a 
reasonable longer period established by the PHA), the PHA must 
terminate the HAP contract and the family will have to move if the 
family wishes to continue to receive assistance (Sec.  
982.404(d)(2)(ii)). As provided in HOTMA, the rule would expressly 
provide that the owner may not terminate the tenancy of the family due 
to the withholding or abatement of the payment, and that the family may 
terminate the tenancy during the abatement period by notifying the 
owner and the PHA (Sec.  982.404(d)(3)).
    Finally, under HOTMA, if the owner makes the repairs and the unit 
complies with the HQS within the required timeframe, the PHA must 
recommence payments to the owner. However, the PHA may not make any 
payments to the owner for the period of time the payments were abated. 
If the owner fails to make the repairs within 60 days (or the 
reasonable longer period established by the PHA, the PHA must terminate 
the HAP contract (Sec.  982.404(d)(4) and (5)).
    The proposed rule would add a new paragraph Sec.  982.404(e) to 
implement the HOTMA provisions related to the family's relocation due 
to HQS deficiencies. The family protections would be as follows: (1) 
The PHA must give the family at least 90 days following the termination 
of the HAP contract to lease a new unit. (2) If the family is unable to 
lease a unit within that period and the PHA owns or operates public 
housing, the PHA must offer and provide the family with a preference 
for the first appropriately sized public housing that become available 
for occupancy after the family's search time expires. (3) The PHA may 
choose to use up to 2 months of the withheld and abated assistance 
payments for costs directly associated with relocating to a new unit, 
including security deposits or reasonable moving costs. Use of the 
abated HAP for this purpose would be an eligible HAP expense under the 
HCV program and would be part of the HAP renewal funding eligibility 
calculation for the PHA.
    As discussed above, HOTMA provides that new provisions under 
section 8(o)(8)(G) of the 1937 Act apply only to HAP contracts that are 
either executed or renewed after the effective date of the implementing 
regulation. HUD is proposing to add a new paragraph (f) on the 
applicability of Sec.  982.404 in accordance with the statutory 
requirement. For HAP contracts not covered by these new HOTMA 
provision, Sec.  982.404 as in effect the day before the Final Rule 
becomes effective will remain applicable.
    HUD is proposing similar changes to Sec.  983.208 to implement 
these same HOTMA provisions for the PBV program. Please see the related 
discussion at Sec.  983.208 later in this preamble.
d. PHA Initial Unit Inspection (Sec.  982.405)
    Section 982.405 covers the requirements for PHA initial and 
periodic unit inspections. As discussed previously, HOTMA provides two 
new alternative initial HQS inspection options for the PHA. If a PHA 
adopts the initial HQS inspection NLT option, the PHA may approve a 
tenancy after a unit has failed a housing quality inspection if the 
unit has failed only for non-life-threatening conditions. Allowing HAP 
payments to begin while the owner makes minor repairs to the unit could 
result in increasing the number of landlords willing to participate in 
the program. This proposed rule would add a new paragraph (Sec.  
982.405(i)) to cover the initial HQS inspection non-life-threatening 
option. The PHA would be allowed to apply the NLT option to all of the 
PHA's initial inspections or may limit the use of the option to certain 
units. The proposed requirements under the new Sec.  982.405(i) are 
consistent with the current requirements that HUD established when it 
implemented the initial HQS inspection NLT option in the FR 
Implementation Notice, including the requirement that the family may 
choose to decline the unit based on the identified NLT deficiencies and 
simply continue their housing search.
    In addition to adding the new NLT option subsection, HUD is 
proposing non-HOTMA related changes to Sec.  982.405, including Sec.  
982.405(g), which concerns the inspection the PHA must conduct on a 
unit when notified of a potential life-threatening deficiency by a 
family or a government official. In the

[[Page 63669]]

case where the reported deficiency, if confirmed, would be a life-
threatening deficiency, the PHA would have to both inspect the housing 
unit and notify the owner (if any life-threatening deficiency is 
confirmed) within 24 hours of receiving the report of the potential 
deficiency. The owner would have to make the repairs within 24 hours of 
the PHA notification. If the reported deficiency (if confirmed) would 
be NLT, the PHA would have to both inspect the unit and notify the 
owner whether the deficiency is confirmed within 15 days that the 
family or government official reported the suspected deficiency. The 
current regulation provides the time frames by which the PHA must make 
the inspection but is silent on the timeframe by which the PHA must 
notify the owner if the deficiency is confirmed. In addition, Sec.  
982.405(g) is being revised to reference the proposed definition of 
what constitutes life-threatening conditions at Sec.  982.401(o) of 
this rule.
    Question 4. Are HUD's proposed deadlines by which the PHA must both 
inspect the unit and notify the owner if the reported deficiency is 
confirmed reasonable?
    Finally, HUD is proposing to add a new paragraph (h) that would 
expressly provide that when a PHA must verify a correction of an HQS 
deficiency, the PHA may use verification methods other than another on-
site inspection. This proposal builds on Notice PIH 2013-17,\2\ where 
HUD provided guidance on the use of photos to document the correction 
of HQS deficiencies for annual inspections. This guidance was issued to 
provide administrative relief as well as a cost-savings measure by 
reducing the need for on-site reinspection. Currently, on-site 
verification is required for initial inspections. In codifying that 
alternative verification methods to on-site re-inspections are 
acceptable, HUD also proposes to expand the use of the alternative 
verification methods to include verifying that deficiencies identified 
in the initial inspection have been corrected.
---------------------------------------------------------------------------

    \2\ ``Housing Choice Voucher (HCV) Program--Review of Existing 
HQS Requirements and the Use of Photos to Improve HQS Oversight'', 
published July 2, 2013, available at https://www.hud.gov/sites/documents/PIH2013-17.PDF.
---------------------------------------------------------------------------

e. Use of Alternative Inspections (Sec.  982.406)
    Section 982.406 covers the requirements for the use of alternative 
inspections. This rule would add a new paragraph (e) to Sec.  982.406 
to codify the HOTMA-authorized use of alternative inspections for 
initial HQS inspections, in addition to the existing requirements for 
biennial inspections once the unit is under HAP contract. Adoption of 
the alternative inspection option for initial HQS inspections would 
enable a PHA to approve an assisted tenancy and enter into a HAP 
contract, provided the unit has passed an approved alternative 
inspection within the 24 months prior to execution of the HAP contract. 
The PHA may not make payments to the owner, however, until the PHA 
inspects the unit. The proposed Sec.  982.406(e) for the initial HQS 
inspection alternative inspection option is consistent with the current 
requirements implemented under the FR Implementation Notice with one 
exception. In response to comments received, HUD is proposing to extend 
the amount of time available to a PHA to conduct its own inspection of 
the unit from 15 to 30 days from receipt of the Request for Tenancy 
Approval.
    Please see the related discussion on the HOTMA alternative 
inspection requirements for PBV later in this preamble at Sec.  
983.103.
6. Eligible Housing (Sec.  982.352)--Compensating Independent Entity 
for PHA-Owned Units
    HUD is taking this opportunity to propose a non-HOTMA related 
change regarding the wording and organization of the current regulation 
at Sec.  982.352(b)(1)(iv)(C). HUD is proposing to clarify that the PHA 
may compensate the independent entity from PHA administrative fees 
(including fees credited to the administrative fee reserve). The 
current regulation refers to ``ongoing administrative fee income'' 
which includes fees in the administrative fee reserve. However, this 
language inadvertently created confusion as to whether the undefined 
term ``ongoing administrative fee income'' included funds in the 
administrative fee reserve. HUD is proposing to revise the language so 
it specifically provides that the administrative fee reserve may be 
used by the PHA to compensate the independent entity.
    HUD further is proposing to redesignate Sec.  982.352(b)(1)(iv)(C) 
to Sec.  982.352(b)(1)(iv)(B). This is a conforming change. Since HUD 
would be formally defining ``independent entity'' in Sec.  982.4 of 
this proposed rule, HUD proposes to eliminate the current Sec.  
983.352(b)(1)(iv)(B), which explains what that term means. Please see 
the related discussion on the definition of independent entity in this 
preamble above at Sec.  982.4.
    Question 5. Are there functions, other than those identified in the 
proposed rule (see Sec. Sec.  982.352(b)(1)(iv)(A), 982.628(d)(3), and 
983.57), that an independent entity should perform in the case of PHA-
owned units?
    Question 6. In contrast, are there functions identified by the 
proposed rule (besides rent reasonableness determinations and 
inspections, which are required by statute) that the PHA should be able 
to perform with respect to PHA-owned units instead of having an 
independent entity do so? If so, why should the PHA perform those 
functions instead of an independent entity?
7. Housing Assistance Payments Contract (Sec. Sec.  982.451, 983.204)--
PHA-Owned Unit Certification Option
    The proposed rule would address how the PHA executes the HAP 
contract for a PHA-owned unit for both tenant-based units (Sec.  
982.451(c)) and project-based units (Sec.  983.204(d)). As a general 
principle of contract law, a PHA cannot execute a HAP contract with 
itself (i.e., signing the HAP contract as both the PHA and the owner). 
For some PHA-owned units, a separate legal entity already owns the PHA-
owned unit (e.g., an entity wholly controlled by the PHA, a limited 
liability corporation controlled by the PHA, or a limited partnership 
controlled by the PHA). However, in other cases a separate legal entity 
does not own the PHA-owned unit. Instead, the PHA is in fact the actual 
legal entity that owns the unit. In order to eliminate confusion over 
the execution of the HAP contract for PHA-owned units, the proposed 
rule would expressly provide that the PHA must execute the HAP contract 
for a PHA-owned unit with a separate legal entity. If the PHA is the 
legal entity that owns the unit, then in order to execute the HAP 
contract the PHA would need to create a separate legal entity. This 
separate legal entity would be established by the PHA to serve as the 
owner solely for the purpose of executing the HAP contract with the 
PHA. The proposed rule would provide that this separate legal entity 
may be one of the following: (a) A non-profit affiliate or 
instrumentality of the PHA; (b) a limited liability corporation, (c) a 
limited partnership; (d) a corporation; or (e) any other legally 
acceptable entity recognized under State law.
    This separate legal entity would be completely different from the 
independent entity that is required to perform certain administrative 
responsibilities on behalf of the PHA for a PHA-owned unit. The 
proposed rule would further clarify that the independent entity may 
notify either the PHA, the separate legal entity created by the PHA to 
serve as the owner for

[[Page 63670]]

purposes of executing the HAP contract, or both the PHA and the 
separate legal entity, of a determination the independent entity has 
made (e.g., the unit passed inspections, the rent for the unit is 
determined to be reasonable) in carrying out its responsibilities for 
the PHA-owned unit.
    HUD recognizes that creating a separate legal entity to serve as 
the owner for the sole purpose of executing the HAP contract may create 
complexity and administrative burden for the PHA, particularly in the 
case of a tenant-based voucher family that wishes to rent an individual 
PHA-owned unit. HUD is therefore proposing a new PHA option for a PHA-
owned unit that is not already owned by a separate legal entity. Under 
this option, the PHA would not execute the HAP contract but instead 
sign a HUD-prescribed certification. The PHA would certify that it will 
fulfill all the program responsibilities required of the private owner 
under the HAP contract. In addition, the PHA would certify it will also 
fulfill all the PHA's responsibilities for the PHA-owned unit, 
including that the PHA has obtained the services of an independent 
entity to perform the required PHA functions. The PHA-executed 
certification would essentially serve as the equivalent of the HAP 
contract for the PHA-owned unit, under which the PHA is legally 
committed to and responsible for fulfilling its responsibilities as 
both the PHA and the owner of the PHA-owned unit.
    The certification option would be available both for tenant-based 
PHA-owned units (Sec.  982.451(c)(3)) and project-based PHA-owned units 
(Sec.  983.204(d)). However, this option would not be available if the 
PHA-owned unit is owned by an entity wholly controlled by the PHA or 
owned by either a limited liability company or limited partnership in 
which the PHA (or an entity wholly controlled by the PHA) holds a 
controlling interest in the managing member or general partner. In that 
circumstance, the PHA would simply execute the HAP contract as the PHA, 
and the entity, limited liability company, or limited partnership 
executes the HAP contract as the owner. Additional changes to Sec.  
983.204 are discussed below.
8. Payment Standards and How To Calculate Housing Assistance Payments 
(Sec. Sec.  982.503, 982.505)
    HOTMA provides that no PHA is required to reduce the payment 
standard applied to a family as a result of a reduction in the fair 
market rent (FMR). This provision was implemented in HUD's Small Area 
FMR (SAFMR) Final Rule at Sec.  982.503(c)(3),\3\ and comprehensive 
guidance was published in Notice PIH 2018-01.\4\ Besides revising Sec.  
982.505(c)(3) for greater clarity, and making other non-HOTMA related 
revisions to parts of Sec.  982.505 to better convey the intent of the 
current requirements, HUD is also proposing several changes related to 
the administration of increases and decreases in the payment standard 
amount. These changes are not required by HOTMA, but they are proposed 
to improve the process by which changes in payment standard amounts are 
applied to impacted families.
---------------------------------------------------------------------------

    \3\ ``Establishing a More Effective Fair Market Rent System; 
Using Small Area Fair Market Rents in the Housing Choice Voucher 
Program Instead of the Current 50th Percentile FMRs,'' published 
November 16, 2016, at 81 FR 80567.
    \4\ ``Guidance on Recent Changes in Fair Market Rent (FMR), 
Payment Standard, and Rent Reasonableness Requirements in the 
Housing Choice Voucher Program,'' published January 17, 2018, 
available at https://www.hud.gov/sites/dfiles/PIH/documents/PIH-2018-01.pdf.
---------------------------------------------------------------------------

a. Payment Standard Areas, Schedule, and Amount (Sec.  982.503)
    This proposed rule would address the conditions and procedures that 
apply to the establishment of exception payment standard areas and 
amounts, whether or not SAFMRs are in effect in the exception payment 
standard area. The regulations at Sec.  983.503 would be revised and 
reorganized for greater clarity. In addition, HUD is proposing to (1) 
establish a minimum size for an exception payment standard area, (2) 
increase the PHA's administrative discretion to establish higher 
exception payment standards without HUD approval, and (3) allow the PHA 
to reduce the payment standard below the basic range without HUD 
approval if certain conditions are met. These proposals are described 
in greater detail below.
b. Minimum Size of Exception Payment Standard Area (Sec.  
982.503(a)(3)(ii))
    HUD proposes to revise the regulations at Sec.  983.503(a) to 
specify that HUD publishes FMRs for Small Area FMR areas, metropolitan 
areas and non-metro counties. In addition, HUD proposes to require that 
an exception payment standard area be no smaller than a census tract 
block group. A census tract block group is the smallest area of 
geography for which rental data is available. The current regulation 
does not address the size of a designated area.
c. Payment Standard Schedules and Basic Range Amounts (Sec.  982.503(b) 
and (c))
    Sections 982.503(b) and (c) would be revised as part of the Sec.  
982.503 restructuring. The proposed Sec.  982.503(b) would cover the 
payment standard schedule that the PHA must maintain (which, in the 
current regulation, is covered under Sec.  982.503(a)). The proposed 
Sec.  982.503(c) would cover basic range payment standard amounts 
(which, in the current regulation, is covered under Sec.  982.503(b)). 
The basic range payment standard amount is any amount in the range from 
90 percent up to and including 110 percent of the published FMR. The 
PHA would be permitted, as is in current regulations, to establish a 
payment standard in the basic range without HUD approval. Payment 
standards above the basic range are exception payment standards. The 
requirements for payment standards that fall outside the basic range--
some of which are currently covered under Sec.  982.503(b) and (c)--
would all be consolidated in Sec.  982.503(d) of this proposed rule. 
The proposed changes to the requirements for exception payments 
standards and also payment standards that are set below the basic range 
are discussed below.
d. Exception Payment Standards (Sec.  982.503(d))
    Section 982.503(d) would address how a PHA may establish exception 
payment standard amounts. In paragraph (d)(1), the regulation would 
clarify that the PHA may establish an exception payment standard for 
all units or may limit the exception payment standard to units of a 
given size, as is currently permitted in the HCV program. The paragraph 
would also clarify that the exception area must meet the minimum size 
requirements (no smaller than a census tract) that is proposed at Sec.  
982.503(a)(3)(ii) in this rule.
    Paragraph (d)(2) would continue the current exception payment 
standard policy that permits a PHA that is not in a designated SAFMR 
area or has not opted to voluntarility inplement SAFMRs under 24 CFR 
888.113(c)(3) to establish exception payment standards for a ZIP code 
area above the basic range of the metropolitan FMR without prior HUD 
approval, provided the exception payment standard does not exceed 110 
percent of the HUD published SAFMR for the ZIP code area. The proposed 
rule clarifies that if the PHA exception area crosses one or more FMR 
boundaries (i.e., contains more than one ZIP Code area), then the 
maximum exception

[[Page 63671]]

payment standard amount that a PHA may adopt for the exception area 
without HUD approval is 110 percent of the ZIP code area with the 
lowest SAFMR amount.
    Paragraph (d)(3) would address the ability of PHAs to set exception 
payment standard amounts for exception areas higher than 110 percent of 
the applicable FMR with prior HUD approval. The PHA would need to 
provide rental market data demonstrating that the exception payment 
standard amount requested is needed to enable families to access rental 
units in the exception payment standard area. The data submitted by the 
PHA would not have to be the same level as that required to request a 
reevaluation of the FMR established in accordance with 24 CFR part 888. 
Instead, the PHA would be permitted to use local sources of information 
to support its request.
    Question 7. For an exception payment standard request unrelated to 
a reasonable accommodation request, should HUD provide greater 
flexibility to PHAs to establish exception payment standards without 
HUD approval in order to reduce administrative burden and allow the PHA 
to respond more quickly to rapidly changing rental markets? If so, what 
parameters or limits should apply to that exception payment standard 
authority (e.g., allow the PHA to establish an exception payment 
standard without prior HUD approval up to 120 percent of the SAFMR)? 
With respect to exception payment standard requests requiring HUD 
approval, should HUD establish a minimum standard for the type of 
rental market data that a PHA must provide to demonstrate the need for 
an exception payment standard in the requested area, and what should 
that standard be? For example, should HUD continue to require that the 
rental market data provided by PHAs include a statistically 
representative sample of rental housing survey data in the exception 
payment standard area? More specifically, should HUD require a PHA to 
obtain, for a sample of properties located in the exception payment 
standard area, a Rent Comparability Study prepared in accordance with 
HUD's Multifamily Accelerated Processing Guide? Should HUD require that 
any assessment of rental market data be prepared by a certified 
appraiser?
    Question 8. For an exception payment standard request unrelated to 
a reasonable accommodation request, should HUD establish a maximum cap 
on exception payment standard amounts that it will consider for 
approval (for example, some percentage of the SAFMR)? HUD has concerns 
that in some high-cost markets, exception payment standards could reach 
unreasonably high levels.
    Finally, HUD proposes consolidating all exception payment standards 
requirements into Sec.  982.503(d) by moving requirements for exception 
payment standards that are required for a reasonable accommodation from 
Sec.  982.505(d) to Sec.  982.503(d)(4). HOTMA provides that, without 
HUD approval, a PHA may establish an exception payment standard of not 
more than 120 percent of the FMR if needed as a reasonable 
accommodation for a family that includes a person with a disability. A 
PHA may establish a payment standard greater than 120 percent of the 
FMR after requesting and receiving HUD approval. These flexibilities 
had already been implemented as part of the SAFMR Final Rule. In this 
proposed rule, HUD would clarify that the exception payment standard 
limit applies to the metropolitan area FMR or the Small Area FMR, 
whichever FMR is in effect in the ZIP code area in which the family 
resides.
e. Payment Standard Below the Basic Range (Sec.  982.503(e))
    HUD proposes that a PHA be permitted to establish a payment 
standard amount that is not lower than 90 percent of the SAFMR for a 
ZIP code area that is subject to metropolitan area FMRs, without HUD 
approval. HUD approval for a payment standard below 90 percent of the 
applicable SAFMR would still be required. Currently, a PHA that has not 
implemented SAFMRs would need HUD approval to reduce the payment 
standard below 90 percent of the metropolitan FMR. As is the case for 
exception payment standards, the HUD-published SAFMRs provide the 
justification that the reduced payment standard would still be 
reasonable for the ZIP code area based on rents in that area, and 
consequently HUD review and approval of a payment standard that is 
within the basic range of the SAFMR for the ZIP code area is not 
necessary.
    Question 9. The current regulation (at Sec.  982.503(h)) provides 
that HUD will monitor PHAs' payment standards for units of a particular 
size if HUD finds that 40 percent or more of families occupying units 
of that unit size pay more than 30 percent of adjusted monthly income 
(AMI) as the family share. The statutory standard for HUD review is 
that a ``significant percentage'' of families pay more than 30 percent 
of adjusted income for rent.
    a. Is 40 percent a reasonable ``significant percentage of 
families,'' or should the trigger be raised to a higher percentage of 
families (for example, the HUD review would be triggered if 50 percent 
of families pay more than 30 percent of AMI as the family share)?
    b. If HUD were to replace 40 percent with a higher percentage of 
families, as described above, should HUD also establish an additional 
threshold that would trigger a review even though the number of 
families paying more than 30 percent of AMI had not reached the 
significant percentage? (For example, the HUD review would be triggered 
if 30 percent of families pay more than 40 percent of AMI, even though 
less than 50 percent of families are paying no more than 30 percent of 
AMI.)
    Question 10. Should HUD retain success rate payment standards, or, 
in the interest of streamlining the regulation, is there a way to use 
SAFMRs to accomplish the same purpose as success rate payment 
standards?
f. Payment Standard Reduction (Sec.  982.505(c)(3))
    Section 982.505(c)(3) would detail how a PHA is to address a 
reduction in the payment standard amount for a family that remains in 
their unit after the reduction. HUD is proposing changes throughout 
this provision to provide clarity on the obligations of and 
flexibilities afforded to the PHA. In addition, HUD is proposing that 
the family protections related to the application of decrease in the 
payment standard amount apply during the time the family remains 
assisted in the same unit, as opposed to during the term of the HAP 
contract. There are circumstances where the owner and the PHA may 
terminate the existing HAP contract and execute a new HAP contract to 
continue to assist the same family in the same unit. For example, 
tenant-based assistance may not be continued unless the PHA has 
approved a new tenancy in accordance with the program requirements and 
executed a new HAP contract with the owner if there are any changes in 
lease requirements governing tenant or owner responsibilities for 
utilities or appliances. If those circumstances occur shortly after the 
decrease in the payment standard, it is not fair to the family to apply 
the reduction in the payment standard amount at the new HAP contract 
effective date, since the family hasn't moved and is being continuously 
assisted at the same unit.
    HUD is also proposing a change in the notification requirements to 
families when a reduction in the family's payment standard amount will 
result in the family paying a higher rent if they stay in their unit. 
Specifically, the 12-

[[Page 63672]]

month advance notice provided to families affected by a decrease in the 
payment standard would have to state the new payment standard amount, 
explain that the family's new payment standard amount will be the 
greater of the amount listed in the current written notice or the new 
amount (if any) on the PHA's payment standard schedule at the end of 
the 12-month period, and make clear where the family will find the 
PHA's payment standard schedule (e.g., online). A notification to the 
family that does not include the amount of the reduced payment standard 
would not be sufficient for families to make an informed decision on 
whether or not they can afford to remain in their current unit and pay 
the higher rent or if they should use the 12 months to begin searching 
for a lower-cost unit.
    The proposed rule would further provide that the initial reduction 
to the family's payment standard amount may not be applied any earlier 
than two years following the effective date of the decrease in the 
payment standard. This 2-year requirement would replace the current 
standard that the initial reduction may not be applied any earlier than 
the family's second regular examination following the effective date of 
the decrease in the payment standard. HUD believes that the 2-year 
standard will provide a consistent and more equitable protection to 
families than the current standard. Under the current policy, the 
length of the ``hold harmless'' protection varies significantly among 
individual families since it is based on when the family's regular 
examination is scheduled compared to when the decrease in payment 
standard went into effect. For example, one family might have the 
decrease in the payment standard applied 13 months following the 
effective date of the payment standard change, while another family 
would benefit from the protection for 23 months.
    In addition to the change to a standard, consistent 2-year 
protection for families that remain in-place, the rule further proposes 
that the decrease in the payment standard could not be applied unless 
the family had received the required 12-month advance notice.
g. Payment Standard Increase During HAP Contract Term (Sec.  
982.505(c)(4))
    Section 982.505(c)(4) would address what a PHA is to do when a 
payment standard amount is increased during the term of a family's HAP 
contract. HUD proposes to require that the increased payment standard 
amount must be used to calculate the family's housing assistance 
payment no later than the earliest of the effective date of (1) an 
increase in the gross rent that will result in an increase in the 
family's share, (2) the family's first regular reexamination, or (3) 
one year following the effective date of the increase in the payment 
standard amount. The intent of this change is to eliminate the 
potential lag time between an increase in the rent to owner brought 
about by an increase in the payment standard, and the increase in the 
assistance payment made on behalf of the family as a result of the 
increase in the payment standard.
    HUD is also proposing to move the requirements at Sec.  982.505(d) 
for the PHA approval of a higher payment standard for a family that is 
necessary as a reasonable accommodation to Sec.  982.503. This change 
would consolidate all the exception payment standard requirements into 
the same regulatory section.
9. Utility Allowance Schedule (Sec.  982.517)
    HUD proposes several non-HOTMA related updates to the utility 
allowance regulations at Sec.  982.517 in order to lessen 
administrative requirements and provide greater flexibility for PHAs in 
determining both area-wide schedules and site-based schedules for the 
PBV program. HUD is also proposing to reorganize Sec.  982.517 for 
better clarity.
    In Sec.  982.517(e), HUD is proposing to revise the text to provide 
greater detail on additional fair housing requirements that a PHA may 
be subject to in determining if a higher utility allowance is needed as 
a reasonable accommodation under Section 504 or the ADA for a family 
that includes a person with disabilities.
    This rule would also eliminate the requirement that a PHA submit 
its utility allowance schedule to the field office in order to reduce 
PHA reporting requirements and administrative burden. While each PHA 
must still maintain a utility allowance schedule and provide the 
schedule to HUD upon request, a PHA would no longer be required to 
routinely submit the schedule to the field office under this proposed 
rule.
    HUD also proposes to allow a PHA to adopt additional options for 
setting its utility allowance schedule. Currently, each PHA must 
maintain one area-wide utility allowance schedule based on energy-
conservative households.
    Through this rulemaking, HUD proposes the following changes:
a. Area-Wide Energy-Efficient Utility Allowance Schedule (Sec.  
982.517(b)(2)(ii))
    The proposed changes to Sec.  982.517 would provide each PHA with 
the option to adopt an area-wide utility allowance schedule for energy-
efficient units in addition to the traditional utility allowance 
schedule. The PHA would be able to use its energy-efficient utility 
allowance schedule only for units in projects that meet certain energy-
efficiency standards. This change would allow the utility allowance 
schedule to reflect utility allowance amounts that more accurately 
reflect what the family's actual utility costs will be in cases where 
the family is leasing an energy efficient unit. This change is intended 
to expand the number of energy efficient units that are available to 
the family. Since the restriction on the maximum amount that the family 
may pay at initial occupancy of a unit is based on the gross rent (rent 
to owner plus the utility allowance for tenant-supplied utilities), a 
utility allowance that reflects the lower utility costs of the energy 
efficient units will allow energy efficient units with correspondingly 
higher rents to now be an option for the family to consider leasing on 
the program.
    Question 11. Should HUD authorize PHAs to use energy-efficient 
utility allowance schedules for a broader range of projects than are 
defined at Sec.  982.517(b)(2)(ii)?
b. Utility Allowance Based on Flat Fees (Sec.  982.517(b)(2)(iii))
    Under the proposed regulation, PHAs would have the option of 
substituting flat fees charged for certain utilities in the lease for 
the area-wide utility allowance for that utility, but only if the flat 
fees are lower than those in the area-wide utility allowance. Sometimes 
the flat fee charged by the owner reflects actual utility costs and is 
considerably lower than the utility allowance amounts. In effect, if 
the PHA uses the utility allowance rather than the actual utility 
costs, the gross rent would be higher. In competitive housing markets, 
this can make the unit exceed the maximum family share at initial 
occupancy even though the rent to owner and the actual utility charges 
do not exceed 40 percent of the family's adjusted monthly income. In 
other cases, the PHA could provide a smaller subsidy if the gross rent 
were based on the flat fee rather than the utility allowance schedule.
    If a PHA adopts an area-wide energy-efficient utility allowance 
schedule or utility allowances based on flat fees, the policies would 
have to be applied consistently for all families and stated in the 
PHA's Administrative Plan.

[[Page 63673]]

10. Manufactured Home Space Rental (Sec.  982.623)
    Section 112 of HOTMA amended section 8(o)(12) of the 1937 Act with 
respect to the use of voucher assistance provided to families that are 
owners of manufactured housing and are paying rent on the space on 
which the manufactured home is located (the manufactured home space). 
The manufactured home space rental is a special housing type under 
Subpart M of the 982 HCV regulations.
    Prior to the HOTMA amendment, voucher assistance payments on behalf 
of owners of manufactured housing under section 8(o)(12) could only be 
made to assist the family with the rent for the manufactured home 
space. Section 112 expanded this definition of the ``rent'' to include 
other housing expenses, specifically the monthly payments made by the 
family to amortize the cost of purchasing the manufactured home 
(including any required insurance and property taxes). This change in 
the rental subsidy calculation for families renting manufactured home 
spaces was implemented by the FR Implementation Notice. The practical 
effect of this change was to increase the amount of housing assistance 
payment that may be paid on the behalf of the family by taking into 
account family housing expenses related to the manufactured home they 
own beyond the space rent and tenant-paid utilities. This proposed rule 
would codify the new subsidy calculation by revising Sec.  983.623. 
Section 112 effectuated the change in the subsidy calculation by 
redefining ``rent'' to include the family's monthly debt payments. 
While section 112 achieves the statutory intent to allow housing 
assistance payments to assist with the family's monthly debt payments 
for the purchase of the home as well as the space rent, characterizing 
the debt payments to be part of the ``rent'' creates confusion in the 
administration of this provision, since these monthly debt payments in 
reality are independent of the space rent, and have no relation to the 
normally understood concept and definition of ``gross rent'' (the sum 
of the rent to owner plus any utility allowance) that applies to other 
rent calculations in the HCV program. In order to simplify program 
administration and more clearly convey the actual intent of the 
statutory language, HUD is proposing in this rule to use the term 
``eligible housing expenses'' instead of ``rent'' in the HAP 
calculation. ``Eligible housing expenses'' under this proposed rule 
includes the same expenses and results in the same amount of HAP for 
the family in accordance with the HOTMA amendment, but does so using 
terminology that better explains and distinguishes between what the 
subsidy calculation takes into account as opposed to what the term 
``rent'' normally suggests for PHAs, participating families, and the 
owners either leasing the space or considering doing so under the HCV 
program.
    In addition to revising the monthly housing assistance calculation, 
the proposed change would also remove an obsolete reference to a 
separate fair market rent for a manufactured home space. Since the 
housing assistance payment now takes the family's housing costs besides 
the space rent into consideration in determining the subsidy, it no 
longer makes sense to publish a separate ``manufactured home space 
rent'' FMR for this special housing type. Instead, the PHA uses its 
regular payment standard for the HCV program in the housing assistance 
payment calculation. This change was previously implemented by the FR 
Implementation Notice.
    Section 112 further provided that the PHA may choose to make a 
single payment to the family for the entire monthly assistance amount, 
rather than making the assistance payment directly to the owner of the 
manufactured home space the family is renting. HUD has not yet 
implemented this option. In addition to the changes in Sec.  982.623 
for the revised subsidy calculation, HUD is proposing a new paragraph 
to implement this single housing assistance payment to the family 
option. Under this proposed rule, if the owner of the manufactured home 
space agrees, the PHA may make the entire housing assistance payment to 
the family, rather than making the payment to the owner. Because the 
assistance payment now covers family housing costs beyond the space 
rent, in many instances the PHA would be paying an assistance payment 
to both the owner of the space rent and the family under this special 
housing type. Under the single payment to the family option, the family 
would be responsible for paying the owner directly for the full amount 
of the rent of the manufactured home space. The PHA and the owner must 
still execute a HAP contract and the owner is still responsible for 
fulfilling all the owner obligations under the HAP contract.
    The HOTMA provisions related to the exclusion of the family's 
manufactured home from the prohibition of the family having a present 
ownership interest in real property that is suitable for occupancy by 
the family, and the exclusion of the equity in the family's 
manufactured home from the net family assets, is being implemented 
through a proposed rule published September 17, 2019, at 84 FR 48820.
11. HCV Homeownership Option (Sec. Sec.  982.625, 982.628, 982.630, 
983.635, 982.641)
    HUD is proposing several non-HOTMA related changes to the HCV 
homeownership special housing type under Subpart M. The HOTMA 
provisions related to the exclusion of the family's HCV homeownership 
unit from the prohibition of the family having a present ownership 
interest in real property that is suitable for occupancy by the family, 
and the exclusion of the equity in the family's homeownership unit from 
the net family assets, is being implemented through a proposed rule 
published September 17, 2019, at 84 FR 48820.
a. PHA-Owned Units (Sec.  982.628(d)
    HUD is proposing to make a clarifying change to Sec.  982.628(d) to 
reference the definition of a PHA-owned unit in the proposed Sec.  
982.4.
b. Homeownership Counseling (Sec.  982.630(e))
    The regulation currently allows a PHA to use a housing counseling 
agency that is not approved by HUD if the PHA ensures that the 
counseling program of such agency is consistent with the homeownership 
counseling provided under HUD's Housing Counseling program. HUD is 
proposing to revise the homeownership regulation to conform with 
current Housing Counseling requirements, which require any 
homeownership counseling to be conducted by a HUD-certified housing 
counselor working for a HUD-approved housing counseling agency. HUD 
believes that the homeownership counseling is a critical component for 
the success of the HCV homeownership program and believes this proposed 
change will help ensure that the counselor and the counseling meet 
acceptable standards.
c. Amount and Distribution of HAP (Sec. Sec.  982.635(b), 982.641(f))
    Currently, the utility allowance amount for a homeownership family 
is based on the lower of the size of the home purchased or the family 
unit size per PHA subsidy standards. The proposed rule would require 
that the utility allowance for a homeownership family always be based 
on the size of the home purchased. This will minimize the possibility 
of default when the family composition changes in the home because the 
amount of the

[[Page 63674]]

family's expenses for purposes of calculating homeownership assistance 
will still reflect the actual utility allowance for which the family is 
responsible.
    The proposed rule also proposes to restructure the payment standard 
provisions and clarify that the payment standard amount used to 
calculate the family's homeownership assistance cannot be lower than 
what the payment standard was at the start of homeownership assistance. 
This is the current requirement, but HUD is proposing to refine the 
wording of the regulation so that the requirement is more easily 
understood.
12. PBV: When the Tenant-Based Voucher Rule Applies (Sec.  983.2)
    Unit size and utility allowance schedule. The regulation governing 
the utility allowance schedule for tenant-based assistance (Sec.  
982.517(d)) requires the PHA to use the utility allowance for the 
lesser of the unit size rented by the family or the unit size per PHA 
subsidy standards (the size of the voucher). This provision is not 
applicable to the PBV program, because a family residing in a PBV-
assisted unit must be housed in a unit consistent with the family unit 
size per the PHA subsidy standards. PBV regulations currently state at 
Sec.  983.2(c)(3) that Sec.  982.517 applies to the PBV program in its 
entirety. HUD proposes to make a technical correction to expressly 
provide that Sec.  982.517(d), which states that the PHA must use the 
appropriate utility allowance for the lesser of the size of dwelling 
unit actually leased by the family or the family unit size as 
determined under the PHA subsidy standards, is not applicable to the 
PBV program. This change would further clarify that the PHA continues 
to use the utility allowance for the unit size leased by a family for 
the period of time prior to a family's move to an appropriately sized 
unit, in cases in which a family is in a wrong-sized PBV-assisted unit 
due, for example, to a change in family size.
    Other technical fixes. HUD has taken this opportunity to clarify 
that Sec.  982.201(e) does not apply to the PBV program. Section 
982.201(e) provides that the PHA must receive information verifying 
that an applicant is eligible within the period of 60 days before the 
PHA issues a voucher to the applicant. However, voucher issuance is one 
of the HCV provisions that does not apply to the PBV program. HUD has 
also revised Sec.  983.251(a)(2) to clarify that the PHA determines 
eligibility for admission of an applicant family (other than a voucher 
participant determined eligible at original admission to the voucher 
program) within 60 days before commencement of PBV assistance.
13. PBV Definitions (Sec.  983.3)
    For administrative ease and convenience, the proposed rule would 
revise the PBV definitions section to include those part 982 terms that 
are also used in part 983. In limited cases, where there is a slight 
PBV distinction to the part 982 term, an annotation would be made in 
this section.
    In addition to adding the applicable terms that are defined in part 
982, the following terms would be added: Applicant, areas where 
vouchers are difficult to use, in-place family, participant, tenant 
selection plan, transferee, and waiting list admission. The terms 
applicant, in-place family, participant, tenant selection plan, and 
waiting list admission were terms previously used but not defined in 
the regulation.
    The following previously defined terms would be revised to conform 
to the HOTMA changes: Agreement to enter into a HAP contract, 
development activity (formerly ``development''), excepted units, 
existing housing, newly constructed housing, rehabilitated housing, and 
Request for Release of Funds. Also, the term admission would be revised 
to specify the date of admission for families that were not previously 
admitted to the HCV tenant-based program.
Areas Where Vouchers Are Difficult To Use
    HOTMA establishes exceptions to the percentage limitation and 
income-mixing requirement for projects located in areas where vouchers 
are ``difficult to use.'' HUD requested comments on this provision on 
the January 18, 2017, notice, though it did not implement the provision 
at that time. Commenters offered a variety of suggestions for how HUD 
might define areas where vouchers are ``difficult to use'' such as: 
Rental vacancy rates; voucher lease-up success rates; areas with rapid 
rent appreciation; areas undergoing revitalization; and high-cost 
areas. Ultimately, HUD would adopt the following definition in this 
proposed rule: (1) A ZIP code area where the rental vacancy rate is 
less than 4 percent; or (2) A ZIP code area where 90 percent of the 
Small Area FMR is more than 110 percent of the metropolitan FMR. HUD 
took into consideration the ideas submitted but determined that many of 
them would be administratively burdensome to determine and/or monitor 
and, in some cases, not determinable for a specific area of a PHA's 
jurisdiction. Instead, HUD is proposing two factors that are easily 
identifiable and consistent data points.
    Question 12. HUD seeks feedback on this proposal, which defines 
areas where vouchers are difficult to use as areas where costs are high 
relative to metropolitan area FMRs. Keeping in mind that HUD wants the 
definition to be fairly straightforward (i.e., not involving a complex 
calculation), is there a better way to identify such areas?
Existing Housing
    With respect to the definition of existing housing, HUD is 
concerned that the current definition is overly broad. The current 
definition of ``existing housing'' is housing that exists on the 
proposal selection date and ``substantially complies'' with HQS on that 
date. By further defining what is meant by ``substantially complies,'' 
HUD intends to provide greater clarity to PHAs and prospective owners 
regarding whether a property may be selected as ``existing housing'' or 
must undergo rehabilitation prior to being placed under a HAP contract. 
This distinction becomes even more critical as this proposed rule is 
also implementing the HOTMA provision that eliminates the environmental 
review requirement for PBV existing housing in certain circumstances.
    On June 25, 2014, at 79 FR 36145, HUD published a final rule making 
conforming changes to regulations as a result of the Housing and 
Economic Recovery Act of 2008 (HERA), entitled, ``Changes to the 
Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher 
Programs'' (HERA Final Rule). In that rule, HUD left the current 
definition of ``existing housing'' in place, while the preamble 
explained that HUD would continue to determine if changes were 
appropriate:

    HUD will further consider what may be the best metric for 
determining compliance with HQS; that is, whether HUD should measure 
the amount of time that must pass from the date of selection to date 
of compliance or identify an appropriate dollar standard of the 
total amount of work that must be performed, or determine some other 
mechanism. HUD will resubmit for public comment any proposed changes 
to the definition of existing housing.

