[Federal Register Volume 89, Number 89 (Tuesday, May 7, 2024)]
[Rules and Regulations]
[Pages 38224-38339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08601]



[[Page 38223]]

Vol. 89

Tuesday,

No. 89

May 7, 2024

Part II





 Department of Housing and Urban Development





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24 CFR Parts 5, 8, 42, et al.





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

  Federal Register / Vol. 89 , No. 89 / Tuesday, May 7, 2024 / Rules 
and Regulations  

[[Page 38224]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 8, 42, 50, 91, 92, 93, 247, 290, 882, 888, 891, 
903, 908, 943, 945, 960, 972, 982, 983, 985, and 1000

[Docket No. FR-6092-F-03]
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: Final rule.

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SUMMARY: This final rule amends HUD's regulations to implement changes 
to the Housing Choice Voucher (HCV) tenant-based program and the 
Project-Based Voucher (PBV) program made by the Housing Opportunity 
Through Modernization Act of 2016 (HOTMA). HOTMA made several 
amendments to the HCV and PBV programs, including establishing a 
statutory definition of public housing agency (PHA)-owned housing, and 
amending several elements of both programs. In response to public 
comments, HUD has also included additional regulatory changes in this 
final rule that are intended to reduce the burden on public housing 
agencies, by either modifying requirements or simplifying and 
clarifying existing regulatory language.

DATES: 
    Effective date: June 6, 2024, except the following sections, which 
are delayed indefinitely: instruction 69, Sec.  982.451(c); instruction 
98, Sec.  983.154(g) and (h); instruction 100, Sec.  983.157; and 
instruction 103, Sec.  983.204(e).
    For more information, see SUPPLEMENTARY INFORMATION.
    Compliance dates: Compliance with this rule is required no later 
than June 6, 2024, except for the following requirements:
    1. 90 days after effective date. PHAs are not required to comply 
with changes to the requirements in the following sections until 
September 4, 2024: 24 CFR 982.301; 24 CFR 982.503; 24 CFR 982.625-641; 
24 CFR 983.58(b); 24 CFR 983.252; 24 CFR 983.260; and 24 CFR 985.3.
    2. 180 days after effective date. PHAs are not required to comply 
with the new requirements in the following section until December 3, 
2024: 24 CFR 982.505.
    3. One year after the effective date. Several sections in this 
final rule require PHAs to update their Administrative Plans. PHAs are 
not required to update their Administrative Plans in compliance with 
these new requirements until June 6, 2025. Additionally, PHAs are not 
required to comply with the new requirements in the following sections 
until June 6, 2025: 24 CFR 983.57; 24 CFR 983.155(b); 24 CFR 
983.251(e); and 24 CFR 983.262.

FOR FURTHER INFORMATION CONTACT: Ryan Jones, Director, Housing Voucher 
Management and Operations Division, Department of Housing and Urban 
Development, 451 7th Street SW, Washington, DC 20011; telephone number 
202-708-1112 (this is not a toll-free number); email 
[email protected]. HUD welcomes and is prepared to receive calls 
from individuals who are deaf or hard of hearing, as well as from 
individuals with speech or communication disabilities. To learn more 
about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION: 

I. Background

The HOTMA Statute

    On July 29, 2016, HOTMA was signed into law (Pub. L. 114-201, 130 
Stat. 782). HOTMA makes numerous significant 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).

The Proposed Rule

    On October 8, 2020, HUD issued a proposed rule \1\ to codify the 
HOTMA provisions that HUD implemented through the HOTMA Implementation 
Notices \2\ in the Federal Register. The proposed rule also sought to 
make changes to regulatory provisions unrelated to HOTMA to eliminate 
obsolete regulatory provisions and reduce the burden on public housing 
agencies, by either modifying requirements or simplifying and 
clarifying existing regulatory language. The proposed rule sought to 
codify the following HOTMA provisions:
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    \1\ Housing Opportunity Through Modernization Act of 2016-
Housing Choice Voucher (HCV) and Project-Based Voucher 
Implementation; Additional Streamlining Changes, 85 FR 63664 (Oct. 
8, 2020).
    \2\ See 81 FR 73030 (Oct. 24, 2016); 82 FR 5458 (Jan. 18, 2017); 
82 FR 32461 (Jul. 14, 2017); additional guidance was provided in 
Notices PIH 2017-18, PIH 2017-20, and PIH 2017-21.
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     Section 101: In accordance with HOTMA section 101(a)(1), 
the proposed rule included a provision regarding non-life-threatening 
deficiencies and an alternative inspections requirement in HOTMA 
section 101(a)(1) at Sec. Sec.  982.405, 982.406, and 983.103. The 
proposed rule also proposed to revise the definition of life-
threatening deficiencies at Sec.  982.401. Additionally, the proposed 
rule sought to include regulations to enforce Housing Quality Standards 
(HQS) in section 101(a)(3) at Sec. Sec.  982.404 and 983.208.
     Section 105: In accordance with HOTMA section 105, the 
proposed rule sought to modify and align the definition of ``PHA-owned 
unit'' with HOTMA's revised definition of the term at Sec. Sec.  982.4 
and 983.3.
     Section 106: In alignment with HOTMA sections 106(a)(2) 
and 106(a)(3), the proposed rule proposed to include regulations on PBV 
program cap, PBV units not subject to project cap or program cap, and 
PBV project cap in Sec. Sec.  983.6, 983.54, and 983.59.
     Section 106: Additionally, to conform to the changes in 
HOTMA section 106(a)(4), the proposed rule included regulations on 
entering into a PBV Housing Assistance Payments (HAP) contract for 
rehabilitated and newly constructed housing projects without an 
agreement to enter into HAP contract at Sec.  983.154. The proposed 
rule sought to codify regulations surrounding PBV additional contract 
conditions and tenant-based assistance for families at termination/
expiration without renewal of PBV HAP contract; PBV priority of 
assistance contracts; PBV adding units to HAP contract without 
competition; and PBV initial term of HAP contract and extension of 
term, in sections 106(a)(4) and 106(a)(5) throughout Part 983. The 
proposed rule sought to codify regulations that allow for rent 
adjustments using an operating cost adjustment factor (OCAF) in HOTMA 
section 106(a)(6) at Sec.  983.302.
     Section 106: Further, to conform to the changes in HOTMA 
sections 106(a)(7) through (a)(9), the proposed rule sought to codify 
HOTMA's changes to PBV preference for voluntary services in section 
106(a)(7) at Sec.  983.251 and owner-maintained waiting lists in 
section 106(a)(7) at Sec.  983.251. The proposed rule also sought to 
codify changes to environmental requirements for existing housing in 
section 106(a)(8) at Sec.  983.56 and attaching PBVs to projects where 
the PHA has an ownership interest in section 106(a)(9) at Sec.  983.51.
    The proposed rule also sought to implement the following HOTMA HCV 
provision:
     Section 112: In accordance with HOTMA section 112, the 
proposed rule proposed to include the manufactured

[[Page 38225]]

home space rent calculation in section 112 at Sec.  982.623, and to 
address the PHA option to make housing assistance payments directly to 
families instead of an owner for manufactured home space rentals in a 
proposed change to Sec.  982.623.
    HUD also proposed changes that were not statutorily required, to 
better clarify or revise existing regulatory requirements, including 
changing the current requirements to refine the Davis-Bacon wage 
requirements and inserting references to obligations under Section 504 
of the Rehabilitation Act of 1973 (Section 504) and the Americans with 
Disabilities Act (ADA). Through these changes, HUD sought to improve 
the administration of the program, simplify program rules, and reduce 
administrative burden and cost. For additional information, please see 
the proposed rule.\3\
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    \3\ 85 FR 63664 (Oct. 8, 2020), https://www.federalregister.gov/documents/2020/10/08/2020-21400/housing-opportunity-through-modernization-act-of-2016-housing-choice-voucher-hcv-and-project-based.
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    HUD received 44 comments on the proposed rule, which were 
considered and are discussed in Section IV of this preamble. Additional 
details about the proposed changes may be found in the ``Housing 
Opportunity Through Modernization Act of 2016-Housing Choice Voucher 
(HCV) and Project-Based Voucher Implementation; Additional Streamlining 
Changes'' proposed rule at 85 FR 63664 (Oct. 8, 2020).

