[Federal Register Volume 88, Number 22 (Thursday, February 2, 2023)]
[Proposed Rules]
[Pages 7044-7046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-02181]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 402, 880, 881, 883, 884, 886, 891

[Docket No. FR-6320-A-01]
RIN 2502-AJ62


Federal Housing Administration (FHA): Section 8 Project-Based 
Rental Assistance: Standard Program Regulation and Renewal Contract; 
Advance Notice of Proposed Rulemaking and Request for Public Comment

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

ACTION: Advance notice of proposed rulemaking and request for public 
comment.

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SUMMARY: The Office of Multifamily Housing Programs (MFH) seeks 
comments from the public regarding an initiative under which MFH, in 
partnership with owners, tenants, and other program stakeholders, would 
move toward a single Section 8 program regulation and single contract 
form pursuant to which the Secretary would renew project-based Section 
8 Housing Assistance Payments (HAP) contracts under section 524 of the 
Multifamily Assisted Housing Reform and Affordability Act of 1997 
(MAHRA). Section 524 authorizes the Secretary to establish the terms 
and conditions under which expiring contracts are renewed, subject to 
the requirements of section 524. Currently, the Secretary issues one of 
several section 524 renewal contracts, which is subject to one of seven 
Section 8 regulatory parts under which the original contract was 
issued, as well as other HUD regulations implementing section 524. To 
reduce regulatory complexities, MFH envisions promulgating a single 
Section 8 project-based rental assistance program regulation consisting 
of a standardized set of Section 8 program requirements and a single 
form of section 524 renewal contract.

DATES: Comment Due Date: Written comments must be received on or before 
April 3, 2023.

ADDRESSES: Interested persons are invited to submit comments regarding 
this advance notice of proposed rulemaking. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Members of the public may submit 
comments 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. Due to security measures at 
all federal agencies, however, submission of comments by standard mail 
often results in delayed delivery. To ensure timely receipt of 
comments, HUD recommends that comments submitted by standard mail be 
submitted at least two weeks in advance of the deadline. HUD will make 
all comments received by mail available to the public at https://www.regulations.gov.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make comments immediately available 
to the public. Comments submitted electronically through the 
www.regulations.gov website can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.
    Note: To receive consideration as public comments, comments must be 
submitted through one of the two methods specified above. All 
submissions must refer to the docket number and title of the rule.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    3. Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD are available for public 
inspection and copying between 8 a.m. and 5 p.m. weekdays at the above 
address. Due to security measures at the HUD Headquarters building, an 
advance appointment to review the public comments must be scheduled by 
calling the Regulations Division at 202-708-3055 (this is not a toll-
free number). Individuals with speech or hearing impairments may access 
this number via teletypewriter (TTY) by calling the Federal Relay 
Service at 800-877-8339 (this is a toll-free number). Copies of all 
comments submitted are available for inspection and downloading at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Jennifer Lavorel, Director, Program 
Administration Division, Office of Asset Management Portfolio 
Oversight, U.S. Department of Housing and Urban Development, 451 7th 
Street, SW, Washington, DC 20410, telephone number 202-402-2515 (this 
is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the Federal Relay 
Service at 800-877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    The Housing and Community Development Act of 1974, Public Law 93-
383 (Aug. 22, 1974) amended the United States Housing Act of 1937 to 
add Section 8. Congress established a new project-based rental 
assistance (PBRA) program under which public housing agencies under 
contract with HUD were authorized to enter into Housing Assistance 
Payments (HAP) contracts on behalf of eligible low-income families 
occupying new, substantially rehabilitated, or existing rental units. 
In 1983, Congress repealed PBRA authority for new construction and 
substantial rehabilitation HAP contracts. As original HAP contracts 
began to expire, Congress enacted the Multifamily Assisted Housing 
Reform and Affordability Act of 1997, Public Law 105-65 (Oct. 27, 
1997), which authorized the renewal of expiring HAP contracts. Section 
524 of MAHRA authorizes the renewal of HAP contracts at market rents 
(524(a)(4)(c)) and above-market rents (524(a)(4)(B)), for contracts

[[Page 7045]]