    HUD is using this proposed rule to propose changes to the 
definition of existing housing as provided in the HERA Final Rule 
preamble. Under this proposed rule, the definition of existing housing 
would be revised to define ``substantially complying'' with HQS as a 
unit that has HQS deficiencies that require only minor repairs to 
correct (repairs that could reasonably be

[[Page 63675]]

expected to be completed within 48 hours of notification of the 
deficiencies). To qualify as existing housing, all proposed PBV units 
in the project must reasonably be expected to be in compliance with HQS 
within 48 hours of notification. Furthermore, to qualify as existing 
housing, the project is ready to go under HAP contract with minimal 
delay--after the unit inspections are complete, all proposed PBV units 
not meeting HQS could be brought into compliance to allow PBV HAP 
contract execution within 48 hours.
    The distinction between PBV existing housing and PBV rehabilitation 
under the proposed rule is, at its essence, based on whether the units 
in their ``as-is'' condition either meet or can meet (with minimal 
repairs and little or no delay in HAP contract execution) the Housing 
Quality Standards, which would allow the PHA to promptly execute the 
PBV HAP contract with the owner. If the repairs are extensive in 
nature, or if the number of units that require repairs is so large that 
the HAP contract execution cannot occur within a relatively short 
amount of time, then the appropriate type of PBV for the project is 
rehabilitation.
    HUD believes that this standard, which is based on the time the HQS 
repairs could reasonably be expected to take as the measure of 
substantial compliance and how promptly the project would be able to be 
placed under HAP contract, has advantages over the use of a dollar 
threshold because of the variation of repair costs across the country 
and because a cost measure would need to be adjusted periodically to 
reflect cost increases. It would also provide a common-sense standard--
for a project to qualify as existing housing for PBV assistance, any 
repairs needed to bring the units into HQS compliance would have to be 
relatively minor in nature and easily completed. Any project requiring 
more extensive and time-consuming repairs would not qualify as existing 
housing and instead would be subject to the PBV rehabilitation 
requirements.
    The current definition provides that the existing units must fully 
comply with the HQS before execution of the HAP contract. Since that 
requirement will not apply if the PHA is using either the alternative 
inspection or NLT option in fulfilling the initial HQS inspection 
requirements for the PBV existing housing project, HUD is proposing to 
revise the definition to state that the units must meet the pre-HAP 
inspection requirements, as opposed to HQS, prior to HAP execution.
    Question 13. HUD seeks comment on the proposed change to the 
definition of existing housing. Is the 48-hour standard reasonable, 
particularly for larger projects? Are there better alternative 
definitions of existing housing that would meet the objective of more 
clearly providing uniformity as to whether a project qualifies as 
existing housing? HUD also seeks comment on whether the definition 
should be tightened to prevent the circumvention of rehabilitation 
program requirements by selecting a project as existing housing when 
significant work is needed for the property to comply fully with HQS. 
For example, a previous proposed definition of existing housing 
provided that to qualify as existing housing, the owner must not be 
planning to perform rehabilitation work on the units within one year 
after HAP contract execution that would cause the units to be in 
noncompliance with HQS and that would total more than $1,000 per 
assisted unit.
    Question 14: The proposed and current definition of ``project'' is 
statutory and must be used to determine PHA compliance with the income-
mixing requirement. HUD has applied this statutory definition to the 
PBV program in general for the sake of administrative consistency. 
Should HUD adopt a different definition of ``project'' for other 
elements of the PBV program? If so, what definition should HUD adopt, 
and for which program elements?
14. Cross-Reference to Other Federal Requirements (Sec.  983.4)--Labor 
Standards
    The proposed rule would make changes to the description of labor 
standards to conform to the changes made elsewhere in the rule 
regarding the applicability of Davis-Bacon wage rates to the PBV 
program. Please see the detailed preamble discussion concerning the 
proposed Davis Bacon change in Sec.  983.210, below.
15. Description of PBV Program (Sec.  983.5)
    The proposed rule would revise Sec.  983.5(a)(3) to conform it to 
changes made elsewhere in the rule that newly constructed or 
rehabilitated housing may be developed with or without an Agreement. 
Please see the below preamble discussion on the proposed change to 
implement the HOTMA provision that PBV housing may be developed without 
an Agreement if certain requirements are met at Sec.  983.155.
    The rule would also make another conforming change to Sec.  
983.5(d) to reference the new section on PBV provisions in the 
Administrative Plan that is proposed at Sec.  983.10 and discussed 
later in this preamble. Finally, HUD is also proposing to revise this 
section to clarify that PBV assistance may be attached to both single-
family and multifamily buildings, and that HCV administrative fee 
funding made available to the PHA is used for both the administration 
of tenant-based and project-based assistance.
16. Maximum Amount of PBV Assistance (Sec.  983.6)
    HUD implemented the HOTMA PBV program limit provisions through the 
FR Implementation Notice. HUD is proposing to substantially revise 
Sec.  983.6 to codify the new HOTMA requirements in the 24 CFR part 983 
program regulations.
    HOTMA changed the methodology used to calculate the PBV program 
limit from a budget authority percentage to a unit count, meaning that 
a PHA may project-base up to 20 percent of its authorized voucher 
units. This proposed rule updates Sec.  983.6(a) to reflect that 
change. Notwithstanding the change in the program limit methodology, 
PHAs would still be responsible for determining that they have 
sufficient funding available to support the vouchers they are planning 
to place under a PBV HAP contract.
    HOTMA also authorizes a PHA to project-base an additional 10 
percent of its authorized voucher units, but only for units that serve 
the homeless, veterans, provide supportive housing to persons with 
disabilities or elderly persons, or are located in areas where vouchers 
are difficult to use. HOTMA also authorizes a PHA to project-base an 
additional 10 percent of its authorized voucher units, but only for 
units that serve the homeless, veterans, provide supportive housing to 
persons with disabilities or elderly persons, or are located in areas 
where vouchers are difficult to use. Under this proposed rule, solely 
for purposes of applying the additional 10 percent veterans exception 
to the PBV program cap, the term ``veteran'' means a person who served 
in the active military, naval, or air service, and who was discharged 
or released therefrom under conditions other than dishonorable, which 
is the definition of veteran defined by 38 U.S.C. 101. For purposes of 
determining this statutory cap exception, the term veteran needs to 
have a standard definition that is applied consistently by PHAs across 
the program. This definition does not preclude a PHA from applying the 
term ``veteran'' differently for other purposes of program 
administration. For example, the PHA could choose to apply a

[[Page 63676]]

broader standard as to who would qualify as a veteran when establishing 
a local preference for admissions for veterans. However, under this 
proposed rule in order for a PBV unit to qualify for the 10% exception 
on the basis that the unit is designated for veterans, the veteran must 
be a person who served in the active military, naval, or air service, 
and who was discharged or released therefrom under conditions other 
than dishonorable.
    These additional units are covered by proposed changes in Sec.  
983.6(d). In addition, HUD would add a proposed definition of ``areas 
where vouchers are difficult to use'' to Sec.  983.3, which is 
discussed in detail in section 13 of the section-by-section summary.
    Commenters on the FR Implementation Notice suggested that other 
categories of units (e.g., units that need preservation) should be made 
eligible for project-basing under the 10 percent exception; HUD however 
lacks the authority to except units that are not specified in statute.
    Commenters also stated that limiting the exception to contracts 
that were first executed on or after April 18, 2017, as provided in the 
FR Implementation Notice, penalizes PHAs who have already made efforts 
to serve the populations favored with the exception. HUD lacks the 
statutory authority to apply the exception retroactively to units that 
were under contract prior to April 18, 2017. After further considering 
these comments, however, HUD proposes to allow units that are added to 
an existing contract under Sec.  983.207(b) and are eligible for the 
exception to qualify for the exception, even if the existing contract 
itself was executed prior to April 18, 2017.
    HOTMA excludes certain categories of units from this program 
limitation entirely (these are referred to in the proposed regulation 
as units excepted from the program cap and project cap). Please see the 
discussion concerning these units later in this preamble under Sec.  
983.59.
    Lastly, under the current regulation at Sec.  983.6(d), a PHA must 
submit information to HUD prior to issuing a request for proposals or 
otherwise selecting a project for an award of PBVs. The intent of the 
requirement is to assure that PHAs determine whether any new selection 
will push them above the statutory cap on project-basing. Taken as a 
whole, HOTMA significantly complicates this calculation through the 
number of different ways a cap may be expanded, or may not apply to a 
unit. In this proposed rule, HUD would eliminate the requirement at 
Sec.  983.6(d) and establish a new Sec.  983.58 that would state all 
the scenarios under which a PHA must perform calculations prior to 
project-basing additional units of assistance.
17. PBV Provisions in the Administrative Plan (Sec.  983.10)
    The proposed rule would redesignate the current Sec.  983.10, 
Project-based certificate (PBC) program, as Sec.  983.11 and add a new 
Sec.  983.10 to contain Administrative Plan requirements unique to the 
PBV program. It would define areas in which the PHA has discretion to 
establish policies with respect to such things as the PHA's standard 
for deconcentrating poverty and expanding housing and economic 
opportunity, waiting list management, and whether the PHA will retain 
the use of an Agreement for new construction/rehabilitation. The list 
provided in the rule is not intended to be an all-inclusive list; 
instead, the list highlights the major policy areas where the PHA has 
some discretion.
18. Project-Based Certificate (PBC) Program (Sec.  983.11)
    HUD is proposing to redesignate Sec.  983.10, Project-based 
certificate (PBC) program, to Sec.  983.11. There are no proposed 
changes to the text.
19. Prohibition of Excess Public Assistance (Sec.  983.12)
    HUD is proposing to add a new section as part of an effort to 
better organize and clarify the subsidy layering requirements for the 
PBV program. Currently, the subsidy layering requirements are found in 
Sec.  983.55, which is found in Subpart B, Selection of PBV Owner 
Proposals. The prohibition of excess public assistance applies only to 
newly constructed and rehabilitated housing after the project is 
selected and placed under HAP. In order to better clarify the current 
requirements and to consolidate information related to development 
requirements, HUD is proposing to add a new Sec.  983.12 that speaks 
generally to the prohibition of excess public assistance for PBV new 
construction and rehabilitated housing. The new section would refer 
readers to Sec.  983.153(b) for the requirements related to placing new 
construction and rehabilitated housing under HAP contract. In addition, 
this new section would include language (currently found in the PBV HAP 
contract for new construction and rehabilitated housing) that the owner 
must disclose information to the PHA regarding any additional related 
public assistance that is made available with respect to the contract 
units during the term of the PBV new construction and rehabilitation 
HAP contract. In those instances, a new subsidy layering review would 
be required to determine if the additional assistance would result in 
excess public assistance in the project. The PHA must adjust the 
housing assistance payments to the owner if the additional public 
assistance results in excess public assistance to the project.
    As is currently the case and in accordance with section 
8(o)(13)(M)(i) of the 1937 Act, under this proposed rule the subsidy 
layering requirements never apply when a PHA is attaching PBV 
assistance to existing housing, either prior to HAP contract execution 
or during the term of the contract.
20. Owner Proposal Selection Procedures (Sec.  983.51)
    HOTMA authorizes a PHA that is engaged in an initiative to improve, 
develop, or replace a public housing property or site to attach PBV 
assistance to an existing, newly constructed, or rehabilitated 
structure in which the PHA has an ownership interest or over which the 
agency has control without following a competitive process, as long as 
the PHA has notified the public of its intent to do so through its PHA 
Plan. While the PHA must have ownership interest in or control over the 
project to attach PBV assistance to it without following a competitive 
process, it is important to emphasize that having ``ownership 
interest'' in the project does not mean that the unit must meet the 
definition of PHA-owned unit. An ownership interest means that the PBV 
PHA or its officers, employees, or agents are in an entity that holds 
any direct or indirect interest in the project in which the units are 
located, including but not limited to an interest as: Titleholder, 
lessee, stockholder, member, or general or limited partner; or member 
of a limited liability corporation. A PHA ownership interest also 
includes cases where the PBV PHA is the lessor of the ground lease for 
the land upon which the PBV project is located. With this proposed 
rule, HUD proposes to codify this HOTMA provision in the 24 CFR part 
983 regulations, which was previously implemented in the FR 
Implementation Notice. In Sec.  983.51(c) under the proposed rule, the 
PHA may select a project in their public housing inventory, or a 
project that may have been removed from the public housing inventory 
through any available legal removal tool within 5 years of the proposal 
selection date. In accordance with Sec.  983.54, Prohibition of 
assistance for units in subsidized housing (redesignated as Sec.  
983.53 in this

[[Page 63677]]

proposed rule), the PHA may not attach or pay PBV assistance until the 
public housing units are removed from the public housing inventory. HUD 
would also make clear in this proposed rule that newly developed or 
replacement housing developed under this authority need not be on the 
same site as the original public housing, in contrast with replacement 
units for which a PHA is claiming an exception from the PBV program and 
project caps (see Sec.  983.59(d)).
    HUD is also proposing to eliminate the $25,000 per unit cost 
requirement for rehabilitation and new construction that was part of 
the initial implementation requirements for this HOTMA provision in the 
FR Implementation Notice by not proposing it in this rule. The purpose 
of the cost test was to ensure that the PHA was truly engaged in an 
initiative to improve the public housing project or site and not simply 
avoiding following the competitive selection process by undertaking 
minor repairs at the project. However, by its very nature, a PBV new 
construction project is replacing the public housing project, which 
fulfills the HOTMA requirement that the PHA is engaged in an initiative 
to improve, develop, or replace the public housing project or site. 
Likewise, if the project will be assisted through PBV for rehabilitated 
housing, the rehabilitation that is undertaken in order to attach the 
PBV assistance to the project constitutes an initiative to improve the 
project.
    In addition, HUD is also proposing, at Sec.  983.51(c)(2), to allow 
a PHA that is engaged in an initiative to improve, develop, or replace 
a public housing property or site to attach PBV assistance to an 
existing, newly constructed, or rehabilitated structure without 
following a competitive process in cases where the PHA has no ownership 
interest or control over the site but where the PHA is administering 
the PBV assistance because the public housing project in question is 
owned by another PHA that does not administer the HCV program. The 
public housing project must either still be in the public housing 
inventory or removed from the public housing inventory through any 
available legal removal tool within 5 years of the proposal selection 
date. In addition, the PBV assistance must have been specifically 
identified as the replacement housing for the impacted public housing 
residents as part of the public housing demolition/disposition 
application, voluntary conversion application, or any other application 
process submitted to and approved by HUD to remove the public housing 
project from the public housing inventory. HUD believes under these 
limited circumstances the administering PHA should be able to attach 
the PBV assistance to the public housing project without following a 
competitive process since the conversion of the project to PBV 
assistance was part of the overall plan approved by HUD to reposition 
the project and preserve it as affordable housing for the public 
housing residents and the community.
    HUD is proposing several non-HOTMA related clarifications to this 
section. HUD would add a reference to the required PHA inspections that 
must occur prior to the proposal selection that are covered elsewhere 
in the regulation since those requirements are a key component of the 
proposal selection process (Sec.  983.51(e)). HUD is also proposing to 
define the proposal selection date (Sec.  983.51(g)). For projects 
selected through a request for proposals or based on a previous 
competition, the proposal selection date would be the date on which the 
PHA provides written notice to the party that submitted the selected 
proposal. For former public housing projects selected without a 
competitive process, the date of proposal selection would be the date 
of the PHA's board resolution approving the project-basing of 
assistance at the specific project. This change is intended to ensure 
that the date of selection is consistently applied in relation to a 
project's eligibility for selection based on a previous competition or 
without regard to a competitive process. Finally, the proposed rule 
would add a new paragraph (k), which serves as a reminder that a PHA 
may not commit project-based assistance to a project if the owner or 
any principal or interested party is debarred, suspended, subject to a 
limited denial of participation, or otherwise excluded under 2 CFR part 
2424 or is listed on the U.S. General Services Administration list of 
parties excluded from Federal procurement programs.
    Question 15: Are there other situations that should be exempt from 
competitive selection requirements? For example, should HUD also exempt 
the placement of project-based vouchers that are used to replace 
previously federally assisted or rent-restricted properties from 
competitive selection requirements?
21. Prohibition of Assistance for Ineligible Units (Sec.  983.52)
    HUD would redesignate Sec.  983.53, Prohibition of assistance for 
ineligible units, as Sec.  983.52. HUD is proposing to delete the 
current Sec.  983.52, Housing Type, cover the definition of existing 
housing in Sec.  983.4, and incorporate the provisions currently found 
at Sec.  983.52(a)(1) and (2) into the newly designated Sec.  
983.52(d). HUD would also revise Sec.  983.52(d) in this proposed rule 
to conform with the proposed implementation of the PHA option to 
undertake PBV development without an Agreement under Sec.  983.155 that 
is discussed later in this preamble.
22. Prohibition of Assistance for Units in Subsidized Housing (Sec.  
983.53)
    HUD would redesignate Sec.  983.54, Prohibition of assistance for 
units in subsidized housing, as Sec.  983.53. There are no proposed 
changes to the current text.
23. Cap on Number of PBV Units in Each Project (Sec.  983.54)
    HOTMA made significant changes to the PBV project cap (also known 
as the income-mixing requirement) that determines how many units in a 
particular project may be PBV assisted. These HOTMA changes were 
implemented by the FR Implementation Notice. HUD is proposing to modify 
the PBV regulation (most notably at Sec. Sec.  983.54 and 983.262) to 
conform to all of these statutory changes as implemented in the FR 
notice.
    In this proposed rule, HUD would redesignate Sec.  983.56, Cap on 
number of PBV units in each project, as Sec.  983.54 and revise Sec.  
983.54 to codify the following HOTMA requirements:
    Under HOTMA, the project cap is whichever number is greater: 25 
units or 25 percent of units (assisted or unassisted) in the project. 
This means that a project with 25 or fewer units may be fully assisted 
with project-based vouchers, provided all other PBV requirements are 
met.
    HOTMA also makes changes to the exceptions to the project cap. 
Prior to HOTMA, dwelling units specifically made available to elderly 
families, disabled families, and families receiving supportive services 
were excepted from the project cap. HOTMA retains the exception for 
elderly families, modifies the exception for families receiving 
supportive services so that families must simply be ``eligible for'' 
supportive services, and eliminates the exception for disabled 
families, while grandfathering in the exception for projects that were 
under a PBV HAP contract prior to April 18, 2017. HOTMA also excluded 
certain categories of units from the project cap entirely (these are 
referred to in the proposed regulation as units excepted from the 
program cap and project cap and discussed at Sec.  983.59 below). HOTMA 
also allowed a higher (40 percent) project cap in two scenarios:

[[Page 63678]]

Where the project is in a Census tract with a poverty rate of 20 
percent or less, and where the project is in an area where vouchers are 
difficult to use. As stated previously, the definition of ``areas where 
vouchers are difficult to use'' has been added to Sec.  983.4.
    Public comments in response to the January 18, 2017, notice were 
mostly in the context of the supportive services exception. Several 
commenters stated that failure to complete a Family Self-Sufficiency 
(FSS) contract should not result in termination and eviction of the 
family. HUD addressed this comment in the July 14, 2017, technical 
corrections notice, explaining that current FSS requirements do not 
allow termination from the housing assistance program for failure to 
complete the FSS contract of participation. Accordingly, in this rule 
HUD also proposes to remove the provision at Sec.  983.257(b), which 
permitted lease termination by the owner where a family failed to 
complete its FSS contract without good cause. As is the case under the 
FR Implementation Notice, the proposed rule would also clarify that a 
PHA that administers an FSS program may use FSS as part of its 
supportive services package in meeting the project cap supportive 
services exception. However, the PHA may not rely solely on FSS in 
meeting the exception. A PHA could, however, make the supportive 
services used in connection with the FSS program available to non-FSS 
PBV families at the project.
    Other commenters proposed that HUD should not require supportive 
services to be made available to all families in a project, but that 
the services should be made available just to those units designated as 
supportive housing units. HUD is unable to implement such a change 
through regulation because it would be in conflict with the current 
statutory language.
    The proposed rule would also clarify, as stated in the January 18, 
2017, notice, that HAP contracts in effect prior to April 18, 2017, 
remain obligated by the terms of those HAP contracts with respect to 
the requirements that apply to the number and type of excepted units in 
a project, unless the owner and the PHA mutually agree to change those 
requirements. HUD has also taken this opportunity to propose to specify 
that the PHA has discretion to determine whether to except units and 
the number of units to be excepted (see Sec.  983.54(d)). The proposed 
rule would remove the reference to combining exception categories in a 
project. This is because while a PHA may offer both the elderly and the 
supportive services exception categories at a project, the supportive 
services exception requires that the supportive services be available 
to all PBV-assisted families at the project, making such combination 
provision irrelevant.
    The proposed rule would revise Sec.  983.262, When occupancy may 
exceed the project cap, to codify the HOTMA changes regarding the 
project cap. Because these changes are so closely related to the 
proposed revisions to Sec.  983.54, they are described in detail both 
here and later in the preamble discussion at Sec.  983.262. In Sec.  
983.262(b), the proposed rule would clarify that while a PHA may 
establish criteria for occupancy of particular units in ensuring that 
excepted units are occupied by a family who qualifies for the 
exception, families who will occupy excepted units must be selected 
through an admissions preference. Section 983.262(c) would set forth 
the requirements for the supportive services exception to apply. The 
unit would be excepted if any member of the family is eligible for one 
or more of the supportive services, even if the family chooses not to 
participate in the services. Also, if any member of the family 
successfully completes the supportive services, the unit would continue 
to be excepted for as long as any member of the family resides in the 
unit. The unit would only lose its excepted status if no member of the 
family successfully completed the supportive services and the entire 
family becomes ineligible during the tenancy for all supportive 
services that are made available to the residents of the project.
    The proposed Sec.  983.262(c) would provide that a family may not 
be terminated from the program or evicted from the unit when the unit 
loses its excepted status. Under this proposed rule, the Sec.  
983.262(d) (formerly (e)) requirements concerning wrong-sized units 
would be revised to remove the reference to disabled family members 
since, under HOTMA, there is no longer an exception to the income 
mixing requirement for disabled families. The current regulatory 
provisions continue to apply under the proposed rule to excepted 
elderly units in cases where the elderly family member no longer 
resides in the unit but the PHA allows the remaining family members to 
remain in the unit. The proposed regulation (in Sec.  983.262(f)) also 
addresses the options available to the PHA when an excepted unit loses 
its excepted status.
    Question 16. Does the proposed rule sufficiently address the 
project cap requirements in relation to a unit losing its excepted 
status?
    Question 17. Should other options not considered by the proposed 
rule be available to the PHA when a unit loses its excepted status?
    Question 18. Does the regulation clearly convey how FSS may be used 
in meeting the supportive services exception?
24. Site Selection Standards (Sec.  983.55)
    HUD would redesignate Sec.  983.57, Site selection standards, as 
Sec.  983.55. There are no changes to the regulatory text.
25. Environmental Review (Sec.  983.56)
    HUD would redesignate Sec.  983.58, Environmental review, as Sec.  
983.56. HUD is proposing to revise the environmental review 
requirements for existing housing in accordance with section 106(a)(8) 
of HOTMA. Section 106(a)(8) of HOTMA amended section 8(o)(13)(M)(ii) of 
the 1937 Act, which addresses environmental reviews for existing PBV 
projects. The provision in the 1937 Act was originally added by section 
2835 of the Housing and Economic Recovery Act (HERA),\5\ and read as 
follows:
---------------------------------------------------------------------------

    \5\ Public Law 110-289, approved July 30, 2008.

    A public housing agency shall not be required to undertake any 
environmental review before entering into a housing assistance 
payments contract under this paragraph for an existing structure, 
except to the extent such a review is otherwise required by law or 
---------------------------------------------------------------------------
regulation.

    However, as HUD explained in the November 24, 2008, Federal 
Register notice implementing HERA changes, the original statutory 
provision was problematic in that it exempted PHAs, which do not 
undertake environmental reviews, instead of responsible entities or 
HUD, which do the reviews. In addition, environmental reviews are 
always conducted as a result of a statutory or regulatory requirement. 
The notice concluded that the HERA provision did not eliminate any 
environmental reviews.\6\
---------------------------------------------------------------------------

    \6\ See 82 FR 5458.
---------------------------------------------------------------------------

    HOTMA addressed the second of these two problems, by requiring 
reviews when the review is required by law or regulation ``relating to 
funding other than housing assistance payments.'' \7\ Therefore, any

[[Page 63679]]

environmental reviews required just because of the provision of HAP 
would no longer be required. However, the language of HOTMA still left 
in place the part of the 1937 Act that exempted PHAs instead of 
responsible entities. A basic canon of statutory construction is that a 
statutory provision should be read so as to give every word meaning.\8\ 
Accordingly, despite the continued presence of the word ``PHA'', HUD is 
seeking to give effect to the apparent intent of Congress expressed in 
HOTMA. While it is the responsible entity that actually undertakes the 
environmental review, HUD believes that Congress referred to PHAs in 
the provision because they are responsible for ensuring that the 
required review has been conducted before undertaking a project or 
activity. Thus, rather than rendering the statutory provision (and the 
subsequent amendment in HOTMA) a nullity, the reference to PHAs 
emphasizes that it is these entities that will be held accountable by 
HUD for compliance with the environmental review requirements prior to 
undertaking an activity.
---------------------------------------------------------------------------

    \7\ Section 106(a)(1) of HOTMA also changed the word 
``structure'' to ``project'' throughout paragraph 8(o)(13) of the 
1937 Act. Consequently section 8(o)(13)(M)(ii) as amended by HOTMA 
reads ``(ii) Environmental review.--A public housing agency shall 
not be required to undertake any environmental review before 
entering into a housing assistance payments contract under this 
paragraph for an existing project, except to the extent such a 
review is otherwise required by law or regulation relating to 
funding other than housing assistance payments.''
    \8\ See Alaska Department of Environmental Conservation v. EPA, 
providing that a statute should be construed so that, ``if it can be 
prevented, no clause, sentence, or word shall be superfluous, void, 
or insignificant'' (540 U.S. 461, 489 n.13 (2004)).
---------------------------------------------------------------------------

    In endeavoring to give full effect to the words of section 
8(o)(13)(M)(ii) of the 1937 Act, HUD is also cognizant that the statute 
provides only a partial exemption to environmental reviews. 
Specifically, the applicability of the provision would be limited to 
``existing projects.'' Environmental reviews would continue to be 
applicable to PBV rehabilitation and new construction projects. The 
limited scope of the proposed exemption from environmental reviews 
reflects Congress's continuing emphasis on the importance of Federal 
assistance being used in an environmentally sound manner. For example, 
statutory provisions authorizing HUD to waive, or establish alternate, 
statutory requirements explicitly exclude environmental, labor, and 
fair housing statutory requirements.\9\
---------------------------------------------------------------------------

    \9\ See, e.g., the Rental Assistance Demonstration (RAD) Program 
in the Consolidated and Further Continuing Appropriations Act, 2012 
(Pub. L. 112-55, approved Dec. 23, 2011); and appropriations for the 
Community Development Block Grant Disaster Recovery programs in 
Public Laws 115-23 (approved April 13, 2017) and 115-72 (approved 
October 16, 2017).
---------------------------------------------------------------------------

    Another generally accepted principle of statutory construction is 
that the words of statutory provisions should be read so as to avoid 
results inconsistent with expressed congressional intent.\10\ A 
superficial reading of the statutory provision would exempt all 
existing projects where PBV assistance is being added from 
environmental review and only require that newly constructed and 
rehabilitated housing comply with environmental requirements, even if 
such existing project had never had an environmental review performed. 
Such a reading appears to be in contravention of Congress's oft-
repeated intent that housing assisted with site-based rental assistance 
comply with Federal environmental review requirements. To avoid what 
HUD believes is this unintended consequence, this rule proposes to 
allow an exemption from further environmental review if an existing 
housing project has ever undergone an earlier environmental review 
pursuant to receiving any form of federal assistance. In other words, 
if a project that meets the definition of ``existing housing'' as 
defined in the PBV regulations for program purposes has not previously 
undergone a federal environmental review because it did not receive 
federal assistance, then the project would not be exempt from an 
environmental review. HUD believes this reading strikes the appropriate 
balance between granting PHAs relief from the burden of duplicative 
environmental reviews while ensuring that all HUD assistance complies 
with Federal environmental standards.
---------------------------------------------------------------------------

    \10\ See Church of the Holy Trinity v. United States, 143 U.S. 
457 (1892).
---------------------------------------------------------------------------

    Question 19. HUD recognizes that properties that were previously 
Federally assisted and conducted their environmental reviews long ago 
may not be able to access documentation proving the review was 
conducted. How should HUD ensure that a review was conducted for those 
properties? Should HUD revise the requirement so that any existing PBV 
project that was formerly federally assisted and would have been 
subject to a federal environmental review (and an environmental review 
is not otherwise required by law or regulation related to funding other 
than PBV housing assistance) would qualify for the exception regardless 
of whether any environmental review documentation is available?
    Question 20. How administratively burdensome will it be for owners 
to demonstrate that an environmental review was conducted for the 
project in the past? Is such information readily available to a project 
owner, even if the environmental review may have been conducted many 
years ago?
    Question 21. Should the final rule establish a time limit for 
accepting environmental reviews conducted for previously Federally 
assisted properties? For example, if the environmental review for such 
a property was conducted 25 years ago, should HUD require that a new 
review be conducted? If such a limit is appropriate, what should the 
time limit be?
    Question 22. HUD's legal reading of section 8(o)(13)(M)(ii)--upon 
which the proposed implementation of the PBV existing housing exception 
from environmental review requirements is based--is that the intent of 
the statute is not to except all existing PBV projects from 
environmental reviews but rather to balance the PBV existing exception 
against Congress's intent that HUD-assisted housing comply with Federal 
environmental review requirements. Are there alternative approaches to 
striking this balance that would be preferable to HUD's proposed 
implementation of the environmental review exception for PBV existing 
projects? For example, project-based vouchers may be attached to 
existing projects with non-Federal affordable housing financing. HUD is 
interested in what non-Federal financing and financial closing also 
include review of contamination screening, floodplain management, flood 
insurance map reviews, or other environmental risk mitigation 
requirements. Are there site suitability reviews that occur in the non-
Federal assistance context that would address HUD's concerns that PBV 
assistance is not attached to buildings or sites that pose potential 
risks to the residents' health and safety or the viability of the 
project?
26. PHA-Owned Units (Sec.  983.57)
    HUD would redesignate Sec.  983.59, PHA-owned units, as Sec.  
983.57. The redesignated Sec.  983.57 governs the selection of PHA-
owned units and the role of independent entities in operating such 
units in the PBV program. Most of the changes in this section are 
intended to improve readability. However, Sec.  983.57(b)(1) would 
specify that, in addition to determining the rent to the owner, the 
independent entity must determine OCAF adjustments. This is a new 
responsibility for the independent entity, resulting from the HOTMA 
provision that allows for rent adjustments under the PBV program using 
an OCAF established by the Secretary and published in the Federal 
Register. HUD is proposing to implement the OCAF option in this rule at 
Sec.  983.302(b)(2); please see the related discussion on the OCAF rent 
adjustment option later in this preamble.

[[Page 63680]]

    Additionally, in Sec.  983.57(b)(4), HUD is proposing that, when 
PHAs carry out development or rehabilitation of PBV PHA-owned units, 
the PHA must submit evidence to the independent entity that the work 
has met applicable requirements. HUD believes the determination that 
the development or rehabilitation of the PHA-owned PBV project has met 
the applicable requirements should be added to the responsibilities of 
the independent entity. The PHA, as the owner of the PBV project, has a 
conflict in making that PHA determination for the HAP contract to be 
executed.
27. PHA Determination Prior to Selection (Sec.  983.58)
    Under the current regulation at Sec.  983.6(d), a PHA must submit 
information to HUD prior to issuing a request for proposals or 
otherwise selecting a project for an award of PBVs. The intent of the 
requirement is to assure that PHAs determine whether any new selection 
will push them above the statutory cap on project-basing. Taken as a 
whole, HOTMA significantly complicates this calculation through the 
number of different ways a cap may be expanded or may not apply to a 
unit. In this proposed rule, HUD would eliminate the requirement at 
Sec.  983.6(d) and establish a new Sec.  983.58 that states all the 
scenarios under which a PHA must perform calculations prior to project-
basing additional units of assistance. Under the proposed Sec.  983.58, 
the PHA would determine, in accordance with the program limit 
requirements at Sec.  983.6, if it is able to project-base additional 
vouchers before it issues a request for proposals or makes a selection 
based on a previous competition, attaches assistance without 
competition in accordance with the proposed requirements of Sec.  
983.51(c) of this rule, or when it amends a current HAP contract to add 
units in accordance with Sec.  983.207(b).
28. Units Excepted From Program Cap and Project Cap (Sec.  983.59)
    HOTMA excepts certain types of units from both the program cap and 
the project cap. These are units that were previously subject to 
certain federal rent restrictions or that were receiving another type 
of long-term housing subsidy provided by HUD. HUD implemented the 
exception for these units as part of the FR Implementation Notice. 
Because the lists for both exceptions are the same, HUD proposes to 
establish a new Sec.  983.59, which would list the types of units that 
are covered by the exceptions in Sec. Sec.  983.6 (program cap) and 
983.54 (project cap). Also, in response to comments received on the 
January 18, 2017, notice, HUD has included two additional types of 
units in the list of units ``previously subject to federally required 
rent restrictions'' that were not included in the list of excepted 
units implemented under the FR Implementation Notice: (1) Units 
financed with Low-Income Housing Tax Credits (26 U.S.C. 42) and (2) 
units subsidized with Section 515 Rural Rental Housing Loans (42 U.S.C. 
1485). In addition to listing the covered units, the proposed rule 
would codify the existing FR Implementation Notice requirement that the 
unit must have received one of the covered forms of HUD assistance or 
been subject to one of the covered federally required rent restrictions 
in the 5 years prior to the date of the request for proposals or the 
date of selection (without competition or a selection based on a prior 
competition).
    As was provided under the FR Implementation Notice, HUD is also 
proposing to exclude HUD-VASH vouchers specifically designated by HUD 
for project-based assistance from the PBV program limits and project 
caps. The proposed rule would also clarify that PBV units under the 
Rental Assistance Demonstration (RAD) are not subject to the program 
limitation or project caps.
    Finally, the proposed rule would address the issue of when newly 
constructed units developed under the PBV program may be excluded from 
the program limitation and project cap because they are replacing units 
that meet the criteria of excepted units because the units were 
formerly subject to federal rent restrictions or were receiving HUD 
assistance. As is the case under the FR Implementation Notice, the 
newly constructed unit would have to be located on the same site as the 
unit it is replacing; however, expansion or modification to the prior 
project's site boundaries is acceptable under certain conditions. In 
addition, the primary purpose of the newly constructed units would be 
required to replace the previous federally assisted or rent-restricted 
eligible units. The PHA would be able to demonstrate compliance with 
this requirement by giving former residents of the original project a 
selection preference that provides the residents with the right of 
first occupancy at the PBV new construction project, or, prior to the 
demolition of the original project, identifying the PBV new 
construction project as replacement housing as part of a documented 
plan for the redevelopment of the site.
    While HOTMA significantly expands the potential number of vouchers 
that may be project-based through this broad exception policy, PHAs 
considering increasing their use of project-basing are cautioned that 
all other PBV requirements apply to these formerly federally assisted 
or rent-restricted excepted units, including that a family occupying 
the PBV unit still has the right to move with tenant-based assistance 
after 12 months of occupancy. Section 8(o)(13)(E) of the 1937 Act (42 
U.S.C. 1437f) provides that a PHA must provide HCV tenant-based 
assistance or comparable tenant-based assistance to a family that seeks 
to exercise this right. If such assistance is not immediately 
available, then the PHA must provide the family with priority to 
receive the next voucher (or other tenant-based assistance) that 
becomes available. PHAs with large percentages of PBV units as a result 
of these exceptions may find it increasingly challenging to reach 
families on the tenant-based waiting list, as families moving under the 
statutory mobility requirements of the PBV program have priority over 
waiting list families for the next available voucher.
    Question 23. HUD recognizes that PBV assistance can be an effective 
tool to preserve affordable project-based housing units in a community. 
However, HUD is concerned about the unintended consequences that over-
use of this broad and unlimited exception authority may have in terms 
of the PHA's ability to meet its obligations to provide families with 
tenant-based vouchers when they wish to exercise their statutory right 
to move from the PBV unit with tenant-based assistance. Since these 
families are given priority for the next available voucher, this 
concern also has significant implications for families on the tenant-
based waiting list and the PHA's ability to address the local needs and 
priorities of their communities through the reissuance of turnover 
vouchers. HUD seeks comment on this issue. For example, should PHAs 
that wish to project-base vouchers over a certain number threshold be 
required to analyze the impact on the availability of vouchers and 
demonstrate that they will still have sufficient tenant-based vouchers 
(or other voucher assistance) available within a reasonable period of 
time for eligible PBV families that wish to move? What other approaches 
should be considered to address this concern? Is there a specific 
threshold in terms of the overall percentage of vouchers that are 
project-based where the PHA and/or HUD should focus on the potential 
impact on the availability of tenant-based assistance to provide PBV

[[Page 63681]]

families with a meaningful opportunity to move with tenant-based 
assistance?
29. Housing Quality Standards (Sec.  983.101)
    HUD is proposing to make a conforming change to Sec.  983.101(e) as 
part of the changes to implement the HOTMA provision that permits the 
PHA to enter into a PBV HAP contract with an owner that is under 
construction or recently has been constructed whether or not the PHA 
and owner sign an Agreement (see preamble discussion below at Sec.  
983.155). This change would remove the requirement that any additional 
requirements for quality, architecture, or design of PBV housing 
establish by the PHA must be specified in the Agreement (since there is 
no Agreement if the PHA opts not to require the Agreement).
30. Inspecting Units (Sec.  983.103)
    As discussed previously in this preamble, HOTMA made significant 
changes to the inspection requirements for both HCV tenant-based and 
project-based assistance. Please see the description of all the HOTMA 
section 101 changes to the unit inspection requirements in Sec.  
982.305. HUD is proposing to change Sec.  983.103 to codify the PBV-
related inspection requirements previously implemented under the FR 
Implementation Notice, as well as proposing new requirements to 
implement the HOTMA HQS enforcement and family relocation provisions 
that were not covered by the notice.
    This proposed rule would revise Sec.  983.103 to codify the initial 
inspection options (NLT and alternative inspections) that were 
implemented under the FR Implementation Notice. However, HUD proposes 
in this rule to limit the use of the NLT and alternative inspection 
options to existing housing. Regarding the NLT deficiencies initial 
inspection option, HUD's view is that the provision of PBV assistance 
for new construction or rehabilitation is intended to increase the 
supply of affordable housing that is decent, safe, and sanitary. HUD's 
expectation, therefore, is that newly constructed or rehabilitated 
units will fully meet Housing Quality Standards (i.e., such units will 
have no HQS deficiencies).
    With respect to the use of an alternative inspection option for the 
initial HQS inspection, HUD cannot identify a scenario under which a 
PHA could realistically rely on an alternative inspection completed 
prior to the rehabilitation. The unit, by virtue of the rehabilitation, 
is no longer in the same condition as it was at the time of the 
alternative inspection. Furthermore, if the rehabilitation was done 
improperly, then the unit may have unsafe conditions that did not exist 
at the time of the alternate inspection. As for newly constructed 
units, the alternative inspection provision does not appear to be a 
viable option, because, prior to construction, the units did not exist.
    Similar to the proposed change for HCV tenant-based assistance in 
Sec.  982.406, HUD is proposing to change the time frame by which the 
PHA must conduct its own inspection of the unit for existing PBV 
housing under the initial HQS inspection alternative inspection. For 
both tenant-based and project-based units under this proposed rule, the 
PHA would be required to conduct HQS inspections on all the assisted 
units within 30 days of the project selection date, as opposed to the 
15-day standard established under the FR Implementation Notice.
    HUD also proposes clarifying changes to Sec.  983.103 to expressly 
provide the timeframes within which the PHA must conduct an inspection 
when notified of a potential life-threatening or non-life-threatening 
deficiency in a PBV unit. If the family or a government official 
notifies the PHA of a potentially life-threatening deficiency, the PHA 
would have to inspect the unit within 24 hours and notify the owner if 
the life-threatening deficiency is confirmed. If the reported condition 
is non-life-threatening, the PHA would have to inspect the unit, and 
provide the owner notification if the deficiency is confirmed, within 
15 days. The rule further proposes that the owner may provide 
photographic evidence or other reliable evidence to the PHA in order 
for the PHA to verify that a defect has been corrected.
    In addition to codifying the HOTMA initial inspection options for 
PBV, Sec.  982.103 would be revised for clarity regarding the 
inspection of units prior to proposal selection (Sec.  983.103(a)) and 
HAP contract execution (Sec.  983.103(b)). These clarifying changes 
would also include revising the text to incorporate the proposed new 
definition for PBV existing housing, which is discussed in subsection 
13 of the section-by-section summary.
    The current regulation requires the independent entity to provide a 
copy of the inspection report for a PHA-owned PBV unit to the PHA and 
to the HUD field office. To reduce administrative burden, HUD proposes 
to remove the requirement that the report be provided to the HUD field 
office, instead proposing to require that the independent entity or PHA 
must provide the report to the field office upon request.
    Question 24. HUD requests comment on the use of the NLT and 
alternative inspection options for PBV new construction and 
rehabilitation. Are there circumstances where it would be acceptable 
for a newly constructed or rehabilitated PBV unit to fail to meet HQS 
once the construction or rehabilitation was completed, making the NLT a 
reasonable option for PHAs? Are there circumstances where the 
alternative inspection option can fulfill the initial HQS inspection 
requirements for PBV rehabilitation or new construction?
31. Applicability (Sec.  983.151)
    HUD is proposing to substantially restructure Subpart D (Sec. Sec.  
983.151 through 983.157). HUD solicits comment on the reorganization of 
this subpart, which is intended to provide clarity regarding the 
applicability of development requirements. Section 983.151 would be 
revised to better express Subpart D's purpose, which is to set forth 
the requirements related to development activity under the PBV program, 
including those requirements related to development activities 
undertaken on units that are under HAP contract (discussed below at 
Sec.  983.157).
32. Nature of Development Activity (Sec.  983.152)
    A new Sec.  983.152 would explain which sections and requirements 
of Subpart D are applicable to an owner undertaking development 
activity for the purpose of either placing a project under a HAP 
contract (newly constructed and rehabilitated housing) or, in the case 
of a partially assisted project (e.g., a project that includes both 
PBV-assisted and unassisted units), in order to add additional units in 
the project to the PBV HAP contract. (A new Sec.  983.157 would cover 
when development activity may be undertaken for units assisted under a 
HAP contract and what requirements apply.) All the development 
requirements under Sec.  983.153 would apply to development activity 
undertaken to place newly constructed or rehabilitated housing under a 
HAP contract. For development activity undertaken to add previously 
unassisted units in the project to a HAP contract, the development 
requirements related to equal employment opportunity, accessibility, 
and broadband infrastructure would apply, as applicable.