The NSPIRE Rulemaking

    On May 11, 2023, after the proposed rule was published, HUD 
published the ``Economic Growth Regulatory Relief and Consumer 
Protection Act: Implementation of National Standards for the Physical 
Inspection of Real Estate (NSPIRE) final rulemaking (``the NSPIRE final 
rule'').\4\ The NSPIRE final rule established a new approach to 
defining and assessing housing quality by consolidating and modernizing 
inspection standards for public housing, multifamily housing, Community 
Planning and Development programs, and the HCV and PBV programs. 
Several of the changes made in this final rule from the proposed rule 
are designed to incorporate or be consistent with the NSPIRE final 
rule, and some additional changes are made to build upon changes made 
by the NSPIRE final rule.
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    \4\ See 88 FR 30442.
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II. The Final Rule

    After considering the public comments received on the October 8, 
2020, proposed rule, and after further review, HUD makes the following 
changes at this final rule stage. Where a section has been relocated 
either from the prior regulations or from what HUD proposed, the 
section numbers shown in the headings of this preamble refer to the 
regulation sections as they appear in this final rule.
    Notes concerning application of this rulemaking to projects 
underway.
    HUD wishes to clarify that no change in this rulemaking requires a 
PHA, or any other party, to repeat a stage in the selection or 
development process which has already been completed for a PBV project 
prior to the compliance date of this rulemaking. If, for instance, a 
PHA has selected a site under the prior site selection standards before 
the effective date of this rulemaking, the PHA is not required to 
complete a new selection. Similarly, an Agreement to enter into HAP 
contract signed before the effective date of this rulemaking does not 
need to be amended to incorporate changes to this rulemaking.
    Additionally, if parties wish to amend an existing Agreement to 
enter into HAP contract to take advantage of changes made by this 
rulemaking, such as the changes made to include a description of 
broadband infrastructure work in the Agreement, nothing in this 
rulemaking prevents such an amendment after the rule is in effect. 
However, HUD notes that if a project is under an Agreement to enter 
into HAP contract as of the effective date of this rule, parties cannot 
nullify the Agreement to enter into HAP contract to proceed without an 
Agreement as will be otherwise allowed under this rule when Sec.  
983.154(f) and (g) take effect.

Sec.  888.113 Fair Market Rents for Existing Housing: Methodology

    In response to public comments, HUD revises Sec.  888.113 to 
increase flexibility for PHAs. This final rule will provide PHAs the 
option in the HCV program to use Small Area Fair Market Rents (SAFMRs) 
in a non-metropolitan area with notification to their local HUD field 
office, which provides PHAs operating in non-metropolitan counties the 
same opportunity to establish payment standards that better align with 
rents that vary significantly between zip code areas within the non-
metropolitan counties. In paragraph (a) this final rule modifies the 
requirement under Sec.  888.113 that the FMR calculation exclude newly 
built units. HUD no longer publishes separate FMRs for newly 
constructed rental units; therefore, the FMRs calculated under Sec.  
888.113 should be reflective of the entire rental market. This final 
rule also clarifies existing practice in paragraph (c)(3) that where a 
PHA that elects to use SAFMRs may exercise this option in one 
metropolitan area or non-metropolitan county, and is not required to 
exercise this option in other metropolitan areas or non-metropolitan 
counties. This final rule changes paragraph (c)(3) which will allow 
PHAs to notify HUD when opting-in to use SAFMRs, rather than require 
HUD's approval.
    This final rule revises paragraph (h) to align with the change to 
paragraph (c)(3) described above and to improve readability. Paragraph 
(h) is also revised to include a cross-reference to separate 
requirements regarding applicability of exception payment standards 
based on Small Area FMRs to PBV projects, to more clearly signal that 
Small Area FMRs may impact PBVs both as described in paragraph (h) and 
where HUD approves use of exception payment standards. This final rule 
also revises paragraph (h)(1) to clarify that the PHA and owner may 
mutually agree to apply the SAFMR to a PBV project where the project 
was selected before ``either or both'' the SAFMR designation and the 
PHA administrative policy. The intent of this provision, as explained 
in the preamble to the Small Area FMR final rule (81 FR 80567, 
published November 16, 2016), was to permit a PHA that had established 
an Administrative Plan policy to apply Small Area FMRs to all future 
PBV projects to also establish a policy permitting the PHA to apply the 
Small Area FMRs to current PBV projects, provided the owner was willing 
to mutually agree to do so. This approach was intended to offer 
``maximum flexibility'' to the PHA for varied circumstances. However, 
the prior language the use of ``both'' inadvertently created confusion 
with respect to projects selected between the two events (the Small 
Area FMR designation and the PHA administrative policy extending Small 
Area FMRs to future PBV projects). Consequently, HUD is making a 
technical correction to paragraph (h)(1) to clarify that if the PHA is 
applying the Small Area FMRs to future PBV projects, the PHA may also 
establish a policy to extend the use of Small Area FMRs to current PBV 
projects, including those projects selected after the Small Area FMR 
designation but prior to the effective date of the PHA administrative 
policy, if the owner is willing to do so.
    This final rule also makes minor revisions to paragraphs (h)(1) and 
(h)(2). First, the final rule includes ``county-wide FMRs,'' for 
consistency with other changes in the regulation that allow voluntary 
use of SAFMRs in non-

[[Page 38226]]

metropolitan areas and to avoid any implication that the PBV Small Area 
FMR flexibilities in paragraph (h) would not be available in non-
metropolitan counties where HUD publishes SAFMRs. Second, this final 
rule changes ``designation'' to ``designation/implementation'' to 
improve clarity; this is not a substantive change, but rather it 
reflects that the applicable date for a PHA that chooses to implement 
Small Area FMRs under paragraph (c)(3) of this section would more 
appropriately be termed the date of ``implementation.'' This final rule 
also clarifies the effective date of a rent increase due to Small Area 
FMR. The proposed rule left unchanged a provision stating that the 
effective date of a rent increase would occur on the ``first annual 
anniversary'' of the HAP contract, but this final rule replaces ``first 
annual anniversary'' with ``next annual anniversary'' to clarify that 
the effective date of a rent increase occurs on the next annual 
anniversary after the agreement, even if that is not the first 
anniversary of the project.
    Finally, this final rule revises paragraph (i)(2) to reflect the 
renumbering of Sec.  982.503(e) to (f). This final rule also revises 
paragraph (i)(3) to reflect the phase-out of success rate payment 
standards in 982.503(f).

Sec.  903.3 What is the purpose of this subpart?

    This final rule clarifies HUD's intent regarding applicability of 
part 903 to the project-based voucher program. Previously, Sec.  
903.4(a)(2)(i) defined tenant-based assistance to broadly mean 
assistance provided under section 8(o) of the 1937 Act, which included 
project-based assistance under section 8(o)(13). When Sec.  903.12 was 
amended to make express reference to project-based assistance under 
section 8(o)(13), an unintended consequence was confusion regarding 
whether the term ``tenant-based assistance'' should still be 
interpreted to include project-based assistance under section 8(o)(13). 
In Sec.  903.3(b)(2), the term ``project-based'' is added to the 
reference of participants who benefit from PHA plans as a source to 
locate basic PHA policies, rules and requirements concerning the PHA's 
operations, programs and services.

Sec.  903.4 What are the public housing agency plans?

    This final rule revises and defines both tenant-based assistance 
and project-based assistance under 903.4(a)(2)(i) to address confusion 
regarding whether the existing regulatory language also covers project-
based assistance under section 8(o)(13). HUD now also makes specific 
reference to tenant-based assistance, project-based assistance, and/or 
tenant and project-based assistance throughout part 903 to bring 
clearer meaning to each provision.

Sec.  903.6 What information must a PHA provide in the 5-Year Plan?