that are not subject to Mark-to-Market debt-restructuring.
    Historically, MFH has issued HAP contracts under the seven 
regulatory parts listed below. Today, MFH issues renewal HAP contracts 
under MAHRA and continues to issue new contracts under 24 CFR part 886 
subpart C (Disposition of HUD-owned Projects) and under the Rental 
Assistance Demonstration (RAD) Project-Based Rental Assistance (PBRA) 
program.
    The Section 8 statute requires that the HAP contract contain 
certain provisions, which means that the contracts MFH has issued over 
the years contain many similar provisions. Many contracts, however, 
contain other provisions that mirror the administrative requirements 
unique to each program's regulatory structure. Some programs (flagged 
below) have both old and new regulation contracts depending on when the 
notice of selection or initial application for the project was issued 
(for projects subject to Part 880, for example, ``old regulation'' 
contracts are those that received a notice of selection for their 
proposal between 1975 and November 5, 1979 and ``new regulation'' 
contracts received the notice of selection after November 5, 1979) as 
follows:
    1. New Construction (24 CFR part 880) (old and new);
    2. Substantial Rehabilitation (24 CFR part 881) (old and new);
    3. State Housing Agencies (24 CFR part 883) (old and new);
    4. New Construction financed under section 515 of the Housing Act 
of 1949 (24 CFR part 884);
    5. Loan Management Set Aside Program (24 CFR part 886, subpart A);
    6. Section 202/8 Program (24 CFR part 891, subpart E) (formerly 
part 885);
    7. Disposition of HUD-Owned Projects (24 CFR part 886, subpart C);
    8. RAD PBRA Program (RAD Notice, Appendix I).
    The fundamental difference between old regulation and new 
regulation HAP contracts is that new regulation contracts impose a 
limitation on distributions for profit-motivated owners, as well as a 
requirement for residual receipts and a reserve for replacement 
account, whereas old regulation contracts generally do not. As another 
example, only new regulation HAP contracts typically require the owner 
to submit audited financial statements. These types of differences are 
carried forward when contracts are renewed, because the renewal 
contracts that HUD has used since the enactment of MAHRA state that 
they renew all the provisions of the expiring contract (except for 
those pertaining to the identification of contract units by size and 
applicable contract rents, the amount of the monthly contract rents, 
contract rent adjustments, and any project account). The differing 
contract terms that result from this environment contribute to program 
complexities that could be reduced by instead having a standard renewal 
contract for all projects renewing under section 524. Adoption of a 
standard program regulation and contract would reduce the complexity 
faced by owners and tenants, in addition to HUD staff and contractors 
who are responsible for the administration and oversight of assisted 
projects.
    HUD sees a clear benefit to moving toward a single program 
regulatory structure and a single program contract that sets forth all 
contract terms. HUD also recognizes that such contract terms may affect 
an owner's decision-making process in considering whether to request 
renewal. As a result, MFH is soliciting public comment on this 
initiative.

II. Request for Public Comment

    This notice offers an opportunity for the public to provide input 
on the policies to be incorporated in a standard program regulation. 
MFH will consider all public comments received and subsequently issue a 
proposed rule. At that time, MFH will accept further public comments on 
the proposed standard program regulation. MFH is particularly 
interested in public comments addressing the following issues:

A. Reserve for Replacement

    (1) To ensure project capital needs are met, HUD intends to require 
an owner to establish a HUD-controlled reserve for replacement account, 
with initial and annual deposits determined by means of a periodic 
capital needs assessment (CNA). Are there circumstances under which HUD 
should consider waiving the need for a CNA and, if so, what 
circumstances and why?
    (2) Should HUD provide an incentive to owners to use their own 
capital to establish and/or make continued deposits to a reserve for 
replacement account? If yes, how might the incentive be structured? 
Should access to the incentive be tied to particular outcomes? If so, 
what outcomes?

B. Rehabilitation

    (3) Should the standard program regulation address requirements 
when a project assisted under section 524 is undergoing rehabilitation? 
If not, why not?
    (4) If the standard regulation should address rehabilitation, what 
elements of rehabilitation should it cover (i.e., rehabilitation 
planning, tenant relocation, use of the pass-through)? Are there items 
that should be excluded from the regulation?

C. Project Finances

    (5) To ensure compliance with the reserve for replacement 
requirement, HUD intends to require all owners to submit annual 
financial reports. Please comment.
    (6) Should the standard program regulation contain any limits on 
distributions? If not, how should HUD ensure that owners dedicate 
appropriate funds to operating and maintenance costs, and that taxpayer 
funds are not providing excessive compensation to owners?

D. HUD Enforcement

    (7) In the interest of providing clarity and transparency, HUD 
believes it would be beneficial to include in the regulation a subpart 
on enforcement, where the tools available to HUD and the circumstances 
under which such tools could be employed would be addressed. Please 
comment.

E. Vacancy Payments

    (8) What incentives could HUD use to encourage owners to re-lease 
vacant units quickly? Are there programmatic changes HUD might consider 
to encourage this result?

F. Scope

    (9) What topics should be addressed in a standard program 
regulation? For example, should the regulation be comprehensive, 
addressing all aspects of the program, ranging from renewal, 
management, occupancy, enforcement, and nondiscrimination, 
accessibility for persons with disabilities and equal opportunity 
requirements? If not, how should the scope of the regulation be 
limited?
    (10) HUD expects to incorporate into the regulation tenant rights 
equivalent to those that apply currently to tenants residing in 
projects assisted under RAD PBRA HAP contracts (as currently described 
in Notice H 2019-09/PIH 2019-23). Should the regulation contain a 
subpart addressing tenant rights and responsibilities? If so, what 
specific topics should the subpart cover?

[[Page 7046]]

G. Renewal Options

    (11) Upon expiration, most contracts in MFH's portfolio are 
eligible for renewal under section 524 of MAHRA. HUD intends to require 
renewal of such contracts by means of the standard program contract, so 
that as owners renew, they will be subject to the requirements laid out 
in the standard program regulation. Please comment.

H. Other Comments

    (12) In addition to the subject areas described above, MFH welcomes 
any other input that interested parties believe would contribute to the 
successful design and implementation of a standard program regulation 
and contract, including input on education and outreach efforts that 
would assist owners in understanding and complying with requirements in 
the standard program regulation and contract.

Julia R. Gordon,
Assistant Secretary for Housing--FHA Commissioner.
[FR Doc. 2023-02181 Filed 2-1-23; 8:45 am]
BILLING CODE 4210-67-P