[[Page 63682]]

33. Development Requirements (Sec.  983.153)
    In this rule HUD is proposing to re-designate Sec.  983.154, 
Conduct of Development Work, as Sec.  983.153, and re-title the section 
``Development Requirements.'' HUD believes that consolidating the 
development requirements in one section of the regulations will provide 
greater clarity and ease of understanding to PHAs and owners.
    The development requirements described in this section would 
include subsidy layering reviews (see the related discussion at Sec.  
983.12), labor standards (please see the discussion regarding Davis-
Bacon requirements in this preamble at Sec.  983.210), equal 
opportunity (section 3 of the Housing and Urban Development Act of 1968 
(12 U.S.C. 1701u), and the implementing regulations at 24 CFR part 
135), equal employment opportunity, accessibility, broadband 
eligibility, and eligibility to participate in federal programs and 
activities. These requirements are the same requirements that are 
currently applicable to development activities carried out for newly 
constructed and rehabilitated housing.
34. Development Agreement (Sec.  983.154)
    This section would cover the existing requirements for the 
Agreement in terms of the timing of the execution of the Agreement and 
the required contents, which are found in the current regulations at 
Sec.  983.152, and implement a new HOTMA provision under which the PHA 
may choose not to execute an Agreement. HOTMA creates new discretionary 
authority for a PHA to enter into a PBV HAP contract with an owner for 
housing that is under construction or recently has been constructed 
whether or not the PHA and owner sign an Agreement to Enter into a HAP 
contract (Agreement). The law provides that, even when an Agreement is 
not used, an owner must be able to demonstrate ``compliance with 
applicable requirements prior to execution of the housing assistance 
payments contract.'' HUD interprets this language to mean that a PHA 
must affirm, for any work done after proposal submission and prior to 
proposal selection, that the owner has complied with all such 
requirements. Once the PHA has affirmed that any work done from the 
point of proposal submission complies with all such requirements, the 
two parties may enter into an Agreement--or not. Under either scenario, 
all work completed from the point of proposal submission forward would 
have to be developed and completed in compliance with the applicable 
requirements.
35. Completion of Work (Sec.  983.155)
    HUD is proposing to revise the section, Completion of Work, to 
conform to the change that the PHA may enter into the PBV HAP contract 
without first entering into an Agreement. In addition, HUD is proposing 
that the PHA shall determine the form and manner by which the owner 
must submit evidence and certify to the PHA that the development 
activity was completed and all such work was completed in accordance 
with the applicable requirements, rather than regulation specifying 
those requirements.
36. PHA Acceptance of Completed Units (Sec.  983.156)
    HUD is proposing to revise this section to conform to the change 
that the PHA may enter into the PBV HAP contract without first entering 
into an Agreement.
37. Development Activity on Units Under a HAP Contract (Sec.  983.157)
    HUD is proposing to add a new section to cover development 
requirements should the owner undertake development activity on units 
under HAP contract. HUD recognizes that, given that PBV HAP contracts 
may be in effect for twenty years or longer, owners may need over the 
course of the contract to undertake work that meets the definition of 
development activity. In addition, standards need to be established to 
prevent the circumvention of development requirements where units are 
placed under a HAP contract as existing housing even though the owner 
intends to undertake significant development activity on the assisted 
units shortly thereafter.
    HUD proposes to permit development activity on units currently 
under HAP contract if the owner is approved to do so by the PHA. 
However, except in extraordinary circumstances (such as repairs 
necessitated due to a fire or natural disaster), this would normally 
occur within the first five years from the effective date of the HAP 
contract. The owner's request would have to include a description of 
the proposed development activity and the length of time, if any, that 
it is anticipated that some or all the assisted units will not meet HQS 
as a result of the development activity. The owner's request would be 
required to include a description of how the families will be rehoused 
during the period that their unit does not comply with Housing Quality 
Standards because of the development activity. Housing assistance 
payments would not be made during the time the units are not in 
compliance with the Housing Quality Standards during the development 
activity.
    The proposed rule would provide that the development requirements 
for equal employment opportunity, accessibility standards, and 
broadband infrastructure apply, as applicable. The other development 
requirements under Sec.  983.153, the Development agreement 
requirements at Sec.  983.154, and the PHA acceptance of unit 
requirements at Sec.  983.156 would not apply.
    Question 25: HUD is specifically seeking comment on the time period 
proposed within which development work would not be permitted except in 
extraordinary circumstances. Is five years within the first five years 
from the effective date of the HAP contract a reasonable time frame? 
The intent of establishing such a timeframe is to prevent the 
circumvention of PBV requirements that apply for PBV rehabilitation 
projects but not existing housing (e.g., environmental reviews in 
certain circumstances, subsidy layering reviews, Davis Bacon, etc.) but 
not to preclude post-HAP execution work that would improve the quality 
of the housing for the assisted families or to protect the longer-term 
health and continued viability of the project. Are there alternative 
time-frames or other approaches that would better balance and address 
these two concerns? Are there reasonable, routine reasons why an owner 
may need to or choose to perform development activity within the first 
five years of the effective date of the HAP contract (please provide 
examples)?
    Question 26: Given that owners of properties under PBV contract 
will periodically need to undertake development to modernize and 
rehabilitate properties, has HUD laid out reasonable guidelines for 
undertaking development activity on units under a HAP contract?
38. HAP Contract Information (Sec.  983.203)
    HUD is proposing to revise Sec.  983.203, HAP contract information, 
so that the current reference to units that exceed the normally 
applicable project cap in paragraph (h) accurately reflect the new 
HOTMA exceptions. Unrelated to HOTMA, the section has proposed 
revisions to expressly state the features described in the HAP contract 
provided to comply with program accessibility requirements include 
those related to the Fair Housing Act and the Americans

[[Page 63683]]

with Disabilities Act, as applicable, in addition to section 504 of the 
Rehabilitation Act. Finally, HUD proposes to require that the PBV HAP 
contract specify whether the PHA has elected not to reduce rents below 
the initial rent to owner. The current regulations at Sec.  
983.302(c)(2) provide that if the PHA has elected, within the HAP 
contract, to not reduce rents below the initial rent to owner, the rent 
to owner may not be reduced below the initial rent except in certain 
circumstances. However, the current regulation lacks a corresponding 
provision in Sec.  983.203, which covers HAP contract information. The 
proposed change would better align the two sections with respect to 
this HAP contract provision.
39. When HAP Contract Is Executed (Sec.  983.204)
    As previously discussed, the proposed rule would address how the 
PHA executes the HAP contract for a PHA-owned unit for both tenant-
based units (Sec.  982.451(c)) and project-based units (Sec.  
983.204(d)). Please see the earlier discussion at Sec.  983.451(c).
    HUD has not provided a HUD-prescribed certification option for the 
Agreement to Enter into a HAP Contract (Agreement) for PHA-owned units, 
as it has for the HAP contract. While a PHA may not enter into an 
Agreement with itself for a PHA-owned unit where the PHA (not a 
separate legal entity) is the owner, the PHA has the option to not 
require the Agreement for PBV new construction and rehabilitated 
projects. The PHA could either create a separate legal entity to 
execute the Agreement as well as the HAP contract as the owner, or 
could use its discretion to not require the Agreement. (The PHA as the 
owner could still decide to voluntarily meet the Davis-Bacon wage 
requirements if it wanted to do so, regardless of the fact the Davis-
Bacon wage requirements are not applicable if the PHA does not require 
the use of the Agreement. See related discussion concerning the Davis-
Bacon requirements at Sec.  983.210.)
    HUD is also proposing to conform Sec.  983.204 to address proposed 
changes related to initial inspections discussed in detail elsewhere in 
this preamble. HUD is proposing to revise the existing language in 
Sec.  983.204(a) and (b) to reflect that for PBV existing housing, the 
PHA may use the initial inspection NLT and alternative inspection 
options. The language would reflect that the PHA must determine that 
the applicable pre-HAP contract HQS requirements have been met, rather 
than specifying requirements that may not be applicable if the PHA 
implemented and applied either initial inspection option to the PBV 
existing project.
    Likewise, HUD is proposing to revise Sec.  983.204(c) to remove the 
references to the Agreement for newly constructed or rehabilitated 
housing in describing the determinations the PHA must make before 
executing the PBV HAP contract, since elsewhere in this rule HUD is 
proposing to implement the option under which the PHA may choose not to 
execute the Agreement for PBV new construction and rehabilitation.
40. Term of HAP Contract (Sec.  983.205)
    HUD implemented section 106(a)(4) of HOTMA, which extends from 15 
to 20 years the term of an initial PBV HAP contract or contract 
extension, in the FR Implementation Notice. In codifying this provision 
in the PBV regulations, HUD proposes to restructure the underlying 
regulation in Sec.  983.205 to clarify the differences between the 
initial PBV HAP contract term, the extension of the initial contract 
term, and subsequent extensions, as suggested in comments on the 
January 18, 2017, Notice.
    In addition to the HOTMA changes related to the initial term and 
extensions, HUD is also proposing to move the current regulatory 
provisions at Sec.  983.205(c) and Sec.  983.210(d), which discuss HAP 
contract terminations, to Sec.  983.206. This proposed change would 
consolidate all provisions related to contract terminations under Sec.  
983.206.
    Question 27: With respect to the prohibition against extending a 
contract beyond 40 years until 24 months prior to the expiration of the 
HAP contract (Sec.  983.205(b)(3)(i)), are there circumstances under 
which HUD should permit a contract extension prior to that period in 
order to facilitate needed financing? If so, what period of time would 
be reasonable for the PHA to determine that such an extension is 
appropriate to continue providing affordable housing for low-income 
families or to expand housing opportunities?
41. Contract Termination or Expiration and Statutory Notice 
Requirements (Sec.  983.206)
    Section 983.206 currently covers the statutory owner notice 
requirements to the families and the PHA regarding the termination of 
the contract. In this proposed rule, HUD is proposing to expand the 
section to cover two new HOTMA requirements related to the termination 
of contracts, both of which were previously implemented under the FR 
Implementation Notice. In addition, HUD is proposing to move a couple 
of provisions currently found in Sec.  983.205 to Sec.  983.206 to 
better align the 24 CFR part 983 regulations.
    HOTMA requires that the PBV HAP contract must provide that, upon 
termination or expiration of a PBV HAP contract without extension, each 
assisted family may elect to remain in the same project with tenant-
based assistance, if its unit complies with HUD's Housing Quality 
Standards, the PHA determines or has determined that the rent for the 
unit is reasonable, and the family pays its required share of the rent 
and the amount, if any, by which the unit rent (including the amount 
allowed for tenant-based utilities) exceeds the applicable payment 
standard. In other words, the family receives the voucher that was 
previously used to assist the family under the PBV contract and may 
choose to use the voucher to stay at the project with continued rental 
assistance if certain conditions are met.
    In this proposed rule, at Sec.  983.206(b), HUD would codify these 
requirements and further specify that this provision applies unless the 
termination or expiration without extension occurs as a result of a 
determination of insufficient funding, as described below. If the PHA 
is terminating the contract because of insufficient funding, the PHA 
would not have funding to provide the families with tenant-based 
vouchers for them to elect to either stay or move from the project. The 
proposed rule would also provide that an owner may not terminate the 
tenancy of the family that elects to remain at the project with the 
tenant-based assistance except as the result of a serious or repeated 
lease violations, or other good cause under Sec.  982.310. (Under Sec.  
982.310, the owner may not terminate the tenancy for ``other good 
cause'' during the initial lease term, unless the owner is terminating 
the tenancy because of something the family did or failed to do.)
    Question 28. Should the family have the ability to remain in the 
same unit and not just the same project?
    HOTMA also provides that, in the event of insufficient appropriated 
funding, payments due under HCV or PBV HAP contracts must be made if 
the PHA is able to implement cost-saving measures that make it possible 
for the PHA to avoid terminating an existing HAP contract. As of the 
publication date of this proposed rule, cost-saving measures are 
governed by Notice PIH 2011-28.
    In Sec.  983.206(c) of this proposed rule, HUD would codify that 
the PHA may terminate a PBV HAP contract only after it determines that 
it lacks sufficient funding to continue housing assistance

[[Page 63684]]

payments for all voucher units currently under a HAP contract and has 
taken appropriate cost-saving measures, as applicable. In addition, HUD 
would have to determine that the PHA lacks sufficient funding. HUD 
proposes as well that a PHA must describe in its Administrative Plan 
the factors it will take into consideration when determining which HAP 
contracts to terminate first (e.g., prioritizing protecting PBV HAP 
contracts over tenant-based HAP contracts or prioritizing protecting 
contracts that serve vulnerable families or individuals over other 
contracts when determining which contracts shall be terminated due to 
insufficient funding). See the related discussion on changes proposed 
for the PHA HCV administrative plan at Sec.  982.54.
    Section 983.206(d) would provide that the owner may terminate the 
contract when the amount of rent to owner for any contract unit is 
reduced in accordance with the rent adjustment requirements of Sec.  
983.302 below the amount of the initial rent to owner, and the assisted 
families residing in the assisted units will be offered tenant-based 
assistance. This provision is currently found in Sec.  983.205(d). HUD 
is proposing to include a reference that the family may remain in the 
project with the tenant-based assistance in accordance with the new 
HOTMA provision. HUD is also proposing to add a sentence that expressly 
provides that the requirement that the owner provide at least one-year 
owner notice of the termination of the HAP contract is not applicable 
to this situation.
42. HAP Contract Amendments (To Add or Substitute Contract Units) 
(Sec.  983.207)
    The current regulation establishes a three-year window following 
the execution date of a PBV HAP contract during which units may be 
added to the contract without a request for proposals. HOTMA eliminates 
this window, allowing units to be added at any time during the term of 
a PBV HAP contract, which HUD implemented through the FR Implementation 
Notice. Section 983.207 of this proposed rule would incorporate the 
HOTMA change, including specifying that the PHA may not add units if 
doing so would push the agency out of compliance with the program 
limitation at Sec.  983.6 or the project cap at Sec.  983.54, and the 
units must comply with the requirements of the PBV HAP contract (e.g., 
rents must be reasonable, etc.). In implementing this provision, HUD is 
also proposing in Sec.  983.10 to require that a PHA describe in its 
Administrative Plan the circumstances under which it will consider 
amending a PBV HAP contract to substitute or add contract units and how 
those circumstances support the goals of the PBV program. The rule 
would further clarify that units added to the HAP contract following 
the execution of the HAP contract must be units that existed and were 
part of the project when the HAP contract was executed.
    HUD is also proposing related changes to two other sections of the 
983 regulations, specifically that if the owner undertakes development 
activity in order to add previously unassisted units to the HAP 
contract, then certain development requirements may apply (see 
Sec. Sec.  983.152 and 983.153). Please see previous preamble 
discussion related to those sections.
43. Condition of Contract Units (Sec.  983.208)
    HUD is proposing similar changes to Sec.  983.208 to implement 
these same HOTMA HQS enforcement and tenant relocation provisions for 
the PBV program that were discussed earlier in this preamble under 
Sec.  982.404 for the tenant-based program.
    The proposed rule would expand Sec.  983.208(b) to make the change 
that the unit is not in compliance with HQS not only if the PHA, but 
also if an inspector authorized by the State or unit of local 
government, determines upon inspection of the unit that the unit fails 
to comply with HQS, the PHA or inspector notifies the owner in writing 
of the failure, and the defects are not corrected within the new 
statutorily mandated time-frames. Additionally, Sec.  983.208(b) would 
include a new paragraph implementing the HOTMA standard for HQS 
deficiencies that are caused by any member or guest of the household, 
whereby the PHA may waive the owner's responsibility to remedy the 
violation and require the family to do so. Section 983.208(c) would be 
revised in similar fashion to Sec.  982.404 to cover when the PHA may 
withhold payments and when the PHA must abate the payment and remove a 
unit from the PBV HAP contract due to HQS deficiencies.
    HUD is proposing to allow the PHA to choose to abate payments for 
the entire PBV HAP contract rather than just the individual unit due to 
the unit's noncompliance with the HQS. Likewise, the PHA would be 
permitted to choose to terminate the entire PBV HAP contract, rather 
than simply removing the unit from the HAP contract, due to 
noncompliance with HQS, which is consistent with current program 
requirements. Finally, the same provisions related to the relocation of 
the family that were discussed in detail in the preamble section on 
Sec.  982.404 would be added to Sec.  983.208. This proposed change 
would apply the HOTMA protections to PBV families forced to relocate 
due to the owner's failure to correct the HQS deficiency, including the 
PHA's option to use up to 2 months of withheld or abated HAP for costs 
directly associated with relocating to a new unit, including security 
deposits or reasonable moving costs.
    As explained earlier in the preamble discussion on Sec.  982.404, 
these HOTMA provisions are set forth in section 8(o)(8)(G) of the 
United States Housing Act of 1937.
    The law provides that these provisions shall apply ``to any 
dwelling unit for which a housing assistance payments contract is 
entered into or renewed after the date of the effectiveness of the 
regulations implementing subparagraph (G).'' For tenant-based HAP 
contracts, HUD is interpreting a contract that is ``renewed'' to mean a 
HAP contract that has continued beyond the end of the initial lease 
term. For PBV, HUD is interpreting a contract that is ``renewed'' to be 
a contract that has been extended beyond the initial term of the 
contract. For contracts that were not entered into or renewed after the 
effective date of the regulations, Sec. Sec.  982.404 and 983.208 in 
effect as of the date before the effective date of the final rule will 
remain in effect.
    Unlike tenant-based HAP contracts, the transition period between 
when a HAP contract executed before the effective date and the final 
rule and its actual renewal may be quite lengthy in the PBV program. 
HUD understands that this adds complexity to the administration of PBV 
HAP contracts, particularly for PHAs that may be administering multiple 
PBV HAP contracts, some of which will be covered by the newly revised 
Sec.  983.208 while others remain under the regulation as it stood 
prior to the effective date of the final rule. The applicability of 
subparagraph (G) is statutory, and as a result HUD may not conform all 
PBV HAP contracts to the new enforcement standards and tenant 
protections under that subparagraph through this rulemaking.
44. Owner Certification (Sec.  983.210)--Davis Bacon, Other Conforming 
Changes
    HUD proposes to remove Sec.  983.210(j), which provides that by 
execution of the HAP contract, the owner certifies that at such 
execution and at all times during the term of the HAP contract, that 
repair work on project selected as an existing project that is 
performed after HAP

[[Page 63685]]

execution within such post execution period as specified by HUD may 
constitute development activity, and if determined to be development 
activity, the repair work undertaken shall be completed in compliance 
with Davis-Bacon wage requirements.
    Section 12 of the 1937 Act mandates the use of Davis-Bacon wage 
rates in the ``development'' of low-income housing projects, including 
projects under section 8 of the 1937 Act, with nine or more assisted 
units where there is an agreement for use of Section 8 program funds 
before the construction or rehabilitation begins.
    In this proposed rule, HUD is proposing to return to its 
requirements prior to a final rule, published June 25, 2014, at 79 FR 
36146, regarding Davis-Bacon applicability and PBV. Specifically, the 
proposal would apply Davis-Bacon wage rates in the PBV program to 
``rehabilitated'' and ``newly constructed'' housing where an Agreement 
covering nine or more assisted units is entered into between the PHA 
and the owner. Within this context, under the proposal, PBV ``existing 
housing'' would not be covered by Davis-Bacon. This approach long pre-
dates the PBV program. Predecessor Section 8 project-based assistance 
programs conditioned applicability of Davis-Bacon on execution of an 
Agreement prior to rehabilitation or construction. In contrast, HUD 
programs that applied to ``existing housing'' did not require an 
``Agreement,'' and Davis-Bacon wage rates did not apply.
    The 2014 final rule substantially redefined the meaning of 
``agreement'' for Davis-Bacon purposes and provided for application of 
Davis-Bacon to PBV ``existing housing'' under certain conditions. In 
particular, HUD revised the cross-reference to labor standards in 24 
CFR 983.4 to remove the reference to labor standards ``applicable to an 
Agreement'' covering nine or more assisted units and substitute a 
reference to labor standards ``applicable to development (including 
rehabilitation) of a project comprising'' nine or more assisted units. 
HUD stated that this language ``clarifies that Davis-Bacon requirements 
may apply to existing housing (which is not subject to the agreement) 
when the nature of any work planned to be performed prior to HAP 
contract execution or after HAP contract execution, within such post-
execution period as may be specified by HUD, constitutes development of 
the project.'' Subsequent guidance from HUD specified that ``work that 
constitutes remodeling that alters the nature or type of housing units 
in a PBV project, reconstruction, or a substantial improvement in the 
quality or kind of original equipment and materials'' conducted within 
18 months after the effective date of the HAP contract counted as 
``development'' and was therefore subject to Davis-Bacon wage 
requirements.\11\
---------------------------------------------------------------------------

    \11\ Applicability of Davis-Bacon Labor Requirements to Projects 
Selected as Existing Housing Under the Section 8 Project-Based 
Voucher Program--Guidance, published March 9, 2015 at 80 FR 12511.
---------------------------------------------------------------------------

    The implication of this is that under the 2014 final rule, HUD may 
require Davis-Bacon wages both: (i) Where the rehabilitation occurs 
prior to the owner entering into a HAP contract or any agreement for 
subsequent Section 8 use; and (ii) where the rehabilitation occurs 
within 18 months after the effective date of the HAP contract, 
regardless of whether the receipt of the assistance is conditioned upon 
the completion of the rehabilitation.
    After careful consideration of the differing views on this subject, 
HUD has concluded that the pre-2014 PBV requirements, rather than the 
requirements contained in the June 25, 2014, final rule, are more 
consistent with the express terms of section 12 of the 1937 Act. In the 
first instance, where rehabilitation occurs prior to the execution of a 
HAP contract or any agreement for subsequent Section 8 use, the 
statutory requirement that there be ``an agreement for such [Section 8] 
use before the construction or rehabilitation is commenced'' cannot be 
satisfied under the 2014 final rule. In the second instance, the sole 
focus on temporal proximity of the rehabilitation to the assistance 
agreement allows HUD to require Davis-Bacon even in those instances 
where the agreement for assistance is not conditioned upon the 
completion of the rehabilitation. This is inconsistent with the intent 
of section 12 and is inconsistent with the otherwise longstanding HUD 
practice of allowing owners of existing housing to engage in 
rehabilitation of Section 8-assisted housing without triggering Davis-
Bacon wage requirements. In addition, the application of Davis-Bacon 
wage rates to federally supported housing is a large federal regulatory 
cost on housing production.
    HUD acknowledges that the broad, open-ended definition of 
``existing housing'' in 24 CFR 983.3 has proven insufficient to ensure 
that PHAs properly classify PBV housing types and contributed to some 
of the Davis-Bacon issues that the June 25, 2014, final rule attempted 
to address. In order to remedy this problem, HUD has proposed a much 
more specific and tighter definition of ``existing housing,'' which is 
discussed in subsection 13 of this preamble.
    In addition, the amendment made by section 106(a)(4) of HOTMA, 
discussed in subsection 34 of this preamble, may significantly impact 
Davis-Bacon coverage. This provision amends section 8(o)(13)(F) of the 
1937 Act to allow a PHA to enter into a HAP contract for housing to be 
rehabilitated or newly constructed whether or not the PHA has entered 
into an Agreement, provided that the owner demonstrates compliance with 
``applicable requirements'' prior to execution of the HAP contract. 
Thus, HOTMA allows rehabilitation or new construction to occur in the 
absence of an Agreement. In these cases, under HUD's proposal to 
construe the reference to ``an agreement for such [Section 8] use'' in 
section 12 of the 1937 Act to refer exclusively to an Agreement, Davis-
Bacon would not apply. In this rule, HUD is proposing to provide the 
PHA with discretion to decide whether to require the Agreement (per 
Sec.  983.155(e)). HUD recognizes that permitting the PHA to exclude 
all rehabilitation and new construction PBV projects from Davis-Bacon 
requirements by not requiring use of the Agreement may be viewed as an 
unintended consequence of HOTMA's elimination of the need for an 
Agreement.
    Question 29. Should the PHA have the flexibility to exclude 
rehabilitation or new construction of PBV projects from Davis-Bacon 
coverage? Given the language in HOTMA that does not require an 
Agreement, should HUD still require Davis-Bacon coverage for new 
construction and rehabilitation through an alternate document?
    HUD is also proposing a conforming change to Sec.  983.210(c) to 
reflect the fact that eligible families may be selected from an owner-
maintained waiting list if applicable, rather than referred to the 
owner by the PHA. Please see the preamble discussion on owner-
maintained waiting lists at Sec.  983.251.
45. Removal of Unit From HAP Contract (Sec.  983.211)
    HUD is proposing a conforming change to Sec.  983.211(c) to reflect 
the fact that families may be selected from an owner-maintained waiting 
list, rather than be referred to the owner by the PHA. Please see the 
related preamble discussion on the proposed implementation of the HOTMA 
provision allowing for owner-maintained site-based waiting lists at 
Sec.  983.251.

[[Page 63686]]

46. How Participants Are Selected (Sec.  983.251)
    Section 106(a)(7)(B) of HOTMA provides that a PHA (or owner, if the 
owner maintains a site-based waiting list as discussed further below) 
may establish a selection preference for families who qualify for 
voluntary services, including disability-specific services, offered in 
conjunction with assisted units, provided that the preference is 
consistent with the PHA Plan. HUD implemented this provision of HOTMA 
in the FR Implementation Notice. HUD proposes to revise Sec.  
983.251(d) to cover PHA and owner preferences for families that qualify 
for these voluntary services. As previously implemented under the FR 
Implementation notice, a key component of the changes that the proposed 
rule provides is that the preference is for families who qualify for 
the voluntary services offered at a particular project. Prior to the 
effective date of this HOTMA provision on April 18, 2017, PHAs were 
required to provide the preference to any disabled family who needed 
the voluntary supportive services, regardless of whether the family was 
eligible to receive the services.
    While PHAs and owners would be permitted provide the preference for 
families that qualify for disability-specific services, the current 
prohibition on granting preferences to persons with a specific 
disability at Sec.  982.207(b)(3) would continue to apply. Furthermore, 
the HOTMA provision specifically provides that the selection preference 
is for families that qualify for voluntary services, including, but not 
limited to, disability-specific services. Families may not be required 
to accept the particular services offered at the project, and the 
preference may not be based on the family's agreement or commitment to 
accept the offered services. The preference may only be based on 
whether the family qualifies for the services offered in conjunction 
with the assisted unit. These preference requirements apply regardless 
of whether the preference is for a PBV excepted unit or a PBV non-
excepted unit.
    The current regulatory restrictions at Sec.  983.251(d)(1) that 
limit the services preference only to a population of families with 
disabilities that (i) significantly interfere with their ability to 
obtain and maintain themselves in housing, (ii) who would not be able 
to obtain or maintain themselves in housing, and (iii) for whom such 
services cannot be provided in a non-segregated setting would be 
eliminated in this proposed rule. HOTMA does not put limits or 
conditions of this nature on the families that may receive the 
preference or the supportive services, including disability-specific 
services, that may be offered in conjunction with the assisted unit, 
other than that those services must be voluntary. However, the PHA 
would still have to ensure that the PBV project complies with all 
applicable Fair Housing and Civil Rights requirements, including but 
not limited to the requirement to administer services, programs, and 
activities in the most integrated setting appropriate to the needs of 
qualified individuals with disabilities under section 504 of the 
Rehabilitation Act and Title II of the Americans with Disabilities Act 
(see 24 CFR 8.4(d) and 28 CFR 35.130(d)). Additionally, the PBV project 
where Medicaid-funded home and community based services will be offered 
as part of ``disability-specific services'' must also fully comply with 
the federal home and community-based settings requirements found at 42 
CFR 441.301(c)(4), (5) (``Home and Community-Based Settings'').
    HOTMA also authorizes the use of owner-maintained, site-based 
waiting lists for PBV units. Under current requirements, while a PHA 
may have project specific PBV waiting lists, such waiting lists must be 
maintained by the PHA, and the owner can assist only eligible families 
referred by the PHA from the PHA's waiting list. This proposed rule 
would implement the HOTMA provision that would allow an owner to 
maintain the PBV waiting list for a project. HUD did not implement this 
provision under the FR Implementation Notice and instead reserved its 
implementation for this rulemaking process. In addition, HUD is 
proposing several non-HOTMA related changes to Sec.  983.251.
    The proposed rule at Sec.  983(c)(7) would detail the roles and 
responsibilities for the PHA and if the PHA decides to allow the owner 
to maintain the site-based waiting list. Under an owner-maintained 
waiting list, the owner, not the PHA, is responsible for managing the 
waiting list, including processing changes in an applicant's 
information, contacting families when their name is reached on the 
waiting list, removing applicant names from the waiting list, and 
opening and closing the waiting list. HUD is proposing that PHAs may 
choose to use owner maintained PBV waiting lists for specific owners or 
projects. In other words, the PHA would not have to allow all owners to 
maintain the waiting list for their PBV projects. The rule proposes to 
allow the PHA to permit an owner to manage a single waiting list that 
covers multiple projects owned by the owner.
    If a PHA decides to let an owner maintain the site-based waiting 
list, HUD is proposing that the owner must develop and submit a written 
tenant selection plan to the PHA for approval. The tenant selection 
plan would have to include the policies and procedures the owner must 
follow in maintaining the waiting list, including any preferences for 
admission. The PHA must incorporate the approved owner tenant selection 
plan into the PHA's Administrative Plan.
    Under the proposed rule, applicants may apply directly at the 
project instead of at the PHA. The PHA may choose to delegate the 
responsibility of making a preliminary eligibility determination for 
purposes of placing the family on the waiting list and determining the 
family's eligibility for any preference for the site-based waiting 
list, or the PHA may continue to carry out those responsibilities for 
the owner-maintained waiting list. Regardless of whether the PHA 
delegates this responsibility to the owner, the PHA would always be 
responsible for conducting any informal review for the applicant.
    Under the proposed rule, the owner may not determine the family's 
final program eligibility. This would always be a PHA administrative 
responsibility. Related to owner maintained waiting lists, the proposed 
rule would also revise Sec.  983.254 to establish that, in cases where 
an owner-maintained waiting list is used, the owner must promptly 
notify the PHA of any vacancy or expected vacancy in a contract unit 
and refer the family to the PHA for final eligibility determination. 
The PHA must then make every reasonable effort to promptly make such 
final eligibility determination. Also, while owners would be required 
to follow all waiting list administration program requirements, 
including the public notice requirements of Sec.  982.206 when opening 
the waiting list, the proposed rule would also require the owner to 
follow such public notice requirements in the limited cases where the 
owner-maintained waiting list is already open and additional applicants 
are needed to fill vacant units. Other technical changes have been 
proposed to other parts of the regulation (Sec. Sec.  983.210(c), 
983.211(c), and 983.253(a)) to conform with the proposed provision 
authorizing the PBV program.
    The PHA would be responsible for oversight of any owner-maintained 
waiting lists to ensure they are administered properly and in

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accordance with all program requirements, including fair housing 
requirements. The owner would have to give the PHA, HUD, and the 
Comptroller General full and free access to its offices and records 
concerning the waiting list. Finally, the rule proposes that HUD may 
take enforcement actions against either the owner or the PHA, or both 
parties, for any program violations related to the owner-maintained 
waiting list.
    The proposed rule would also clarify that the income-targeting 
requirements apply to owner-maintained waiting lists for the PBV 
program.
    HUD is proposing to make several non-HOTMA related changes and 
clarifying edits to Sec.  983.251, How participants are selected. 
Specifically, HUD is proposing to reorganize and revise Sec.  
983.251(b) for greater clarity. As in current regulations, the proposed 
rule would continue to afford PHAs discretion to determine how to 
structure the PBV waiting list (whether a single waiting list for the 
entire PBV program, a project-specific waiting list, or as part of its 
HCV waiting list). The PHA would be able to choose to use a combination 
of these options. For example, the PHA may choose to use a central PBV 
waiting list for some PBV projects (either using a dedicated PBV 
waiting list or as part of the tenant-based waiting list) and use 
project-specific waiting lists for the other PBV project(s) in its 
portfolio. In the case of project-specific waiting lists, the PHA would 
have discretion to determine whether the owner will maintain such 
waiting lists.
    HUD is also proposing to expand this subsection to specifically 
address situations where the in-place family is a tenant-based voucher 
participant. These are not new requirements but clarify how the related 
requirements in Sec.  982.310(d) concerning when the owner may 
terminate the tenant-based tenancy come into play in terms of 
protections for in-place families under the PBV program. This proposed 
rule would provide that during the initial term of the lease, the in-
place tenant-based voucher family may agree but is not required to 
mutually terminate the lease with the owner and enter into a PBV lease. 
If the family is not willing to terminate the tenant-based lease during 
the initial term, the owner would not be permitted to terminate the 
lease for other good cause, unless the owner is terminating the tenancy 
because of something the family did or failed to do. The owner would 
not be permitted to terminate the tenancy during the initial lease term 
because the family is unwilling to terminate the lease and accept the 
owner's offer of a new lease under the PBV program, and the unit may 
not be added to the PBV HAP contract during that time. The proposed 
rule would further provide that, after the initial term of the tenant-
based lease, the owner may choose not to renew the lease or may 
terminate the tenant-based lease for other good cause, and the family 
would be required to move with their tenant-based voucher or could 
choose to stay if they were willing to give up their tenant-based 
voucher and enter into the PBV lease at that time.
    The current regulation addresses the impact of a family's rejection 
of the PBV offer or the owner's rejection of the family based on a 
family's position on the tenant-based waiting list, but it does not 
address the impact on a family's position on the PBV waiting list. The 
proposed rule would give discretion to the PHA to determine in its 
Administrative Plan the number of offers a family may reject before the 
family is removed from a central PBV waiting list. Likewise, the PHA's 
Administrative Plan would be required to address whether an owner's 
rejection will affect the family's place on a central PBV waiting list. 
Where a project-specific PBV waiting list is used, the family's name 
would be removed from the project-specific waiting list connected to 
the family's rejection of the offer or the owner's rejection of the 
family. Likewise, the family's place on the tenant-based waiting list 
would not be affected regardless of which type of PBV waiting list is 
used.
    Question 30. Should HUD establish additional or different criteria 
for the removal of the family from the PBV waiting list when a family 
rejects an offer or the owner rejects the family?
    Question 31. The proposed regulation at Sec.  983.251 addresses the 
roles and responsibilities of the owner and the PHA when owner-
maintained waiting lists are used. Are there any additional areas 
concerning this topic that require further clarification?
47. PHA Information for Accepted Family (Sec.  983.252)
    HUD has taken this opportunity to propose clarifications to the 
requirements concerning the oral briefing and the information packet 
the PHA is required to provide to a family selected for the PBV 
program. These are all non-HOTMA related changes. Specifically, HUD 
proposes that the oral briefing must include information on the 
family's right to move. With respect to the information packet, the 
proposed regulation would require PHAs to include information on 
federal, state, and local equal opportunity laws. Lastly, HUD proposes 
that the information packet must include information about the PHA's 
subsidy standards, including when the PHA will consider granting 
exceptions. This requirement is consistent with the information packet 
requirements of the HCV program. HUD expects that most PHAs already 
provide such information to PBV families.
48. Leasing of Contract Units (Sec.  983.253)
    HUD is proposing a conforming change to Sec.  983.253(c) to reflect 
the fact that under this proposed rule, families could be selected from 
an owner-maintained waiting list, rather than be referred to the owner 
by the PHA. Please see the related preamble discussion on the proposed 
implementation of the HOTMA provision allowing for owner-maintained 
site-based waiting lists at Sec.  983.251.
    In addition, HUD is proposing a non-HOTMA related change to Sec.  
983.253(a)(3), which would require that when a PBV owner rejects an 
applicant and notifies the applicant in writing of the grounds for the 
rejection, the owner must also provide the PHA with a copy of the 
written notice. HUD believes that this information is important for the 
PHA to have in cases where an owner has rejected an otherwise eligible 
applicant for a vacant PBV unit.
49. Vacancies (Sec.  983.254)
    HUD is proposing conforming changes to Sec.  983.254 to reflect the 
fact that families could be selected from an owner-maintained waiting 
list, rather than be referred to the owner by the PHA. Please see the 
related preamble discussion on the proposed implementation of the HOTMA 
provision allowing for owner-maintained site-based waiting lists at 
Sec.  983.251.
    As discussed previously in the preamble section on Sec.  983.251, 
the owner would not determine the family's final program eligibility as 
part of the owner's responsibilities for an owner-maintained site-based 
waiting list. The final eligibility determination for an applicant 
family would always be a PHA administrative responsibility. HUD is 
consequently proposing to revise Sec.  983.254 to reflect that if an 
owner maintained waiting list is used, the owner must promptly notify 
the PHA of any vacancy or expected vacancy in a contract unit and refer 
the family to the PHA for final eligibility determination, and the PHA 
must then make every reasonable effort to promptly make such final 
eligibility determination.

[[Page 63688]]

    Finally, HUD is proposing to revise Sec.  983.254(a) to expressly 
provide that both the PHA and the owner must make reasonable, good-
faith efforts to minimize the likelihood and length of any vacancy. 
This general requirement would cover any circumstance where there is a 
vacant PBV unit, regardless of whether the PHA is administering the 
waiting list directly or has implemented an owner-maintained site-based 
waiting list for the vacancy in question.
    Question 32. What would be a reasonable timeframe for the PHA to 
complete this final eligibility determination?
50. Owner Termination of Tenancy and Eviction (Sec.  983.257)
    As previously discussed in this preamble at Sec.  983.54, Cap on 
number of PBV units in each project, current FSS requirements do not 
allow termination from the HCV program for failure to complete the FSS 
contract of participation. Accordingly, HUD proposes to remove the 
outdated provision at Sec.  983.257(b), which permitted lease 
termination by the owner where a family failed to complete its FSS 
contract without good cause. This proposed change would conform the 
regulation to the current FSS program requirements, the HOTMA-related 
provision that the exception from the cap on the number of PBV units in 
each project for supportive services is dependent on the services being 
voluntary, and that tenants may not have their tenancies terminated 
because they decline to accept (or choose to no longer accept) the 
voluntary supportive service offered in conjunction with the assisted 
unit.
51. Security Deposit: Amounts Owed by Tenant (Sec.  983.259)
    The regulation governing security deposits currently gives PHAs 
discretion to prohibit an owner from charging PBV-assisted tenants a 
higher security deposit than the private market practice or higher than 
what the owner would charge unassisted tenants. Unrelated to HOTMA, HUD 
is proposing to revise the regulation by removing the PHA discretion to 
prohibit this practice of charging HCV families a higher security 
deposit and instead prohibit it in all cases. This would provide 
consistency with rent reasonableness requirements, where assisted 
families cannot be charged a higher rent than unassisted families.
52. Overcrowded, Under-Occupied, and Accessible Units (Sec.  983.260)
    HUD is proposing several non-HOTMA related changes to Sec.  
983.260. To provide certainty regarding the amount of time a family may 
remain in a wrong-sized unit or an accessible unit with features that 
the family does not need, the proposed rule would establish a timeframe 
of 30 days for the PHA to notify the family and owner that the family 
is in such a unit. (See 24 CFR 8.27 of the current regulations for 
further explanation of occupancy of accessible units.) Also, while the 
PHA would continue to set the time within which a family must move out 
of the unit when the PHA offers a form of continued assistance other 
than an HCV, the proposed rule would establish a maximum of 90 days 
within which a family must move. HUD also proposes restructuring the 
section to make the requirements clearer.
    Question 33. Are these proposed timeframes reasonable?
53. When Occupancy May Exceed the Project Cap (Sec.  983.262)
    The proposed rule would revise Sec.  983.262, When occupancy may 
exceed the project cap, to codify the HOTMA changes to project cap 
limits. In Sec.  983.262(b), the proposed rule would clarify that, 
while a PHA may establish criteria for occupancy of particular units in 
ensuring that units excepted from the project cap are occupied by a 
family who qualifies for the exception, families who will occupy 
excepted units must be selected through an admissions preference. 
Please see the related discussion at Sec.  983.54 above in this 
preamble.
    As discussed previously in the preamble discussion on the project 
cap at Sec.  983.54, Sec.  983.262(c) would set forth the requirements 
for the HOTMA supportive services exception to be applicable to a unit. 
The unit would be excepted if any member of the family is eligible for 
one or more of the supportive services, even if the family chooses not 
to participate in the services. Also, if any member of the family 
successfully completes the supportive services, the unit would continue 
to be excepted for as long as any member of the family resides in the 
unit. The unit would only lose its excepted status if no member of the 
family successfully completed the supportive services and the entire 
family becomes ineligible during the tenancy for all supportive 
services that are made available to the residents of the project. The 
proposed Sec.  983.262(c) would also provide that a family may not be 
terminated from the program or evicted from the unit when the unit 
loses its excepted status.
    Under this proposed rule, the Sec.  983.262(d) (formerly (e)) 
provisions concerning wrong-sized units would be revised to remove the 
reference to disabled family members since, under HOTMA, there is no 
longer an exception to the PBV unit project cap for disabled families. 
The current regulatory provisions would continue to apply under the 
proposed rule to excepted elderly units in cases where the elderly 
family member no longer resides in the unit but the PHA allows the 
remaining family members to remain in the unit. Finally, the proposed 
regulation (in Sec.  983.262(f)) would cover in detail the options 
available to the PHA when an excepted unit loses its excepted status.
    Question 34. Does the proposed rule sufficiently address the 
project cap requirements in relation to a unit losing its excepted 
status?
    Question 35. Should other options not considered by the proposed 
rule be available to the PHA when a unit loses its excepted status?
    Question 36. Does the regulation clearly convey how FSS may be used 
in meeting the supportive services exception?
54. Determining the Rent to Owner (Sec.  983.301)
    HUD is proposing to make several non-HOTMA related changes to Sec.  
983.301(f), Use of FMRs and utility allowance schedule in determining 
the amount of rent to owner.
    First, the current regulation states that a PHA must use the same 
utility allowance schedule for both its tenant-based and project-based 
programs. HUD is proposing to allow a PHA to request HUD field office 
approval to establish a project-specific utility allowance (for 
example, based on a flat fee charged by an owner or a third-party 
determination of actual or projected utility costs) for a project 
assisted under the PBV program. HUD will direct PHAs to use the process 
used for PBRA described in Notice H 2015-04 unlesPIH promulgates 
guidance specific to the PBV program. The use of a project-specific 
utility allowance is intended to assure that payments to tenants for 
utilities more closely reflect actual utility costs.
    HUD is aware that a project-specific utility allowance that under-
estimates the actual costs of utilities will have a negative impact on 
families. Therefore, the proposed change would further provide that the 
PHA request must demonstrate that the utility allowances used in its 
voucher program would either create an undue cost on families (because 
the utility allowance provided under the voucher program is too low), 
or that use of the utility allowances will discourage conservation and 
efficient use of HAP funds (because the utility

[[Page 63689]]

allowances provided under the voucher program would be excessive if 
applied to the project). The PHA would have to submit an analysis of 
utility rates for the community and consumption data of project 
residents in comparison to community consumption rates; and a proposed 
alternative methodology for calculating utility allowances on an 
ongoing basis. In addition, under this proposed change, HUD may 
establish additional standards or requirements for the PHA requests 
through a Federal Register notice subject to public comment. This would 
allow HUD to further refine the information and documentation that is 
needed based on experience over time without having to change the 
regulation, while still ensuring that any such requirements have the 
benefit of public comments before being implemented.
    Question 37. How could HUD streamline its utility allowance 
policies across the RAD PBV, traditional PBV, and HCV programs?
    Question 38. Should HUD permit the use of a site-specific utility 
allowance schedule for the HCV program? Is there additional 
information, including utility consumption data sources, that HUD 
should consider in setting utility allowance policy?
    Second, HUD is proposing several clarifying changes that to better 
reflect how the current requirements, in Sec.  888.113(c)(5) and Sec.  
888.113(h) for Small Area FMRs and project-based vouchers and the 
requirements at Sec.  982.503 for exception payment standards, 
determine the amount of rent to owner under the PBV program. 
Specifically, the proposed change would clarify that for any area in 
which SAFMRs are in effect, a HUD-approved exception payment standard 
amount will apply to the PHA's project-based voucher program only if 
the PHA has adopted a policy applying SAFMRs to its PBV program (see 
Sec.  888.113(h)).
55. Redetermination of Rent to Owner (Sec.  983.302)
    HOTMA authorizes a PHA and owner to agree that a PBV HAP contract 
will be adjusted by an annual operating cost adjustment factor (OCAF), 
subject to the applicable PBV cap on the rent to owner and the rent 
reasonableness requirement. HUD is proposing to implement this change 
by revising Sec.  983.302(b) under this rule. Under HOTMA, this OCAF 
option applies only to PBV HAP contracts that were entered into after 
the date of enactment of HOTMA (July 29, 2016).
    The proposed rule would provide that a rent increase may occur as 
the result of an owner request or, if both parties agree and provided 
for in the HAP contract, through an automatic adjustment by an 
operating cost adjustment factor. However, regardless of the method of 
the adjustment, the rent increase could not result in a rent that 
exceeds the maximum rent for the PBV project, as determined by the PHA 
pursuant to Sec.  983.301. Except for certain tax credit units, the 
rent to owner must not exceed an amount determined by the PHA, which in 
accordance with the statutory provision in section 8(o)(13)(H) of the 
1937 Act may not exceed the lowest of 110 percent of the FMR (or any 
exception payment standard approved by HUD under paragraph (1)(D))) for 
the unit bedroom size minus any utility allowance, the reasonable rent, 
or the rent requested by the owner. For example, if the rent to owner 
is capped by the PHA at 105 percent of the FMR, the owner would be 
unable to receive an OCAF adjustment that results in rents above this 
level.
    Question 39. Should HUD permit a PHA and owner to agree to OCAF 
adjustments up to the maximum level permitted by the statute without 
regard to the cap adopted by the PHA, as long as rents remain 
reasonable?
    In the event an annual OCAF adjustment fails to increase a 
property's rent up to the maximum level established by the PHA, HOTMA 
states that an owner may request an additional adjustment up to that 
level. Lastly, HOTMA states that, in the case of a PBV HAP contract 
that is adjusted by an OCAF, the contract must require an adjustment, 
if requested, up to the maximum level established by the PHA, at the 
point of contract extension. These HOTMA provisions are included in the 
proposed changes to Sec.  983.302(b) to implement the OCAF adjustment 
option.
    In addition to the HOTMA changes discussed above, HUD is also 
proposing to make the following non-HOTMA-related change to Sec.  
983.302(c), regarding the PHA option not to reduce PBV rents below the 
initial rent to owner. The regulation currently allows PHAs to elect 
within the HAP contract not to reduce PBV rents below the initial rent 
to owner but does not specifically address the timing of such election. 
The proposed rule would allow a PHA to make such an election at any 
time during the term of the HAP contract. The proposed rule would also 
clarify that if rents have already been reduced below the initial rent 
to owner, then the PHA may not make such an election as a way to 
increase the rents. If rents increase (pursuant to a rent increase 
under Sec.  983.302(b)) above the initial rent to owner, then the 
election would once again become available to the PHA. Additionally, 
the proposed rule would make a technical change to this provision by 
removing the following phrase: ``for dwelling units under the initial 
HAP contract.'' HUD believes this phrase may be misconstrued to limit a 
PHA's ability to make the ``rent floor'' choice only during the initial 
term of a HAP contract, or only for units covered under an initial HAP 
contract. To avoid such confusion, the phrase would be removed.
56. Reasonable Rent (Sec.  983.303)
    To reduce administrative cost and burden, HUD proposes to eliminate 
the requirement that the independent entity furnish a copy of its 
determination of reasonable rent for PHA-owned units to the HUD field 
office. HUD would retain the requirement that the independent entity 
furnish this information to the PHA.
    HUD is also proposing a conforming change in Sec.  983.303(f) to 
revise the existing reference to 983.59 to 983.57, as that section 
would be redesignated as Sec.  983.57 under this proposed rule.
57. Purpose and Applicability (Sec.  985.1)
    The proposed rule includes a revision to 24 CFR 985.1(b) to make 
clear that SEMAP applies to the PBV program in the same manner in which 
it applies to the former project-based certificate program. 
Specifically, SEMAP applies to the PBV program to the extent that PBV 
family and unit data are reported and measured under the stated HUD 
verification method.
58. Indicators, HUD Verification Methods, and Ratings (Sec.  985.3)
    HUD is proposing a change to Sec.  985.3(i), to correct the current 
reference to Sec.  982.503(c)(iii). The reference should read Sec.  
982.503(c)(3).