    HUD adds paragraph (c) to Sec.  903.6 to clarify that when a PHA 
intends to select one or more projects for project-based assistance 
without competition, the PHA must first include a statement of this 
intent in its 5-Year Plan to put the public on notice. The proposed 
rule referenced this requirement in 983.51(c)(1) but only generically 
referenced the PHA Plan.

Sec.  903.7 What information must a PHA provide in the Annual Plan?

    This final rule clarifies the requirements for PHAs that provide 
project-based assistance under section 8(o)(13) with respect to what 
information a PHA must provide in the Annual Plan. HUD now makes 
specific references to project-based assistance in paragraphs (a)(1), 
(c), (d), (e)(4), (f), and (l)(1)(iii) and (2). HUD also inserts a new 
paragraph (r) which contains text that was previously located in Sec.  
903.12, as HUD determined that the project-based assistance statement 
requirement in that section was not appropriately located.
    Finally, in the Federal Register notice published on January 18, 
2017 (82 FR 5458), HUD stated, ``The HOTMA amendments permit a PHA to 
establish a preference based on who qualifies for voluntary services, 
including disability-related services, offered in conjunction with the 
assisted units.'' HUD further provided ``The revised statute permits 
such a preference to be established if it is consistent with the PHA 
Plan. As part of the PHA Plan review process, the Office of Fair 
Housing and Equal Opportunity, in consultation with the Office of 
General Counsel, will review each proposed preference for consistency 
with fair housing and civil rights requirements. As part of this 
process, HUD may request the PHA or owner provide any additional 
documentation necessary to determine consistency with the PHA Plan and 
all applicable Federal fair housing and civil rights requirements.'' In 
this final rule, HUD clarifies that the Office of Fair Housing and 
Equal Opportunity, in consultation with the Office of General Counsel, 
may review proposed preferences as part of the PHA Plan review process. 
Approval of a PHA Plan does not constitute compliance with federal fair 
housing and civil rights requirements. As stated in the comment 
discussion of Sec.  983.251, adoption of such preferences cannot 
conflict with Section 504 or other federal civil rights requirements. 
Further explanation of these issues is located in that discussion and 
in HUD's January 2017 notice.

Sec.  903.11 Are certain PHAs eligible to submit a streamlined Annual 
Plan?

    HUD makes a minor revision to Sec.  903.11(c)(1) and (3) to include 
the requirement that a PHA must identify its participation in the 
project-based assistance program in the streamlined Annual Plan 
consistent with the changes to Sec.  903.7 made by this final rule.
    HUD is also revising paragraphs (a)(3) and (c)(3). These paragraphs 
allow PHAs to submit a streamlined Annual Plan if they do not own or 
operate public housing. This final rule clarifies that PHAs that 
participate in the project-based assistance program are still eligible 
to submit a streamlined Annual Plan.

Sec.  903.12 What are the streamlined Annual Plan requirements for 
small PHAs?

    In this final rule, HUD moves the PBV requirements previously 
located in Sec.  903.12 to Sec.  903.7 as described above. HUD makes a 
minor revision to Sec.  903.12 to include the requirement that in the 
streamlined Annual Plan for Small PHAs, a PHA must identify its 
participation in the PBV program consistent with the changes to Sec.  
903.7 made by this final rule. HUD also makes express reference to 
project-based assistance in paragraph (b).

Sec.  903.13 What is a Resident Advisory Board and what is its role in 
development of the Annual Plan?

    This final rule clarifies in Sec.  903.13(b)(1) and (3) the 
requirements that Resident Advisory Board composition provides for 
reasonable representation of families receiving project-based 
assistance, in addition to families receiving tenant-based assistance.

Sec.  903.15 What is the relationship of the public housing agency 
plans to the Consolidated Plan and a PHA's Fair Housing requirements?

    This final rule clarifies in paragraph (c) that all admission and 
occupancy policies for section 8 project-based housing programs, in 
addition to public housing and section 8 tenant-based must comply with 
Fair Housing Act requirements and other civil rights laws and 
regulations and with a PHA's plans to affirmatively further fair 
housing.

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Sec.  982.4 Definitions

    In this final rule, HUD has revised the organizational structure of 
the cross-references for clarity and consistency with cross references 
in other sections. In addition, this final rule makes the following 
changes to definitions:
    HUD adds the definition of ``building,'' to clarify that a building 
is a structure with a roof and walls that contains one or more dwelling 
units.
    HUD adds the definitions of ``foster adult'' and ``foster child'' 
to the HCV program to clarify that foster adult and foster child are 
members of the household, but not members of a family. These 
definitions are identical to the definitions added by the Housing 
Opportunity Through Modernization Act of 2016: Implementation of 
Sections 102, 103, and 104 final rule.\5\
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    \5\ See ``Housing Opportunity Through Modernization Act of 2016: 
Implementation of Sections 102, 103, and 104'' final rule at 88 FR 
9600 (Feb. 14, 2023).
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    HUD revises the definition of ``housing quality standards'' to make 
a technical correction to the existing definition and eliminate 
confusion regarding the use of the alternative inspection option. Under 
the statute, the term ``housing quality standards'' (HQS) refers to the 
standards prescribed by HUD under section 8(o)(8)(B)(i) or variations 
approved by HUD under section 8(o)(8)(B)(ii) of the United States 
Housing Act of 1937. While the alternative inspection option at Sec.  
982.406 allows a PHA to comply with the initial and regular inspection 
requirements by relying on an alternative inspection (i.e., an 
inspection conducted for another housing program), that does not mean 
the standards of the alternative inspection become the applicable HQS 
for the HCV program. For example, assume a PHA places a unit under a 
HAP contract by using the alternative inspection option for initial 
inspections under Sec.  982.406(e). Under that option, the PHA may 
place a unit under HAP contract on the basis that the unit passed an 
alternative inspection for a different housing program if certain 
conditions are met prior to conducting its own inspection. However, the 
PHA must still conduct its own HQS inspection within 30 days of 
receiving the Request for Tenancy Approval (RFTA) and may not make 
housing assistance payments to the owner until the PHA has inspected 
the unit. The PHA conducts its inspection of the unit based on the HQS 
established by HUD for the HCV program, not the housing standards that 
were applicable under the alternative inspection. Likewise, any interim 
inspection conducted by the PHA for a unit under HAP contract is to 
determine that the unit meets the HQS established by HUD for the HCV 
program, regardless of whether the PHA is relying on an alternative 
inspection of another housing program (that may have different 
standards) for regular inspections. For these same reasons, HUD is also 
revising the definition of HQS for the PBV program at Sec.  983.3 and 
making conforming changes to Sec. Sec.  982.401, 982.605(a), 
982.609(a), 982.614(a), 982.618(b), 982.621, and 983.101(a) in this 
final rule.
    HUD revises the definition of ``independent entity'' from the 
definition in the proposed rule to clarify when the unit of general 
local government meets the definition of an independent entity and more 
clearly explain the requirements and prohibited connections for a HUD-
approved entity.
    HUD revises the proposed definition of ``Request for Tenancy 
Approval (RFTA)'' to make clear that the RFTA may be submitted not just 
by the family, but also on behalf of a family.
    HUD revises the definition of ``Small Area Fair Market Rents'' from 
the proposed rule to remove language suggesting that the definition 
only applies to areas meeting the definition at Sec.  888.113(d)(2). 
HUD removed this reference because the SAFMRs in part 982 are not meant 
to be limited to the mandatory Small Area FMR metropolitan areas, and 
as such the ``Small Area Fair Market Rents'' definition deleted the 
citation to Sec.  888.113(d)(2), which only covers mandatory 
metropolitan areas designated as Small Area FMR areas.
    HUD revises the definition of ``tenant-paid utilities'' by stating 
that utilities and services may include those required by HUD through 
Federal Register notice with opportunity for comment.