Additional Requests for Comment

    In addition to the provision-specific questions above, HUD is 
specifically soliciting comment on the following general questions.
    Question 40. HUD is not proposing any changes to the existing 24 
CFR 983.261 (Family Right to Move). Is Sec.  983.261 clear? If not, 
what needs to be clarified?
    Question 41. HUD is interested in aligning PBV program requirements 
with Housing Trust Fund (HTF) program requirements and solicits input 
from stakeholders regarding areas in which alignment will be 
particularly beneficial.
    Question 42. Under HUD's Rental Assistance Demonstration, PBV 
assistance may be transferred from one

[[Page 63690]]

site to another. Should HUD establish a new regulatory provision in 
part 983 governing transfers of assistance from one project to another? 
If so, what factors should HUD take into consideration in developing 
such a provision?
    Question 43. To make progress on eliminating regulatory barriers as 
reflected in the E.O. 13878, HUD is seeking public comment as it 
relates to this proposed rule to take productive steps in this policy 
area, if applicable. Given that the funding to support PBVs is a 
valuable resource to increase/preserve affordable housing units in 
communities, what, if any, policies related to PBVs could HUD consider 
to incent communities to reduce local regulatory barriers (e.g., 
prohibit impact fees on PBVs, increase by-right zoning, reduce 
affordable housing permitting) that would effectively decrease the cost 
of developing and producing housing? In addition, if HUD were to 
explore the need for data collection in this area, what are some 
existing PBV-related community level data that HUD could collect to 
help inform future policy making?

III. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    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 Executive Order. 
Executive Order 13563 (Improving Regulations and Regulatory Review) 
directs executive agencies to analyze regulations that are ``outmoded, 
ineffective, insufficient, or excessively burdensome, and to modify, 
streamline, expand, or repeal them in accordance with what has been 
learned.''
    This proposed rule would update HUD regulations for the HCV and PBV 
programs to conform to changes made by HOTMA. These changes include 
alternatives to HUD's housing quality standard inspection requirement, 
establishing a statutory definition of PHA-owned housing, and other 
elements of both programs, ranging from owner proposal selection 
procedures to how participants are selected. In addition to 
implementing these HOTMA provisions, HUD has included changes that are 
intended to reduce the burden on public housing agencies, by either 
modifying requirements or simplifying and clarifying existing 
regulatory language.
    This proposed rule was determined to be a significant regulatory 
action under section 3(f) of Executive Order 12866 (although not an 
economically significant regulatory action under the Order). 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, which is available for public inspection at 
www.regulations.gov.

Executive Order 13771

    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017. This 
proposed rule is considered an E.O. 13771 deregulatory action. Details 
on the estimated cost savings of this proposed rule can be found in the 
rule's RIA.

Information Collection Requirements

    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 2577-0226. In accordance with the Paperwork 
Reduction Act, 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 currently valid OMB control number.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for federal agencies to assess the effects of 
their regulatory actions on state, local, and tribal governments and 
the private sector. This rule will not impose any federal mandates on 
any state, local, or tribal governments or the private sector within 
the meaning of UMRA.

Environmental Review

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations in 24 CFR 
part 50 that implement section 102(2)(C) of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is available 
online at www.regulations.gov.

Impact on Small Entities

    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.
    For purposes of this rule, HUD defines a small PHA as a PHA for 
which the sum of the number of public housing dwelling units 
administered by the agency and the number of vouchers is 550 or fewer. 
There are approximately 2,700 such agencies; some are voucher-only, 
some are combined, some are public housing-only. HUD includes all of 
these agencies among the number that could be affected by the proposed 
rule. For those that operate voucher programs, the potential to be 
affected is evident. For public housing-only agencies, the potential 
effect of the proposed rule depends on whether the agency removes its 
public housing from the public housing program via one of the available 
legal removal tools, then project-bases any tenant protection vouchers 
awarded in connection with that removal.
    This proposed rule revises HUD regulations in certain ways that 
will reduce the burden on or provide flexibility for all PHAs, owners, 
and other responsible entities, irrespective of whether they are small 
entities. For example, the proposed rule leverages Small Area Fair 
Market Rents to provide PHAs with greater autonomy in setting exception 
payment standard amounts. It proposes to implement HOTMA's exceptions 
to the program and project caps under the PBV program, such as 
authorizing a PHA to project-base 100 percent of the units in any 
project with 25 units or fewer. It extends from 15 to 20 years the 
permissible duration of a PBV HAP contract, resulting in less frequent 
need for extensions, and eliminates the three-year window during which 
units may be added to an existing contract without a PHA issuing a new 
request for proposals (RFP). The rule proposes to eliminate extraneous 
requirements specific to the project-basing of VASH and FUP vouchers, 
as long as project-basing is done consistent with PBV program rules. It 
proposes to provide PHAs with greater flexibility in the establishment 
of utility allowance schedules. It also proposes to implement new 
discretionary authority for a PHA to enter into a PBV HAP contract with 
an owner for housing that is newly constructed or recently 
rehabilitated, as long as PBV program rules are followed, even if 
construction or rehabilitation commenced prior to the PHA issuing an 
RFP. HUD estimates that such changes have the potential to generate a 
range of cost savings but is unable to estimate the number of small 
entities that would experience cost savings as a result of changes 
proposed

[[Page 63691]]

by this rule, as such savings depend largely on actions that PHAs will 
take (or not) at their own discretion.
    For the reasons presented, the undersigned certifies that this rule 
will not have a significant economic impact on a substantial number of 
small entities.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final 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.
Catalog of Federal Domestic Assistance
    The Catalog of Federal Domestic Assistance numbers applicable for 
the programs that would be affected by this rule are: 14.871, 14.880, 
and 14.896.

List of Subjects

24 CFR Part 888

    Grant programs-housing and community development, rent subsidies.

24 CFR Part 982

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

24 CFR Part 983

    Grant programs-housing and community development, Low and moderate 
income housing, Rent subsidies, Reporting and recordkeeping 
requirements.

24 CFR Part 985

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

    Accordingly, for the reasons stated in the preamble, HUD proposes 
to amend 24 CFR parts 888, 982, 983, and 985 as follows:

PART 888--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--FAIR 
MARKET RENTS AND CONTRACT RENT ANNUAL ADJUSTMENT FACTORS

0
1. The authority for part 888 continues to read as follows:

    Authority:  42 U.S.C. 1437f and 3535d.

0
2. In Sec.  888.113, revise the second sentence in paragraph (c)(3) to 
read as follows:


Sec.  888.113   Fair market rents for existing housing: Methodology.

* * * * *
    (c) * * *
    (3) * * * A PHA administering an HCV program in a metropolitan area 
not subject to the application of Small Area FMRs may use Small Area 
FMRs after requesting and receiving approval from its local HUD field 
office.
* * * * *

PART 982--SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER 
PROGRAM

0
3. The authority for part 982 continues to read as follows:

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

0
4. In Sec.  982.4:
0
a. Revise paragraph (a); and
0
b. In paragraph (b):
0
i. Add in alphabetical order definitions for ``abatement'' and 
``authorized voucher units'';
0
ii. Revise the definition of ``Fair market rent (FMR)''; and
0
iii. Add in alphabetical order definitions for ``Independent entity'', 
``PHA-owned unit'', ``Request for Tenancy Approval (RFTA)'', ``Section 
8 Management Assessment Program (SEMAP)'', ``Small Area Fair Market 
Rents (SAFMRs)'', ``Tenant-paid utilities'', and ``Withholding''.
    The revisions and additions read as follows:


Sec.  982.4  Definitions.

    (a) Definitions found elsewhere. (1) The following terms are 
defined in 24 CFR part 5, subpart A: 1937 Act, covered person, drug, 
drug-related criminal activity, federally assisted housing, guest, 
household, HUD, MSA, other person under the tenant's control, public 
housing, Section 8, and violent criminal activity.
    (2) The terms ``adjusted income,'' ``annual income,'' ``extremely 
low income family,'' ``tenant rent,'' ``total tenant payment,'' 
``utility allowance,'' ``utility reimbursement,'' and ``welfare 
assistance'' are defined in part 5, subpart F of this title. The 
definitions of ``tenant rent'' and ``utility reimbursement'' in part 5, 
subpart F of this title do not apply to the HCV program under this 
part.
    (b) * * *
    Abatement. Stopping HAP payments to an owner with no potential for 
retroactive payment.
* * * * *
    Authorized voucher units. The number of units for which a PHA is 
authorized to make assistance payments to owners under the annual 
contributions contract.
* * * * *
    Fair market rent (FMR). The rent, including the cost of utilities 
(except telephone), as established by HUD for units of varying sizes 
(by number of bedrooms), that must be paid in the housing market area 
to rent privately owned, existing, decent, safe and sanitary rental 
housing of modest (non-luxury) nature with suitable amenities. In the 
HCV program, the FMR may be established at the ZIP code level (see 
definition of Small Area Fair Market Rents), metropolitan area level, 
or non-metropolitan county level.
* * * * *
    Independent entity. The entity responsible for performing the 
functions described at Sec.  982.352(b)(1)(iv)(A) (and at Sec.  
982.628(d)(3) under the homeownership option) for PHA-owned units. Such 
entity may be the unit of general local government or a HUD-approved 
entity. If the PHA itself is the unit of general local government or an 
agency of such government, then the next level of general local 
government (or an agency of such government) may perform such functions 
without HUD approval. If there is no next level of general local 
government, then the independent entity must be approved by HUD. HUD-
approved independent entities cannot be connected to the PHA legally, 
financially (except regarding compensation for services performed for 
PHA-owned units), or in any other manner that could cause the PHA to 
improperly influence the independent entity.
* * * * *
    PHA-owned unit. (i) A dwelling unit in a project that is:
    (A) Owned by the PHA (including having a controlling interest in 
the entity that owns the project);
    (B) Owned by an entity wholly controlled by the PHA; or
    (C) Owned by a limited liability company or limited partnership in 
which the PHA (or an entity wholly controlled by the PHA) holds a 
controlling interest in the managing member or general partner.

[[Page 63692]]

    (ii) A controlling interest is:
    (A) Holding more than 50 percent of the stock of any corporation;
    (B) Having the power to appoint more than 50 percent of the members 
of the board of directors of a non-stock corporation (such as a 
nonprofit corporation);
    (C) Where more than 50 percent of the members of the board of 
directors of any corporation also serve as directors, officers, or 
employees of the PHA;
    (D) Holding more than 50 percent of all managing member interests 
in an LLC;
    (E) Holding more than 50 percent of all general partner interests 
in a partnership; or
    (F) Equivalent levels of control in other ownership structures.
* * * * *
    Request for Tenancy Approval (RFTA). A form (form HUD-52517) that a 
family submits to a PHA once the family has identified a unit that it 
wishes to rent using tenant-based voucher assistance.
* * * * *
    Section 8 Management Assessment Program (SEMAP). A system used by 
HUD to measure PHA performance in key Section 8 program areas. See 24 
CFR part 985.
* * * * *
    Small Area Fair Market Rents (SAFMRs). Small Area FMRs are FMRs 
established at the U.S. Postal Service ZIP code level. SAFMRs are 
calculated in accordance with 24 CFR 888.113(a) and (b) for areas 
meeting the definition in 24 CFR 888.113(d)(2).
* * * * *
    Tenant-paid utilities. Utilities and services that are not included 
in the rent to owner and are the responsibility of the assisted family, 
regardless of whether the payment goes to the utility company or the 
owner. The utilities and services are those necessary in the locality 
to provide housing that complies with the Housing Quality Standards.
* * * * *
    Withholding. Stopping HAP payments to an owner while holding them 
for potential retroactive disbursement.
0
5. In Sec.  982.54, revise the section heading, amend paragraph (b) by 
removing ``PHA plan'' and adding in its place ``PHA Plan'', and revise 
paragraph (d).
    The revisions reads as follows:


Sec.  982.54  Administrative Plan.

* * * * *
    (d) The PHA Administrative Plan must cover, at a minimum, the PHA's 
policies on the following subjects (see Sec.  983.10 for a list of 
subjects specific to the PBV program that must be included in the 
Administrative Plan of a PHA that operates a PBV program):
    (1) Selection and admission of applicants from the PHA waiting 
list, including any PHA admission preferences, procedures for removing 
applicant names from the waiting list, and procedures for closing and 
reopening the PHA waiting list;
    (2) Issuing or denying vouchers, including PHA policy governing the 
voucher term and any extensions of the voucher term. If the PHA decides 
to allow extensions of the voucher term, the PHA Administrative Plan 
must describe how the PHA determines whether to grant extensions and 
how the PHA determines the length of any extension.
    (3) Any special rules for use of available funds when HUD provides 
funding to the PHA for a special purpose (e.g., desegregation), 
including funding for specified families or a specified category of 
families;
    (4) Occupancy policies, including:
    (i) Definition of what group of persons may qualify as a 
``family'';
    (ii) Definition of when a family is considered to be ``continuously 
assisted'';
    (iii) Standards for denying admission or terminating assistance 
based on criminal activity or alcohol abuse in accordance with Sec.  
982.553, or other factors in accordance with Sec. Sec.  982.552, 
982.554, and 982.555;
    (iv) Policies concerning residency by a foster child or live-in 
aide, including defining when PHA consent for occupancy by a foster 
child or live-in aide may be given or denied;
    (5) Encouraging participation by owners of suitable units located 
outside areas of low-income or minority concentration;
    (6) Assisting a family that claims that illegal discrimination has 
prevented the family from leasing a suitable unit;
    (7) Providing information about a family to prospective owners;
    (8) Disapproval of owners;
    (9) Subsidy standards;
    (10) Family absence from the dwelling unit;
    (11) How to determine who remains in the program if a family breaks 
up;
    (12) Informal review procedures for applicants;
    (13) Informal hearing procedures for participants;
    (14) Payment standard policies, including:
    (i) The process for establishing and revising payment standards, 
including whether the PHA has voluntarily adopted the use of Small Area 
Fair Market Rents (SAFMRs);
    (ii) A description of how the PHA will administer decreases in the 
payment standard amount for a family continuing to reside in a unit for 
which the family is receiving assistance (see Sec.  982.505(d)(3)); and
    (iii) If the PHA establishes different payment standard amounts for 
designated areas within its jurisdiction, including exception areas, 
the criteria used to determine the designated areas and the payment 
standard amounts for those designated areas (see Sec.  982.503(a)(2)) 
(all such areas must be described in the PHA's Administrative Plan or 
payment standard schedule).
    (15) The method of determining that rent to owner is a reasonable 
rent (initially and during the term of a HAP contract);
    (16) Special policies concerning special housing types in the 
program (e.g., use of shared housing);
    (17) Policies concerning payment by a family to the PHA of amounts 
the family owes the PHA;
    (18) Policies concerning interim redeterminations of family income 
and composition, the frequency of determinations of family income, and 
income-determination practices, including whether the PHA will accept a 
family declaration of assets;
    (19) Restrictions, if any, on the number of moves by a participant 
family (see Sec.  982.354(c));
    (20) Approval by the Board of Commissioners or other authorized 
officials to charge the administrative fee reserve;
    (21) Procedural guidelines and performance standards for conducting 
required housing quality standard inspections, including:
    (i) The specific life-threatening conditions that will be 
identified through the PHA's inspections. This list must include the 
HUD required conditions found in Sec.  982.401(o), as well as any 
amendments to the definition by HUD, and any life-threatening 
deficiency adopted by the PHA prior to January 18, 2017.
    (ii) For PHAs that adopt the non-life-threatening provision:
    (A) The PHA policy on whether the provision will apply to all 
initial inspections or a portion of initial inspections.
    (B) If the provision will be applied to only some inspections, how 
the units will be selected.
    (C) The PHA policy on using withheld HAP funds to repay an owner 
once the unit is in compliance with Housing Quality Standards.
    (iii) For PHAs that adopt the alternative inspection provision:

[[Page 63693]]

    (A) The PHA policy on how it will apply the provision to initial 
and biennial inspections.
    (B) The specific alternative inspection method used by the PHA.
    (C) The specific properties or types of properties where the 
alternative inspection method will be employed.
    (D) The maximum amount of time the PHA will withhold HAP if the 
owner does not correct the HQS deficiencies within the cure period, and 
the period of time after which the PHA will terminate the HAP contract 
for the owner's failure to correct the deficiencies, which may not 
exceed 180 days from the effective date of the HAP contract.
    (iv) The PHA policy on charging a reinspection fee to owners.
    (22) PHA screening of applicants for family behavior or suitability 
for tenancy;
    (23) Whether the PHA will permit a family to submit more than one 
Request for Tenancy Approval at a time (Sec.  982.302(b)); and
    (24) In the event of insufficient funding, taking into account any 
cost-savings measures taken by the PHA, a description of the factors 
the PHA will consider when determining which HAP contracts to terminate 
first (e.g., prioritization of PBV HAP contracts over tenant-based HAP 
contracts or prioritization of contracts that serve vulnerable families 
or individuals).
* * * * *
0
6. In Sec.  982.301, revise the paragraph (a) subject heading and 
paragraphs (a)(2) and (4) and (b) and add paragraph (c) to read as 
follows:


Sec.  982.301  Information when family is selected.

    (a) Oral briefing. * * *
    (2) The PHA may not discourage the family from choosing to live 
anywhere in the PHA jurisdiction, or outside the PHA jurisdiction under 
portability procedures, unless otherwise expressly authorized by 
statute, regulation, PIH Notice, or court order. The family must be 
informed of how portability may affect the family's assistance through 
screening, subsidy standards, payment standards, and any other elements 
of the portability process that may affect the family's assistance.
* * * * *
    (4) In briefing a family that includes any persons with 
disabilities, the PHA must take appropriate steps to ensure effective 
communication in accordance with 24 CFR 8.6 and 28 CFR part 35, subpart 
E.
* * * * *
    (b) Information packet. When a family is selected to participate in 
the program, the PHA must give the family a packet that includes 
information on the following subjects:
    (1) The term of the voucher, voucher suspensions, and PHA policy on 
any extensions of the term. If the PHA allows extensions, the packet 
must explain how the family can request an extension.
    (2) How the PHA determines the amount of the housing assistance 
payment for a family, including:
    (i) How the PHA determines the payment standard for a family; and
    (ii) How the PHA determines the total tenant payment for a family.
    (3) How the PHA determines the maximum rent for an assisted unit.
    (4) Where the family may lease a unit and an explanation of how 
portability works, including information on how portability may affect 
the family's assistance through screening, subsidy standards, payment 
standards, and any other elements of the portability process that may 
affect the family's assistance.
    (5) The HUD-required ``tenancy addendum'' that must be included in 
the lease.
    (6) The form that the family uses to request PHA approval of the 
assisted tenancy, and an explanation of how to request such approval.
    (7) A statement of the PHA policy on providing information about a 
family to prospective owners.
    (8) PHA subsidy standards, including when the PHA will consider 
granting exceptions to the standards, including when required as a 
reasonable accommodation for persons with disabilities under Section 
504, the Fair Housing Act, or the ADA.
    (9) Materials (e.g., brochures) on how to select a unit and any 
additional information on selecting a unit that HUD provides.
    (10) Information on federal, State, and local equal opportunity 
laws, the contact information for the Section 504 coordinator, a copy 
of the housing discrimination complaint form, and information on how to 
request a reasonable accommodation or modification under Section 504, 
the Fair Housing Act, and the Americans with Disabilities Act.
    (11) A list of landlords known to the PHA who may be willing to 
lease a unit to the family or other resources (e.g., newspapers, 
organizations, online search tools) known to the PHA that may assist 
the family in locating a unit. PHAs must ensure that the list of 
landlords or other resources covers areas outside of poverty or 
minority concentration.
    (12) Notice that if the family includes a person with disabilities, 
the PHA is subject to the requirement under 24 CFR 8.28(a)(3) that the 
family may request a current listing of accessible units known to the 
PHA that may be available and, if necessary, other assistance in 
locating an available accessible dwelling unit.
    (13) Family obligations under the program, including any 
obligations of a welfare-to-work family.
    (14) The advantages of areas that do not have a high concentration 
of low-income families.
    (15) A description of when the PHA is required to give a 
participant family the opportunity for an informal hearing and how to 
request a hearing.
    (c) Providing information for persons with limited English 
proficiency. The PHA shall take reasonable steps to assure meaningful 
access by persons with limited English proficiency in accordance with 
obligations contained in Title VI of the Civil Rights Act of 1964, 
Executive Order 13166, and HUD's LEP Guidance.
* * * * *
0
7. In Sec.  982.305, revise paragraphs (a) introductory text, (b)(1) 
introductory text, and (b)(2)(ii), add paragraph (b)(2)(iii), revise 
paragraphs (c)(3) and (4), and add paragraph (f) to read as follows:


Sec.  982.305  PHA approval of assisted tenancy.

    (a) Program requirements. The PHA may not give approval for the 
family of the assisted tenancy, or execute a HAP contract, until the 
PHA has determined that:
* * * * *
    (b) * * *
    (1) All of the following must be completed before the beginning of 
the initial term of the lease for a unit:
* * * * *
    (2) * * *
    (ii) The 15-day clock (under paragraph (b)(2)(i)(A) or (B) of this 
section) is suspended during any period when the unit is not available 
for inspection.
    (iii) If the PHA has implemented, and the unit is covered by, the 
alternative inspection option for initial inspections under Sec.  
982.406(f), the PHA is not required to inspect the unit, determine 
whether the unit satisfies the HQS, and notify the family and owner of 
the determination within the time period described in paragraphs 
(b)(1)(i) and (ii) of this section. Instead, the PHA must have 
determined that the unit is covered by the alternative inspection and 
notified the family and the owner that the alternative inspection 
option is available in accordance with the time periods described in 
paragraphs (b)(1)(i)

[[Page 63694]]

and (ii). See Sec.  982.406(e) for the PHA initial inspection 
requirements under the alternative inspection option.
* * * * *
    (c) * * *
    (3) If the HAP contract is executed within 60 calendar days from 
the beginning of the lease term, the PHA will pay housing assistance 
payments after execution of the HAP contract (in accordance with the 
terms of the HAP contract), to cover the portion of the lease term 
before execution of the HAP contract (a maximum of 60 days).
    (4) Any HAP contract executed after the 60-day period is void, and 
the PHA may not pay any housing assistance payment to the owner. If 
there are extenuating circumstances that prevent or prevented the PHA 
from meeting the 60-day deadline, then the PHA may submit to HUD a 
request for an extension. The request must include an explanation of 
the extenuating circumstances and any supporting documentation.
* * * * *
    (f) Initial HQS inspection requirements. (1) Unless the PHA has 
implemented, and determined that the unit is covered by, either of the 
two initial HQS inspection options in paragraphs (f)(2) and (3) of this 
section, the unit must be inspected by the PHA and pass HQS before:
    (i) The PHA may approve the assisted tenancy and execute the HAP 
contract, and
    (ii) The beginning of the initial lease term.
    (2) If the PHA has implemented, and determines that the unit is 
covered by, the non life-threatening deficiencies option at Sec.  
982.405(i), the unit must be inspected by the PHA and must have no 
life-threatening deficiencies as defined under Sec.  982.401(o) before:
    (i) The PHA may approve the assisted tenancy and execute the HAP 
contract, and
    (ii) The beginning of the initial lease term.
    (3) If the PHA has implemented and determines that the unit is 
covered by the alternative inspection option at Sec.  982.406(e), then 
the PHA must determine that the unit was inspected in the previous 24 
months by an inspection that meets the requirements of Sec.  982.406 
before:
    (i) The PHA may approve the assisted tenancy and execute the HAP 
contract, and
    (ii) The beginning of the initial lease term.
    (4) If the PHA has implemented and determines that the unit is 
covered by both the no life-threatening deficiencies option and the 
alternative inspection option, the unit is subject only to paragraph 
(f)(3) of this section, not paragraph (f)(2) of this section.
* * * * *
0
8. In Sec.  982.352, revise paragraphs (a) and (b) to read as follows:


Sec.  982.352   Eligible housing.

    (a) Ineligible housing. The following types of housing may not be 
assisted by a PHA in the tenant-based programs:
    (1) A public housing or Indian housing unit;
    (2) A unit receiving project-based assistance under section 8 of 
the 1937 Act (42 U.S.C. 1437f);
    (3) Nursing homes, board and care homes, or facilities providing 
continual psychiatric, medical, or nursing services;
    (4) College or other school dormitories;
    (5) Units on the grounds of penal, reformatory, medical, mental, 
and similar public or private institutions; or
    (6) A unit occupied by its owner or by a person with any interest 
in the unit. (For provisions on PHA disapproval of an owner, see Sec.  
982.306.)
    (b) PHA-owned housing. (1) PHA-owned units, as defined in Sec.  
982.4, may be assisted under the tenant-based program only if all the 
following conditions are satisfied:
    (i) The PHA must inform the family, both orally and in writing, 
that the family has the right to select any eligible unit available for 
lease.
    (ii) A PHA-owned unit is freely selected by the family, without PHA 
pressure or steering.
    (iii) The unit selected by the family is not ineligible housing.
    (iv) During assisted occupancy, the family may not benefit from any 
form of housing subsidy that is prohibited under paragraph (c) of this 
section.
    (v)(A) The PHA must obtain the services of an independent entity, 
as defined in Sec.  982.4, to perform the following PHA functions as 
required under the program rule:
    (1) To determine rent reasonableness in accordance with Sec.  
982.507. The independent entity shall communicate the rent 
reasonableness determination to the family and the PHA.
    (2) To assist the family in negotiating the rent to owner in 
accordance with Sec.  982.506.
    (3) To inspect the unit for compliance with HQS in accordance with 
Sec. Sec.  982.305(a) and 982.405 (except that Sec.  982.405(e) is not 
applicable). The independent entity shall communicate the results of 
each such inspection to the family and the PHA.
    (B) The PHA may compensate the independent entity from PHA 
administrative fees (including fees credited to the administrative fee 
reserve) for the services performed by the independent entity. The PHA 
may not use other program receipts to compensate the independent entity 
for such services. The PHA and the independent entity may not charge 
the family any fee or charge for the services provided by the 
independent entity.
* * * * *
0
9. In Sec.  982.401, revise paragraph (a)(3) and add paragraphs (a)(5) 
and (o) to read as follows:


Sec.  982.401  Housing quality standards (HQS).

    (a) * * *
    (3) All program housing must meet the HQS requirements both at 
commencement of assisted occupancy (Sec.  982.305(f)), and throughout 
the assisted tenancy (Sec.  982.404).
* * * * *
    (5) All defects that are not life-threatening conditions defined in 
paragraph (o) of this section must be remedied within 30 days of the 
owner's receipt of written notice of the defects or a reasonable longer 
period that the PHA establishes.
* * * * *
    (o) Life-threatening conditions. (1) Life-threatening conditions 
must be cured within 24 hours after written notice of the defects has 
been provided. Failure to do so may result in termination, suspension, 
or reduction of housing assistance payments and termination of the HAP 
contract.
    (2) Life-threatening conditions are defined as:
    (i) Gas (natural or liquid petroleum) leak or fumes. A life-
threatening condition under this standard is one of the following:
    (A) A fuel storage vessel, fluid line, valve, or connection that 
supplies fuel to a HVAC unit is leaking; or
    (B) A strong gas odor detected with potential for explosion or 
fire, or that results in health risk if inhaled.
    (ii) Electrical hazards that could result in shock or fire. A life-
threatening condition under this standard is one of the following:
    (A) A light fixture is readily accessible, is not securely mounted 
to the ceiling or wall, and electrical connections or wires are 
exposed;
    (B) A light fixture is hanging by its wires;
    (C) A light fixture has a missing or broken bulb, and the open 
socket is readily accessible to the tenant during the day to day use of 
the unit;
    (D) A receptacle (outlet) or switch is missing or broken and 
electrical connections or wires are exposed;

[[Page 63695]]

    (E) A receptacle (outlet) or switch has a missing or damaged cover 
plate and electrical connections or wires are exposed;
    (F) An open circuit breaker position is not appropriately blanked 
off in a panel board, main panel board, or other electrical box that 
contains circuit breakers or fuses;
    (G) A cover is missing from any electrical device box, panel box, 
switch gear box, control panel, etc., and there are exposed electrical 
connections;
    (H) Any nicks, abrasions, or fraying of the insulation that expose 
conducting wire;
    (I) Exposed bare wires or electrical connections;
    (J) Any condition that results in openings in electrical panels or 
electrical control device enclosures;
    (K) Water leaking or ponding near any electrical device; or
    (L) Any condition that poses a serious risk of electrocution or 
fire and poses an immediate life-threatening condition.
    (iii) Inoperable or missing smoke detector. A life-threatening 
condition under this standard is one of the following:
    (A) The smoke detector is missing; or
    (B) The smoke detector does not function as it should.
    (iv) Interior air quality. A life-threatening condition under this 
standard is one of the following:
    (A) The carbon monoxide detector is missing; or
    (B) The carbon monoxide detector does not function as it should.
    (v) Gas/oil fired water heater or heating, ventilation, or cooling 
system with missing, damaged, improper, or misaligned chimney or 
venting. A life-threatening condition under this standard is one of the 
following:
    (A) The chimney or venting system on a fuel fired water heater is 
misaligned, negatively pitched, or damaged, which may cause improper or 
dangerous venting of gases;
    (B) A gas dryer vent is missing, damaged, or is visually determined 
to be inoperable, or the dryer exhaust is not vented to the outside;
    (C) A fuel fired space heater is not properly vented or lacks 
available combustion air;
    (D) A non-vented space heater is present;
    (E) Safety devices on a fuel fired space heater are missing or 
damaged; or
    (F) The chimney or venting system on a fuel fired heating, 
ventilation, or cooling system is misaligned, negatively pitched, or 
damaged which may cause improper or dangerous venting of gases.
    (vi) Lack of alternative means of exit in case of fire or blocked 
egress. A life-threatening condition under this standard is one of the 
following:
    (A) Any of the components that affect the function of the fire 
escape are missing or damaged;
    (B) Stored items or other barriers restrict or prevent the use of 
the fire escape in the event of an emergency; or
    (C) The building's emergency exit is blocked or impeded, thus 
limiting the ability of occupants to exit in a fire or other emergency.
    (vii) Other interior hazards. A life-threatening condition under 
this standard is a fire extinguisher (where required) that is missing, 
damaged, discharged, overcharged, or expired.
    (viii) Deteriorated paint, as defined by 24 CFR 35.110, in a unit 
built before 1978 that is to be occupied by a family with a child under 
6 years of age. This is a life-threatening condition only for the 
purpose of a condition that would prevent a family from moving into the 
unit. All lead hazard reduction requirements in 24 CFR part 35, 
including the timeline for lead hazard reduction procedures, still 
apply.
    (ix) Any other condition identified by the administering PHA as 
life-threatening in the PHA's administrative plan.
    (3) Any other condition subsequently identified by HUD as life-
threatening. These additional items will be added through a document 
published in the Federal Register for 30 days of public comment, 
followed by a final notice announcing any additional life-threatening 
conditions and the date on which the additions take effect.
0
10. In Sec.  982.404, revise paragraphs (a), (b)(1) introductory text, 
and (b)(2) and add paragraphs (c) through (f) to read as follows:


Sec.  982.404   Maintenance: Owner and family responsibility; PHA 
remedies.

    (a) Owner obligation. (1) The owner must maintain the unit in 
accordance with HQS. A unit is not in compliance with HQS if the PHA or 
other inspector authorized by the State or local government determines 
that the unit fails to comply with HQS, the agency or inspector 
notifies the owner in writing of the failure to comply, and the defects 
are not remedied within the appropriate timeframe.
    (2) If the owner fails to maintain the dwelling unit in accordance 
with HQS, the PHA must withhold or must abate housing assistance 
payments and terminate HAP contracts in accordance with this section.
    (3) If a defect is life-threatening, the owner must correct the 
defect within no more than 24 hours after notification. For other 
defects, the owner must correct the defect within no more than 30 
calendar days after notification (or any PHA-approved extension).
    (4) In the case of an HQS deficiency that is caused by any member, 
or guest of the assisted family, the PHA may waive the owner's 
responsibility to remedy the violation. If the PHA waives the owner's 
responsibility, then the family must make the repairs in accordance 
with paragraph (b)(2) of this section. However, the PHA may terminate 
assistance to a family because of an HQS breach caused by any member or 
guest of the assisted family.
    (b) * * *
    (1) The family may be held responsible for a breach of the HQS that 
is caused by any of the following:
* * * * *
    (2) If an HQS breach caused by the family is life threatening, the 
family must correct the defect within no more than 24 hours after 
receiving notification. For other family-caused defects, the family 
must correct the defect within 30 calendar days after notification (or 
any PHA-approved extension).
* * * * *
    (c) Determination of noncompliance with Housing Quality Standards. 
The unit is in noncompliance with Housing Quality Standards if:
    (1) The PHA or authorized inspector determines the unit fails to 
comply based upon an inspection;
    (2) The PHA notified the owner in writing of the unit failure; and
    (3) The unit failures are not corrected in accordance with the 
timeframes established in Sec.  982.401(a)(5) and (o).
    (d) PHA remedies for HQS deficiencies identified during regular or 
interim inspections. This subsection covers PHA actions when HQS 
deficiencies are identified as a result of a regular inspection (HQS 
inspection conducted for a unit under HAP contract at least biennially) 
or interim inspection (when the PHA inspects the unit at other times as 
needed, such as when a family or government official notifies the PHA 
of a deficiency). For PHA HQS enforcement actions for HQS deficiencies 
under the initial HQS inspection NLT or alternative inspection options, 
see Sec. Sec.  982.405(i) and 982.406(e), respectively.
    (1) A PHA may withhold assistance payments for units that do not 
meet HQS once the PHA has notified the owner in writing of the 
deficiencies. If the unit is brought into compliance during the 
applicable cure period (24 hours for life-threatening deficiencies and 
30 days (or other reasonable period established by the PHA) for non-
life-threatening deficiencies, the PHA must:

[[Page 63696]]

    (i) Resume assistance payments; and
    (ii) Provide assistance payments to cover the time period for which 
the assistance payments were withheld.
    (2)(i) The PHA must abate the HAP if the owner fails to make the 
repairs within the applicable cure period (24 hours for life-
threatening deficiencies and 30 days (or other reasonable period 
established by the PHA) for non-life-threatening deficiencies).
    (ii) If a PHA abates the assistance payments under this paragraph, 
the PHA must notify the family and the owner that it is abating 
payments and that if the unit does not meet HQS within 60 days (or a 
reasonable longer period established by the PHA) after the 
determination of noncompliance in accordance with paragraph (c) of this 
section, the PHA will terminate the HAP contract for the unit, and the 
family will have to move if the family wishes to receive continued 
assistance. The PHA must issue the family its voucher and provide the 
family with any other forms necessary to move to another unit with 
continued HCV assistance.
    (3) An owner may not terminate the tenancy of any family due to the 
withholding or abatement of assistance under paragraph (a) of this 
section. During the period that assistance is abated, the family may 
terminate the tenancy by notifying the owner and the PHA. If the family 
chooses to terminate the tenancy, the HAP contract will automatically 
terminate on the effective date of the tenancy termination or the date 
the family vacates the unit.
    (4) If the family did not terminate the tenancy and the owner makes 
the repairs and the unit complies with HQS within 60 days (or a 
reasonable longer period established by the PHA) of the notice of 
abatement, the PHA must recommence payments to the owner. The PHA does 
not make any payments to the owner for the period of time that the 
payments were abated.
    (5) If the owner fails to make the repairs within 60 days (or a 
reasonable longer period established by the PHA) of the notice of 
abatement, the PHA must terminate the HAP contract.
    (e) Relocation due to HQS deficiencies. (1) The PHA must give any 
family residing in a unit for which the HAP contract is terminated 
under paragraph (d)(5) of this section due to a failure to correct HQS 
deficiencies at least 90 days or a longer period as the PHA determines 
is reasonably necessary following the termination of the HAP contract 
to lease a new unit.
    (2) If the family is unable to lease a new unit within the period 
provided by the PHA under paragraph (e)(1) of this section and the PHA 
owns or operates public housing, the PHA must offer, and, if accepted, 
provide the family a preference for the first appropriately sized 
public housing unit that becomes available for occupancy after the time 
period expires.
    (3) PHAs may assist families relocating under this paragraph (e) in 
finding a new unit, including using up to 2 months of the withheld and 
abated assistance payments for costs directly associated with 
relocating to a new unit, including security deposits or reasonable 
moving costs as determined by the PHA based on their locality. If the 
family receives security deposit assistance from the PHA for the new 
unit, the PHA may require the family to remit the security deposit 
returned by the owner of the new unit at such time that the lease is 
terminated, up to the amount of the security deposit assistance 
provided by the PHA for that unit. The PHA must include in its 
Administrative Plan the policies it will implement for this provision.
    (f) Applicability. This section is applicable to HAP contracts that 
were either executed on or renewed after [EFFECTIVE DATE OF FINAL 
RULE]. For purposes of this paragraph, a HAP contract is renewed if the 
HAP contract continues beyond the initial term of the lease. For all 
other HAP contracts, Sec.  982.404 as in effect on [DATE ONE DAY BEFORE 
EFFECTIVE DATE OF FINAL RULE] remains applicable.
* * * * *
0
11. Revise Sec.  982.405 to read as follows:


Sec.  982.405  PHA initial and periodic unit inspection.