Sec.  982.54 Administrative Plan

    This final rule revises the requirements for the PHA Administrative 
Plan. Specifically, this final rule requires PHAs at Sec.  
982.54(d)(22) to specify in the Administrative Plan the PHA's policy 
for withholding HAP for units that do not meet HQS. This final rule 
also requires at Sec.  982.54(d)(4)(iv) that the PHA Administrative 
Plan include the PHA's policy concerning residency for foster children 
and adults and requires at Sec.  982.54(d)(23) that the PHA's 
Administrative Plan include the PHA's policy on assisting families with 
relocating and finding a new unit. This final rule also modifies Sec.  
982.54(d)(4)(iii) to include Sec. Sec.  982.552, 982.554, and 982.55 as 
regulations that PHAs must follow in establishing their standards for 
denying admission or terminating assistance based on criminal activity 
or alcohol abuse and which must be included in their Administrative 
Plan. HUD's directives and guidance on a PHA's use of criminal activity 
as an admission screening factor are contained in PIH Notice 2015-19, 
Guidance for Public Housing Agencies (PHAs) and Owners of Federally-
Assisted Housing on Excluding the Use of Arrest Records in Housing 
Decisions. Through this notice and other issuances, such as the 2016 
Office of General Counsel's Guidance on the Application of Fair Housing 
Act Standards to the Use of Criminal Records by Providers of Housing 
and Real Estate-Related Transactions, HUD has required PHAs to adopt 
admission policies that do not intentionally discriminate against 
members of a protected class or otherwise have an unjustified 
discriminatory effect on members of a protected class, even when the 
PHA has no intent to discriminate. HUD urges PHAs to achieve a sensible 
and effective balance between allowing individuals with a criminal 
record to access HUD-subsidized housing and ensuring the safety of all 
residents of such housing.
    Consistent with the NSPIRE final rule, HUD modifies Sec.  
982.54(d)(21)(i) to require the PHA to include in its Administrative 
Plan any life-threatening deficiencies adopted by the PHA. Under the 
proposed rule, the PHA's Administrative Plan had to include the 
specific life-threatening conditions that would be identified through 
the PHA's inspections, including the HUD required life-threatening 
conditions and any life-threatening deficiencies adopted by the PHA 
prior to January 18, 2017. Since the deficiencies that HUD requires 
must be considered life-threatening are mandatory and not a matter of 
PHA administrative policy, requiring the PHA to list the HUD-required 
life-threatening deficiencies in the Administrative Plan is unnecessary 
and burdensome. In addition, singling out life-threatening deficiencies 
adopted by the PHA prior to January 18, 2017, which was related to how 
HUD initially implemented the non-life-threatening initial inspection 
option in the HOTMA Implementation Federal Register notice (82 FR 5458, 
published January 18, 2017), may create confusion. The revised text in 
this final rule clarifies that the Administrative Plan must include a 
list of any PHA designated life-threatening deficiencies that, in 
addition to all HUD-required life-threatening deficiencies, will be 
applied

[[Page 38228]]

by the PHA, regardless of date that the PHA designated the deficiency 
as life-threatening.

Sec.  982.301 Information When Family Is Selected

    This final rule makes changes to the information provided to a 
family when they are selected. For transparency and to ensure equal 
access, this section specifies that PHAs must provide information in a 
way that ensures meaningful access to individuals with limited English 
proficiency. Additionally, the final rule expands upon the requirement 
in the proposed rule to provide information on reasonable accommodation 
policies and procedures in the information packet, by also requiring 
that the packet specifically address an increase in the payment 
standard as a reasonable accommodation. The final rule also includes a 
requirement that reasonable accommodations must also be covered in the 
oral briefing. In this section, this final rule removes all references 
to the welfare to work program, since it no longer exists. Finally, 
this rule reorganizes paragraph (a) so that paragraph (a)(1) represents 
a list of what must be provided in an oral briefing, moving some 
content from paragraphs (a)(2) and (3); this reorganization does not 
change the requirements of paragraph (a) in any way.

Sec.  982.305 PHA Approval of Assisted Tenancy

    This final rule reorganizes Sec.  982.305(b) of the proposed rule 
by relocating paragraph (b)(2)(iii) of the proposed rule to a new 
paragraph (b)(3) and moving the previous paragraph (b)(3) to a new 
paragraph (b)(4). For clarity and simplicity, this final rule removes 
the requirement that the PHA determine that the unit is covered by the 
alternative inspection and simplifies this provision to state that an 
alternative inspection is allowed and alternatively cross references 
what the PHA is subject to and the alternative inspection option at 
Sec.  982.406. In addition, this final rule does not make the proposed 
non-substantive change to paragraph (c)(3).

Sec.  982.352 Eligible Housing

    This final rule changes proposed Sec.  982.352(b)(1)(v)(A)(3) by 
removing the exception of applicability of Sec.  982.405(e), 
acknowledging that sometimes independent entities schedule inspections, 
and in those cases, they must consider complaints and any other 
information brought to their attention.

Sec.  982.401 Housing Quality Standards

    NSPIRE includes the new standards for setting HQS at Sec.  5.703 
for all HUD programs including the standards for life-threatening and 
non-life-threatening conditions and the amount of time required to 
correct such deficiencies. Other than a conforming change related to 
the revised definition of HQS discussed previously in the description 
of the changes to Sec.  982.4, this final rule makes no change to the 
section as codified in the NSPIRE rule (88 FR 30442 (May 11, 2023)).

Sec.  982.404 Maintenance: Owner and Family Responsibility; PHA 
Remedies

    HUD makes several clarifying revisions to this section, which 
includes changes to certain terminology such as changing ``fails to 
comply'' to ``has HQS deficiencies'' and consistently changing 
``defect'' to ``deficiency.'' These clarifying changes also make it 
clear that a unit is ``not in compliance with HQS'' when it has 
deficiencies that are not remedied within the appropriate timeframe. 
This final rule also revises paragraph (a)(2) to provide clarifying 
changes from the proposed rule text that ensure the paragraph is clear 
that it does not provide a different requirement from the remainder of 
the section, and amends paragraph (a)(4) to align with the HOTMA 
statutory text. HUD provides in paragraph (b)(4) that, in the case of a 
family being responsible for HQS deficiency repairs, the family need 
not itself make the repairs but rather is responsible for taking all 
steps permissible under the lease and State and local law to ensure the 
deficiency is corrected. This is in response to commenters who pointed 
out that in some cases the lease or local law may prevent the family 
from undertaking the repairs itself.
    The proposed rule used varying terminology to explain HQS 
inspections throughout parts 982 and 983. To promote clarity, this 
final rule replaces the varied terminology to explain HQS inspections 
and consistently uses the inspection terms outlined in Sec.  982.405. 
This rule specifically names each type of inspection that exists within 
its respective section and specifies when actions or provisions apply 
to specific inspections. As such, this final rule also removes 
references to ``regular inspection'' since it was undefined in the 
proposed rule, and this final rule clarifies that Sec.  982.404(d) 
applies to every inspection type other than initial inspections. This 
final rule also adds the requirement at paragraph (d)(1) that a PHA's 
Administrative Plan contains the conditions for withholding HAP from an 
owner for such deficiencies, to align with Sec.  982.54.
    In paragraph (d)(2)(i), this final rule clarifies that the 
abatement requirement includes amounts that had previously been 
withheld. To better protect families from homelessness, in paragraph 
(d)(2)(ii), HUD outlines the timeframe in which a PHA must issue a 
family its voucher to include at least 30 days prior to the termination 
of the HAP contract. In paragraph (d)(3), this final rule specifies 
that the family has discretion to terminate their lease and that the 
termination will occur either immediately or when the family vacates 
the unit, whichever is earlier. This final rule also includes the 
requirement that PHAs promptly issue the family a voucher to move. In 
paragraph (e)(3), HUD expands what is included in costs associated with 
relocating to include temporary housing costs. The final rule further 
provides that if the PHA uses the withheld and abated assistance 
payments to assist with the family's relocation costs, the PHA must 
provide security deposit assistance to the family as necessary, and 
that PHAs must assist families with disabilities in locating available 
accessible units in accordance with 24 CFR 8.28(a)(3).
    Lastly, in paragraph (f), HUD provides that the revised Sec.  
982.404 applies to HAP contracts that are executed on or after the 
effective date of this final rule, as well as HAP contracts renewed 
after the rule's effective date.

Sec.  982.405 PHA Initial and Periodic Unit Inspection

    HUD has made technical organizational changes to Sec.  982.405 by 
dividing paragraphs and changing the headers to consistently use 
identifiable names for each inspection type. New paragraph (d) splits 
up the proposed paragraph (g) to specifically outline the types of 
interim inspections to include life-threatening, non-life-threatening, 
and extraordinary circumstances.

Sec.  982.406 Use of Alternative Inspections

    HUD revises Sec.  982.406 primarily to address issues with respect 
to compatibility between parts 982 and 983. Paragraph (a) now applies 
only to HCV, part 982 as HUD moved generally applicable language at 
proposed paragraph (a)(2) to paragraph (d) and removed the language at 
proposed paragraph (a)(3) applicable only to PBV. HUD also revises 
paragraph (c)(2)(ii) to align with the renumbering in Sec.  982.405. 
This final rule revises paragraph (d) regarding use of alternative 
inspections to apply to both HCV and PBV, by removing specific 
citations to Sec.  982.405.

[[Page 38229]]

These changes continue to require that any alternative inspection 
standard be identified in the PHA Administrative Plan for both HCV and 
PBV.

Sec.  982.451 Housing Assistance Payments Contract

    In this final rule, the text from paragraph (c)(1)(i) has been 
moved under paragraph (c)(1), resulting in a renumbering of paragraphs 
(c)(1)(i)(A)-(E) from the proposed rule to (c)(1)(i)-(v) in the final 
rule. Paragraph (c)(1) now expressly states the requirement that the 
separate legal entity must execute the HAP contract with the PHA if it 
chooses the option of establishing a separate legal entity to serve as 
the owner. HUD deletes paragraph (c)(1)(ii) of the proposed rule and 
moves the text of proposed (c)(2)(i) under paragraph (c)(2) in the 
final rule. This final rule also revises paragraph (c)(2)(i) to clarify 
that the PHA-owned certification obligates the PHA, as the owner, to 
all of the requirements of the HAP contract. This revision prevents 
confusion with other regulations that reference HAP contracts, but not 
the PHA-owned certification. Finally, other minor changes were made in 
paragraph (c) to align with corresponding requirements in Sec.  
983.204(e).

Sec.  982.503 Payment Standard Areas, Schedule, and Amounts

    HUD makes clarifying edits to paragraph (a)(1) to reflect HUD's 
practice of setting SAFMRs for ZIP codes outside designated SAFMRs. HUD 
also revises paragraph (d)(1) to explain the areas in which an 
exception payment standard may be established. In addition, in response 
to public comment, HUD revises paragraph (d)(2) to allow PHAs to set 
SAFMR-based exception payment standards above 110 percent of the FMR 
for non-metropolitan counties, just as they are currently permitted to 
do for metropolitan areas. This ensures parity between metropolitan and 
non-metro PHAs and provides non-metropolitan PHAs with the ability to 
establish exception payment standards that better reflect actual market 
conditions based on HUD's SAFMR determinations. In paragraph (d)(2), 
this final rule also allows PHAs that qualify for exception payment 
standards above 110 percent of the applicable FMR to set exception 
payment standards up to the same percentage of the SAFMR for the 
applicable ZIP code. HUD also divides proposed paragraph (d)(3) into 
paragraphs (d)(3) and (4) and moves proposed paragraph (d)(4) to 
(d)(5). In order to provide PHAs more flexibility to respond to rapidly 
changing rental markets, paragraph (d)(3) now provides set situations 
in which HUD will allow PHAs the discretion to establish an exception 
payment standard amount between 110 percent and 120 percent of 
applicable FMR upon notification to HUD that the PHA meets a specified 
criterion instead of requiring prior HUD approval. The PHA must meet 
one of three criteria: (i) Fewer than 75 percent of the families to 
whom the PHA issued tenant-based rental vouchers during the most recent 
12-month period for which there is success rate data available have 
become participants in the voucher program; (ii) More than 40 percent 
of families with tenant-based rental assistance administered by the 
agency pay more than 30 percent of adjusted income as the family share; 
or (iii) Such other criteria as the Secretary establishes by notice. 
This change will allow PHAs to more quickly respond to changing rental 
market conditions, which will help them better manage program 
utilization, success rates, and rent burdens. New paragraph (d)(4) 
outlines how the PHA must request approval from HUD to establish 
payment standards above 110 percent of the applicable FMR except as 
provided in paragraphs (d)(2), (d)(3), and (d)(5). This new paragraph 
consolidates requirements related to exception payment standards for 
PHAs in designated SAFMR areas and for PHAs subject to the metropolitan 
area or non-metropolitan county FMRs. It also establishes criteria for 
designated SAFMR PHAs to request an exception payment standard over 110 
percent of the SAFMR, which the current regulation previously stated 
would be provided in a separate Federal Register notice. Further, HUD 
revises paragraph (d)(4) to explain the application of the exception 
payment standard to the entire fair market rent area and the use of 
rental market data, specifically allowing the use of local rental 
market data. HUD provides clarifying changes to relocated paragraph 
(d)(5), which now specifies existing policy that PHAs may establish an 
exception payment standard of up to 120 percent of the applicable FMR 
without prior notification to HUD if they are seeking a reasonable 
accommodation for a person with a disability.
    HUD also amends paragraph (e) by establishing a modified standard 
for approving payment standards below the basic range which will 
require a projection of rent burden based on the lower payment 
standard, rather than measuring rent burden based on current program 
participants prior to that reduction. The standard does allow HUD to 
approve a payment standard below the basic range to help prevent 
termination of assistance in the case of a PHA budget shortfall. In 
this final rule, HUD does not adopt the proposed rule modification to 
paragraph (e) and removes the PHA's option to go below the basic 
payment standard range for Small Area FMR ZIP code areas without HUD 
approval. In addition, HUD amends paragraph (f) to eliminate the option 
to establish success rate payment standards. HUD determined that the 
new flexibility provided in the rule to set payment standards up to 120 
percent of the FMR makes this option unnecessary. In paragraph (h), 
this final rule specifies that HUD will monitor rent burdens only of 
families assisted with tenant-based rental assistance, because PBV 
tenants are unlikely to have rent burdens above 30 percent.

Sec.  982.505 How To Calculate Housing Assistance Payment

    In this final rule, HUD revises paragraph (c)(3)(iv) to eliminate 
the option in the proposed rule for PHAs to adopt different policies 
related to applying decreases in payment standards in different 
geographic areas out of concern that this could result in 
discriminatory policies. Additionally, in response to public comment, 
HUD revises paragraph (c)(4)(ii) to require PHAs to apply payment 
standard increases at the family's next regular reexamination or the 
next interim recertification (in addition to the other events listed) 
and adds paragraph (c)(5) to give PHAs the flexibility to adopt 
policies to apply increases in the payment standard earlier than 
required. HUD also revised paragraph (c)(6), which was previously 
paragraph (c)(5), to clarify that while the new family unit size must 
be used in the recalculation by the first regular reexamination 
following the change, it may be used immediately.

Sec.  982.517 Utility Allowance Schedule

    In response to public comments HUD is not going forward with the 
proposed Sec.  982.517(a)(2), which would have required PHAs to provide 
the utility allowance schedule to HUD only when HUD requests it, and 
instead maintains the current requirement that the PHA provide HUD with 
the utility allowance schedule regardless of whether HUD requests it, 
and to only require the PHA to provide information or procedures used 
in preparation of the schedule when HUD requests it. HUD also revises 
paragraph (b)(1)(i) to allow for the possibility of an expansion of 
utility allowances in the future through a Federal Register notice. 
Additionally, in

[[Page 38230]]

paragraph (b)(1)(ii), this final rule expands the category of utilities 
and services to include applicable surcharges. In paragraph (b)(1)(iv), 
HUD removed wireless internet from the list of non-essential utility 
costs so that HUD could consider such inclusion of wireless internet as 
essential in a Federal Register notice under paragraph (b)(1)(i).
    In paragraph (b)(2)(ii), HUD expands the utility allowance 
standards to include criteria for applying utility allowance to 
retrofitted units. The revised paragraph (b)(2)(ii) clarifies that 
while the entire building must meet Leadership in Energy and 
Environmental Design (LEED) or Energy Star standards, in the future HUD 
may provide by notice, when an energy-efficient utility allowance 
(EEUA) may be used for retrofitted units even if the entire building 
does not meet the standard. The revisions notes that there are only two 
design standards that can be used for energy-efficient utility 
allowance (EEUA) to prevent EEUAs from being applied broadly. HUD also 
moves paragraph (b)(2)(iv) to paragraph (b)(2)(v) and adds a new 
paragraph (b)(2)(iv) to state that the PHA must use the project-
specific utility allowance schedule for tenant-based participants in 
projects that have an approved project-specific utility allowance under 
Sec.  983.301(f)(4). This requirement was previously in Sec.  
983.301(f)(4) of the proposed rule and Sec.  983.301(f)(2)(ii) of the 
previous regulatory text but has been moved from part 983. The 
Administrative Plan requirements to include PHAs state their policy for 
utility allowance payments are consistent with Sec.  982.54.