    (a) Initial unit inspections. The PHA must conduct an initial unit 
inspection, and then inspect the unit at least biennially and at other 
times as needed during assisted occupancy, to determine if the unit 
meets HQS. (See Sec.  982.305(b)(2) concerning timing of initial 
inspection by the PHA and Sec.  982.406 concerning the use of 
alternative inspections in meeting the initial and biennial inspection 
requirements.)
    (b) Supervisory quality control inspections. The PHA must conduct 
supervisory quality control HQS inspections.
    (c) Scheduling inspections. In scheduling inspections, the PHA must 
consider complaints and any other information brought to the attention 
of the PHA.
    (d) PHA notification of owner. The PHA must notify the owner of 
defects shown by the inspection.
    (e) Charge to family for inspection. The PHA may not charge the 
family for an initial inspection or reinspection of the unit.
    (f) Charge to owner for inspection. The PHA may not charge the 
owner for the inspection of the unit prior to the initial term of the 
lease or for a first inspection during assisted occupancy of the unit. 
The PHA may establish a reasonable fee to owners for a reinspection if 
an owner notifies the PHA that a repair has been made or the allotted 
time for repairs has elapsed and a reinspection reveals that any 
deficiency cited in the previous inspection that the owner is 
responsible for repairing pursuant to Sec.  982.404(a) was not 
corrected. The owner may not pass this fee along to the family. Fees 
collected under this paragraph (f) will be included in a PHA's 
administrative fee reserve and may be used only for activities related 
to the provision of the HCV program.
    (g) Other inspection. When a participant family or government 
official notifies the PHA of a potential life-threatening deficiency as 
defined in Sec.  982.401(o), the PHA must, within 24 hours, both 
inspect the housing unit and notify the owner if the life-threatening 
deficiency is confirmed. The owner must then make the repairs within 24 
hours of PHA notification. If the reported condition is non-life-
threatening, the PHA must, within 15 days, both inspect the unit and 
notify the owner if the deficiency is confirmed. The owner must then 
make the repairs within 30 days of notification from the PHA or within 
any PHA-approved extension. In the event of extraordinary 
circumstances, such as if a unit is within a presidentially declared 
disaster area, HUD may waive the 24-hour or the 15-day inspection 
requirement until such time as an inspection is feasible.
    (h) Verification methods. When a PHA must verify correction of a 
deficiency, the PHA may use verification methods other than another on-
site inspection. The PHA may establish different verification methods 
for initial and subsequent inspections or for different HQS 
deficiencies. Upon either an inspection for initial occupancy or a 
reinspection, the PHA may accept photographic evidence or other 
reliable evidence from the owner to verify that a defect has been 
corrected.
    (i) Initial HQS inspection option: No life-threatening 
deficiencies. (1) A PHA may elect to approve an assisted tenancy, 
execute the HAP contract, and begin making assistance payments for a 
unit that failed the initial HQS inspection, provided that the unit has 
no life-threatening conditions as defined in Sec.  982.401(o). A PHA 
that implements

[[Page 63697]]

this option (NLT option) may apply the option to all the PHA's initial 
inspections or may limit the use of the option to certain units. The 
PHA's Administrative Plan must specify the circumstances under which 
the PHA will exercise the NLT option. If the PHA has established, and 
the unit is covered by, both the NLT option and the alternative 
inspections option for the initial HQS inspection, see Sec.  
982.406(f).
    (2) The PHA must notify the owner and the family if the NLT option 
is available for the unit selected by the family. After completing the 
inspection and determining there are no life-threatening deficiencies, 
the PHA provides both the owner and the family with a list of all the 
non-life threatening deficiencies identified by the initial HQS 
inspection and, should the owner not complete the repairs within 30 
days, the maximum amount of time the PHA will withhold HAP before 
abating assistance. The PHA must also inform the family that if the 
family accepts the unit and the owner fails to make the repairs within 
the cure period, which may not exceed 180 days from the effective date 
of the HAP contract, the PHA will terminate the HAP contract, and the 
family will have to move to another unit in order to receive voucher 
assistance. The family may choose to decline the unit based on the 
deficiencies and continue its housing search.
    (3) If the family decides to lease the unit, the PHA and the owner 
execute the HAP contract, and the family enters into the assisted lease 
with the owner. The PHA commences making assistance payments to the 
owner.
    (4) The owner must correct the deficiencies within 30 days from the 
effective date of the HAP contract. If the owner fails to correct the 
deficiencies within the 30-day cure period, the PHA must withhold the 
housing assistance payments until the owner makes the repairs and the 
PHA verifies the correction. Once the deficiencies are corrected, the 
PHA may use the withheld housing assistance payments to make payments 
for the period that payments were withheld.
    (5) A PHA relying on the non life-threatening inspection provision 
must identify in the PHA Administrative Plan all the optional policies 
identified in Sec.  982.54(d)(21).
0
12. In Sec.  982.406, revise paragraphs (a), (b), (c)(1), and (c)(2) 
introductory text, redesignate existing paragraph (e) as paragraph (g), 
and add new paragraph (e) and paragraph (f).
    The revisions and additions read as follows:


Sec.  982.406  Use of alternative inspections.

    (a) In general. (1) A PHA may comply with the initial inspection 
requirements in 982.405(a) by relying on an alternative inspection 
(i.e., an inspection conducted for another housing program) only if the 
PHA is able to obtain the results of the alternative inspection. The 
PHA may implement the use of alternative inspections for both initial 
and biennial inspections or may limit the use of alternative 
inspections to either initial or biennial inspections. The PHA may 
limit the use of alternative inspections to certain units, as provided 
in the PHA's Administrative Plan.
    (2) If an alternative inspection method employs sampling, then a 
PHA may rely on such alternative inspection method to comply with the 
requirements in Sec.  982.405(a) only if HCV units are included in the 
population of units forming the basis of the sample.
    (3) Units in properties that are mixed-finance properties assisted 
with project-based vouchers may be inspected at least triennially 
pursuant to 24 CFR 983.103(h).
    (b) Administrative Plan. A PHA relying on an alternative inspection 
to fulfill the requirements in Sec.  982.405(a) must identify in the 
PHA Administrative Plan all the optional policies identified in Sec.  
982.54(d)(21).
    (c) * * *
    (1) A PHA may rely upon inspections of housing assisted under the 
HOME Investment Partnerships (HOME) program or housing financed using 
Low-Income Housing Tax Credits (LIHTCs), or inspections performed by 
HUD.
    (2) If a PHA wishes to rely on an inspection method other than a 
method listed in paragraph (c)(1) of this section, then, prior to 
amending its Administrative Plan, the PHA must submit to the Real 
Estate Assessment Center (REAC) a copy of the inspection method it 
wishes to use, along with its analysis of the inspection method that 
shows that the method ``provides the same or greater protection to 
occupants of dwelling units'' as would HQS.
* * * * *
    (e) Initial inspections using the alternative inspection option. 
(1) The PHA may approve the tenancy, allow the family to enter into the 
lease agreement, and execute the HAP contract for a unit that has been 
inspected in the previous 24 months where the alternative inspection 
meets the requirements of this section. If the PHA has established and 
the unit is covered by both the NLT option under Sec.  982.405(i) and 
the alternative inspections option for the initial HQS inspection, see 
paragraph (f) of this section.
    (2) The PHA notifies the owner and the family that the alternative 
inspection option is available for the unit selected by the family. The 
PHA must provide the family with the PHA list of HQS deficiencies that 
are considered life-threatening under Sec.  982.401(o) as part of this 
notification. If the owner and family agree to the use of this option, 
the PHA approves the assisted tenancy, allows the family to enter into 
the lease agreement with the owner, and executes the HAP contract on 
the basis of the alternative inspection.
    (3) The PHA must conduct an HQS inspection within 30 days of 
receiving the Request for Tenancy Approval. If the family reports a 
deficiency to the PHA prior to the PHA's HQS inspection, the PHA must 
inspect the unit within the time period required under Sec.  982.404(g) 
or within 30 days of the effective date of the HAP contract, whichever 
time period ends first.
    (4) The PHA must enter into the HAP contract with the owner before 
conducting the HQS inspection. The PHA may not make housing assistance 
payments to the owner until the PHA has inspected the unit.
    (5) The PHA may commence housing assistance payments to the owner 
and make housing assistance payments retroactive to the effective date 
of the HAP contract only after the unit passes the PHA's HQS 
inspection. If the unit does not pass the HQS inspection, the PHA may 
not make housing assistance payments to the owner until all the 
deficiencies have been corrected. If a defect is life threatening, the 
owner must correct the defect within 24 hours of notification from the 
PHA. For other defects, the owner must correct the defect within no 
more than 30 calendar days (or any PHA-approved extension) of 
notification from the PHA. If the owner corrects the deficiencies 
within the required cure period, the PHA makes the housing assistance 
payments retroactive to the effective date of the HAP contract.
    (6) The PHA establishes in the Administrative Plan:
    (i) The maximum amount of time it will withhold payments if the 
owner does not correct the deficiencies within the required cure period 
before abating payments; and
    (ii) The date by which the PHA will terminate the HAP contract for 
the owner's failure to correct the deficiencies, which may not exceed 
180 days from the effective date of the HAP contract.

[[Page 63698]]

    (f) Initial inspection: Using the alternative inspection option in 
combination with the no life-threatening deficiencies option. (1) The 
PHA notifies the owner and the family that both the alternative 
inspection option and the NLT option are available for the unit 
selected by the family. The PHA must provide the family the list of HQS 
deficiencies that are considered life-threatening under Sec.  
982.401(o) as part of this notification. If the owner and family agree 
to the use of both options, the PHA approves the assisted tenancy, 
allows the family to enter into the lease agreement with the owner, and 
executes the HAP contract on the basis of the alternative inspection.
    (2) The PHA must conduct an HQS inspection within 30 days after the 
family and owner submit a complete Request for Tenancy Approval. If the 
family reports a deficiency to the PHA prior to the PHA's HQS 
inspection, the PHA must inspect the unit within the time period 
required under Sec.  982.404(g) or within 30 days of the effective date 
of the HAP contract, whichever time period ends first.
    (3) The PHA must enter into the HAP contract with the owner before 
conducting the HQS inspection. The PHA may not make housing assistance 
payments to the owner until the PHA has inspected the unit. If the unit 
passes the HQS inspection, the PHA commences making housing assistance 
payments to the owner and makes payments retroactive to the effective 
date of the HAP contract.
    (4) If the unit fails the PHA's HQS inspection but has no life-
threatening deficiencies, the PHA commences making housing assistance 
payments, which are made retroactive to the effective date of the HAP 
contract. The owner must correct the deficiencies within 30 days from 
the effective date of the HAP contract. If the owner fails to correct 
the deficiencies within the 30-day cure period, the PHA must withhold 
the housing assistance payments until the owner makes the repairs and 
the PHA verifies the correction. Once the unit is in compliance with 
HQS, the PHA may use the withheld housing assistance payments to make 
payments for the period that payments were withheld.
    (5) If the unit does not pass the HQS inspection and has life-
threatening deficiencies, the PHA may not commence making housing 
assistance payments to the owner until all the deficiencies have been 
corrected. The owner must correct all life-threatening deficiencies 
within 24 hours of notification from the PHA. For other defects, the 
owner must correct the defect within 30 days (or any PHA-approved 
extension) of notification from the PHA. If the owner corrects the 
deficiencies within the required cure period, the PHA makes the housing 
assistance payments retroactive to the effective date of the HAP 
contract.
    (6) The PHA establishes in the Administrative Plan:
    (i) The maximum amount of time it will withhold payments if the 
owner fails to correct the deficiencies within the required cure period 
before abating payments; and
    (ii) The date by which the PHA will terminate the HAP contract for 
the owner's failure to correct the deficiencies, which may not exceed 
180 days from the effective date of the HAP contract.
* * * * *
0
13. In Sec.  982.451, add subject headings to paragraphs (a) and (b), 
revise paragraphs (b)(4)(i) introductory text and (b)(5)(iii), and add 
paragraph (c) to read as follows:


Sec.  982.451   Housing assistance payments contract.

    (a) Form and term.
* * * * *
    (b) Housing assistance payment amount.
* * * * *
    (4)(i) The part of the rent to owner that is paid by the tenant may 
not be more than:
* * * * *
    (5) * * *
    (iii) The PHA may use only the following sources to pay a late 
payment penalty from program receipts under the consolidated ACC: 
Administrative fee income for the program or the administrative fee 
reserve for the program. The PHA may not use other program receipts for 
this purpose.
    (c) PHA-owned units. If the PHA-owned unit is not owned by a 
separate legal entity from the PHA (e.g., an entity wholly controlled 
by the PHA or a limited liability company or limited partnership owned 
by the PHA), the PHA must choose one of the two following options for 
the PHA-owned unit, because the PHA cannot execute a HAP contract with 
itself.
    (1) HAP contract execution. (i) Prior to execution of a HAP 
contract, the PHA must establish a separate legal entity to serve as 
the owner. The separate legal entity must have the legal capacity to 
lease units and must be one of the following:
    (A) A non-profit affiliate or instrumentality of the PHA;
    (B) A limited liability corporation;
    (C) A limited partnership;
    (D) A corporation; or
    (E) Any other legally acceptable entity recognized under State law.
    (ii) In cases where the independent entity, as defined in Sec.  
982.4, is required to notify the PHA of a determination, the 
independent entity may notify the PHA or the separate legal entity, or 
both.
    (2) PHA certification option. (i) Instead of executing the HAP 
contract for the PHA-owned unit, the PHA signs the HUD-prescribed 
certification covering the PHA-owned unit. By signing the HUD 
certification, the PHA certifies that it will fulfill all the required 
program responsibilities of the private owner under the HAP contract, 
and that it will also fulfill all of the program responsibilities 
required of the PHA for the PHA-owned unit.
    (ii) The PHA executed certification serves as the equivalent of the 
HAP contract for the PHA-owned unit.
    (iii) The PHA must obtain the services of an independent entity to 
perform the required PHA functions in accordance with Sec.  
982.352(b)(1)(v) before signing the certification.
    (iv) The PHA may not use the PHA-owned certification if the PHA-
owned unit is owned by a separate legal entity from the PHA (e.g., an 
entity wholly controlled by the PHA or a limited liability corporation 
or limited partnership controlled by the PHA).
0
14. Revise Sec.  982.503 to read as follows:


Sec.  982.503  Payment standard areas, schedule, and amounts.

    (a) Payment standard areas. (1) Annually, HUD publishes fair market 
rents (FMRs) for Small Area FMR areas (U.S. Postal Service ZIP code 
areas within designated metropolitan areas), metropolitan areas, and 
nonmetropolitan counties (see 24 CFR 888.113). Within each of these FMR 
areas, the applicable FMR is:
    (i) The HUD-published Small Area FMR for:
    (A) Any metropolitan area designated as a Small Area FMR area by 
HUD in accordance with 24 CFR 888.113(c)(1).
    (B) Any area where a PHA has notified HUD that the PHA will 
voluntarily use SAFMRs in accordance with 24 CFR 888.113(c)(3).
    (ii) The HUD-published metropolitan FMR for any other metropolitan 
area.
    (iii) The HUD-published FMR for any non-metropolitan county.
    (2) The PHA must adopt a payment standard schedule that establishes 
voucher payment standard amounts for each FMR area in the PHA 
jurisdiction. These payment standard amounts are used to calculate the 
monthly housing assistance payment for a family (Sec.  982.505).

[[Page 63699]]

    (3) The PHA may designate payment standard areas within each FMR 
area and establish payment standard amounts for such designated areas. 
If the PHA designates payment standard areas, then it must include in 
its Administrative Plan the criteria used to determine the designated 
areas and the payment standard amounts for those areas.
    (i) The PHA may designate payment standard areas within which 
payment standards will be established according to paragraph (c) (basic 
range) or paragraph (d) (exception payment standard), of this section.
    (ii) A PHA-designated payment standard area may be no smaller than 
a census tract block group.
    (b) Payment standard schedule. For each payment standard area, the 
PHA must establish a payment standard amount for each unit size, 
measured by number of bedrooms (zero-bedroom, one-bedroom, and so on). 
These payment standard amounts comprise the PHA's payment standard 
schedule.
    (c) Basic range payment standard amounts. A basic range payment 
standard amount is a dollar amount that is equivalent to any amount in 
the range from 90 percent up to and including 110 percent of the 
published FMR for a unit size.
    (1) The PHA may establish a basic payment standard amount without 
HUD approval.
    (2) The PHA's basic range payment standard amount for each unit 
size may be based on the same percentage of the published FMR (i.e., 
all payment standard amounts may be set at 100 percent of the FMR), or 
the PHA may establish different payment standard amounts for different 
unit sizes (for example, 90 percent for efficiencies, 100 percent for 
1-bedroom units, 110 percent for larger units).
    (3) The PHA must revise its payment standard amounts and schedule 
no later than 3 months following the effective date of the published 
FMR if revisions are necessary to stay within the basic range.
    (d) Exception payment standard amounts. An exception payment 
standard amount is a dollar amount that exceeds 110 percent of the 
published FMR.
    (1) The PHA may establish exception payment standard amounts for 
all units, or for units of a particular size, in a designated part of 
the FMR area (called an ``exception area''). The exception area must 
meet the minimum area requirement at Sec.  982.503(a)(3)(ii).
    (2) A PHA that is not in a designated Small Area FMR area or has 
not opted voluntarily to implement Small Area FMRs under 24 CFR 
888.113(c)(3) may establish exception payment standards for a ZIP code 
area that exceed the basic range for the metropolitan area FMR as long 
as the amounts established by the PHA do not exceed 110 percent of the 
HUD published SAFMR for the applicable ZIP code. The exception payment 
standard must apply to the entire ZIP code area. If an exception area 
crosses one or more FMR boundaries, then the maximum exception payment 
standard amount that a PHA may adopt for the exception area without HUD 
approval is 110 percent of the ZIP code area with the lowest SAFMR 
amount.
    (3) In all other cases, the PHA must request approval from HUD to 
establish an exception payment standard amount for an exception area 
that exceeds 110 percent of the applicable FMR. In its request to HUD, 
the PHA must provide rental market data demonstrating that the 
requested exception payment standard amount is needed in order for 
families to access rental units in the exception area. Once HUD has 
approved the exception payment standard for the requesting PHA, any 
other PHA with jurisdiction in the HUD approved exception payment 
standard area may also use the exception payment standard amount.
    (4) If required as a reasonable accommodation in accordance with 24 
CFR part 8 for a person with a disability, the PHA may establish, 
without HUD approval, an exception payment standard amount that does 
not exceed 120 percent of the applicable FMR. A PHA may establish a 
payment standard greater than 120 percent of the applicable FMR as a 
reasonable accommodation for a person with a disability in accordance 
with 24 CFR part 8, after requesting and receiving HUD approval.
    (e) Payment standard amount below 90 percent of the applicable FMR. 
(1) Without HUD approval, the PHA may establish a payment standard 
amount that is not lower than 90 percent of the Small Area FMR for the 
relevant ZIP code area in its jurisdiction that is currently under a 
metropolitan FMR.
    (2) In cases other than the circumstance described in paragraph 
(e)(1) of this section, a PHA that wishes to establish a payment 
standard amount that is below the basic range must obtain HUD approval. 
In determining whether to approve the PHA request, HUD will consider 
such factors as whether approval of the request is necessary to prevent 
the termination of program participants or increase the number of 
families the PHA may assist.
    (f) Success rate payment standard amounts. In order to increase the 
number of voucher holders who become participants, HUD may approve 
requests from PHAs whose FMRs are computed at the 40th percentile rent 
to establish higher, success rate payment standard amounts. A success 
rate payment standard amount is defined as any amount from 90 percent 
up to and including 110 percent of the 50th percentile rent, calculated 
in accordance with the methodology described in 24 CFR 888.113.
    (1) A PHA may obtain HUD Field Office approval of success rate 
payment standard amounts provided the PHA demonstrates to HUD that it 
meets the following criteria:
    (i) Fewer than 75 percent of the families to whom the PHA issued 
rental vouchers during the most recent 6-month period for which there 
is success rate data available have become participants in the voucher 
program;
    (ii) The PHA has established payment standard amounts for all unit 
sizes in the entire PHA jurisdiction within the FMR area at 110 percent 
of the published FMR for at least the 6-month period referenced in 
paragraph (f)(1)(i) of this section and up to the time the request is 
made to HUD; and
    (iii) The PHA has a policy of granting automatic extensions of 
voucher terms to at least 90 days to provide a family who has made 
sustained efforts to locate suitable housing with additional search 
time.
    (2) In determining whether to approve the PHA request to establish 
success rate payment standard amounts, HUD will consider whether the 
PHA has a SEMAP overall performance rating of ``troubled.'' If a PHA 
does not yet have a SEMAP rating, HUD will consider the PHA's SEMAP 
certification.
    (3) HUD approval of success rate payment standard amounts shall be 
for all unit sizes in the FMR area. A PHA may opt to establish a 
success rate payment standard amount for one or more unit sizes in all 
or a designated part of the PHA jurisdiction within the FMR area.
    (g) Payment standard protection for PHAs that meet deconcentration 
objectives. This paragraph applies only to a PHA with jurisdiction in 
an FMR area where the FMR had previously been set at the 50th 
percentile rent to provide a broad range of housing opportunities 
throughout a metropolitan area, pursuant to 24 CFR 888.113(i)(3), but 
is now set at the 40th percentile rent.
    (1) Such a PHA may obtain HUD Field Office approval of a payment 
standard amount based on the 50th percentile

[[Page 63700]]

rent if the PHA scored the maximum number of points on the 
deconcentration bonus indicator in Sec.  985.3(h) in the prior year, or 
in two of the last three years.
    (2) HUD approval of payment standard amounts based on the 50th 
percentile rent shall be for all unit sizes in the FMR area that had 
previously been set at the 50th percentile rent pursuant to 24 CFR 
888.113(i)(3). A PHA may opt to establish a payment standard amount 
based on the 50th percentile rent for one or more unit sizes in all or 
a designated part of the PHA jurisdiction within the FMR area.
    (h) HUD review of PHA payment standard schedules. (1) HUD will 
monitor rent burdens of families assisted in a PHA's voucher program. 
HUD will review the PHA's payment standard for a particular unit size 
if HUD finds that 40 percent or more of such families occupying units 
of that unit size currently pay more than 30 percent of adjusted 
monthly income as the family share. Such determination may be based on 
the most recent examinations of family income.
    (2) After such review, HUD may, at its discretion, require the PHA 
to modify payment standard amounts for any unit size on the PHA payment 
standard schedule. HUD may require the PHA to establish an increased 
payment standard amount within the basic range.
0
15. In Sec.  982.505, revise paragraphs (c)(3) through (5) and remove 
paragraph (d).
    The revisions read as follows:


Sec.  982.505  How to calculate housing assistance payment.

* * * * *
    (c) * * *
    (3) Decrease in the payment standard amount while the family 
remains assisted in the same unit. The PHA may choose not to reduce the 
payment standard amount used to calculate the subsidy for a family for 
as long as the family continues to reside in the unit for which the 
family is receiving assistance.
    (i) If the PHA chooses to reduce the payment standard amount used 
to calculate such a family's subsidy in accordance with its 
Administrative Plan, then the initial reduction to the family's payment 
standard amount may not be applied any earlier than two years following 
the effective date of the decrease in the payment standard, and then 
only if the family has received the notice required under paragraph 
(c)(3)(iii) of this section.
    (ii) The PHA may choose to reduce the payment standard amount for 
the family to the current payment standard amount in effect on the PHA 
voucher payment standard schedule, or it may reduce the payment 
standard amount to an amount that is higher than the normally 
applicable payment standard amount on the PHA voucher payment standard 
schedule. After an initial reduction, the PHA may further reduce the 
payment standard amount for the family during the time the family 
resides in the unit, provided any subsequent reductions continue to 
result in a payment standard amount that meets or exceeds the normally 
applicable payment standard amount on the PHA voucher payment standard 
schedule.
    (iii) The PHA must provide the family with at least 12 months' 
written notice of any reduction in the payment standard amount that 
will affect the family if the family remains in place. In the written 
notice, the PHA must state the new payment standard amount, explain 
that the family's new payment standard amount will be the greater of 
the amount listed in the current written notice or the new amount (if 
any) on the PHA's payment standard schedule at the end of the 12-month 
period, and make clear where the family will find the PHA's payment 
standard schedule (i.e., online).
    (iv) The PHA must administer decreases in the payment standard 
amount for the family in accordance with the PHA policy as described in 
the PHA Administrative Plan. The PHA may establish different policies 
for different designated areas within its jurisdiction (e.g., for 
different ZIP code areas), but the PHA administrative policy on 
decreases to payment standard amounts must apply to all families under 
HAP contract at the time of the effective date of a decrease in the 
payment standard amount within a designated area.
    (4) If the payment standard amount is increased during the term of 
the HAP contract, the PHA must use the increased payment standard 
amount to calculate the monthly housing assistance payment for the 
family beginning no later than the earliest of:
    (i) The effective date of an increase in the gross rent that would 
result in an increase in the family share;
    (ii) The family's first regular reexamination; or
    (iii) One year following the effective date of the increase in the 
payment standard amount.
    (5) Irrespective of any increase or decrease in the payment 
standard amount, if the family unit size increases or decreases during 
the HAP contract term, the new family unit size must be used to 
determine the payment standard amount for the family beginning at the 
family's first regular reexamination following the change in family 
unit size.
0
16. In Sec.  982.517, revise paragraphs (a)(2), (b), and (e) to read as 
follows:


Sec.  982.517  Utility allowance schedule.

    (a) * * *
    (2) At HUD's request, the PHA must provide the utility allowance 
schedule and any information or procedures used in preparation of the 
schedule.
    (b) How allowances are determined. (1)(i) A PHA's utility allowance 
schedule, and the utility allowance for an individual family, must 
include the utilities and services that are necessary in the locality 
to provide housing that complies with the Housing Quality Standards.
    (ii) In the utility allowance schedule, the PHA must classify 
utilities and other housing services according to the following general 
categories: Space heating; air conditioning; cooking; water heating; 
water; sewer; trash collection (disposal of waste and refuse); other 
electric; refrigerator (cost of tenant-supplied refrigerator); range 
(cost of tenant-supplied range); and other specified housing services.
    (iii) The PHA must provide a utility allowance for tenant-paid air-
conditioning costs if the majority of housing units in the market 
provide centrally air-conditioned units or there is appropriate wiring 
for tenant-installed air conditioners.
    (iv) The PHA may not provide any allowance for non-essential 
utility costs, such as costs of cable, satellite television, or 
wireless internet.
    (2)(i) The PHA must maintain an area-wide utility allowance 
schedule. The area-wide utility allowance schedule must be determined 
based on the typical cost of utilities and services paid by energy-
conservative households that occupy housing of similar size and type in 
the same locality. In developing the schedule, the PHA must use normal 
patterns of consumption for the community as a whole and current 
utility rates.
    (ii) The PHA may maintain an area-wide, energy-efficient utility 
allowance schedule to be used for units that are in a building that 
meets LEED or Energy Star or other Energy Savings Design standards 
included in HUD's Utility Schedule Model. HUD may subsequently identify 
additional Energy Savings Design standards, which will be modified or 
added through a document published in the Federal Register for 30 days 
of public comment, followed by a final document announcing the modified 
Energy Savings Design standards and the date on which the modifications 
take effect. The energy-

[[Page 63701]]

efficient utility allowance schedule is to be maintained in addition 
to, not in place of, the area-wide utility allowance schedule described 
in paragraph (b)(2)(i) of this section, unless all units within a PHA's 
jurisdiction meet one or more of the required standards.
    (iii) The PHA may base its utility allowance payments on actual 
flat fees charged by an owner for utilities that are billed directly by 
the owner, but only if the flat fee charged by the owner is less than 
the PHA's applicable utility allowance for the utilities covered by the 
fee. If an owner charges a flat fee for only some of the utilities, 
then the PHA must pay a separate allowance for any tenant-paid 
utilities that are not covered in the flat fee.
    (iv) The PHA must state its policy for utility allowance payments 
in its Administrative Plan and apply it consistently to all similarly 
situated households.
* * * * *
    (e) Higher utility allowance as reasonable accommodation for a 
person with disabilities. On request from a family that includes a 
person with disabilities, the PHA must approve a utility allowance 
which is higher than the applicable amount on the utility allowance 
schedule if a higher utility allowance is needed as a reasonable 
accommodation under 24 CFR part 8, the Fair Housing Act and 24 CFR part 
100, or Titles II or III of the Americans with Disabilities Act and 28 
CFR parts 35 and 36, to make the program accessible to and usable by 
the family member with a disability.
* * * * *
0
17. Revise Sec.  982.623 to read as follows:


Sec.  982.623   Manufactured home space rental: Housing assistance 
payment.

    (a) Amount of monthly housing assistance payment. The monthly 
housing assistance payment is calculated as the lower of:
    (1) The PHA payment standard, determined in accordance with Sec.  
982.503 minus the total tenant payment; or
    (2) The family's eligible housing expenses minus the total tenant 
payment.
    (b) Eligible housing expenses. The family's eligible housing 
expenses are the total of:
    (1) The rent charged by the owner for the manufactured home space.
    (2) Charges for the maintenance and management the space owner must 
provide under the lease.
    (3) The monthly payments made by the family to amortize the cost of 
purchasing the manufactured home established at the time of application 
to a lender for financing the purchase of the manufactured home if 
monthly payments are still being made, including any required insurance 
and property taxes included in the loan payment to the lender.
    (i) Any increase in debt service or term due to refinancing after 
purchase of the home may not be included in the amortization cost.
    (ii) Debt service for installation charges incurred by a family may 
be included in the monthly amortization payments. Installation charges 
incurred before the family became an assisted family may be included in 
the amortization cost if monthly payments are still being made to 
amortize the charges.
    (4) The applicable allowances for tenant-paid utilities, as 
determined under Sec. Sec.  982.517 and 982.624.
    (c) Distribution of housing assistance payment. In general, the 
monthly housing assistance payment is distributed as follows:
    (1) The PHA pays the owner of the space the lesser of the housing 
assistance payment or the portion of the monthly rent due to the owner. 
The portion of the monthly rent due to the owner is the total of:
    (i) The actual rent charged by the owner for the manufactured home 
space; and
    (ii) Charges for the maintenance and management the space owner 
must provide under the lease.
    (2) If the housing assistance payment exceeds the portion of the 
monthly rent due to the owner, the PHA may pay the balance of the 
housing assistance payment to the family. Alternatively, the PHA may 
pay the balance to the lender or utility company, in an amount no 
greater than the amount due for the month to each, respectively, 
subject to the lender's or utility company's willingness to accept the 
PHA's payment on behalf of the family. If the PHA elects to pay the 
lender or the utility company directly, the PHA must notify the family 
of the amount paid to the lender or the utility company and must pay 
any remaining balance directly to the family.
    (d) PHA option: Single housing assistance payment to the family. 
(1) If the owner of the manufactured home space agrees, the PHA may 
make the entire housing assistance payment to the family, and the 
family shall be responsible for paying the owner directly for the full 
amount of rent of the manufactured home space due to the owner, 
including owner maintenance and management charges. If the PHA 
exercises this option, the PHA may not make any payments directly to 
the lender or utility company.
    (2) The PHA and owner of the manufactured home space must still 
execute the HAP contract, and the owner is still responsible for 
fulfilling all of the owner obligations under the HAP contract, 
including but not limited to complying with Housing Quality Standards 
and rent reasonableness requirements. The owner's acceptance of the 
family's monthly rent payment during the term of the HAP contract 
serves as the owner's certification to the reasonableness of the rent 
charged for the space in accordance with Sec.  982.622(b)(4).
    (3) If the family and owner agree to the single housing assistance 
payment, the owner is responsible for collecting the full amount of the 
rent and other charges under the lease directly from the family. The 
PHA is not responsible for any amounts owed by the family to the owner 
and may not pay any claim by the owner against the family.
0
18. In Sec.  982.625, revise paragraphs (a), (b), (f), and add a 
paragraph (g) subject heading to read as follows:


Sec.  982.625   Homeownership option: General.

    (a) Applicability. The homeownership option is used to assist a 
family residing in a home purchased and owned by one or more members of 
the family.
    (b) Family status. A family assisted under the homeownership option 
may be a newly admitted or existing participant in the program.
* * * * *
    (f) Live-in aide. The PHA must approve a live-in aide if needed as 
a reasonable accommodation so that the program is readily accessible to 
and useable by persons with disabilities in accordance with parts 8 and 
100 of this title. (See Sec.  982.316 concerning occupancy by a live-in 
aide.)
    (g) PHA capacity. * * *
* * * * *
0
19. In Sec.  982.628, revise paragraphs (d) introductory text and 
(d)(3) introductory text to read as follows:


Sec.  982.628  Homeownership option: Eligible units.

* * * * *
    (d) PHA-owned units. A family may purchase a PHA-owned unit, as 
defined in Sec.  982.4, with homeownership assistance only if all of 
the following conditions are satisfied:
    * * *
    (3) The PHA must obtain the services of an independent entity, as 
defined in Sec.  982.4 and in accordance with

[[Page 63702]]

Sec.  982.352(b)(1)(iv)(B), to perform the following PHA functions:
* * * * *
0
20. In Sec.  982.630, revise paragraph (a), add a paragraph (b) subject 
heading, and revise paragraphs (c) through (e) to read as follows:


Sec.  982.630  Homeownership option: Homeownership counseling.

    (a) Pre-assistance counseling. Before commencement of homeownership 
assistance for a family, the family must attend and satisfactorily 
complete the pre-assistance homeownership and housing counseling 
program required by the PHA (pre-assistance counseling).
    (b) Counseling topics. * * *
* * * * *
    (c) Local circumstances. The PHA may adapt the subjects covered in 
pre-assistance counseling (as listed in paragraph (b) of this section) 
to local circumstances and the needs of individual families.
    (d) Additional counseling. The PHA may also offer additional 
counseling after commencement of homeownership assistance (ongoing 
counseling). If the PHA offers a program of ongoing counseling for 
participants in the homeownership option, the PHA shall have discretion 
to determine whether the family is required to participate in the 
ongoing counseling.
    (e) HUD-certified housing counselor. Any homeownership counseling 
provided to families in connection with this section must be conducted 
by a HUD certified housing counselor working for an agency approved to 
participate in HUD's Housing Counseling Program.
0
21. In Sec.  982.635, revise paragraphs (b)(3), (c)(2)(vii), and 
(c)(3)(vii) to read as follows:


Sec.  982.635   Homeownership option: Amount and distribution of 
monthly homeownership assistance payment.

* * * * *
    (b) * * *
    (3) The payment standard amount may not be lower than what the 
payment standard amount was at commencement of homeownership 
assistance.
* * * * *
    (c) * * *
    (2) * * *
    (vii) Principal and interest on mortgage debt incurred to finance 
costs for major repairs, replacements or improvements for the home. If 
a member of the family is a person with disabilities, such debt may 
include debt incurred by the family to finance costs needed to make the 
home accessible for such person, if the PHA determines that allowance 
of such costs as homeownership expenses is needed as a reasonable 
accommodation so that the homeownership option is readily accessible to 
and usable by such person, in accordance with parts 8 and 100 of this 
title; and
* * * * *
    (3) * * *
    (vii) Principal and interest on debt incurred to finance major 
repairs, replacements or improvements for the home. If a member of the 
family is a person with disabilities, such debt may include debt 
incurred by the family to finance costs needed to make the home 
accessible for such person, if the PHA determines that allowance of 
such costs as homeownership expenses is needed as a reasonable 
accommodation so that the homeownership option is readily accessible to 
and usable by such person, in accordance with 24 CFR parts 8 and 100.
* * * * *
0
22. In Sec.  982.641, revise paragraph (f)(3) to read as follows:


Sec.  982.641  Homeownership option: Applicability of other 
requirements.

* * * * *
    (f) * * *
    (3) Section 982.517 (Utility allowance schedule), except that Sec.  
982.517(d) does not apply because the utility allowance is always based 
on the size of the home bought by the family with homeownership 
assistance.
* * * * *

PART 983--PROJECT-BASED VOUCHER (PBV) PROGRAM

0
23. The authority for part 983 continues to read as follows:

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

0
24. In part 983, revise all references to ``structure'' to read 
``project''.
0
25. In Sec.  983.2, revise paragraphs (c)(1), (c)(2)(iii), and 
(c)(6)(iii) to read as follows:


Sec.  983.2   When the tenant-based voucher rule (24 CFR part 982) 
applies.

* * * * *
    (c) * * *
    (1) In subpart E of part 982: Sec. Sec.  982.201(e), 982.202(b)(2), 
and 982.204(d);
    (2) * * *
    (iii) Section 982.316 (live-in aide) applies to the PBV program;
* * * * *
    (6) * * *
    (iii) Section 982.517 (utility allowance schedule), except that 
Sec.  982.517(d) does not apply.
* * * * *
0
26. Revise Sec.  983.3 to read as follows:


Sec.  983.3  PBV definitions.

    (a) General. This section defines PBV terms used in this part. For 
administrative ease and convenience, those part 982 terms that are also 
used in this part are included in this section. In limited cases, where 
there is a slight PBV distinction to the part 982 term, an annotation 
is made in this section.
    (b) Definitions.
    1937 Act. The United States Housing Act of 1937 (42 U.S.C. 1437 et 
seq.).
    Abatement. See 24 CFR 982.4.
    Activities of daily living. Eating, bathing, grooming, dressing, 
and home management activities.
    Administrative fee. See 24 CFR 982.4.
    Administrative fee reserve. See 24 CFR 982.4.
    Administrative Plan. See 24 CFR 982.4.
    Admission. The point when the family becomes a participant in the 
PHA's tenant-based or project-based voucher program. If the family is 
not already a tenant-based voucher participant, the date of admission 
for the project-based voucher program is the first day of the initial 
lease term (the commencement of the assisted tenancy) in the PBV unit. 
After admission, and so long as the family is continuously assisted 
with tenant-based or project-based voucher assistance from the PHA, a 
shift from tenant-based or project-based assistance to the other form 
of voucher assistance is not a new admission.
    Agreement to enter into HAP contract (Agreement). A written 
contract between the PHA and the owner in the form prescribed by HUD. 
The Agreement defines requirements for development activity undertaken 
for units to be assisted under this section. When development is 
completed by the owner in accordance with the Agreement, the PHA enters 
into a HAP contract with the owner. The Agreement is not used for 
existing housing assisted under this section.
    Applicant. A family that has applied for admission to the PBV 
program but is not yet a program participant.
    Area where vouchers are difficult to use. An area where a voucher 
is difficult to use is:
    (i) A ZIP code area where the rental vacancy rate is less than 4 
percent; or
    (ii) A ZIP code area where 90 percent of the Small Area FMR is more 
than 110 percent of the metropolitan area FMR.
    Assisted living facility. A residence facility (including a 
facility located in a larger multifamily property) that meets all the 
following criteria:
    (i) The facility is licensed and regulated as an assisted living 
facility by

[[Page 63703]]

the state, municipality, or other political subdivision;
    (ii) The facility makes available supportive services to assist 
residents in carrying out activities of daily living; and
    (iii) The facility provides separate dwelling units for residents 
and includes common rooms and other facilities appropriate and 
available to provide supportive services for the residents.
    Authorized voucher units. See 24 CFR 982.4.
    Budget authority. See 24 CFR 982.4.
    Comparable rental assistance. A subsidy or other means to enable a 
family to obtain decent housing in the PHA jurisdiction renting at a 
gross rent that is not more than 40 percent of the family's adjusted 
monthly gross income.
    Congregate housing. See 24 CFR 982.4.
    Continuously assisted. See 24 CFR 982.4.
    Contract units. The housing units covered by a HAP contract.
    Cooperative housing. See 24 CFR 982.4.
    Cooperative member. See 24 CFR 982.4.
    Covered housing provider. For Project-Based Voucher (PBV) program, 
``covered housing provider,'' as such term is used in HUD's regulations 
in 24 CFR part 5, subpart L (Protection for Victims of Domestic 
Violence, Dating Violence, Sexual Assault, or Stalking) refers to the 
PHA or owner (as defined in 24 CFR 982.4), as applicable given the 
responsibilities of the covered housing provider as set forth in 24 CFR 
part 5, subpart L. For example, the PHA is the covered housing provider 
responsible for providing the notice of occupancy rights under VAWA and 
certification form described at 24 CFR 5.2005(a). In addition, the 
owner is the covered housing provider that may choose to bifurcate a 
lease as described at 24 CFR 5.2009(a), while the PHA is the covered 
housing provider responsible for complying with emergency transfer plan 
provisions at 24 CFR 5.2005(e).
    Development activity. The replacement of equipment and/or materials 
rendered unsatisfactory because of normal wear and tear by items of 
substantially the same kind does not constitute development activity. 
Development activity is activity that entails either:
    (i) New construction or rehabilitation work done after the proposal 
selection date in order for the PHA and owner to execute a PBV HAP 
contract for newly constructed or rehabilitated housing, or
    (ii) One of the following activities undertaken during the term of 
the PBV HAP contract:
    (A) Remodeling that alters the nature or type of housing units in a 
project,
    (B) Reconstruction, or
    (C) A substantial improvement in the quality or kind of equipment 
and materials.
    Excepted units. Units in a project not counted against the project 
cap. See Sec.  983.54(c).
    Existing housing. A housing project in which all the proposed PBV 
units either fully comply or substantially comply with the HQS on the 
proposal selection date. (The units must comply with the initial pre-
HAP inspection requirements in accordance with Sec.  983.103(b) and (c) 
before execution of the HAP contract.) A unit substantially complies 
with the HQS if it has HQS deficiencies that require only minor repairs 
to correct (repairs that are minor in nature and could reasonably be 
expected to be completed within 48 hours of notification of the 
deficiency.) To qualify as existing housing, the project is ready to be 
placed under HAP contract with minimal delay--after the unit 
inspections are complete, all proposed PBV units not meeting HQS can 
brought into compliance to allow PBV HAP contract execution within 48 
hours.
    Family. See 24 CFR 982.4.
    Family self-sufficiency program. See 24 CFR 982.4.
    Group home. See 24 CFR 982.4.
    HAP contract. See 24 CFR 982.4.
    Household. The family and any PHA-approved live-in aide.
    Housing assistance payment. The monthly assistance payment for a 
PBV unit by a PHA, which includes:
    (i) A payment to the owner for rent to owner under the family's 
lease minus the tenant rent; and
    (ii) An additional payment to or on behalf of the family, if the 
utility allowance exceeds the total tenant payment, in the amount of 
such excess.
    Housing credit agency. For purposes of performing subsidy layering 
reviews for proposed PBV projects, a housing credit agency includes a 
State housing finance agency, a State participating jurisdiction under 
HUD's HOME program (see 24 CFR part 92), or other State housing 
agencies that meet the definition of ``housing credit agency'' as 
defined by section 42 of the Internal Revenue Code of 1986.
    Housing quality standards (HQS). See 24 CFR 982.4.
    Independent entity. See 24 CFR 982.4, except that under the PBV 
program, the independent entity functions are described in Sec.  
983.57.
    Initial rent to owner. See 24 CFR 982.4.
    In-place family. An eligible family residing in a proposed contract 
unit on the proposal selection date.
    Jurisdiction. See 24 CFR 982.4.
    Lease. See 24 CFR 982.4.
    Multifamily building. A building with five or more dwelling units 
(assisted or unassisted).
    Newly constructed housing. Housing units that do not exist on the 
proposal selection date and are developed after the date of selection 
for use under the PBV program.
    Owner. See 24 CFR 982.4.
    Partially assisted project. A project in which there are fewer 
contract units than residential units.
    Participant. A family that has been admitted and is currently 
assisted in the PBV (or HCV) program. If the family is not already a 
tenant-based voucher participant, the family becomes a participant on 
the effective date of the initial lease term (the commencement of the 
assisted tenancy) in the PBV unit.
    PHA-owned unit. See 24 CFR 982.4.
    Premises. The project in which the contract unit is located, 
including common areas and grounds.
    Program. The voucher program under section 8 of the 1937 Act, 
including tenant-based or project-based assistance.
    Project. A project is a single building, multiple contiguous 
buildings, or multiple buildings on contiguous parcels of land. 
Contiguous in this definition includes ``adjacent to'', as well as 
touching along a boundary or a point.
    Project-based certificate (PBC) program. The program in which 
project-based assistance is attached to units pursuant to an Agreement 
executed by a PHA and owner before January 16, 2001 (see Sec.  983.11).
    Proposal selection date. See Sec.  983.51(e)(2).
    Public housing agency (PHA). See 24 CFR 982.4.
    Reasonable rent. See 24 CFR 982.4.
    Rehabilitated housing. Housing units that exist on the proposal 
selection date, but do not substantially comply with the HQS on that 
date, and are developed for use under the PBV program.
    Request for Release of Funds and Certification (for purposes of 
environmental review). Under 24 CFR 58.1(b)(6)(iii) and Sec.  983.56, 
HUD approves the local PHA's Request for Release of Funds and 
Certification (form HUD-7015.15) by issuing a Letter to Proceed or form 
HUD-7015.16, authorizing the PHA to execute an ``agreement to enter 
into housing assistance payment contract'' (Agreement) or enter 
directly into a HAP

[[Page 63704]]

contract with an owner of units selected under the PBV program, or 
execute a PHA certification under Sec.  983.204(d)(2).
    Rent to owner. The total monthly rent payable by the family and the 
PHA to the owner under the lease for a contract unit. Rent to owner 
includes payment for any housing services, maintenance, and utilities 
to be provided by the owner in accordance with the lease. (Rent to 
owner must not include charges for non-housing services including 
payment for food, furniture, or supportive services provided in 
accordance with the lease.)
    Responsible entity (RE) (for environmental review). The unit of 
general local government within which the project is located that 
exercises land use responsibility or, if HUD determines this 
infeasible, the county or, if HUD determines that infeasible, the 
state.
    Single-family building. A building with no more than four dwelling 
units (assisted or unassisted).
    Single room occupancy housing (SRO). See 24 CFR 982.4.
    Site. The grounds where the contract units are located or will be 
located after development.
    Small Area Fair Market Rents (SAFMRs). See 24 CFR 982.4. (See also 
24 CFR 888.113(c)(5).)
    Special housing type. Subpart M of 24 CFR part 982 states the 
special regulatory requirements for different special housing types. 
Subpart M provisions on shared housing, manufactured home space rental, 
and the homeownership option do not apply to PBV assistance under this 
part.
    Subsidy standards. See 24 CFR 982.4.
    Tenant. See 24 CFR 982.4.
    Tenant-paid utilities. See 24 CFR 982.4.
    Tenant-selection plan. A written document that describes the 
owner's policies and procedures for the selection of tenants for 
occupancy of PBV units as described in Sec. Sec.  983.251(c)(7) and 
983.253(a).
    Waiting list admission. An admission from the PBV waiting list in 
accordance with Sec.  983.251.
    Wrong-size unit. A unit occupied by a family that does not conform 
to the PHA's subsidy standard for family size, by being either too 
large or too small compared to the standard.
0
27. In Sec.  983.4, revise ``labor standards'' to read as follows:


Sec.  983.4  Cross-reference to other Federal requirements.

* * * * *
    Labor standards. Regulations implementing the Davis-Bacon Act, 
Contract Work Hours and Safety Standards Act (40 U.S.C. 3701-3708), 29 
CFR part 5, and other federal laws and regulations pertaining to labor 
standards applicable to an Agreement covering nine or more assisted 
units.
* * * * *
0
28. Revise Sec.  983.5 to read as follows:


Sec.  983.5   Description of the PBV program.

    (a) How PBV works. (1) The PBV program is administered by a PHA 
that already administers the tenant-based voucher program under an 
annual contributions contract (ACC) with HUD. In the PBV program, the 
assistance is ``attached to the structure,'' which may be a multifamily 
building or single-family building. (See description of the difference 
between ``project-based'' and ``tenant-based'' rental assistance at 24 
CFR 982.1(b).)
    (2) The PHA enters into a HAP contract with an owner for units in 
existing housing or in newly constructed or rehabilitated housing.
    (3) In the case of new construction or rehabilitation, the housing 
may be developed pursuant to an Agreement (Sec.  983.155) between the 
owner and the PHA. In the Agreement, the PHA agrees to execute a HAP 
contract after the owner completes the construction or rehabilitation 
of the units. Alternatively, the housing may be developed without such 
an Agreement (Sec.  983.155(e)).
    (4) During the term of the HAP contract, the PHA makes housing 
assistance payments to the owner for units leased and occupied by 
eligible families.
    (b) How PBV is funded. If a PHA decides to operate a PBV program, 
the PHA's PBV program is funded with a portion of appropriated funding 
(budget authority) available under the PHA's voucher ACC. This pool of 
funding is used to pay housing assistance for both tenant-based and 
project-based voucher units. Likewise, the administrative fee funding 
made available to a PHA is used for the administration of both tenant-
based and project-based voucher assistance.
    (c) PHA discretion to operate PBV program. A PHA has discretion 
whether to operate a PBV program. HUD approval is not required, except 
that the PHA must notify HUD of its intent to project-base its 
vouchers. The PHA must also state in its Administrative Plan that it 
will engage in project-basing and must amend its Administrative Plan to 
address the subjects listed in Sec.  983.10, as applicable.
0
29. Revise Sec.  983.6 to read as follows:


Sec.  983.6  Maximum amount of PBV assistance (percentage limitation).

    (a) In general. Except as provided in paragraphs (b) and (c) of 
this section, a PHA may commit project-based assistance to no more than 
20 percent of its authorized voucher units at the time of commitment.
    (1) A PHA is not required to reduce the number of units to which it 
has committed PBV assistance under an AHAP or HAP if the number of 
authorized voucher units is subsequently reduced and the number of PBV 
units consequently exceeds the program limitation.
    (2) A PHA that was within the program limit prior to January 18, 
2017, and exceeded the program limit on that date due solely to the 
change in how the program cap is calculated is not required to reduce 
the number of PBV units under an Agreement or HAP contract.
    (3) In the circumstances described in paragraphs (a)(1) and (2) of 
this section, the PHA may not add units to PBV HAP contracts, or enter 
into new Agreements or HAP contracts (except for HAP contracts 
resulting from Agreements entered into before the reduction of 
authorized units or January 18, 2017, as applicable), unless such units 
meet the conditions described in paragraph (d) of this section.
    (b) Units subject to percentage limitation. All PBC and project-
based voucher units for which the PHA has issued a notice of proposal 
selection or which are under an Agreement or HAP contract for PBC or 
project-based voucher assistance count against the 20 percent maximum.
    (c) PHA determination. The PHA is responsible for determining the 
amount of budget authority that is available for project-based vouchers 
and for ensuring that the amount of assistance that is attached to 
units is within the amounts available under the ACC.
    (d) Increased cap. A PHA may project-base an additional 10 percent 
of its authorized voucher units, provided the additional units meet 
both of the conditions in paragraphs (d)(1) and (2) of this section:
    (1) The units are part of a HAP contract executed on or after April 
18, 2017, or are added on or after that date to any current HAP 
contract, including a contract entered into prior to April 18, 2017; 
and
    (2) The units fall into at least one of the following categories:
    (i) The units are specifically made available to house individuals 
and families that meet the definition of homeless under section 103 of 
the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11302), included 
in 24 CFR 578.3.
    (ii) The units are specifically made available to house families 
that are

[[Page 63705]]

comprised of or include a veteran. For purposes of the increased cap, a 
veteran means a person who served in the active military, naval, or air 
service, and who was discharged or released therefrom under conditions 
other than dishonorable.
    (iii) The units provide supportive housing to persons with 
disabilities or to elderly persons, as defined in 24 CFR 5.403. 
Supportive housing means that the project makes supportive services 
available for all of the assisted families in the project and provides 
a range of services tailored to the needs of the residents occupying 
such housing. Such supportive services need not be provided by the 
owner or on site but must be reasonably available to the families 
receiving PBV assistance in the project.
    (iv) The units are located in a census tract with a poverty rate of 
20 percent or less, as determined by HUD.
    (v) The units are located in an area where vouchers are difficult 
to use as defined in Sec.  983.3.
    (e) Units previously subject to federally required rent 
restrictions or that received long-term rental assistance from HUD. 
Units covered by a PBV HAP contract will not count toward the program 
cap if the units meet the requirements of Sec.  983.59.
0
30. Revise Sec.  983.10 to read as follows:


Sec.  983.10  PBV provisions in the Administrative Plan.

    (a) In addition to complying with the requirements of Sec.  982.54, 
a PHA that has implemented or plans to implement a PBV program must 
state the PHA policy on all PBV-related matters over which the PHA has 
policymaking discretion.
    (b) With respect to the PHA's PBV program, the PHA Administrative 
Plan must cover, at a minimum, the following PHA policies:
    (1) Regarding the selection of PBV proposals:
    (i) A description of the procedures for owner submission of PBV 
proposals and for PHA selection of PBV proposals (Sec.  983.51(a));
    (ii) Whether the PHA will select, without competition, a proposal 
for housing assisted under another program that required competitive 
selection of proposals (Sec.  983.51(b)(2));
    (iii) If the PHA will project-base assistance as part of an 
initiative to improve, develop, or replace a public housing property or 
site without following a competitive process, its scope of work for the 
project or site, and how many units of PBV it plans to add (Sec.  
983.51(c));
    (2) A description of the types of services that will be offered to 
families for a project to qualify for the exception from the project 
cap and the extent to which such voluntary services will be available 
(e.g., length of time services will be provided to a family, frequency 
of services, and depth of services) (Sec.  983.54(c)(1)(ii));
    (3) Regarding site selection standards:
    (i) The PHA's standard for deconcentrating poverty and expanding 
housing and economic opportunities, which must be consistent with the 
PHA Plan under 24 CFR part 903 (Sec.  983.55(b)(1));
    (ii) The PHA's site selection policy, which must explain how the 
PHA's site selection procedures promote the PBV goals (Sec.  
983.55(c)(1));
    (4) PHA inspection policies, including:
    (i) How frequently a PHA will conduct inspections during the term 
of a HAP contract in order to ensure that the premises are maintained 
in accordance with HUD's Housing Quality Standards (Sec.  983.103(d) 
and (g));
    (ii) If the PHA has adopted either the non-life threatening 
deficiencies option or the alternative inspection option, or both, in 
accordance with Sec.  982.405(i) and/or Sec.  982.305(f), for initial 
inspections of existing housing, the PHA policies that will apply to 
such inspections;
    (iii) If the PHA will attach PBV assistance to existing housing, 
the amount of time that may elapse between the initial inspection of a 
unit and execution of a HAP contract for that unit;
    (5) Whether and under what circumstances the PHA will enter into a 
PBV HAP contract for new construction or rehabilitation without first 
entering into an Agreement (Sec.  983.204(c));
    (6) A description of the circumstances under which a PHA will 
consider amending PBV HAP contracts to substitute or add contract 
units, and how those circumstances support the goals of the PBV program 
(Sec.  983.207(a) and (b));
    (7) A description of the PHA's waiting list policies for admission 
to PBV units. Specifically:
    (i) Whether the PHA will establish a separate waiting list for 
admission to PBV units (Sec.  983.251(c)(2)(i));
    (ii) Whether the PHA will establish separate waiting lists for 
admission to individual projects or buildings (or for sets of such 
units), including the names of the project(s) (Sec.  
983.251(c)(2)(iii));
    (iii) Any criteria or preferences that the PHA has decided to 
establish for admission to any PBV units, including the name of the 
project(s) and the specific criteria or preferences that are to be used 
by project (Sec.  983.251(c)(3));
    (iv) Whether the PHA will allow for owner-maintained, site-based 
waiting lists (Sec.  983.251(c)(7)), including the name of the 
project(s), the oversight procedures the PHA will use to ensure owner-
maintained waiting lists are administered properly and in accordance 
with program requirements, and the approval process of an owner's 
tenant selection plan (including any preferences). The owner's tenant-
selection plan must be incorporated in the PHA's Administrative Plan;
    (v) Whether a family's position on a central PBV waiting list will 
be affected by the family's rejection of the PBV offer, without good 
cause, or the owner's rejection of the family (Sec.  983.251(e)(2));
    (8) Regarding tenant screening:
    (i) Whether the PHA will screen applicants for family behavior or 
suitability for tenancy (Sec.  983.255(a)(1));
    (ii) whether the PHA will offer information to an owner about a 
family that wishes to lease a dwelling unit from the owner, including 
information about the tenancy history of family members or about drug 
trafficking and criminal activity by family members (Sec.  
983.255(c)(2));
    (9) The PHA's policy on continued housing assistance for a family 
that occupies a wrong-sized unit or a unit with accessibility features 
that the family does not require (Sec.  983.260(b)(2));
    (10) Whether the PHA will allow a family that initially qualified 
for occupancy of a unit excepted based on elderly family status to 
continue to reside in the unit where, through circumstances beyond the 
control of the family, the elderly family member no longer resides in 
the unit (Sec.  983.262(d));
    (11) Whether the PHA will establish site-specific utility 
allowances at any of its PBV-assisted properties (Sec.  983.301);
    (12) For an owner that wishes to request a rent increase, the 
length of the required notice period and the form in which such request 
must be submitted (Sec.  983.302(b)(2));
    (13) Whether the PHA will employ a PBV HAP contract that provides 
for vacancy payments to an owner, for what duration of time such 
payments will be made, and the form and manner in which requests for 
such vacancy payments must be made (Sec.  983.352(b)(1) and (4));
    (14) Whether utility reimbursements will be paid to the family or 
to the utility supplier (Sec.  983.353(d)(2);
    (15) Which option the PHA will select if a unit loses its excepted 
status (Sec.  983.262(f)); and
    (16) If the PHA is employing SAFMRs in the operation of its Housing 
Choice Voucher program, whether it will apply

[[Page 63706]]

SAFMRs to its PBV program per 24 CFR 888.113(h);
0
31. Add Sec.  983.11 to subpart A to read as follows:


Sec.  983.11  Project-based certificate (PBC) program.

    (a) What is it? ``PBC program'' means project-based assistance 
attached to units pursuant to an Agreement executed by a PHA and owner 
before January 16, 2001, and in accordance with:
    (1) The regulations for the PBC program at 24 CFR part 983, 
codified as of May 1, 2001, and contained in 24 CFR part 983 revised as 
of April 1, 2002; and
    (2) Section 8(d)(2) of the 1937 Act, as in effect before October 
21, 1998 (the date of enactment of Title V of Public Law 105-276, the 
Quality Housing and Work Responsibility Act of 1998, codified at 42 
U.S.C. 1437 et seq.).
    (b) What rules apply? Units under the PBC program are subject to 
the provisions of 24 CFR part 983, codified as of May 1, 2001, with the 
following exceptions:
    (1) PBC renewals--(i) General. Consistent with the PBC HAP 
contract, at the sole option of the PHA, HAP contracts may be renewed 
for terms for an aggregate total (including the initial and any renewal 
terms) of 15 years, subject to the availability of appropriated funds.
    (ii) Renewal of PBC as PBV. At the sole discretion of the PHA, upon 
the request of an owner, PHAs may renew a PBC HAP contract as a PBV HAP 
contract. All PBV regulations (including 24 CFR part 983, subpart G--
Rent to Owner) apply to a PBC HAP contract renewed as a PBV HAP 
contract with the exception of Sec. Sec.  983.51, 983.56, and 
983.57(b)(1). In addition, the following conditions apply:
    (A) The term of the HAP contract for PBC contracts renewed as PBV 
contracts shall be consistent with Sec.  983.205.
    (B) A PHA must make the determination, within one year before 
expiration of a PBC HAP contract, that renewal of the contract under 
the PBV program is appropriate to continue providing affordable housing 
for low-income families.
    (C) The renewal of PBC assistance as PBV assistance is effectuated 
by the execution of a PBV HAP contract addendum as prescribed by HUD 
and a PBV HAP contract for existing housing.
    (2) Housing quality standards. The regulations in 24 CFR 982.401 
(Housing Quality Standards) (HQS) apply to units assisted under the PBC 
program.
    (i) Special housing types. HQS requirements for eligible special 
housing types, under this program, apply (See 24 CFR 982.605. 982.609, 
and 982.614).
    (ii) Lead-based paint requirements. (A) The lead-based paint 
requirements at 24 CFR 982.401(j) do not apply to the PBC program.
    (B) The Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821-
4846), the Residential Lead-based Paint Hazard Reduction Act of 1992 
(42 U.S.C. 4851-4856), and implementing regulations at 24 CFR part 35, 
subparts A, B, H, and R, apply to the PBV program.
    (iii) HQS enforcement. The regulations in 24 CFR parts 982 and 983 
do not create any right of the family or any party, other than HUD or 
the PHA, to require enforcement of the HQS requirements or to assert 
any claim against HUD or the PHA for damages, injunction, or other 
relief for alleged failure to enforce the HQS.
    (c) Statutory notice requirements. In addition to provisions of 24 
CFR part 983 codified as of May 1, 2001, Sec.  983.206 applies to the 
PBC program.
0
32 Add Sec.  983.12 to subpart A to read as follows:


Sec.  983.12  Prohibition of excess public assistance.

    (a) The PHA may provide PBV assistance for newly constructed and 
rehabilitation housing only in accordance with HUD subsidy layering 
regulations (24 CFR 4.13) and other requirements.
    (b) The subsidy layering requirements are not applicable to 
existing housing.
    (c) For the subsidy layering requirements related to development 
activity to place newly constructed or rehabilitated housing under a 
HAP contract, see Sec.  983.153(b).
    (d)(1) For newly constructed or rehabilitated housing under a HAP 
contract, the owner must disclose to the PHA, in accordance with HUD 
requirements, information regarding any additional related assistance 
from the Federal Government, a State, or a unit of general local 
government, or any agency or instrumentality thereof, that is made 
available with respect to the contract units during the term of the HAP 
contract. Such related assistance includes but is not limited to any 
loan, grant, guarantee, insurance, payment, rebate, subsidy, credit, 
tax benefit, or any other form of direct or indirect assistance.
    (2) A subsidy layering review is required to determine if the 
additional related assistance in paragraph (d)(1) of this section would 
result in excess public assistance to the project.
    (3) Housing assistance payments must not be more than is necessary, 
as determined in accordance with HUD requirements, to provide 
affordable housing after taking account of such related assistance. The 
PHA must adjust in accordance with HUD requirements, the amount of the 
housing assistance payments to the owner to compensate in whole or in 
part for such related assistance.
0
33. Revise subpart B to read as follows:
Subpart B--Selection of PBV Owner Proposals
Sec.
983.51 Owner proposal selection procedures.
983.52 Prohibition of assistance for ineligible units.
983.53 Prohibition of assistance for units in subsidized housing.
983.54 Cap on number of PBV units in each project (income-mixing 
requirement).
983.55 Site selection standards.
983.56 Environmental review.
983.57 PHA-owned units.
983.58 PHA determination prior to selection.
983.59 Units excepted from program cap and project cap.

Subpart B--Selection of PBV Owner Proposals


Sec.  983.51  Owner proposal selection procedures.

    (a) Procedures for selecting PBV proposals. The PHA Administrative 
Plan must describe the procedures for owner submission of PBV proposals 
and for PHA selection of PBV proposals. Before selecting a PBV 
proposal, the PHA must determine that the PBV proposal complies with 
HUD program regulations and requirements, including a determination 
that the property is eligible housing (Sec. Sec.  983.52 and 983.53), 
complies with the cap on the number of PBV units per project (Sec.  
983.54), and meets the site selection standards (Sec.  983.55).
    (b) Methods of selection. The PHA must select PBV proposals in 
accordance with the selection procedures in the PHA Administrative 
Plan. (See paragraph (f) of this section for information about the 
selection of PHA-owned units.) The PHA must select PBV proposals by 
either of the following two methods:
    (1) The PHA may issue a Request for Proposals (RFP), selecting a 
PBV proposal through a competition. The PHA's RFP may not limit 
proposals to a single site or impose restrictions that explicitly or 
practically preclude owner submission of proposals for PBV housing on 
different sites.
    (2) The PHA may select, without a PBV competition, a proposal for 
housing assisted under a Federal, State, or local

[[Page 63707]]

government housing assistance, community development, or supportive 
services program that required competitive selection of proposals 
(e.g., HOME, and units for which competitively awarded Low-Income 
Housing Tax Credits (LIHTCs) have been provided), where the proposal 
has been selected in accordance with such program's competitive 
selection requirements within 3 years of the PBV proposal selection 
date. The earlier competitively selected housing assistance proposal 
must not have involved any consideration that the project would receive 
PBV assistance.
    (c) Exceptions to competitive selection. (1) A PHA may attach PBV 
assistance to an existing, newly constructed, or rehabilitated 
structure in which the PHA has an ownership interest or over which the 
PHA has control without regard to a competitive process when the PHA is 
engaged in an initiative to improve, develop, or replace a public 
housing property or site. The PHA must have notified the public of its 
intent through its PHA Plan. Newly developed or replacement housing 
need not be on the same site as the original public housing in order 
for this exception to apply. In addition, the public housing properties 
or sites may be in the public housing inventory or they may have been 
removed from the public housing inventory through any available legal 
removal tool within 5 years of the proposal selection date.
    (2) A PHA may select a project formerly assisted under the public 
housing program in which a PHA has no ownership interest or control 
over without regard to a competitive process, or a project that is 
replacing the public housing project, provided:
    (i) The public housing project is either still in the public 
housing inventory or had been removed from the public housing inventory 
through any available legal removal tool within 5 years of the proposal 
selection date;
    (ii) The PHA that owned or owns the public housing project does not 
administer the HCV program; and
    (iii) The PBV assistance was specifically identified as replacement 
housing for the impacted public housing residents as part of the public 
housing demolition/disposition application, voluntary conversion 
application, or any other application process submitted to and approved 
by HUD to remove the public housing project from the public housing 
inventory.
    (d) Public notice of PHA request for PBV proposals. If the PHA will 
be selecting proposals under paragraph (b)(1) of this section, PHA 
procedures for selecting PBV proposals must be designed and actually 
operated to provide broad public notice of the opportunity to offer PBV 
proposals for consideration by the PHA. The public notice procedures 
may include publication of the public notice in a local newspaper of 
general circulation and other means designed and actually operated to 
provide broad public notice. The public notice of the PHA request for 
PBV proposals must specify the submission deadline. Detailed 
application and selection information must be provided at the request 
of interested parties.
    (e) Inspections required prior to proposal selection. (1) The PHA 
must examine the proposed site before the proposal selection date to 
determine whether the site complies with the site selection standards 
(Sec.  983.55).
    (2) The PHA may enter into a HAP contract for existing housing if:
    (i) The project fully or substantially complies with the HQS on the 
proposal selection date, which the PHA must determine via inspection,
    (ii) If applicable, the project meets the environmental review 
requirements at Sec.  983.153(a), and
    (iii) The project meets the initial inspection requirements in 
accordance with Sec.  983.103(b).
    (f) PHA written notice of proposal selection. The PHA must give 
prompt written notice to the party that submitted a selected proposal 
under either paragraph (b)(1) or (2) of this section and must also give 
prompt public notice of such selection. The PHA's requirement to 
provide public notice may be met via publication of the public notice 
in a local newspaper of general circulation or other means designed and 
actually operated to provide broad public notice.
    (g) Proposal selection date. (1) The proposal selection date is the 
date on which the PHA provides written notice to the party that 
submitted the selected proposal under either paragraph (b)(1) or (2) of 
this section.
    (2) For properties selected in accordance with Sec.  983.51(c), the 
date of proposal selection is the date of the PHA's board resolution 
approving the project-basing of assistance at the specific project.
    (h) PHA-owned units. A PHA-owned unit may be assisted under the PBV 
program only if the HUD field office or the independent entity reviews 
the selection process the PHA undertook and determines that the PHA-
owned units were appropriately selected based on the selection 
procedures specified in the PHA Administrative Plan. Under no 
circumstances may PBV assistance be used with a public housing unit. 
With the exception of properties selected in accordance with Sec.  
983.51(c), the PHA's selection procedures must be designed in a manner 
that does not effectively eliminate the submission of proposals for 
non-PHA-owned units or give preferential treatment (e.g., additional 
points) to PHA-owned units.
    (i) Public review of PHA selection decision documentation. The PHA 
must make documentation available for public inspection regarding the 
basis for the PHA selection of a PBV proposal.
    (j) Previous participation clearance. HUD approval of specific 
projects or owners is not required. For example, owner proposal 
selection does not require submission of form HUD-2530 (Previous 
Participation Certification) or other HUD previous participation 
clearance.
    (k) Excluded from Federal procurement. A PHA may not commit 
project-based assistance to a project if the owner or any principal or 
interested party is debarred, suspended subject to a limited denial of 
participation, or otherwise excluded under 2 CFR part 2424 or is listed 
on the U.S. General Services Administration list of parties excluded 
from Federal procurement or non-procurement programs.


Sec.  983.52   Prohibition of assistance for ineligible units.

    (a) Ineligible unit. The PHA may not attach or pay PBV assistance 
for units in the following types of housing:
    (1) Shared housing;
    (2) Units on the grounds of a penal, reformatory, medical, mental, 
or similar public or private institution;
    (3) Nursing homes or facilities providing continuous psychiatric, 
medical, nursing services, board and care, or intermediate care. 
However, the PHA may attach PBV assistance for a dwelling unit in an 
assisted living facility that provides home health care services such 
as nursing and therapy for residents of the housing;
    (4) Units that are owned or controlled by an educational 
institution or its affiliate and are designated for occupancy by 
students of the institution;
    (5) Manufactured homes; and
    (6) Transitional Housing.
    (b) Prohibition against assistance for owner-occupied unit. The PHA 
may not attach or pay PBV assistance for a unit occupied by an owner of 
the housing. A member of a cooperative who owns shares in the project 
assisted under the PBV program shall not be considered an owner for 
purposes of participation in the PBV program.
    (c) Prohibition against selecting unit occupied by an ineligible 
family. Before

[[Page 63708]]

a PHA selects a specific unit to which assistance is to be attached, 
the PHA must determine whether the unit is occupied and, if occupied, 
whether the unit's occupants are eligible for assistance. The PHA must 
not select or enter into an Agreement or HAP contract for a unit 
occupied by a family ineligible for participation in the PBV program.
    (d) Prohibition against assistance for units for which commencement 
of construction or rehabilitation occurred prior to AHAP. Unless a PHA 
has exercised the discretion at Sec.  983.155(e) to undertake 
development activity without an Agreement, the PHA may not attach PBV 
assistance to units on which construction or rehabilitation commenced 
after proposal submission and prior to execution of an Agreement.
    (1) Units for which rehabilitation or new construction began after 
proposal submission but prior to execution of an Agreement (if 
applicable) do not subsequently qualify as existing housing.
    (2) Units that were newly constructed or rehabilitated in violation 
of program requirements also do not qualify as existing housing.


Sec.  983.53   Prohibition of assistance for units in subsidized 
housing.

    A PHA may not attach or pay PBV assistance to units in any of the 
following types of subsidized housing:
    (a) A public housing dwelling unit;
    (b) A unit subsidized with any other form of Section 8 assistance 
(tenant-based or project-based);
    (c) A unit subsidized with any governmental rent subsidy (a subsidy 
that pays all or any part of the rent);
    (d) A unit subsidized with any governmental subsidy that covers all 
or any part of the operating costs of the housing;
    (e) A unit subsidized with Section 236 rental assistance payments 
(12 U.S.C. 1715z-1). However, the PHA may attach assistance to a unit 
subsidized with Section 236 interest reduction payments;
    (f) A unit subsidized with rental assistance payments under Section 
521 of the Housing Act of 1949, 42 U.S.C. 1490a (a Rural Housing 
Service Program). However, the PHA may attach assistance for a unit 
subsidized with Section 515 interest reduction payments (42 U.S.C. 
1485);
    (g) A Section 202 project for non-elderly persons with disabilities 
(assistance under Section 162 of the Housing and Community Development 
Act of 1987, 12 U.S.C. 1701q note);
    (h) Section 811 project-based supportive housing for persons with 
disabilities (42 U.S.C. 8013);
    (i) Section 202 supportive housing for the elderly (12 U.S.C. 
1701q);
    (j) A Section 101 rent supplement project (12 U.S.C. 1701s);
    (k) A unit subsidized with any form of tenant-based rental 
assistance (as defined at 24 CFR 982.1(b)(2)) (e.g., a unit subsidized 
with tenant-based rental assistance under the HOME program, 42 U.S.C. 
12701 et seq.);
    (l) A unit with any other duplicative federal, state, or local 
housing subsidy, as determined by HUD or by the PHA in accordance with 
HUD requirements. For this purpose, ``housing subsidy'' does not 
include the housing component of a welfare payment; a social security 
payment; or a federal, state, or local tax concession (such as relief 
from local real property taxes).


Sec.  983.54  Cap on number of PBV units in each project (income-mixing 
requirement).

    (a) Project cap. Except as provided in paragraph (b) of this 
section, the number of units in a project that the PHA may place under 
an Agreement or a HAP contract cannot be more than the greater of 25 
percent of the number of dwelling units (assisted or unassisted) in the 
project or 25 units.
    (b) Higher project cap. A PHA may provide PBV assistance to the 
greater of 25 units or 40 percent of the number of dwelling units 
(assisted or unassisted) in the project if:
    (1) The project is located in a census tract with a poverty rate of 
20 percent or less, as determined by HUD, or
    (2) The project is located in an area where vouchers are difficult 
to use as defined in Sec.  983.3.
    (c) Exceptions to the project cap. (1) PBV units are not counted 
against the project cap in the following cases:
    (i) Units exclusively serving elderly families, as such term is 
defined in 24 CFR 5.403.
    (ii) Units exclusively made available to households eligible for 
supportive services available to the residents of the project assisted 
with project-based voucher assistance. The project must make supportive 
services available to all PBV assisted families in the project, but the 
family may not be required to participate in the services as a 
condition of living in the excepted unit. Such supportive services need 
not be provided by the owner or on-site, but must be reasonably 
available to the families receiving PBV assistance in the project and 
designed to help the families in the project achieve self-sufficiency 
or live in the community as independently as possible. The PHA must 
include in its Administrative Plan the types of services offered to 
families that will enable the units to qualify under the exception and 
the extent to which such services will be provided (e.g., length of 
time services will be provided to a family, frequency of services, and 
depth of services). A PHA that manages an FSS program may offer FSS as 
part of its supportive services package but must not rely solely on FSS 
to meet the exception. A PHA may, however, make the supportive services 
used in connection to the FSS program available to non-FSS PBV families 
at the project.
    (2) Units covered by a PBV HAP contract will not count toward the 
project cap if the units meet the requirements of Sec.  983.59.
    (3)(i) The PBV HAP contract must specify, and the owner must set 
aside, the number of excepted units made available for occupancy by 
families who qualify for the exception.
    (ii) For a unit to be considered excepted it must be occupied by a 
family who qualifies for the exception.
    (d) Existing HAP contracts. (1) In general, HAP contracts in effect 
prior to April 18, 2017, are governed by the terms of those HAP 
contracts with respect to the requirements that apply to the number and 
type of excepted units in a project. The owner must continue to 
designate the same number of contract units and assist the same number 
and type of excepted units as provided under the HAP contract during 
the remaining term of the HAP contract and any extension.
    (2) The owner and the PHA may mutually agree to change the 
requirements for excepted units under the HAP contract to comply with 
the excepted unit requirements in subsection (c) of this section. 
However, any change to the HAP contract may only be made if the change 
does not jeopardize an assisted family's eligibility for continued 
assistance at the project.
    (e) PHA determination. The PHA determines the number of units in 
the project for which the PHA will provide project-based assistance, 
including whether and how many units will be excepted, subject to the 
provisions of this section. See Sec.  983.262 for more detail on the 
occupancy requirements of excepted units.
    (f) HUD monitoring. HUD may establish additional monitoring and 
oversight requirements for PBV projects in which more than 40 percent 
of the dwelling units are assisted under a PBV HAP contract through a 
Federal Register document, subject to public comment.

[[Page 63709]]

Sec.  983.55   Site selection standards.

    (a) Applicability. The site selection requirements in paragraph (d) 
of this section apply only to site selection for existing housing and 
rehabilitated PBV housing. The site selection requirements in paragraph 
(e) of this section apply only to site selection for newly constructed 
PBV housing. Other provisions of this section apply to selection of a 
site for any form of PBV housing, including existing housing, newly 
constructed housing, and rehabilitated housing.
    (b) Compliance with PBV goals, civil rights requirements, and HQS. 
The PHA may not select a proposal for existing, newly constructed, or 
rehabilitated PBV housing on a site or enter into an Agreement or HAP 
contract for units on the site, unless the PHA has determined that:
    (1) Project-based assistance for housing at the selected site is 
consistent with the goal of deconcentrating poverty and expanding 
housing and economic opportunities. The standard for deconcentrating 
poverty and expanding housing and economic opportunities must be 
consistent with the PHA Plan under 24 CFR part 903 and the PHA 
Administrative Plan. In developing the standards to apply in 
determining whether a proposed PBV development will be selected, a PHA 
must consider the following:
    (i) Whether the census tract in which the proposed PBV development 
will be located is in a HUD-designated Enterprise Zone, Economic 
Community, or Renewal Community;
    (ii) Whether a PBV development will be located in a census tract 
where the concentration of assisted units will be or has decreased as a 
result of public housing demolition;
    (iii) Whether the census tract in which the proposed PBV 
development will be located is undergoing significant revitalization;
    (iv) Whether state, local, or federal dollars have been invested in 
the area that has assisted in the achievement of the statutory 
requirement;
    (v) Whether new market rate units are being developed in the same 
census tract where the proposed PBV development will be located and the 
likelihood that such market rate units will positively impact the 
poverty rate in the area;
    (vi) If the poverty rate in the area where the proposed PBV 
development will be located is greater than 20 percent, the PHA should 
consider whether in the past five years there has been an overall 
decline in the poverty rate;
    (vii) Whether there are meaningful opportunities for educational 
and economic advancement in the census tract where the proposed PBV 
development will be located.
    (2) The site is suitable from the standpoint of facilitating and 
furthering full compliance with the applicable provisions of Title VI 
of the Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d(4)) and HUD's 
implementing regulations at 24 CFR part 1; Title VIII of the Civil 
Rights Act of 1968 (42 U.S.C. 3601-3629); and HUD's implementing 
regulations at 24 CFR parts 100 through 199; Executive Order 11063 (27 
FR 11527; 3 CFR, 1959-1963 Comp., p. 652) and HUD's implementing 
regulations at 24 CFR part 107. The site must also be suitable from the 
standpoint of facilitating and furthering full compliance with the 
applicable provisions of the Americans with Disabilities Act and 
implementing regulations, and Section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794) and HUD's implementing regulations at 24 CFR part 
8, including meeting the Section 504 site selection requirements 
described in 24 CFR 8.4(b)(5).
    (3) The site meets the HQS site standards at 24 CFR 982.401(l).
    (c) PHA PBV site selection policy. (1) The PHA administrative plan 
must establish the PHA's policy for selection of PBV sites in 
accordance with this section.
    (2) The site selection policy must explain how the PHA's site 
selection procedures promote the PBV goals.
    (3) The PHA must select PBV sites in accordance with the PHA's site 
selection policy in the PHA administrative plan.
    (d) Existing and rehabilitated housing site and neighborhood 
standards. A site for existing or rehabilitated housing must meet the 
following site and neighborhood standards. The site must:
    (1) Be adequate in size, exposure, and contour to accommodate the 
number and type of units proposed, and adequate utilities and streets 
must be available to service the site. (The existence of a private 
disposal system and private sanitary water supply for the site, 
approved in accordance with law, may be considered adequate utilities.)
    (2) Promote greater choice of housing opportunities and avoid undue 
concentration of assisted persons in areas containing a high proportion 
of low-income persons.
    (3) Be accessible to social, recreational, educational, commercial, 
and health facilities and services and other municipal facilities and 
services that are at least equivalent to those typically found in 
neighborhoods consisting largely of unassisted, standard housing of 
similar market rents.
    (4) Be so located that travel time and cost via public 
transportation or private automobile from the neighborhood to places of 
employment providing a range of jobs for lower-income workers is not 
excessive. While it is important that housing for the elderly not be 
totally isolated from employment opportunities, this requirement need 
not be adhered to rigidly for such projects.
    (e) New construction site and neighborhood standards. A site for 
newly constructed housing must meet the following site and neighborhood 
standards:
    (1) The site must be adequate in size, exposure, and contour to 
accommodate the number and type of units proposed, and adequate 
utilities (water, sewer, gas, and electricity) and streets must be 
available to service the site.
    (2) The site must not be located in an area of minority 
concentration, except as permitted under paragraph (e)(3) of this 
section, and must not be located in a racially mixed area if the 
project will cause a significant increase in the proportion of minority 
to non-minority residents in the area.
    (3) A project may be located in an area of minority concentration 
only if:
    (i) Sufficient, comparable opportunities exist for housing for 
minority families in the income range to be served by the proposed 
project outside areas of minority concentration (see paragraphs 
(e)(3)(iii) through (v) of this section for further guidance on this 
criterion); or
    (ii) The project is necessary to meet overriding housing needs that 
cannot be met in that housing market area (see paragraph (e)(3)(vi) of 
this section for further guidance on this criterion).
    (iii) As used in paragraph (e)(3)(i) of this section, 
``sufficient'' does not require that in every locality there be an 
equal number of assisted units within and outside of areas of minority 
concentration. Rather, application of this standard should produce a 
reasonable distribution of assisted units each year, that, over a 
period of several years, will approach an appropriate balance of 
housing choices within and outside areas of minority concentration. An 
appropriate balance in any jurisdiction must be determined in light of 
local conditions affecting the range of housing choices available for 
low-income minority families and in relation to the racial mix of the 
locality's population.

[[Page 63710]]

    (iv) Units may be considered ``comparable opportunities,'' as used 
in paragraph (e)(3)(i) of this section, if they have the same household 
type (elderly, disabled, family, large family) and tenure type (owner/
renter); require approximately the same tenant contribution towards 
rent; serve the same income group; are located in the same housing 
market; and are in standard condition.
    (v) Application of this sufficient, comparable opportunities 
standard involves assessing the overall impact of HUD-assisted housing 
on the availability of housing choices for low-income minority families 
in and outside areas of minority concentration, and must take into 
account the extent to which the following factors are present, along 
with other factors relevant to housing choice:
    (A) A significant number of assisted housing units are available 
outside areas of minority concentration.
    (B) There is significant integration of assisted housing projects 
constructed or rehabilitated in the past 10 years, relative to the 
racial mix of the eligible population.
    (C) There are racially integrated neighborhoods in the locality.
    (D) Programs are operated by the locality to assist minority 
families that wish to find housing outside areas of minority 
concentration.
    (E) Minority families have benefited from local activities (e.g., 
acquisition and write-down of sites, tax relief programs for 
homeowners, acquisitions of units for use as assisted housing units) 
undertaken to expand choice for minority families outside of areas of 
minority concentration.
    (F) A significant proportion of minority households has been 
successful in finding units in non-minority areas under the tenant-
based assistance programs.
    (G) Comparable housing opportunities have been made available 
outside areas of minority concentration through other programs.
    (vi) Application of the ``overriding housing needs'' criterion, for 
example, permits approval of sites that are an integral part of an 
overall local strategy for the preservation or restoration of the 
immediate neighborhood and of sites in a neighborhood experiencing 
significant private investment that is demonstrably improving the 
economic character of the area (a ``revitalizing area''). An 
``overriding housing need,'' however, may not serve as the basis for 
determining that a site is acceptable, if the only reason the need 
cannot otherwise be feasibly met is that discrimination on the basis of 
race, color, religion, sex, national origin, age, familial status, or 
disability renders sites outside areas of minority concentration 
unavailable or if the use of this standard in recent years has had the 
effect of circumventing the obligation to provide housing choice.
    (4) The site must promote greater choice of housing opportunities 
and avoid undue concentration of assisted persons in areas containing a 
high proportion of low-income persons.
    (5) The neighborhood must not be one that is seriously detrimental 
to family life or in which substandard dwellings or other undesirable 
conditions predominate, unless there is actively in progress a 
concerted program to remedy the undesirable conditions.
    (6) The housing must be accessible to social, recreational, 
educational, commercial, and health facilities and services and other 
municipal facilities and services that are at least equivalent to those 
typically found in neighborhoods consisting largely of unassisted, 
standard housing of similar market rents.
    (7) Except for new construction, housing designed for elderly 
persons, travel time, and cost via public transportation or private 
automobile from the neighborhood to places of employment providing a 
range of jobs for lower-income workers, must not be excessive.