Sec.  982.552 PHA Denial or Termination of Assistance for Family

    This final rule makes a conforming change to remove Sec.  
982.552(c)(1)(viii), which denies housing assistance for a family's 
failure to comply with the FSS contract of participation, to align with 
a statutory amendment to the Family Self-Sufficiency (FSS) program 
authorizing language and the program's regulations, which amended 24 
CFR 984.303(b)(5) through a final rule effective on June 16, 2022 (87 
FR 30020). This change is in accordance with the Economic Growth, 
Regulatory Relief, and Consumer Protection Act (``the Economic Growth 
Act'') (Pub. L. 115-174) \6\ which states that, ``Housing assistance 
may not be terminated as a consequence of either successful completion 
of the contract of participation or failure to complete such 
contract.''
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    \6\ See The Economic Growth, Regulatory Relief, and Consumer 
Protection Act (``the Economic Growth Act'') (Pub. L. 115-174).
---------------------------------------------------------------------------

Sec. Sec.  982.605; 982.609; 982.614; 982.618; 982.621

    The final rule makes a conforming change to Sec. Sec.  982.605; 
982.609; 982.614; 982.618; and 982.621 to align the text with the 
revised definition of HQS discussed previously in the description of 
the changes to Sec.  982.4.

Sec.  983.2 When the Tenant-Based Voucher Rule (24 CFR Part 982) 
Applies

    HUD revises Sec.  983.2(c) to outline the specific part 982 
provisions that do not apply to PBV assistance and revises paragraphs 
(c)(1) and (2) to specify that the HAP contract retention provisions at 
Sec.  983.158(e)(2) do not apply to PBV assistance. HUD also clarifies 
in paragraph (c)(5) which provisions of part 982, subpart I do not 
apply to PBV assistance and in paragraph (c)(7)(i) which provisions of 
Sec.  982.503 do not apply.

Sec.  982.641 Homeownership Option: Applicability of Other Requirements

    The final rule amends paragraph (d) to clarify that Sec.  982.406 
(Use of alternative inspections), along with Sec.  982.405 (PHA unit 
inspection) as the CFR previously provided, does not apply to the 
homeownership option. Because no HAP or downpayment assistance may be 
paid until the PHA inspects a family's homeownership unit and 
determines it passes HQS (see 24 CFR 982.631(a)), Sec. Sec.  982.405 
and 982.406 describing inspection requirements particular to rental 
assistance are incompatible with the homeownership option. HUD notes 
that this is not a substantive change.

Sec.  983.3 PBV Definitions

    In response to public comment about the utility of establishing 
SAFMRs in some non-metropolitan counties, this final rule revises the 
definition of ``area where vouchers are difficult to use'' to include 
areas where 90 percent of the SAFMR exceeds 110 percent of FMR not just 
for metropolitan areas, but also for non-metropolitan counties. HUD 
determines that, when used in a non-metropolitan context, the 
difference between the SAFMR and FMR remains an easily identifiable and 
consistent data point for determining if an area is one in which 
vouchers are difficult to use.
    This final rule also revises the definition of an ``area where 
vouchers are difficult to use'' to include a census tract with a 
poverty rate of 20 percent or less. This is not a substantive change, 
but rather a reorganization of the rule text for streamlining. In the 
proposed rule, Sec.  983.54(b), regarding the project cap (income-
mixing requirement), contained two separate categories of projects that 
were subject to a higher project cap: these categories were projects 
``located in a census tract with a poverty rate of 20 percent or less'' 
and projects ``located in an area where vouchers are difficult to 
use.'' Similarly, Sec.  983.6(d), regarding the program cap (percentage 
limitation), included both units ``located in a census tract with a 
poverty rate of 20 percent or less'' and units ``located in an area 
where vouchers are difficult to use'' as two separate categories of 
units eligible for an increased cap. For both the program cap and 
project cap, there was no difference between the requirements 
applicable to the two categories of projects and units. To simplify 
Sec. Sec.  983.54(b) and 983.6(d), HUD examined whether the 1937 Act 
permitted the PBV regulatory definitions to consider a project or unit 
``located in a census tract with a poverty rate of 20 percent or less'' 
to be a type of project or unit ``located in an area where vouchers are 
difficult to use.'' In the case of the program cap, section 
8(o)(13)(B)(ii) of the 1937 Act provides for a specific 10 percent 
authority category for areas where vouchers are difficult to use ``as 
specified in subparagraph (D)(ii)(II),'' which is the subparagraph 
applying an exception to the project cap for areas where vouchers are 
difficult to use and for census tracts with a poverty rate of 20 
percent or less. As a result, HUD determines that the authority for an 
exception to the program cap for census tracts with a poverty rate of 
20 percent or less derives from the program cap exception for areas 
where vouchers are difficult to use, and therefore it would be more 
appropriate to include census tracts with a poverty rate of 20 percent 
or less within the definition of ``areas where vouchers are difficult 
to use.'' While the project cap exceptions for census tracts with a 
poverty rate of 20 percent or less and areas where vouchers are 
difficult to use are both mandated by section 8(o)(13)(D)(ii)(II) of 
the 1937 Act, given that the exception is identical for each category 
HUD determines the streamlining benefit makes placing census tracts 
with a poverty rate of 20 percent or less in the definition of ``areas 
where vouchers are difficult to use'' appropriate for purposes of 
codification of the project cap categories in the CFR.
    Also, in response to public comment, HUD in this final rule changes 
the term ``comparable rental assistance'' to

[[Page 38231]]