Sec.  983.56  Environmental review.

    (a)(1) HUD environmental regulations at 24 CFR parts 50 and 58 
apply to activities under the PBV program, except as provided in 
paragraph (a)(2) of this section.
    (2) Existing housing is exempt from environmental review only if 
the project in which the units are located has previously received 
federal assistance and has undergone a federal environmental review 
under the applicable federal program. This exemption does not apply if 
a federal environmental review is required by law or regulation 
relating to funding other than PBV housing assistance payments.
    (b) Under 24 CFR part 58, a unit of general local government, a 
county or a state (the ``responsible entity'' or ``RE'') is responsible 
for the federal environmental review under the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321 et seq.) and related applicable 
federal laws and authorities in accordance with 24 CFR 58.5 and 58.6. 
If a PHA objects in writing to having the RE perform the federal 
environmental review, or if the RE declines to perform it, then HUD may 
perform the review itself (24 CFR 58.11). 24 CFR part 50 governs HUD 
performance of the review. The PHA must supply all available, relevant 
information necessary for the RE (or HUD, if applicable) to perform any 
required environmental review for any site.
    (c) For any project that is not exempt from an environmental 
review, if such a review has not been conducted prior to the proposal 
selection date, then the PHA's written notice of proposal selection 
must state that the selection is subject to completion of a favorable 
environmental review and that the project site may be rejected based on 
the results of the environmental review.
    (d) When an environmental review is required, a PHA may not enter 
into an Agreement or HAP contract with an owner, amend a HAP contract 
to add units pursuant to the authority at Sec.  983.207(b)(3), or 
execute a PHA certification under Sec.  983.204(d)(2), and the PHA, the 
owner, and its contractors may not acquire, rehabilitate, convert, 
lease, repair, dispose of, demolish, or construct real property or 
commit or expend program or local funds for these activities, until one 
of the following occurs:
    (1) The responsible entity has determined that the project to be 
assisted is exempt under 24 CFR 58.34 or is categorically excluded and 
not subject to compliance with environmental laws under 24 CFR 
58.35(b);
    (2) The responsible entity has completed the environmental review 
procedures required by 24 CFR part 58, and HUD has approved the PHA's 
Request for Release of Funds and Certification (form HUD-7015.15), as 
defined in Sec.  983.3(b); or
    (3) HUD has performed an environmental review under 24 CFR part 50 
and has notified the PHA in writing of environmental approval of the 
site.
    (e) HUD will not issue a Letter to Proceed or form HUD-7015.16 to 
the PHA if any of the activities described in paragraph (d) of this 
section have already occurred.
    (f) Any mitigating measures required by HUD pursuant to a HUD 
review under 24 CFR part 50 must be included in HUD's written 
environmental approval of the site.
    (g) The PHA must supply all available, relevant information 
necessary for the RE (or HUD, if applicable) to perform any required 
environmental review for any site.


Sec.  983.57  PHA-owned units.

    (a) Selection of PHA-owned units. The selection of PHA-owned units 
must be done in accordance with Sec.  983.51(f).

[[Page 63711]]

    (b) Independent entity functions. The independent entity, as 
defined in Sec.  983.3, must perform the following functions in 
connection with PHA-owned units:
    (1) The independent entity must determine rent to owner, including 
the reasonable rent and the OCAF adjustment, in accordance with 
Sec. Sec.  983.301 through 983.305.
    (2) The term of the HAP contract and any HAP contract renewal for 
PHA-owned units must comply with the requirements of Sec.  983.205 and 
must be agreed upon by the PHA and the independent entity.
    (3) The independent entity must perform unit inspections in 
accordance with Sec.  983.103(f).
    (4) The PHA must carry out development activity under Sec.  983.152 
or rehabilitation of units subject to a HAP contract under Sec.  
983.153 in accordance with the applicable requirements and must submit 
evidence to the independent entity that work has been completed in 
accordance with such requirements.
    (c) Payment to independent entity. (1) The PHA may compensate the 
independent entity from PHA ongoing administrative fee income 
(including amounts credited to the administrative fee reserve). The PHA 
may not use other program receipts to compensate the independent entity 
for its services.
    (2) The PHA, and the independent entity, may not charge the family 
any fee for the services provided by the independent entity.


Sec.  983.58  PHA determination prior to selection.

    Before a PHA issues a request for proposals in accordance with 
Sec.  983.51(b)(1), makes a selection based on a previous competition 
in accordance with Sec.  983.51(b)(2), amends an existing HAP contract 
to add units in accordance with Sec.  983.207(b), or attaches 
assistance without competition in accordance with Sec.  983.51(c), it 
must calculate the number of authorized voucher units that it is 
permitted to project-base and determine the amount of budget authority 
that it has available for project-basing in accordance with HUD 
requirements.


Sec.  983.59  Units excepted from program cap and project cap.

    (a) General. For HAP contracts entered into on or after April 18, 
2017, the PHA may commit project-based assistance to units that meet 
the requirements for exclusion in paragraphs (b) and (c) of this 
section without the units counting against the program cap or project 
cap described in Sec. Sec.  983.6 and 983.54, respectively.
    (b) Requirements for exclusion of existing or rehabilitated units. 
Such units must, in the 5 years prior to the request for proposals 
(RFP) or selection without competition or selection based on a prior 
competition, fall into one of the following categories:
    (1) The units have received one of the following forms of HUD 
assistance:
    (i) Public Housing Capital or Operating Funds (section 9 of the 
1937 Act).
    (ii) Project-Based Rental Assistance (section 8 of the 1937 Act). 
Project-based rental assistance under section 8 includes the section 8 
moderate rehabilitation program, including the single-room occupancy 
(SRO) program.
    (iii) Housing For the Elderly (section 202 of the Housing Act of 
1959).
    (iv) Housing for Persons With Disabilities (section 811 of the 
Cranston-Gonzalez National Affordable Housing Act).
    (v) The Rent Supplement (Rent Supp) program (section 101 of the 
Housing and Urban Development Act of 1965).
    (vi) Rental Assistance Program (RAP) (section 236(f)(2) of the 
National Housing Act).
    (vii) Flexible Subsidy Program (section 201 of the Housing and 
Community Development Amendments Act of 1978).
    (2) The units have been subject to a federally required rent 
restriction under one of the following programs:
    (i) The Low Income Housing Tax Credit program (26 U.S.C. 42).
    (ii) Section 515 Rural Rental Housing Loans (42 U.S.C. 1485).
    (iii) The following HUD programs:
    (A) Section 236.
    (B) Section 221(d)(3) or (d)(4) Below Market Interest Rate.
    (iii) Housing For the Elderly (section 202 of the Housing Act of 
1959).
    (iv) Housing for Persons With Disabilities (section 811 of the 
Cranston-Gonzalez National Affordable Housing Act).
    (v) Flexible Subsidy Program (section 201 of the Housing and 
Community Development Amendments Act of 1978).
    (c) Other excluded units. PBV units pursuant to a conversion of 
public housing assistance under HUD's Rental Assistance Demonstration 
(RAD) program and HUD-VASH awarded vouchers specifically designated by 
HUD for project-based assistance are excluded from the PBV program and 
project caps.
    (d) Replacement units. Newly constructed units developed under the 
PBV program may be excluded from the program cap and project cap 
provided the primary purpose of the newly constructed units is or was 
to replace units that meet the criteria of paragraph (b)(1) or (2) of 
this section. The newly constructed unit must be located on the same 
site as the unit it is replacing; however, an expansion of or 
modification to the prior project's site boundaries as a result of the 
design of new construction project is acceptable as long as a majority 
of the replacement units are built back on the site of the original 
public housing development and any replacement units that are not 
located on the existing site are part of a project that shares a common 
border with, are across a public right of way from, or touch that site. 
In addition, in order for the replacement units to be excluded from the 
program and project caps, one of the following must be true:
    (1) Former residents of the original project must be provided with 
a selection preference that provides the residents with the right of 
first occupancy at the PBV new construction project when it is ready 
for occupancy.
    (2) Prior to the demolition of the original project, the PBV new 
construction project must have been identified as replacement housing 
for that original project as part of a documented plan for the 
redevelopment of the site.
    (e) Unit size configuration and number of units for new 
construction and rehabilitation projects. The unit size configuration 
of the PBV new construction or rehabilitation project may differ from 
the unit size configuration of the original project that the PBV units 
are replacing. In addition, the total number of PBV-assisted units may 
differ from the number of units in the original project. However, only 
the total number of units in the original project are excepted from the 
program limitation and the project cap. Units that exceed the total 
number of covered units in the original project are subject to the 
program limitation and the project cap.
0
34. In Sec.  983.101, revise the second sentence of paragraph (e) to 
read as follows:


Sec.  983.101   Housing quality standards.

* * * * *
    (e) * * * However, the PHA may elect to establish additional 
requirements for quality, architecture, or design of PBV housing.
0
35. Revise Sec.  983.103 to read as follows:


Sec.  983.103   Inspecting units.

    (a) Inspection of existing units prior to selection. If the units 
to be assisted already exist, the PHA must inspect all units before the 
proposal selection date

[[Page 63712]]

and must determine if the project meets the definition of existing 
housing. The PHA may not execute the HAP contract until all units meet 
the initial inspection requirements in accordance with paragraph (c) of 
this section.
    (b) Inspection of new construction and rehabilitation projects. 
Following completion of work pursuant to Sec. Sec.  983.155 and 
983.156, the PHA must inspect each proposed PBV unit before execution 
of the HAP contract. Each proposed PBV unit must fully comply with the 
Housing Quality Standards prior to HAP execution.
    (c) Initial inspection requirements for existing housing--(1) In 
general. If the PHA has not adopted the initial inspection non-life-
threatening deficiency option (NLT option) or the alternative 
inspection option for the project, the PHA must inspect and determine 
that all of the proposed PBV units fully comply with the Housing 
Quality Standards below entering the HAP contract.
    (2) Initial inspection--NLT option. (i) A PHA may execute the HAP 
contract and begin making assistance payments for all of the assisted 
units, including units that failed the initial HQS inspection, provided 
that no unit has no life-threatening conditions as defined in Sec.  
982.401(o), if the owner agrees to the NTL option. If the PHA has 
established and the unit is covered by both the NLT option and the 
alternative inspections option for the initial HQS inspection, see 
Sec.  983.103(c)(4).
    (ii) After completing the inspections and determining there are no 
life-threatening deficiencies, for any unit with non-life threatening 
deficiencies, the PHA provides both the owner and the family (any 
eligible in-place family (Sec.  983.251(d)) or any family referred from 
the PBV waiting list being offered that unit) with a list of the non-
life-threatening deficiencies identified by the initial HQS inspection 
and, should the owner not complete the repairs within 30 days, the 
maximum amount of time the PHA will withhold HAP before abating 
assistance. The PHA must also inform the family that if the family 
accepts the unit and the owner fails to make the repairs within the 
cure period, which may not exceed 180 days from the effective date of 
the HAP contract, the PHA will remove the unit from the HAP contract, 
and the family will be issued a voucher to move to another unit in 
order to receive voucher assistance. The family referred from the 
waiting list may choose to decline the unit and remain on the waiting 
list. An eligible in-place family may decline the unit, and the PHA 
must issue the family a tenant-based voucher to move from the unit in 
that circumstance.
    (iii) If the family decides to lease the unit, the family enters 
into the assisted lease with the owner. The PHA commences making 
assistance payments to the owner.
    (iv) The owner must correct the deficiencies within 30 days from 
the effective date of the HAP contract. If the owner fails to correct 
the deficiencies within the 30-day cure period, the PHA must withhold 
the housing assistance payments for the unit until the owner makes the 
repairs and the PHA verifies the correction. Once the deficiencies are 
corrected, the PHA may use the withheld housing assistance payments to 
make payments for the period that payments were withheld.
    (iv) The PHA must state in its Administrative Plan the maximum 
amount of time it will withhold payments before abating payments, and 
the number of days after which the PHA will either terminate the PBV 
HAP contract or remove the unit from HAP contract as a result of the 
owner's failure to correct the deficiencies, which may not exceed 180 
days from the effective date of the HAP contract; and
    (vi) The owner may not terminate the tenancy of a family because of 
the withholding or abatement of assistance payments. During any period 
the assistance is abated under the NLT option, the family may terminate 
the tenancy by notifying the owner and the PHA, and the PHA must 
provide the family with tenant-based assistance. In the case of an in-
place family, the family may also choose to terminate the tenancy 
during the withholding period following the 30-day cure period, and the 
PHA must offer the family either another assisted unit in the PBV 
project that fully complies with HQS or tenant-based assistance.
    (3) Initial inspection--alternative inspection option. The PHA may 
adopt the alternative inspection option for initial inspections of 
existing housing.
    (i) After the PHA determines the project meets the definition of 
existing housing in accordance with paragraph (a) of this section, the 
PHA execute the HAP contract for the project if the project has been 
inspected in the previous 24 months where the alternative inspection 
meets the requirements of Sec.  982.406, as opposed to re-inspecting 
the project to make such all units fully comply with the Housing 
Quality Standards before executing the HAP contract, if the owner 
agrees to the use of the alternative inspection option. If the PHA has 
established and the unit is covered by both the NLT option under 
paragraph (c)(2) of this section and the alternative inspections option 
for the initial HQS inspection, see paragraph (c)(4) of this section.
    (ii) The PHA notifies all families (any eligible in-place family 
(Sec.  983.251(d)) or any family referred from the PBV waiting list 
being offered that unit) that will occupy the unit before the PHA 
conducts the HQS inspection that the alternative inspection option is 
in effect for the project. The PHA must provide each family with the 
PHA list of HQS deficiencies that are considered life-threatening under 
Sec.  982.401(o) as part of this notification. A family on the waiting 
list may decline to accept the unit due to unit conditions and retain 
its place on the PBV waiting list.
    (iii) The PHA must conduct an HQS inspection within 30 days of the 
project selection date. If the family reports a deficiency to the PHA 
prior to the PHA's inspection, the PHA must inspect the unit within the 
time period required under Sec.  983.103(f) or within 30 days of the 
effective date of the HAP contract, whichever time period ends first.
    (iv) The PHA may not make housing assistance payments to the owner 
until the PHA has inspected all the units under the HAP contract and 
determined they meet Housing Quality Standards.
    (v) The PHA may commence housing assistance payments to the owner 
and make housing assistance payments retroactive to the effective date 
of the HAP contract only after the assisted units pass the PHA's HQS 
inspection. If any unit does not pass the HQS inspection, the PHA may 
not make housing assistance payments to the owner until all the 
deficiencies have been corrected. If a defect is life threatening, the 
owner must correct the defect within 24 hours of notification from the 
PHA. For other defects, the owner must correct the defect within no 
more than 30 calendar days (or any PHA-approved extension) of 
notification from the PHA. If the owner corrects the deficiencies 
within the required cure period, the PHA makes the housing assistance 
payments retroactive to the effective date of the HAP contract.
    (vi) The PHA establishes in the Administrative Plan the maximum 
amount of time it will withhold payments if the owner does not correct 
the deficiencies within the required cure period before abating 
payments, and the date by which the PHA will either remove the unit 
from the HAP contract or terminate the HAP contract for the owner's 
failure to correct the deficiencies, which may not exceed 180 days from 
the effective date of the HAP contract.
    (vii) If the owner fails to make the repairs within the applicable 
time

[[Page 63713]]

periods, the PHA must abate the payments for the non-compliant units, 
while continuing to withhold payments for the HQS compliant units until 
all the units meet HQS.
    (viii) The owner may not terminate the tenancy of a family because 
of the withholding or abatement of assistance payments. During the 
abatement period, a family may terminate the tenancy by notifying the 
owner, and the PHA must provide the family with tenant-based 
assistance. The PHA must state in its Administrative Plan the number of 
days after which the PHA will terminate the HAP contract for the 
owner's failure to correct the deficiencies, which may not exceed 180 
days from the effective date of the HAP contract.
    (4) Initial inspection--use of both the NTL and alternative 
options. The PHA may adopt both the NLT option and the alternative 
inspection option for initial inspections of existing housing.
    (i) If the owner agrees to both the NLT option and the alternative 
inspection option, then the PHA notifies all families (any eligible in-
place family (Sec.  983.251(d)) or any family referred from the PBV 
waiting list that will occupy the unit before the PHA conducts the HQS 
inspection) that both the NLT option and the alternative inspection 
option will be used for the family's unit. As part of this 
notification, the PHA must provide the family with the PHA's list of 
HQS deficiencies that are considered life-threatening under 24 CFR 
982.401(o). A family on the waiting list may decline to move into a 
unit due to unit conditions and retain its place on the PBV waiting 
list.
    (ii) The PHA executes the HAP contract with the owner on the basis 
of the alternative inspection. The PHA must conduct an HQS inspection 
within 30 days after the date of project selection. If the family 
reports a deficiency to the PHA during this interim period, the PHA 
must inspect the unit within the time period required under 24 CFR 
983.103(f) or within 30 days of the project selection date, whichever 
time period ends first.
    (iii) The PHA may not make housing assistance payments to the owner 
until the PHA has inspected all the assisted units.
    (iv) If none of the units have any life-threatening deficiencies, 
the PHA commences payments and makes retroactive payments to the 
effective date of the HAP contract for all the assisted units. For any 
unit that failed the PHA's HQS inspection but has no life-threatening 
deficiencies, the owner must correct the deficiencies within no more 
than 30 days from the effective date of the HAP contract. If the owner 
fails to correct the deficiencies within the 30-day cure period, the 
PHA must withhold the housing assistance payments for that unit until 
the owner makes the repairs and the PHA verifies the correction. Once 
the unit is in compliance with HQS, the PHA may use the withheld 
housing assistance payments to make payments for the period that 
payments were withheld.
    (v) If any units have life-threatening deficiencies, the PHA may 
not commence making housing assistance payments to the owner until all 
the HQS deficiencies (life-threatening and non-life threatening) have 
been corrected. The owner must correct all life-threatening 
deficiencies within no more than 24 hours. For other defects, the owner 
must correct the defect within no more than 30 calendar days (or any 
PHA-approved extension). If the owner corrects the all the deficiencies 
within the required cure period, the PHA makes the housing assistance 
payments retroactive to the effective date of the HAP contract.
    (vi) The owner may not terminate the tenancy of the family because 
of the withholding or abatement of assistance payments. During the 
period the assistance is abated, a family may terminate the tenancy by 
notifying the owner, and the PHA must provide the family with tenant-
based assistance. The PHA must establish in its Administrative Plan:
    (A) The maximum amount of time it will withhold payments if the 
owner fails to correct the deficiencies within the required cure period 
before abating payments; and
    (B) The number of days after which the PHA will terminate the HAP 
contract for the owner's failure to correct the deficiencies, which may 
not exceed 180 days from the effective date of the HAP contract.
    (d) Turnover inspections. Before providing assistance to a new 
family in a contract unit, the PHA must inspect the unit. The PHA must 
not provide assistance on behalf of a family for a unit that fails to 
comply fully with HQS.
    (e) Biennial inspections. (1) At least biennially during the term 
of the HAP contract, the PHA must inspect a random sample, consisting 
of at least 20 percent of the contract units in each building, to 
determine if the contract units and the premises are maintained in 
accordance with HQS. Turnover inspections pursuant to paragraph (c) of 
this section are not counted toward meeting this inspection 
requirement.
    (2) If more than 20 percent of the sample of inspected contract 
units in a building fail the initial inspection, then the PHA must 
reinspect 100 percent of the contract units in the building.
    (3) A PHA may also use the procedures applicable to HCV units in 24 
CFR 982.406.
    (f) Other inspections. (1) When a participant family or government 
official notifies the PHA of a potential life-threatening deficiency as 
defined in 24 CFR 982.401(o), the PHA must inspect the housing unit 
within 24 hours and notify the owner if the life-threatening deficiency 
is confirmed. The owner must then make the repairs within 24 hours of 
PHA notification. If the reported condition is non-life threatening, 
within 15 days, the PHA must inspect the unit and provide the owner 
notification if the deficiency is confirmed. The owner must then make 
the repairs within 30 days or any PHA-approved extension. In the event 
of extraordinary circumstances, such as if a unit is within a 
Presidentially declared disaster area, HUD may waive the 24-hour or the 
15-day inspection requirement until such time as an inspection is 
feasible.
    (2) The PHA must conduct follow-up inspections needed to determine 
if the owner (or, if applicable, the family) has corrected an HQS 
violation, and must conduct inspections to determine the basis for 
exercise of contractual and other remedies for owner or family 
violation of the HQS. (Family HQS obligations are specified in 24 CFR 
982.404(b).)
    (3) In conducting PHA supervisory quality control HQS inspections, 
the PHA should include a representative sample of both tenant-based and 
project-based units.
    (g) Inspecting PHA-owned units. (1) In the case of PHA-owned units, 
the inspections required under this section must be performed by an 
independent entity designated in accordance with Sec.  983.57, rather 
than by the PHA.
    (2) The independent entity must furnish a copy of each inspection 
report to the PHA.
    (3) The PHA must take all necessary actions in response to 
inspection reports from the independent entity, including exercise of 
contractual remedies for violation of the HAP contract by the PHA 
owner.
    (h) Verification methods. When a PHA must verify correction of a 
deficiency, the PHA may use verification methods other than another on-
site inspection. The PHA may establish different verification methods 
for initial and subsequent inspections or for different HQS 
deficiencies. Upon either an inspection for initial occupancy or a 
reinspection, the PHA may accept photographic evidence or

[[Page 63714]]

other reliable evidence from the owner to verify that a defect has been 
corrected.
    (i) Mixed-finance properties. In the case of a property assisted 
with project-based vouchers (authorized at 42 U.S.C. 1437f(o)(13)) that 
is subject to an alternative inspection, the PHA may rely upon 
inspections conducted at least triennially to demonstrate compliance 
with the inspection requirement of 24 CFR 982.405(a).
0
36. Revise subpart D to read as follows:
Subpart D--Requirements for Rehabilitated and Newly Constructed Units
Sec.
983.151 Applicability.
983.152 Nature of development activity.
983.153 Development requirements.
983.154 Development agreement.
983.155 Completion of work.
983.156 PHA acceptance of completed units.
983.157 Development activity on units under a HAP contract.

Subpart D--Requirements for Rehabilitated and Newly Constructed 
Units


Sec.  983.151   Applicability.

    This subpart applies to development activity, as defined in Sec.  
983.3, under the PBV program.


Sec.  983.152   Nature of development activity.

    (a) Purpose of development activity. An owner may undertake 
development activity, as defined at Sec.  983.3, for the purpose of:
    (1) Placing a project under a HAP contract (new construction or 
rehabilitation), or
    (2) Adding previously unassisted units in the project to the HAP 
contract in accordance with Sec.  983.207(b)(3).
    (b) Development requirements. (1) Development activity undertaken 
in order to place a new construction or rehabilitation project under a 
HAP contract must comply with the requirements of Sec. Sec.  983.153 
through 983.156.
    (2) Development activity undertaken in order to add previously 
unassisted units in the project to the HAP contract must comply with 
the requirements of Sec. Sec.  983.153(e), (f), and (g); 983.155; and 
983 156. Section 983.154, Development agreement, is not applicable if 
the development activity is undertaken to add previously unassisted 
units in the project to the HAP contract.


Sec.  983.153  Development requirements.

    (a) Environmental review requirements. The development activity 
must comply with any applicable environmental review requirements at 
Sec.  983.56.
    (b) Subsidy layering review. (1) The PHA may provide PBV assistance 
only in accordance with the HUD subsidy layering regulations (24 CFR 
4.13) and other requirements. A subsidy layering review is required 
when an owner undertakes development activity to place a project under 
a HAP contract (new construction or rehabilitation) at Sec.  
983.152(a)(1) and housing assistance payment subsidy under the PBV 
program is combined with other governmental housing assistance from 
federal, state, or local agencies, including assistance such as tax 
concessions or tax credits. The subsidy layering review is intended to 
prevent excessive public assistance for the housing by combining 
(layering) housing assistance payment subsidy under the PBV program 
with other governmental housing assistance from federal, state, or 
local agencies, including assistance such as tax concessions or tax 
credits.
    (2) When a subsidy layering review is required, it must occur 
before a PHA commits to provide assistance to a project. Specifically, 
the PHA may not enter into an Agreement or HAP contract with an owner 
until HUD or a housing credit agency approved by HUD has conducted any 
required subsidy layering review and determined that the PBV assistance 
is in accordance with HUD subsidy layering requirements.
    (3) If a PHA is undertaking development activity to place a project 
under a HAP contract (new construction or rehabilitation) at Sec.  
983.152(a)(1), a further subsidy layering review is not required if 
HUD's designee has conducted a review in accordance with HUD's PBV 
subsidy layering review guidelines and that review included a review of 
PBV assistance.
    (4) The HAP contract must contain the owner's certification that 
the project has not received and will not receive (before or during the 
term of the HAP contract) any public assistance for acquisition, 
development, or operation of the housing other than assistance 
disclosed in the subsidy layering review in accordance with HUD 
requirements. A subsidy layering review is required for newly 
constructed or rehabilitated housing under a HAP contract that receives 
additional assistance, as described in Sec.  983.12(d).
    (5) Existing housing is exempt from subsidy layering requirements.
    (c) Labor standards. (1) Labor standards as described in paragraphs 
(c)(2) and (3) of this section apply to development activity undertaken 
to place a new construction or rehabilitation project under a HAP 
contract if the PHA and owner execute an Agreement in accordance with 
Sec.  983.154(a). If the PHA decides not to require the Agreement in 
accordance with Sec.  983.154(e), the labor standards described in 
paragraphs (c)(2) and (3) of this section do not apply.
    (2) In the case of development involving nine or more contract 
units (whether or not completed in stages), the owner and the owner's 
contractors and subcontractors must pay Davis-Bacon wages to laborers 
and mechanics employed in development of the housing.
    (3) The owner and the owner's contractors and subcontractors must 
comply with the Contract Work Hours and Safety Standards Act, 
Department of Labor regulations in 29 CFR part 5, and other applicable 
federal labor relations laws and regulations. The PHA must monitor 
compliance with labor standards.
    (4) For any project to which labor standards apply, the PHA's 
written notice of proposal selection must state that any construction 
contracts must incorporate a Davis-Bacon contract clause and the 
current applicable prevailing wage determination.
    (d) Equal opportunity. Development activity at Sec.  983.152 is 
subject to Section 3 of the Housing and Urban Development Act of 1968 
(12 U.S.C. 1701u) and the implementing regulations at 24 CFR part 135.
    (e) Equal employment opportunity. Development activity at Sec.  
983.152 is subject to the federal equal employment opportunity 
requirements of Executive Orders 11246 as amended (3 CFR, 1964-1965 
Comp., p. 339), 11625 (3 CFR, 1971-1975 Comp., p. 616), 12432 (3 CFR, 
1983 Comp., p. 198), and 12138 (3 CFR, 1977 Comp., p. 393).
    (f) Accessibility. As applicable, the design and construction 
requirements of the Fair Housing Act and implementing regulations at 24 
CFR 100.205; the accessibility requirements of Section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations 
at 24 CFR 8.22 and 8.23; and Title II of the Americans with 
Disabilities Act (42 U.S.C. 12131-12134) and implementing regulations 
at 28 CFR part 35, including Sec. Sec.  35.150 and 35.151 apply to 
development activity at Sec.  983.152. A description of any required 
work item resulting from these requirements must be included in the 
Agreement (if applicable), as specified in Sec.  983.155(d)(9).
    (g) Broadband infrastructure. (1) Any development activity under 
Sec.  983.152(a) that constitutes substantial rehabilitation as defined 
by 24 CFR

[[Page 63715]]

5.100 of a building with more than 4 rental units and where the date of 
the notice of proposal selection or the start of the development 
activity while under a HAP contract is after January 19, 2017, must 
include installation of broadband infrastructure, as this term is 
defined in 24 CFR 5.100, except where the owner determines and 
documents the determination that:
    (i) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (ii) The cost of installing broadband infrastructure would result 
in a fundamental alteration in the nature of its program or activity or 
in an undue financial burden; or
    (iii) The structure of the housing to be substantially 
rehabilitated makes installation of broadband infrastructure 
infeasible.
    (2) A description of any required work item resulting from this 
requirement must be included in the Agreement (if applicable), as 
specified in Sec.  983.55(d)(9).
    (h) Eligibility to participate in federal programs and activities. 
(1) An owner or project principal who is on the U.S. General Services 
Administration list of parties excluded from federal procurement and 
nonprocurement programs may not participate in development activity or 
the rehabilitation of units subject to a HAP contract. Both the 
Agreement (if applicable) and the HAP contract must include a 
certification by the owner that the owner and other project principals 
(including the officers and principal members, shareholders, investors, 
and other parties having a substantial interest in the project) are not 
on such list.
    (2) An owner must disclose any possible conflict of interest that 
would be a violation of the Agreement (if applicable), the HAP 
contract, or HUD regulations.


Sec.  983.154   Development agreement.

    (a) Agreement to enter into a HAP contract (Agreement). Except as 
specified in paragraph (e) of this section, the PHA and owner must 
enter into an Agreement that will govern development activity under 
Sec.  983.152. In the Agreement the owner agrees to develop the 
contract units to comply with HQS, and the PHA agrees that, upon timely 
completion of such development activity in accordance with the terms of 
the Agreement, the PHA will enter into an initial HAP contract with the 
owner for the contract units.
    (b) Timing of Agreement. The Agreement must be signed prior to the 
commencement of development activity, as described in paragraph (c) of 
this section, and must be in the form required by HUD (see Sec.  
982.162(b)).
    (c) Commencement of development activity. The PHA may not enter 
into an Agreement if development activity has commenced after the date 
of proposal submission (for housing subject to competitive selection) 
or the date of the PHA's board resolution approving the project-basing 
of assistance at the project (for housing excepted from competitive 
selection).
    (1) In the case of new construction, development activity begins 
with excavation or site preparation (including clearing of the land);
    (2) In the case of rehabilitation, development activity begins with 
the physical commencement of rehabilitation activity on the housing.
    (d) Contents of Agreement. At a minimum, the Agreement must 
describe the following features of the housing to be developed and 
assisted under the PBV program:
    (1) Site;
    (2) Location of contract units on site;
    (3) Number of contract units by area (square footage) and number of 
bedrooms and bathrooms;
    (4) Services, maintenance, or equipment to be supplied by the owner 
without charges in addition to the rent to owner;
    (5) Utilities available to the contract units, including a 
specification of utility services to be paid by the owner (without 
charges in addition to rent) and utility services to be paid by the 
tenant;
    (6) The Agreement must include a description of any required work 
item necessary to comply with the accessibility requirements of Sec.  
983.153(f).
    (7) If the requirement at Sec.  983.153(g) to install broadband 
infrastructure applies, then the Agreement must include a description 
of any required work item resulting from this requirement.
    (8) Estimated initial rents to owner for the contract units;
    (9) Description of the work to be performed under the Agreement.
    (i) If the Agreement is for new construction, then the work 
description must include the working drawings and specifications.
    (ii) If the Agreement is for rehabilitation, then the work 
description must include the rehabilitation work write-up and, where 
determined necessary by the PHA, specifications and plans.
    (e) PHA discretion. With respect to development activity under 
Sec.  983.152, the PHA may decide whether to require the use of an 
Agreement.
    (1) A PHA that will not require the use of an Agreement must state 
this in its Administrative Plan.
    (2) The following conditions apply:
    (i) The owner of the project must be able to document its 
compliance with the requirements of Sec.  983.153 from the date of 
proposal submission (for housing subject to competitive selection) or 
from the date of the PHA's board resolution approving the project-
basing of assistance at the project (for housing excepted from 
competitive selection);
    (ii) Prior to selecting the project, the PHA must confirm that, 
from the point of proposal submission (for housing subject to 
competitive selection) or from the date of the PHA's board resolution 
approving the project-basing of assistance at the project (for housing 
excepted from competitive selection), the owner has complied with the 
requirements of Sec.  983.153.
    (3) Following the date of proposal selection, the PHA and owner may 
enter into an Agreement but are not required to do so.


Sec.  983.155  Completion of work.

    The owner must submit evidence and certify to the PHA, in the form 
and manner required by the PHA, that development activity under Sec.  
983.152 or development activity undertaken on units under a HAP 
contract under Sec.  983.157 has been completed, and that all such work 
was completed in accordance with the applicable requirements.


Sec.  983.156   PHA acceptance of completed units.

    (a) Inspection of units. After the PHA has received all required 
evidence of completion and the owner's certification that all work was 
completed in accordance with the applicable requirements, the PHA must 
inspect the units to determine whether they were completed in 
accordance with HUD's Housing Quality Standards (see Sec.  
983.103(b)(1)) and any additional design or quality requirements 
specified by the PHA.
    (b) Execution or amendment of the HAP contract. If the PHA 
determines that the development activity was completed in accordance 
with the applicable requirements, and the units meet HUD's Housing 
Quality Standards and any additional design or quality requirements 
specified by the PHA, then the PHA must submit the HAP contract for 
execution by the owner and must execute the HAP contract for PBV 
rehabilitation and new construction

[[Page 63716]]

projects (Sec.  983.152(a)(1)) or amend the HAP contract to add the 
units to the HAP contract (Sec.  983.152(a)(2).


Sec.  983.157  Development activity on units under a HAP contract.

    (a) Owner request to undertake development activity on units under 
a HAP contract. The owner may undertake development activity on units 
currently under a HAP contract if approved to do so by the PHA. The 
owner may not request, and a PHA may not approve, the owner's request 
within the first five years of the effective date of the HAP contract 
except in extraordinary circumstances (e.g., the units were damaged by 
fire, natural disaster, etc.). The owner's request must include a 
description of the development activity proposed to be undertaken and 
the length of time, if any, it is anticipated that the units will not 
meet HQS. If any of the units will not meet Housing Quality Standards 
during the period of the development activity, the owner's request must 
include a description of how the families will be rehoused during the 
period the units will not meet Housing Quality Standards. Housing 
assistance payments may not be made during the time the units are not 
in compliance with Housing Quality Standards requirements during the 
development activity. The PHA may choose to temporarily remove units 
from the PBV HAP contract during the time the units will not meet 
Housing Quality Standards during the development activity.
    (b) Applicable requirements. The following development requirements 
under Sec.  983.153 apply to development activity undertaken on units 
under a HAP contract.
    (1) The equal opportunity employment opportunity requirements at 
Sec.  982.153(e) shall apply, as applicable.
    (2) The accessibility standards at Sec.  983.153(f) shall apply, as 
applicable.
    (3) The broadband infrastructure requirements at Sec.  983.153(g) 
shall apply, as applicable.
    (c) Inapplicable requirements. (1) Except as provided in paragraph 
(b) of this section, the development requirements under Sec.  983.153 
do not apply to development activity undertaken for units under a HAP 
contract.
    (2) Section Sec.  983.154, Development agreement, does not apply to 
development activity undertaken for units that are currently under a 
HAP contract.
    (3) Section Sec.  983.156, PHA acceptance of completed units, does 
not apply to development activity undertaken for units that are 
currently under a HAP contract.
0
37. In Sec.  983.203, revise paragraphs (f) through (i) and add 
paragraph (j) to read as follows:


Sec.  983.203  HAP contract information.

* * * * *
    (f) Features provided to comply with program accessibility 
requirements of Section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794) and implementing regulations at 24 CFR part 8, the Fair 
Housing Act, and the Americans with Disabilities Act, as applicable;
    (g) The HAP contract term;
    (h) The number of units in any project that will exceed the 25 
percent per-project project cap (as described in Sec.  983.54), which 
will be set-aside for occupancy by families who qualify for an 
exception (as described in Sec.  983.54);
    (i) The initial rent to owner (for the first 12 months of the HAP 
contract term); and
    (j) Whether the PHA has elected not to reduce rents below the 
initial rent to owner in accordance with 24 CFR 983.302(c)(2).
0
38. Revise Sec.  983.204 to read as follows:


Sec.  983.204  When HAP contract is executed.

    (a) PHA inspection of housing. Before execution of the HAP 
contract, the PHA must determine that applicable pre-HAP contract HQS 
requirements have been met in accordance with Sec.  983.103(b). The PHA 
may not enter into the HAP contract for any contract unit that does not 
meet the pre-HAP contract HQS requirements.
    (b) Existing housing. In the case of existing housing, the HAP 
contract must be executed promptly after PHA selection of the owner 
proposal and PHA determination that the applicable pre-HAP contract HQS 
requirements have been met.
    (c) Newly constructed or rehabilitated housing. In the case of 
newly constructed or rehabilitated housing, the HAP contract must be 
executed after the PHA determines that the housing was completed in 
accordance with the applicable requirements, HUD's Housing Quality 
Standards, and any additional design or quality requirements specified 
by the PHA. .
    (d) PHA-owned units. If the PBV project containing PHA-owned units 
is not owned by a separate legal entity from the PHA (e.g., an entity 
wholly controlled by the PHA or a limited liability company or limited 
partnership owned by the PHA), the PHA must choose one of the two 
following options because the PHA cannot execute a PBV HAP contract 
with itself.
    (1) PBV HAP contract execution. (i) Prior to execution of the PBV 
HAP contract, the PHA must establish a separate legal entity to serve 
as the owner. The separate legal entity must have the legal capacity to 
lease units and must be one of the following:
    (A) A non-profit affiliate or instrumentality of the PHA;
    (B) A limited liability corporation;
    (C) A limited partnership;
    (D) A corporation; or
    (E) Any other legally acceptable entity recognized under State law.
    (ii) In cases where the independent entity, as defined in Sec.  
982.4, is required to notify the PHA of a determination, the 
independent entity may notify the PHA or the separate legal entity, or 
both.
    (2) PHA certification option. (i) Instead of executing the PBV HAP 
contract, the PHA signs the HUD-prescribed certification covering the 
PHA-owned PBV project. By signing the HUD certification, the PHA 
certifies that it will fulfill all the required program 
responsibilities of the private owner under the PBV HAP contract, and 
that it will also fulfill all of the program responsibilities required 
of the PHA for the PHA-owned PBV project.
    (ii) The PHA executed certification serves as the equivalent of the 
PBV HAP contract for the PHA-owned PBV project.
    (iii) The PHA must obtain the services of an independent entity to 
perform the required PHA functions in accordance with Sec.  983.57(b) 
before signing the certification.
    (iv) The PHA may not use the PHA-owned certification if the PHA-
owned PBV project is owned by a separate legal entity from the PHA 
(e.g., an entity wholly controlled by the PHA or a limited liability 
corporation or limited partnership controlled by the PHA).
0
39. Revise Sec.  983.205 to read as follows:


Sec.  983.205   Term of HAP contract.

    (a) Initial term. The PHA may enter into a HAP contract with an 
owner for an initial term of up to 20 years for each contract unit. The 
length of the term of the HAP contract for any contract unit may not be 
less than one year, nor more than 20 years.
    (b) Extension of term. (1) The PHA and owner may agree to extend 
the term of the HAP contract for up to 20 years beyond the initial term 
of the contract, provided the PHA determines the extension is 
appropriate to continue providing affordable housing for low-income 
families.
    (2) The PHA and owner may agree to extend the contract term 
multiple times during the term of the HAP contract,

[[Page 63717]]

provided that the extensions cumulatively do not extend more than 20 
years beyond the end of the initial contract term.
    (3) The PHA and owner may subsequently agree to extend the term of 
the contract beyond 20 years from the end of the initial term, but only 
if the following conditions are met:
    (i) No earlier than 24 months prior to the expiration of the HAP 
contract, the PHA determines that the extension is appropriate to 
continue providing affordable housing for low-income families or to 
expand housing opportunities; and
    (ii) The term of the new extension may not exceed 20 years.
    (4) Any extension of the term must be on the form and subject to 
the conditions prescribed by HUD at the time of the extension.
    (c) PHA-owned units. In the case of PHA-owned units, the term of 
the HAP contract and any HAP contract extension must comply with the 
requirements of this section and must be agreed upon by the PHA and the 
independent entity (see Sec.  983.57(b)(2)).
0
40. Revise Sec.  983.206 to read as follows:


Sec.  983.206  Contract termination or expiration and statutory notice 
requirements.