``comparable tenant-based rental assistance,'' amends the definition 
consistent with section 8(o)(13)(E) of the 1937 Act, and outlines the 
minimum requirements for assistance to qualify as comparable tenant-
based rental assistance. HUD also finds that the proposed definition of 
``development activity,'' in referring to both rehabilitation and new 
construction done for the project to receive PBV assistance and for 
other work occurring later during the term of the PBV HAP contract, 
produced significant confusion. As a result, HUD removes work occurring 
later during the term of the HAP contract from the proposed definition 
of ``development activity'' in this final rule and instead covers this 
work under a definition of ``substantial improvement.'' HUD revises the 
content of the term ``substantial improvement'' for additional clarity. 
This final rule also revises the definition of ``excepted units'' to 
clarify that excepted units exclusively serve certain families in 
accordance with Sec.  983.54(c)(2) and to distinguish its definition 
from ``excluded units,'' which is a newly added definition that 
excludes units that meet certain requirements from the program and 
project cap.
    As suggested by commenters, HUD revises the definition of 
``existing housing'' to mean housing that meets or substantially 
complies with HQS, which housing is distinct from housing that will 
soon undergo development activity. ``Substantial compliance'' in this 
definition provides specific limitations to ensure the deficiencies in 
the project require minor work that can reasonably be completed within 
a 30-day period of time. These revisions reflect the need to better 
distinguish rehabilitated housing from existing housing so PHAs can 
comply with the distinct program requirements applicable to each 
housing type while also recognizing that HQS corrections may take a 
longer time than the period noted in the proposed rule. HUD changes the 
relevant time period in which existing housing is not expected to 
undergo or need substantial improvement from five years to two years 
after the HAP contract effective date in response to public comment. 
HUD also revises the definitions of ``newly constructed housing'' and 
``rehabilitated housing'' by establishing a standard determined on a 
project-basis, rather than the prior unit-basis which was in the 
proposed rule, consistent with prior HUD guidance that a project can 
only be one type overall, and therefore specifying between the two 
types on a per-unit basis was impractical. HUD further amends the 
definition of ``rehabilitated housing'' to more directly note the 
difference between such projects and ``existing housing.'' HUD also 
clarifies the definition of ``independent entity'' to specify how it 
relates to the PBV program and revises the definition of ``waiting list 
admission'' to include owner-maintained waiting lists.
    This final rule added to the definition of ``project'' to more 
clearly describe the discretion PHAs already have to modify the 
definition of project in their Administrative Plans. This final rule 
adds a definition of ``tenant rent'' as applicable to the PBV program. 
This final rule also adds the definitions for building, gross rent, 
manufactured home, PHA Plan, program receipts, total tenant payment, 
utility allowance, and utility reimbursement to clarify that these 
terms apply to the PBV program.
    This final rule removes the term ``eligible'' from the definition 
of ``in-place family,'' and instead discusses the eligibility of an in-
place family in Sec.  983.251. HUD also changes ``proposal selection 
date'' to ``proposal or project selection date'' to align with changes 
made to Sec.  983.51 (described below).
    This final rule makes a conforming change to align the PBV program 
definition of ``housing quality standards'' with the revised HCV 
program definition discussed previously in the description of the 
changes to Sec.  982.4.
    In addition, this final rule removes the definition of ``project-
based certificate (PBC) program'' because it is no longer in existence. 
Finally, this final rule removes the definition of ``request for 
release of funds and certification'' and moves the relevant information 
that was contained in the proposed rule to a more appropriate location, 
Sec.  983.56.

Sec.  983.4 Cross-Reference to Other Federal Requirements

    HUD proposed to revise HUD's labor standards cross-reference 
regarding applicability of regulations implementing the Davis-Bacon 
Act, but HUD at this final rule removes this change. As explained in 
the summary of changes to Sec.  983.153, HUD requires Davis-Bacon 
compliance regardless of whether an Agreement (referring to an 
Agreement to enter into a HAP contract) is used in this final rule so 
the change to this section is no longer necessary. HUD notes that under 
section 12(a) of the 1937 Act, the labor standards provisions cross-
referenced in Sec.  983.4 only apply where there is an agreement for 
section 8 use before construction or rehabilitation is commenced. As 
discussed in reference to the changes to Sec.  983.153, the PHA's pre-
construction offer and owner's acceptance of PBV assistance to be 
provided once the units are constructed or rehabilitated constitutes an 
agreement triggering Davis-Bacon requirements on projects with 9 or 
more assisted units, in accordance with section 12(a) of the 1937 Act, 
regardless of whether an Agreement is used.
    Finally, as a technical matter, HUD has revised Sec.  983.4 to 
remove the reference to the definitions in 24 CFR part 5, subpart D. 
Because HUD has revised Sec.  982.4(a)(2) to properly incorporate the 
relevant definitions in 24 CFR part 5, subpart D, and because Sec.  
983.4 incorporates 982.4, this incorporation is not necessary.

Sec.  983.5 Description of the PBV Program

    HUD makes a minor revision to the proposed Sec.  983.5(a)(1) to 
include the citation to the consolidated annual contributions contract 
(ACC). This final rule also revises paragraph (a)(3) to better describe 
the options available for development of newly constructed and 
rehabilitated housing, including adding reference to the option added 
in this final rule to Sec.  983.157 (which is described in greater 
detail below). HUD revises paragraph (c) to require PHAs to provide 
notice to HUD when the PHA executes, amends,\7\ or extends a HAP 
contract, to align with system development already in progress,\8\ and 
makes changes to align with the language in Sec.  983.10, to require 
the PHA to address all PBV related matters over which the PHA has 
policymaking discretion.
---------------------------------------------------------------------------

    \7\ Amendments in this context refers to changes such as those 
that add or substitute contract units, rather than substantive 
revisions to contractual text. The general requirement per 24 CFR 
982.162 to use HUD-prescribed forms, including PBV HAP contracts, 
without modification remains in place.
    \8\ See 84 FR 70986 (Dec. 26, 2019); 85 FR 60249 (Sep. 24, 
2020); 88 FR 28594 (May 4, 2023).
---------------------------------------------------------------------------

Sec.  983.6 Maximum Amount of PBV Assistance (Percentage Limitation)

    This final rule revises paragraphs (a) and (e) to explain how to 
calculate the maximum number of PBV units to prevent the possibility of 
the PHA miscalculating the cap and project-basing more units than it 
should. This change reflects that the cap is 20 percent as adjusted, 
and not a flat 20 percent of all Annual Contributions Contract (ACC) 
units because the PHA must remove excluded units when calculating the 
cap. This final rule also corrects the date in paragraph (a)(2), and in 
paragraph (a)(3) expands the conditions under which the PHA may not add 
units to PBV HAP contracts to include

[[Page 38232]]

paragraph (e). In paragraph (b), HUD clarifies that the PBV assistance 
percentage limitation applies to all PBV units which the PHA has 
selected, and that selection takes place from the time of the proposal 
or project selection date.
    This final rule also revises language in paragraph (d)(1)(iii) to 
require that the Administrative Plan describe the availability of 
supportive services in alignment with the language in Sec.  983.10. HUD 
amends paragraph (d)(1)(iv) to remove the separate exception category 
for census tracts with a poverty rate of 20 percent or less, given the 
revised definition of an ``area where vouchers are difficult to use'' 
now includes a census tract with a poverty rate of 20 percent or less, 
as explained further in the discussion of Sec.  983.3 above, and moves 
the proposed paragraph (d)(1)(v) to (d)(1)(iv). HUD adds a new 
exception in response to public comment to paragraph (d)(1)(v) for 
units that replace, on a different site, the units removed from the 
housing types listed in Sec.  983.59(b)(1)-(2) (see discussion of 
comments received regarding Sec.  983.59). HUD revises paragraph (d)(2) 
to increase the program cap and project cap for PBV units to include 
the Fostering Stable Housing Opportunity (FSHO) authority enacted in 
section 103 of division Q of the Consolidated Appropriations Act, 2021 
(Pub. L. 116-260, 134 Stat. 1182).\9\ Pursuant to section 103(c)(1) of 
FSHO, the percentage limitation (i.e., the program cap) now includes 
units that are exclusively made available to eligible youth receiving 
FUP/FYI assistance under the 10 percent increased cap. This final rule 
adds a new paragraph (d)(3) to clarify requirements to fill units under 
certain 10 percent increased cap categories with the appropriate 
families.
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    \9\ See 87 FR 3570 (Jan. 24, 2022).
---------------------------------------------------------------------------

    This final rule also revises paragraph (e) by explaining that units 
previously subject to federally required rent restrictions or that 
received long-term rental assistance from HUD are removed for purposes 
of calculating the percentages under paragraphs (a) and (d) of this 
section.
    This final rule also revises paragraph (1)(ii) by adding ``space 
service'' to the definition of ``veteran'' to accurately include types 
of service encompassed within the current statutory definition of 
``veteran'' found in the Department of Veterans Affairs governing 
statutes (i.e., 38 U.S.C. 101(2)). By adding ``space service,'' it will 
ensure that no type of service for a veteran or veteran family goes 
unaccounted for.

Sec.  983.10 PBV Provisions in the Administrative Plan

    HUD revises the structure of Sec.  983.10 to outline the areas in 
which PHAs have policymaking discretion specific to the PBV program and 
requires these policies be included in the PHA Administrative plan. The 
PHAs' policymaking discretion is noted throughout part 983 consistent 
with this section. Section 983.10 includes a brief description of the 
provisions that must be in the Administrative Plan for a PHA that 
operates a PBV program and a citation in each provision to the 
regulation that provides complete details about the requirement. 
However, HUD notes that the policies listed in Sec.  983.10 are the 
minimum that the PHA must include in its Administrative Plan. There are 
additional areas, beyond those listed in Sec.  983.10, where a PHA may 
properly exercise policy-making discretion consistent with language in 
other sections in this part. In cases where a PHA exercises this 
discretion, these additional policies must be included in the PHA's 
Administrative Plan.