    (a) Nonextension by owner--notice requirements. (1) Notices 
required in accordance with this section must be provided in the form 
prescribed by HUD.
    (2) Not less than one year before termination of a PBV or PBC HAP 
contract, the owner must notify the PHA and assisted tenants of the 
termination.
    (3) The term ``termination'' for applicability of this notice 
requirement means the expiration of the HAP contract or an owner's 
refusal to renew the HAP contract.
    (4) If an owner fails to provide the required notice, the owner 
must permit the tenants in assisted units to remain in their units for 
the required notice period with no increase in the tenant portion of 
their rent, and with no eviction as a result of an owner's inability to 
collect an increased tenant portion of rent.
    (5) An owner and PHA may agree to extend the terminating contract 
for a period of time sufficient to provide tenants with the required 
notice, under such terms as HUD may require.
    (b) Termination or expiration without extension--required provision 
of tenant-based assistance. The PBV HAP contract must provide that, 
unless a termination or expiration without extension occurs as a result 
of a determination of insufficient funding pursuant to paragraph (c) of 
this section upon termination or expiration without extension of a PBV 
HAP contract, each assisted family may elect to use their tenant-based 
assistance to remain in the same project, subject to the following:
    (1) The unit must comply with HUD's Housing Quality Standards;
    (2) The PHA must determine or have determined that the rent for the 
unit is reasonable;
    (3) The family must pay its required share of the rent and the 
amount, if any, by which the unit rent (including the amount allowed 
for tenant-based utilities) exceeds the applicable payment standard 
(the limitation at Sec.  982.508 regarding maximum family share at 
initial occupancy shall not apply);
    (4) The family shall not be considered a new admission to the 
tenant-based program
    (5) The family shall not count toward the PHA's income-targeting 
requirements at Sec.  982.201(b)(2)(i); and
    (6) An owner may not terminate the tenancy of a family that elects 
to use their tenant-based assistance to remain in the same project, 
except for in response to serious or repeated lease violations, or for 
other good cause (see Sec.  982.310).
    (c) Termination by PHA. (1) The HAP contract must provide that the 
term of the PHA's contractual commitment is subject to the availability 
of sufficient appropriated funding (budget authority) as determined by 
HUD. For purposes of this section, ``sufficient funding'' means the 
availability of appropriations, and of funding under the ACC from such 
appropriations, to make full payment of housing assistance payments 
payable to the owner for any contract year in accordance with the terms 
of the HAP contract. Consistent with the policies in the PHA's 
Administrative Plan, the PHA has the option of terminating a PBV HAP 
contract only if:
    (i) The PHA determines that it lacks sufficient funding to continue 
housing assistance payments for all voucher units under a HAP contract;
    (ii) The PHA has taken cost-saving measures specified by HUD; and
    (iii) HUD determines that the PHA lacks sufficient funding.
    (2) If the PHA determines that a breach has occurred, the PHA may 
exercise any of its rights or remedies under the HAP contract, 
including but not limited to contract termination. In the case of 
contract termination, families shall be provided tenant-based 
assistance, as described in paragraph (b) of this section.
    (d) Termination by owner--reduction below initial rent. If the 
amount of the rent to owner for any contract unit, as adjusted in 
accordance with Sec.  983.302, is reduced below the amount of the 
initial rent to owner, the owner may terminate the HAP contract, upon 
notice to the PHA, and families must be provided tenant-based 
assistance and may elect to remain in the project in accordance with 
paragraph (b) of this section. The owner is not required to provide the 
one-year notice of the termination of the HAP contract to the family 
and the PHA, as described in paragraph (a) of this section, when 
terminating the HAP contract due to rent reduction below the initial 
rent to owner.
0
41. Revise Sec.  983.207 to read as follows:


Sec.  983.207  HAP contract amendments (to add or substitute contract 
units).

    (a) Amendment to substitute contract units. At the discretion of 
the PHA and subject to all PBV requirements, the HAP contract may be 
amended to substitute a different unit with the same number of bedrooms 
in the same project for a previously covered contract unit. Prior to 
such substitution, the PHA must inspect the proposed substitute unit to 
determine whether it complies with HQS and must determine the 
reasonable rent for such unit.
    (b) Amendment to add contract units. At the discretion of the PHA, 
and provided that the total number of units in a project that will 
receive PBV assistance will not exceed the limitations in Sec.  983.6 
or Sec.  983.54, a HAP contract may be amended to add PBV units in the 
same project to the contract, without a new proposal selection.
    (1) Added units that qualify for an exception to the program cap 
(as described in Sec.  983.6 and Sec.  983.59) or the project cap (as 
described in Sec.  983.54 and Sec.  983.59) will not count against such 
cap(s).
    (2) The anniversary and expiration dates of the HAP contract for 
the additional units must be the same as the anniversary and expiration 
dates of the HAP contract term for the PBV units originally placed 
under HAP contract.
    (3) A unit that is not under a HAP contract but is in a project 
with other units that are under a HAP contract may undergo repairs or 
renovation prior to amending the PBV HAP contract to add the unit. If 
such repairs or renovation constitutes development activity as defined 
in Sec.  983.3, then the requirements at Sec.  983.152(b) must be met.

[[Page 63718]]

    (4) Units may only be added to the HAP contract if the units 
existed at the time of HAP contract execution.
    (c) Staged completion of contract units. Even if contract units are 
placed under the HAP contract in stages commencing on different dates, 
there is a single annual anniversary for all contract units under the 
HAP contract. The annual anniversary for all contract units is the 
annual anniversary date for the first contract units placed under the 
HAP contract. The expiration of the HAP contract for all the contract 
units completed in stages must be concurrent with the end of the HAP 
contract term for the units originally placed under HAP contract.
0
42. Revise Sec.  983.208 to read as follows:


Sec.  983.208  Condition of contract units.

    (a) Owner maintenance and operation. (1) The owner must maintain 
and operate the contract units and premises in accordance with HUD's 
Housing Quality Standards, including performance of ordinary and 
extraordinary maintenance.
    (2) The owner must provide all the services, maintenance, 
equipment, and utilities specified in the HAP contract with the PHA and 
in the lease with each assisted family.
    (3) At the discretion of the PHA, the HAP contract may also require 
continuing owner compliance during the HAP term with additional housing 
quality requirements specified by the PHA (in addition to, but not in 
place of, compliance with HUD's Housing Quality Standards). Such 
additional requirements may be designed to assure continued compliance 
with any design, architecture, or quality requirement specified by the 
PHA (Sec.  983.204(c)).
    (b) Enforcement of Housing Quality Standards. (1) The PHA must 
vigorously enforce the owner's obligation to maintain contract units in 
accordance with HUD's Housing Quality Standards. The PHA may not make 
any HAP payment to the owner for a contract unit covering any period 
during which the contract unit does not comply with HUD's Housing 
Quality Standards.
    (2) The unit is considered to be in noncompliance with Housing 
Quality Standards if:
    (i) The PHA or authorized inspector determines the unit fails to 
comply based upon an inspection;
    (ii) The PHA notified the owner in writing of the unit failure; and
    (iii) The unit failures are not corrected in accordance with the 
timeframes established in Sec.  982.401(a)(5) and/or Sec.  982.401(o).
    (3) In the case of an HQS deficiency that is caused byany member or 
guest of the assisted family, the PHA may waive the owner's 
responsibility to remedy the violation. If the PHA waives the owner's 
responsibility, then the family must make the repairs in accordance 
with the applicable timeframes. However, the PHA may terminate 
assistance to a family because of HQS breach caused by the family, 
which may result in removing the unit from the HAP contract.
    (c) PHA remedies. This paragraph covers PHA actions when HQS 
deficiencies are identified as the result of a regular inspection (HQS 
inspection conducted on the PBV project at least biennially or interim 
inspection (when the PHA inspects a PBV unit at other times as needed, 
such as when a family or government official notifies the PHA of a 
deficiency)). See Sec.  983.103 for PHA enforcement actions related to 
the initial HQS inspection options for PBV existing housing.
    (1) A PHA may withhold assistance payments for individual units 
that do not meet HQS once the PHA has notified the owner in writing of 
the deficiencies. If the unit is brought into compliance during the 
applicable cure period (24 hours for life-threatening deficiencies and 
30 days (or other reasonable period established by the PHA), the PHA 
must:
    (i) Resume assistance payments; and
    (ii) Provide assistance payments to cover the time period for which 
the assistance payments were withheld.
    (2)(i) The PHA must abate the HAP for the PBV unit if the owner 
fails to make the repairs within the applicable cure period (24 hours 
for life-threatening deficiencies and 30 days (or other reasonable 
period established by the PHA)). Once the repairs are made and the unit 
complies with HQS, the PHA must recommence HAP.
    (ii) If the PHA abates HAP under this paragraph, the PHA must 
notify the tenant and the owner that it is abating payments and that if 
the unit does not meet HQS within 60 days after the determination of 
noncompliance or a reasonable longer period established by the PHA, the 
PHA will remove the unit from the HAP contract, and the family will 
have to move if the family wishes to receive continued assistance. The 
PHA must provide the family with any forms necessary to move to another 
unit and transfer the rental assistance accordingly.
    (iii) The PHA may choose to abate payments for the entire PBV HAP 
due to unit's noncompliance with the HQS, even if some of the units 
continue to meet HQS. The PHA may terminate the entire HAP contract, 
rather than simply removing the unit from the HAP contract, due to 
noncompliance with HQS.
    (iv) If a PHA abates the HAP for the unit, the PHA must notify the 
family and the owner that it is abating payments and that if the unit 
does not meet HQS within 60 days after the determination of 
noncompliance (or a reasonable longer period established by the PHA), 
the PHA will either terminate the HAP contract or remove the unit from 
the HAP contract, and the family will have to move if the family wishes 
to receive continued assistance. The PHA must issue the family its 
voucher and provide the family with any other forms necessary to move 
to another unit with continued HQS assistance.
    (3) An owner may not terminate the tenancy of any family due to the 
withholding or abatement of assistance. During the period that 
assistance is abated, the family may terminate the tenancy by notifying 
the owner.
    (4) If the owner makes the repairs and the unit complies with HQS 
within 60 days (or a reasonable longer period established by the PHA) 
of the notice of abatement, the PHA must recommence payments to the 
owner. The PHA does not make any payments for the unit to the owner for 
the period of time that the payments were abated.
    (5) If the owner fails to make the repairs within 60 days (or a 
reasonable longer period established by the PHA) of the notice of 
abatement, the PHA must either remove the unit from the HAP contract or 
terminate the HAP contract in its entirety.
    (6)(i) The PHA must give any family residing in a unit that is 
either removed from the HAP contract or for which the HAP contract is 
terminated under this paragraph (c) due to a failure to correct HQS 
deficiencies at least 90 days or a longer period as the PHA determines 
is reasonably necessary following the termination of the HAP contract 
to lease a unit with tenant-based assistance.
    (ii) If the family is unable to lease a unit within the period 
under paragraph (c)(6) of this section and the PHA owns or operates 
public housing, the PHA must offer, and if accepted, provide the family 
a preference for the first appropriately sized public housing unit that 
becomes available for occupancy after the time period expires.
    (iii) PHAs may assist families relocating under this paragraph (c) 
in finding a new unit, including using up to 2 months of the withheld 
and abated assistance payments for costs directly associated with 
relocating to a new unit, including security deposits or reasonable 
moving costs as determined

[[Page 63719]]

by the PHA based on their locality. If the family receives security 
deposit assistance from the PHA for the new unit, the PHA may require 
the family to remit the security deposit returned by the owner of the 
new unit at such time that the lease is terminated, up to the amount of 
the security deposit assistance provided by the PHA for that unit. The 
PHA must include in its Administrative Plan the policies it will 
implement for this provision.
    (d) Maintenance and replacement--Owner's standard practice. 
Maintenance and replacement (including redecoration) must be in 
accordance with the standard practice for the building concerned as 
established by the owner.
    (e) Applicability. This section is applicable to HAP contracts that 
were either executed on or renewed after [EFFECTIVE DATE OF FINAL 
RULE]. For purposes of this paragraph, a HAP contract is renewed when 
the HAP contract is extended beyond the initial term of the lease. For 
all other HAP contracts, Sec.  983.208 as in effect on [DATE ONE DAY 
BEFORE EFFECTIVE DATE OF FINAL RULE] remains applicable.
0
43. In Sec.  983.210, revise paragraphs (a), (c), and (e) and remove 
paragraph (j).
    The revisions read as follows:


Sec.  983.210  Owner certification.

* * * * *
    (a) The owner is maintaining the premises and all contract units in 
accordance with HUD's Housing Quality Standards.
* * * * *
    (c) Each contract unit for which the owner is receiving housing 
assistance payments is leased to an eligible family referred by the 
PHA, or selected from the owner-maintained waiting list in accordance 
with Sec.  983.251, and the lease is in accordance with the HAP 
contract and HUD requirements.
* * * * *
    (e) The owner (including a principal or other interested party) is 
not the spouse, parent, child, grandparent, grandchild, sister, or 
brother of any member of a family residing in a contract unit unless 
needed as a reasonable accommodation under Section 504, the Fair 
Housing Act, or the ADA, for a household member who is a person with 
disabilities.
* * * * *
0
44. In Sec.  983.211, revise paragraph (a) and the final sentence of 
paragraph (c) to read as follows:


Sec.  983.211  Removal of unit from HAP contract.

    (a) Units occupied by families whose income has increased during 
their tenancy resulting in the tenant rent equaling the rent to the 
owner, shall be removed from the HAP contract 180 days following the 
last housing assistance payment on behalf of the family.
* * * * *
    (c) * * * Families must be selected in accordance with program 
requirements under Sec.  983.251 of this part.
0
45. Revise Sec.  983.251 to read as follows:


Sec.  983.251   How participants are selected.

    (a) Who may receive PBV assistance? (1) The PHA may select families 
who are participants in the PHA's tenant-based voucher program and 
families who have applied for admission to the voucher program.
    (2) Except for tenant-based voucher participants (determined 
eligible at original admission to the voucher program), the PHA may 
only select families determined eligible for admission within 60 days 
prior to commencement of PBV assistance.
    (3) The protections for victims of domestic violence, dating 
violence, sexual assault, or stalking in 24 CFR part 5, subpart L, 
apply to admission to the project-based voucher program.
    (4) A PHA may not approve a tenancy if the owner (including a 
principal or other interested party) of a unit is the parent, child, 
grandparent, grandchild, sister, or brother of any member of the 
family, unless the PHA determines that approving the unit would provide 
reasonable accommodation under Section 504, the Fair Housing Act, or 
the ADA, for a family member who is a person with disabilities.
    (b) Protection of in-place families. (1) In order to minimize 
displacement of in-place families, if an existing unit or a unit 
requiring rehabilitation is occupied by an eligible family on the 
proposal selection date, the in-place family must be placed on the PBV 
waiting list (if the family is not already on the list) and given an 
absolute selection preference. If a project-specific waiting list is 
not used for the project, the PHA must refer the family to the 
applicable project owner for an appropriately sized PBV unit in the 
project.
    (2) The in-place family protection applies only to families that 
are eligible to participate in the PBV program on the proposal 
selection date. If the in-place family is a tenant-based voucher 
participant, program eligibility is not re-determined. However, the PHA 
may deny or terminate assistance for the grounds specified in 24 CFR 
982.552 and 982.553.
    (3)(i) During the initial term of the tenant-based lease, an in-
place tenant-based voucher family may agree, but is not required, to 
mutually terminate the tenant-based lease with the owner and enter into 
a PBV lease. If the family chooses to continue under the tenant-based 
lease, the unit may not be added to the PBV HAP contract. The owner may 
not terminate the lease for other good cause during the initial term of 
the tenant-based lease unless the owner is terminating the tenancy 
because of something the family did or failed to do in accordance with 
24 CFR 982.310(d)(2). The owner is expressly prohibited from 
terminating the tenancy during the initial term of the lease based on 
the family's failure to accept the offer of a new lease or revision, or 
for a business or economic reason.
    (ii) After the initial term of the tenant-based lease, an owner may 
choose not to renew the tenant-based lease or may terminate the tenant-
based lease for other good cause (as defined in Sec.  982.310(d)). In 
this case, the family would be required to move with continued tenant-
based assistance or relinquish the tenant-based voucher and enter into 
a PBV lease.
    (4) Admission of in-place families is not subject to income-
targeting under 24 CFR 982.201(b)(2)(i).
    (c) Selection from waiting list. (1) Applicants who will occupy PBV 
units must be selected from the waiting list for the PBV program.
    (2) The PHA has the following options in determining how to 
structure the waiting list for the PBV program:
    (i) The PHA may use a separate, central, waiting list comprised of 
more than one, or all, PBV projects;
    (ii) The PHA may use the same waiting list for both tenant-based 
assistance and some or all PBV projects; or
    (iii) The PHA may use separate waiting lists for PBV units in 
individual projects or buildings (or for sets of such units). This 
option may be used in combination with option in paragraph (c)(2)(i) or 
(ii) of this section. The PHA may permit the owner to maintain such 
waiting lists (see Sec.  983.251(c)(7) for more information).
    (3) For any of the options under paragraph (c)(2) of this section, 
the waiting list may establish preferences for occupancy of particular 
units. Criteria for occupancy of units (e.g. elderly families) may also 
be established; however, selection of families must be done through an 
admissions preference.

[[Page 63720]]

    (4) The PHA may merge the waiting list for PBV assistance with the 
PHA waiting list for admission to another assisted housing program.
    (5) Where applicable, the PHA may place families referred by the 
PBV owner on its PBV waiting list.
    (6) If the PHA chooses to use a separate waiting list for admission 
to PBV units, under paragraphs (c)(2)(i) and (iii) of this section, the 
PHA must offer to place applicants who are listed on the waiting list 
for tenant-based assistance on the waiting list for PBV assistance 
(including owner-maintained PBV waiting lists).
    (7) PHAs using separate waiting lists for individual projects or 
buildings, as described in paragraph (c)(2)(iii) of this section, may 
permit owners to maintain such waiting lists. PHAs may choose to use 
owner-maintained PBV waiting lists for specific owners or projects. 
And, PHAs may permit an owner to maintain a single waiting list across 
multiple projects owned by the owner. Under an owner-maintained waiting 
list, the owner is responsible for carrying out responsibilities 
including, but not limited to, processing changes in applicant 
information, removing an applicant's name from the waiting list, 
opening and closing the waiting list. Where a PHA allows for owner-
maintained waiting lists, all the following apply:
    (i) The owner must develop and submit a written tenant selection 
plan to the PHA for approval. The tenant selection plan must include 
policies and procedures concerning waiting list management and 
selection of applicants from the project's waiting list, including any 
admission preferences, procedures for removing applicant names from the 
waiting list, and procedures for closing and reopening the waiting 
list. The owner must receive approval from the PHA of its tenant 
selection plan in accordance with the process established in the PHA's 
Administrative Plan. The owner's tenant-selection plan must be 
incorporated in the PHA's Administrative Plan.
    (ii) The owner must receive approval from the PHA for any 
preferences that will be applicable to the project. The PHA will 
approve such preferences as part of its approval of the owner's tenant 
selection plan. Each project may have a different set of preferences. 
Preferences must be consistent with the PHA plan and listed in the 
owner's tenant-selection plan.
    (iii) The owner is responsible for opening and closing the waiting 
list, including providing public notice when the owner opens the 
waiting list in accordance with Sec.  982.206. If the owner-maintained 
waiting list is open and additional applicants are needed to fill 
vacant units, the owner must give public notice in accordance with the 
requirements of Sec.  982.206 and the tenant selection plan.
    (iv) The applicant may apply directly at the project, or the 
applicant may request that the PHA refer the applicant to the owner for 
placement on the project's waiting list. The PHA must disclose to the 
applicant all the PBV projects available to the applicant, including 
the projects' contact information and other basic information about the 
project.
    (v) Applicants already on the PHA's waiting list must be permitted 
to place their names on the project's waiting lists.
    (vi) At the discretion of the PHA, the owner may make preliminary 
eligibility determinations for purposes of placing the family on the 
waiting list, and preference eligibility determinations. The PHA may 
choose to make this determination rather than delegating it to the 
owner.
    (vii) If the PHA delegated the preliminary eligibility and 
preference determinations to the owner, the owner is responsible for 
notifying the family of the owner's determination not to place the 
applicant on the waiting list and a determination that the family is 
not eligible for a preference. The PHA is then responsible for 
conducting the informal review.
    (viii) Once an owner selects the family from the waiting list, the 
owner refers the family to the PHA who then determines the family's 
final program eligibility. The owner may not offer a unit to the family 
until the PHA determines that the family is eligible for the program.
    (ix) All HCV waiting list administration requirements that apply to 
the PBV program (24 CFR part 982, subpart E, other than Sec. Sec.  
982.202(b)(2) and 982.204(d)) apply to owner-maintained waiting lists.
    (x) The PHA is responsible for oversight of owner-maintained 
waiting lists to ensure that they are administered properly and in 
accordance with program requirements, including fair housing 
requirements under the authorities cited at 24 CFR 5.105(a). The owner 
is responsible for maintaining complete and accurate records as 
described in Sec.  982.158. The owner must give the PHA, HUD, and the 
Comptroller General full and free access to its offices and records 
concerning waiting list management, as described in Sec.  982.158(c). 
HUD may take enforcement action against either the owner or the PHA, or 
both.
    (8) Not less than 75 percent of the families admitted to a PHA's 
tenant-based and project-based voucher programs during the PHA fiscal 
year from the PHA waiting list shall be extremely low-income families. 
The income-targeting requirements at 24 CFR 982.201(b)(2) apply to the 
total of admissions to the PHA's project-based voucher program and 
tenant-based voucher program during the PHA fiscal year from the PHA 
waiting list (including owner maintained PBV waiting lists) for such 
programs.
    (9) Families who require particular accessibility features for 
persons with disabilities must be selected first to occupy PBV units 
with such accessibility features (see 24 CFR 8.26 and 100.202). Also 
see Sec.  983.260.
    (d) Preference for services offered. In selecting families, PHAs 
(or owners in the case of owner-maintained waiting lists) may give 
preference to families who qualify for voluntary services, including 
disability-specific services, offered at a particular project, 
consistent with the PHA plan and Administrative Plan.
    (1) The prohibition on granting preferences to persons with a 
specific disability at Sec.  982.207(b)(3) continues to apply.
    (2) Families shall not be required to accept the particular 
services offered at the project.
    (3) In advertising the project, the owner may advertise the project 
as offering services for a particular type of disability; however, the 
preference must be provided to all applicants who qualify for the 
voluntary services offered in conjunction with the assisted units.
    (e) Offer of PBV assistance or owner's rejection. (1) If a family 
refuses the PHA's offer of PBV assistance or the owner rejects a family 
for admission to the owner's PBV units, the family's position on the 
PHA waiting list for tenant-based assistance is not affected 
(regardless of the type of PBV waiting list used by the PHA).
    (2) The impact (of a family's rejection of the offer or the owner's 
rejection of the family) on a family's position on the PBV waiting list 
will be determined as follows:
    (i) If a central PBV waiting list is used, the PHA's Administrative 
Plan must address the number of offers a family may reject before the 
family is removed from the PBV waiting list and whether the owner's 
rejection will impact the family's place on the PBV waiting list.
    (ii) If a project-specific PBV waiting list is used, the family's 
name is removed from the project's waiting list connected to the 
family's rejection of the offer or the owner's rejection of the

[[Page 63721]]

family. The family's position on any other project-specific PBV waiting 
list is not affected.
    (3) None of the following actions may be taken against an applicant 
who has applied for, received, or refused an offer of PBV assistance:
    (i) Refuse to list the applicant on the PHA waiting list for 
tenant-based assistance or any other available PBV waiting list. 
However, the PHA (or owner in the case of owner-maintained waiting 
lists) is not required to open a closed waiting list to place the 
family on that waiting list;
    (ii) Deny any admission preference for which the applicant is 
currently qualified;
    (iii) Change the applicant's place on the waiting list based on 
preference, date, and time of application, or other factors affecting 
selection from the waiting list;
    (iv) Remove the applicant from the waiting list for tenant-based 
voucher assistance.
0
46. Revise Sec.  983.252 to read as follows:


Sec.  983.252  PHA information for accepted family.

    (a) Oral briefing. When a family accepts an offer of PBV 
assistance, the PHA must give the family an oral briefing. The briefing 
must include information on the following subjects:
    (1) A description of how the program works;
    (2) Family and owner responsibilities; and
    (3) Family right to move.
    (b) Information packet. The PHA must give the family a packet that 
includes information on the following subjects:
    (1) How the PHA determines the total tenant payment for a family;
    (2) Family obligations under the program;
    (3) Information on federal, State, and local equal opportunity 
laws, the contact information for the Section 504 coordinator, a copy 
of the housing discrimination complaint form, and information on how to 
request reasonable accommodations and modifications under Section 504, 
the Fair Housing Act, or the ADA; and
    (4) PHA subsidy standards, including when the PHA will consider 
granting exceptions to the standards, including when required as a 
reasonable accommodation for a person with disabilities under Section 
504, the Fair Housing Act, or the ADA.
    (c) Providing information for persons with disabilities. (1) The 
PHA must take appropriate steps to assure effective communication, in 
accordance with 24 CFR 8.6 and 28 CFR part 35, subpart E, in conducting 
the oral briefing and in providing the written information packet, 
including in alternative formats.
    (2) The PHA shall have some mechanism for referring to accessible 
PBV units a family that includes a person with a mobility or sensory 
impairment.
    (d) Providing information for persons with limited English 
proficiency. The PHA should take reasonable steps to assure meaningful 
access by persons with limited English proficiency in accordance with 
obligations contained in Title VI of the Civil Rights Act of 1964, 
Executive Order 13166, and HUD's LEP Guidance.
0
47. In Sec.  983.253, revise paragraphs (a)(1) and (3) to read as 
follows:


Sec.  983.253   Leasing of contract units.

    (a) * * *
    (1) During the term of the HAP contract, the owner must lease 
contract units only to eligible families selected from the waiting list 
for the PBV program in accordance with Sec.  983.251 of this part.
* * * * *
    (3) An owner must promptly notify in writing any rejected applicant 
of the grounds for any rejection. The owner must provide a copy of such 
rejection notice to the PHA.
* * * * *
0
48. Revise Sec.  983.254 to read as follows:


Sec.  983.254  Vacancies.

    (a) Filling vacant units. (1) The PHA and the owner must make 
reasonable good-faith efforts to minimize the likelihood and length of 
any vacancy.
    (i) If an owner-maintained waiting list is used, in accordance with 
Sec.  983.251, the owner must promptly notify the PHA of any vacancy or 
expected vacancy in a contract unit and refer the family to the PHA for 
final eligibility determination. The PHA must make every reasonable 
effort to promptly make such final eligibility determination.
    (ii) If a PHA-maintained waiting list is used, in accordance with 
Sec.  983.251, the owner must promptly notify the PHA of any vacancy or 
expected vacancy in a contract unit, and the PHA must, after receiving 
the owner notice, make every reasonable effort to refer promptly a 
sufficient number of families for the owner to fill such vacancies.
    (2) The owner must lease vacant contract units only to families 
determined eligible by the PHA.
    (b) Reducing number of contract units. If any contract units have 
been vacant for a period of 120 days or more since owner notice of 
vacancy, as required in paragraph (a) of this section, and 
notwithstanding the reasonable good-faith efforts of the PHA and the 
owner to fill such vacancies, the PHA may give notice to the owner 
amending the HAP contract to reduce the number of contract units by 
subtracting the number of contract units (by number of bedrooms) that 
have been vacant for such period.
0
49. Revise Sec.  983.257 to read as follows:


Sec.  983.257   Owner termination of tenancy and eviction.

    24 CFR 982.310 applies with the exception that Sec.  
982.310(d)(1)(iii) and (iv) do not apply to the PBV program. (In the 
PBV program, ``good cause'' does not include a business or economic 
reason or desire to use the unit for an individual, family, or non-
residential rental purpose.) 24 CFR 5.858 through 5.861 on eviction for 
drug and alcohol abuse apply to this part. 24 CFR part 5, subpart L 
(Protection for Victims of Domestic Violence, Dating Violence, Sexual 
Assault, or Stalking) applies to this part.
0
50. Revise Sec.  983.259 to read as follows:


Sec.  983.259  Security deposit: Amounts owed by tenant.

    (a) Security deposit permitted. The owner may collect a security 
deposit from the tenant.
    (b) Amount of security deposit. The PHA must prohibit the owner 
from charging assisted tenants security deposits in excess of private 
market practice, or in excess of amounts charged by the owner to 
unassisted tenants.
    (c) Use of security deposit. When the tenant moves out of the 
contract unit, the owner, subject to state and local law, may use the 
security deposit, including any interest on the deposit, in accordance 
with the lease, as reimbursement for any unpaid tenant rent, damages to 
the unit, or other amounts which the tenant owes under the lease.
    (d) Security deposit reimbursement to owner. The owner must give 
the tenant a written list of all items charged against the security 
deposit and the amount of each item. After deducting the amount used to 
reimburse the owner, the owner must promptly refund the full amount of 
the balance to the tenant.
    (e) Insufficiency of security deposit. If the security deposit is 
not sufficient to cover amounts the tenant owes under the lease, the 
owner may seek to collect the balance from the tenant. However, the PHA 
has no liability or responsibility for payment of any

[[Page 63722]]

amount owed by the family to the owner.
0
51. Revise Sec.  983.260 to read as follows:


Sec.  983.260  Overcrowded, under-occupied, and accessible units.

    (a) Family occupancy of wrong-size or accessible unit. (1) The PHA 
subsidy standards determine the appropriate unit size for the family 
size and composition.
    (2) If the PHA determines that a family is occupying a wrong-size 
unit, or a unit with accessibility features that the family does not 
require, and the unit is needed by a family that requires the 
accessibility features (see 24 CFR 8.27), the PHA must, within 30 days 
from the PHA's determination:
    (i) Notify the family and the owner of this determination, and
    (ii) Offer the family continued housing assistance in another unit, 
pursuant to paragraph (b) of this section.
    (b) PHA offer of continued assistance. The PHA policy on continued 
housing assistance must be stated in the Administrative Plan and may be 
in the form of:
    (1) Project-based voucher assistance in an appropriate-size unit 
(in the same project or in another project);
    (2) Other project-based housing assistance (e.g., by occupancy of a 
public housing unit);
    (3) Tenant-based rental assistance under the voucher program; or
    (4) Other comparable public or private tenant-based assistance 
(e.g., under the HOME program).
    (c) PHA termination of housing assistance payments. (1) If the PHA 
offers the family the opportunity to receive tenant-based rental 
assistance under the voucher program:
    (i) The PHA must terminate the housing assistance payments for a 
wrong-sized or accessible unit at the earlier of the expiration of the 
term of the family's voucher (including any extension granted by the 
PHA) or the date upon which the family vacates the unit.
    (ii) If the family does not move out of the wrong-sized unit or 
accessible unit by the expiration date of the term of the family's 
voucher, the PHA must remove the unit from the HAP contract.
    (2) If the PHA offers the family another form of continued housing 
assistance (other than a tenant-based voucher), in accordance with 
paragraph (b)(3) of this section, the PHA must terminate the housing 
assistance payments for the wrong-sized or accessible unit and remove 
the unit from the HAP contract when:
    (i) The family does not accept the offer and does not move out of 
the PBV unit within a reasonable time as determined by the PHA, not to 
exceed 90 days.
    (ii) The family accepts the offer but does not move out of the PBV 
unit within a reasonable time as determined by the PHA, not to exceed 
90 days.
0
52. Revise Sec.  983.262 to read as follows:


Sec.  983.262  When occupancy may exceed the project cap.

    (a) General. Pursuant to Sec.  983.54(a), the PHA may not place 
units under an Agreement or a HAP contract in excess of the project 
cap. There are certain exceptions to the project cap as described in 
Sec.  983.54(c). This section provides more detail on the occupancy 
requirements of excepted units.
    (b) Excepted units. A unit is excepted only if it is occupied by a 
family who qualifies for the exception; that is, by an elderly family, 
or a family eligible for supportive services, as applicable.
    (1) Families who will occupy excepted units must be selected from 
the waiting list for the PBV program through an admissions preference 
(see Sec.  983.251).
    (2) Once the family vacates the unit, in order to continue as an 
excepted unit under the HAP contract, the unit must be made available 
to and occupied by a family that qualifies for the exception.
    (c) Supportive services exception. A unit is excepted if any member 
of the family is eligible for one or more of the supportive services 
even if the family chooses not to participate in the services. If any 
member of the family chooses to participate and successfully completes 
the supportive services, the unit continues to be excepted for as long 
as any member of the family resides in the unit. The unit loses its 
excepted status only if the entire family becomes ineligible during the 
tenancy for all supportive services available to the family. A family 
cannot be terminated from the program or evicted from the unit because 
they become ineligible for all supportive services during the tenancy. 
See paragraph (f) of this section.
    (d) Elderly family exception. The PHA may allow a family that 
initially qualified for occupancy of an excepted unit based on elderly 
family status to continue to reside in a unit, where through 
circumstances beyond the control of the family (e.g., death of the 
elderly family member or long term or permanent hospitalization or 
nursing care), the elderly family member no longer resides in the unit. 
In this case, the unit may continue to count as an excepted unit for as 
long as the family resides in that unit. However, the requirements of 
Sec.  983.260, concerning wrong-sized units, apply. If the PHA chooses 
not to exercise this discretion, the unit is no longer considered 
excepted; and, if the family is not required to move from the unit as a 
result of Sec.  983.260, the PHA may use one of the options described 
in paragraph (f) of this section.
    (e) Disabled family exception. The same provisions of paragraph (d) 
of this section apply to units previously excepted based on disabled 
family status under a HAP contract in effect prior to April 18, 2017.
    (f) Unit loss of excepted status. If a unit loses its excepted 
status, the PHA may do one or more of the following:
    (1) Substitute the excepted unit for a non-excepted unit if it is 
possible to do so in accordance with Sec.  983.207(a), so that the 
overall number of excepted units in the project is not reduced.
    (2) Temporarily remove the unit from the PBV HAP contract and 
provide the family with tenant-based assistance. The family and the 
owner may agree to use the tenant-based voucher on the unit; otherwise, 
the family must move from the unit with the tenant-based voucher.
    (3) Change the unit's designation to a non-excepted unit, provided 
that the change in designation does not place non-excepted units above 
the project cap.
0
53. In Sec.  983.301, revise paragraphs (f) and (g) to read as follows:


Sec.  983.301   Determining the rent to owner.

* * * * *
    (f) Use of FMRs and utility allowance schedule in determining the 
amount of rent to owner. (1) When determining the initial rent to 
owner, the PHA shall use the most recently published FMR in effect and 
the utility allowance schedule in effect at execution of the HAP 
contract. At its discretion, the PHA may use the amounts in effect at 
any time during the 30-day period immediately before the beginning date 
of the HAP contract.
    (2) When redetermining the rent to owner, the PHA shall use the 
most recently published FMR and the PHA utility allowance schedule in 
effect at the time of redetermination. At its discretion, the PHA may 
use the amounts in effect at any time during the 30-day period 
immediately before the redetermination date.
    (3)(i) For any area in which Small Area FMRs are not in effect, any 
HUD-approved exception payment standard amount under 24 CFR 982.503(c) 
applies to both the tenant-based and project-based voucher programs. 
HUD will not approve a different payment

[[Page 63723]]

standard amount for use in the PBV program.
    (ii) For any area in which SAFMRs are in effect, a HUD-approved 
exception payment standard amount under 24 CFR 982.503(c) will apply to 
a PHA's project-based voucher programs only if the PHA has adopted a 
policy applying SAFMRs to its PBV program in accordance with 24 CFR 
888.113(h).
    (4) At the request of the PHA, the HUD field office may approve a 
PHA's request to establish a project-specific utility allowance for a 
PBV-assisted project. Absent the establishment of such a project-
specific utility allowance, the PHA's utility allowance schedule 
applies to both the tenant-based and PBV programs.
    (i) The PHA request to establish a project-specific utility 
allowance must demonstrate that the utility allowances used in its 
voucher program would either create an undue cost on families (because 
the utility allowance provided under the voucher program is too low), 
or that use of the utility allowances will discourage conservation and 
efficient use of HAP funds (because the utility allowances provided 
under the voucher program would be excessive if applied to the 
project). The PHA must submit an analysis of utility rates for the 
community and consumption data of project residents in comparison to 
community consumption rates; and a proposed alternative methodology for 
calculating utility allowances on an ongoing basis.
    (ii) A PHA that has established a HUD-approved project-specific 
utility allowance must use the same utility allowance for residents of 
the project who have tenant-based assistance.
    (iii) HUD may establish additional standards or requirements for 
PHA requests to establish project specific utility allowances, 
including but not limited to circumstances where there is another form 
of rental assistance at the project, through a Federal Register notice 
subject to public comment.
    (g) PHA-owned units. For PHA-owned PBV units, the initial rent to 
owner, the annual redetermination of rent at the annual anniversary of 
the HAP contract, and any project-specific utility allowance must be 
determined by an independent entity in accordance with Sec.  983.57. 
The PHA must use the rent to owner established by the independent 
entity.
0
54. Revise Sec.  983.302 to read as follows:


Sec.  983.302  Redetermination of rent to owner.

    (a) Requirement to redetermine the rent to owner. The PHA must 
redetermine the rent to owner:
    (1) Upon the owner's request; or
    (2) When there is a 10 percent decrease in the published FMR.
    (b) Rent increase. (1) An owner may receive an increase in the rent 
to owner during the term of a HAP contract. Any such increase will go 
into effect at the annual anniversary of the HAP contract. (Provisions 
for special adjustments of contract rent pursuant to 42 U.S.C. 
1437f(c)(2)(B) do not apply to the voucher program.)
    (2)(i) A rent increase may occur through automatic adjustment by an 
operating cost adjustment factor (OCAF) or as the result of an owner 
request for such an increase. Regardless of the method of adjustment, 
the rent increase must not result in a rent that exceeds the maximum 
rent, as determined pursuant to Sec.  983.301.
    (ii) By agreement of the parties, the HAP contract may provide for 
rent adjustments using an operating cost adjustment factor (OCAF) 
established by the Secretary pursuant to section 524(c) of the 
Multifamily Assisted Housing Reform and Affordability Act of 1997 
(which shall not result in a negative adjustment) at each annual 
anniversary of the HAP contract. OCAFs are established by the Secretary 
and published annually in the Federal Register. The provisions in the 
following paragraphs (b)(2)(ii)(A) through (D) apply to a contract that 
provides for rent adjustments using an OCAF:
    (A) A rent adjustment using an OCAF may not exceed the maximum rent 
determined by the PHA pursuant to Sec.  983.301.
    (B) The contract may require an additional increase up to the 
maximum rent determined by the PHA pursuant to Sec.  983.301, if 
requested by the owner in writing, periodically during the term of the 
contract.
    (C) The contract shall require an additional increase up to the 
maximum rent determined by the PHA pursuant to Sec.  983.301 at the 
point of contract extension, if requested by the owner in writing.
    (D) A PHA may not provide a rent adjustment that will result in 
rents that exceed the maximum rent determined by the PHA pursuant to 
Sec.  983.301.
    (iii) If the HAP contract does not provide for automatic adjustment 
by an OCAF, then an owner who wishes to receive an increase in the rent 
to owner must request such an increase at the annual anniversary of the 
HAP contract by written notice to the PHA.
    (iv) The PHA must establish the length of the required notice 
period for any rent increase that requires a written request from the 
owner. The written request must be submitted as required by the PHA 
(e.g., to a particular mailing address or email address).
    (3) The PHA may not approve and the owner may not receive any 
increase of rent to owner until and unless the owner has complied with 
all requirements of the HAP contract, including compliance with the 
HQS. The owner may not receive any retroactive increase of rent for any 
period of noncompliance.
    (c) Rent decrease. (1) If there is a decrease in the rent to owner, 
as established in accordance with Sec.  983.301, the rent to owner must 
be decreased, regardless of whether the contract provides for rent 
adjustments pursuant to an OCAF or if an owner requests a rent 
adjustment.
    (2) At any time during the term of the HAP contract, the PHA may 
elect within the HAP contract to not reduce rents below the initial 
rent to owner. If the rents have already been reduced below the initial 
rent to owner, the PHA may not make such an election as a way to 
increase the rents. If rents increase (pursuant to paragraph (b) of 
this section) above the initial rent to owner, then the PHA may once 
again make that choice. Where a PHA makes such an election, the rent to 
owner shall not be reduced below the initial rent to owner, except:
    (i) To correct errors in calculations in accordance with HUD 
requirements;
    (ii) If additional housing assistance has been combined with PBV 
assistance after the execution of the initial HAP contract and a rent 
decrease is required pursuant to Sec.  983.153(b); or
    (iii) If a decrease in rent to owner is required based on changes 
in the allocation of responsibility for utilities between the owner and 
the tenant.
    (d) Notice of change in rent to owner. Whenever there is a change 
in rent to owner, the PHA must provide written notice to the owner 
specifying the amount of the new rent to owner (as determined in 
accordance with Sec. Sec.  983.301 and 983.302). The PHA notice of the 
rent change in rent to owner constitutes an amendment of the rent to 
owner specified in the HAP contract.
    (e) Contract year and annual anniversary of the HAP contract. (1) 
The contract year is the period of 12 calendar months preceding each 
annual anniversary of the HAP contract during the HAP contract term. 
The initial

[[Page 63724]]

contract year is calculated from the first day of the first calendar 
month of the HAP contract term.
    (2) The annual anniversary of the HAP contract is the first day of 
the first calendar month after the end of the preceding contract year. 
The adjusted rent to owner amount applies for the period of 12 calendar 
months from the annual anniversary of the HAP contract.
    (3) See Sec.  983.207(c) for information on the annual anniversary 
of the HAP contract for contract units completed in stages.
0
55. In Sec.  983.303, revise paragraph (f) to read as follows:


Sec.  983.303  Reasonable rent.

* * * * *
    (f) Determining reasonable rent for PHA-owned units. (1) For PHA-
owned units, the amount of the reasonable rent must be determined by an 
independent entity in accordance with Sec.  983.57, rather than by the 
PHA. The reasonable rent must be determined in accordance with this 
section.
    (2) The independent entity must furnish a copy of the independent 
entity determination of reasonable rent for PHA-owned units to the PHA 
where the project is located.

PART 985--SECTION 8 MANAGEMENT ASSESSMENT PROGRAM (SEMAP)

0
56. The authority for part 985 continues to read as follows:

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

0
57. In Sec.  985.1, revise paragraph (b) to read as follows:


Sec.  985.1  Purpose and applicability.

* * * * *
    (b) Applicability. This rule applies to PHA administration of the 
Housing Choice Voucher (HCV) program (24 CFR part 982), the project-
based component (PBC) of the certificate program and the Project-Based 
Voucher (PBV) program (24 CFR part 983) to the extent that PBC and PBV 
family and unit data are reported and measured under the stated HUD 
verification method, and enrollment levels and contributions to escrow 
accounts for Section 8 participants under the family self-sufficiency 
program (FSS) (24 CFR part 984).
0
58. In Sec.  985.3, revise the final sentence in paragraph (i)(1) to 
read as follows:


Sec.  985.3   Indicators, HUD verification methods and ratings.

* * * * *
    (i) * * *
    (1) * * * For purposes of this paragraph (i)(1), payment standards 
include exception payment standards established by the PHA in 
accordance with 24 CFR 982.503(d)(2).
* * * * *

    Dated: September 23, 2020.
R. Hunter Kurtz,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2020-21400 Filed 10-7-20; 8:45 am]
BILLING CODE 4210-67-P