Sec.  983.11 Project-Based Certificate (PBC) Program

    In the proposed rule, HUD proposed to move Sec.  983.10, dealing 
with Project-Based Certificates (PBC), to Sec.  983.11. However, the 
PBC program was replaced by the PBV program in 2001 and no units remain 
in the PBC program.\10\ Therefore, in this final rule, references to 
the PBC program have instead been removed. The currently codified Sec.  
983.10, dealing with PBC, is instead being removed entirely. Because 
the previous Sec.  983.10 is not being moved to Sec.  983.11, the 
proposed Sec.  983.12 is, in this final rule, moved up to Sec.  983.11. 
Section 983.12 of this final rule is new to this final rule and 
discussed further below.
---------------------------------------------------------------------------

    \10\ Units under a PBC Agreement executed by the PHA and Owner 
prior to January 16, 2001, remained in the PBC program. The maximum 
term for PBCs under standard-form PBC HAP contracts was an aggregate 
15 years (generally, three 5-year terms). Therefore, no more valid 
PBC HAP contracts should exist. Upon expiration of a PBC HAP 
contract, a PHA and Owner could agree to renew the PBC contract as a 
PBV contract, consistent with section 6904 of the Troop Readiness, 
Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007, Public Law 110-28, and the now repealed 24 
CFR 983.310(b)(1)(ii).
---------------------------------------------------------------------------

Sec.  983.11 Prohibition of Excess Public Assistance

    In response to public comments, HUD revises paragraph (d)(2) 
dealing with subsidy layering review. Instead of requiring Subsidy 
Layering Review (SLR) any time new funding of any amount or percentage 
is added to the project during the term of the HAP contract, HUD will 
specify when a new SLR is required via a Federal Register notice, 
consistent with current practice. HUD concluded that finalizing 
paragraph (d)(2) as proposed would be administratively burdensome.

Sec.  983.12 Project Record Retention

    This final rule adds a new Sec.  983.12 to cover program accounts 
and records for the PBV program (Sec.  982.158 continues to apply to 
records applicable to both the tenant-based and project-based programs, 
except as now specified in Sec.  983.2). While these documents should 
already be maintained for compliance with HUD's regulations, this 
section provides a specific list of documents, location, and time 
period for retention of the PBV HAP contract and any PBV-specific 
documents (e.g., Agreement to enter into HAP contract (Agreement), 
completion documents, SLR, environmental review, selection materials), 
including records demonstrating the independent entity's review of a 
PHA-owned project selection. This section includes retention provisions 
for records newly required under new PBV program components of this 
final rule.

Sec.  983.51 Proposal and Project Selection Procedures

    This final rule amends Sec.  983.51 throughout to clarify the 
distinction between competitive selection of proposals versus 
noncompetitive selection of projects since selection without 
competition does not entail solicitation or selection of competing 
proposals. As recommended by commenters, this final rule revises 
paragraph (a) by allowing entities that have site control to submit PBV 
proposals. HUD intends to provide further guidance on what HUD 
considers to be ``site control'' through PIH notice.
    Paragraph (a) also specifies that an owner may submit PBV proposals 
to cover multiple projects where each consists of a single-family 
building. Consistent with Sec.  983.10, HUD clarifies the requirement 
that the PHA Administrative Plan must describe the procedures for 
submission and selection of PBV proposals under the methods of 
competitive selection in paragraph (b) and selection of projects under 
an exception to competitive selection under paragraph (c), including 
under what circumstances the PHA will use the selection methods 
described in paragraphs (b) and (c).
    HUD amends paragraph (b)(1) to address the methods the PHA must use 
for competitive selection of PBV

[[Page 38233]]

proposals. This change clarifies that the PHA request for proposal 
(RFP) selection method can be a part of another competition or run 
simultaneously with another competition. This change also addresses 
public concerns about the inability or difficulty of awarding PBVs to 
projects that also compete and receive other funds, specifically 
development dollars through Low-Income Housing Tax Credits (LIHTC), 
Housing Trust Fund (HTF), and HOME investment partnerships program. HUD 
also makes clarifying changes to paragraph (b)(2) to remove the 
language concerning LIHTC and HOME to avoid confusion because, in 
practice, LIHTC and HOME almost always require the PBVs to be awarded 
prior to receiving applications.
    HUD clarifies in paragraph (c) that prior to a PHA selecting one or 
more projects for PBV assistance without competition, the PHA must 
notify the public of its intent to do so in its 5-Year Plan. HUD also 
reorganizes paragraph (c)(1) in the proposed rule by moving applicable 
requirements to new paragraphs (c)(1)(i)-(ii). Further, in response to 
public comments, HUD adds clarifying language to paragraphs (c)(1) and 
(c)(2) to better align with the statutory language in section 
8(o)(13)(N) of the 1937 Act as amended by HOTMA, including a 
clarification under (c)(1)(i) and a new paragraph at (c)(2)(iv) 
regarding the number of units permitted to be replaced.
    This final rule also adds a new paragraph (c)(3), which provides 
increased flexibility for PHAs to noncompetitively select a project 
comprised of PHA-owned units. HOTMA expressly allows PHAs to attach 
PBVs to projects in which the PHA has an ownership interest without 
following a competitive process in cases where the PHA is engaged in an 
initiative to improve, develop, or replace a public housing property or 
site. HUD implemented this provision in 2017. Based on HUD's experience 
with these noncompetitive selections and after careful consideration, 
HUD believes that it is advisable to extend the exception to PHA-owned 
units in general. The main benefit of this final rule change is to 
strengthen the PHA's ability to preserve and expand affordable housing 
by increasing the viable options and paths available to the PHA through 
strategies such as acquisition followed by rehabilitation. HUD further 
adds paragraph (c)(4) to streamline the process of project-basing units 
when a family chooses to relinquish their enhanced voucher for PBV 
assistance. The new paragraph extends the types of housing that can be 
selected without going through a competition. HUD also notes that PIH 
Notice 2013-27 provides essential background on the voluntary 
relinquishment of enhanced voucher assistance (and regular housing 
choice voucher assistance) in exchange for PBV assistance.
    HUD clarifies paragraph (e)(2)(i) to state that all contract units 
must fully or substantially comply with HQS on the proposal or project 
selection date. HUD also restructures and amends paragraph (f) of the 
proposed rule to add new paragraphs (1) through (5) to address the 
separate notice requirements depending upon whether a proposal is 
selected competitively, or a project is selected without competition 
and to provide a cross-reference to applicable language that must be in 
the notice for certain projects. Finally, HUD clarifies in paragraph 
(h) that under no circumstances may a HAP contract be effective for any 
of the subsidized housing types set forth in Sec.  983.53(a).

Sec.  983.52 Prohibition of Assistance for Ineligible Units

    HUD clarifies the meaning of paragraphs (a), (a)(3), (b), and (d) 
by replacing the term ``attach'' with clearer statements of the 
prohibited actions for the listed units, to align with the changes to 
Sec.  983.53 described below. This final rule creates an exception to 
the total prohibition in the original PBV rule on project-basing for 
manufactured homes under paragraph (a)(5) where both the manufactured 
home is permanently attached to the ground and the owner owns both the 
manufactured home and the land. Allowing PBVs for manufactured homes 
will likely decrease the cost to build, allow PBVs to be in areas where 
traditional building would be difficult, and avoid requiring changes to 
construction plans solely for the purpose of compliance.
    Paragraph (c) provides that a PHA may attach assistance to an 
occupied unit only if the occupant is eligible. HUD amends paragraph 
(c) to specify what ``eligible'' means in this context, and to clarify 
when eligibility is determined. Eligibility of the family is determined 
in accordance with Sec.  982.201 prior to attaching assistance to the 
unit (i.e., executing a HAP contract or amending a HAP contract by 
adding or substituting a unit). For the unit to be eligible, the unit 
must be appropriate for the size of the family and the tenant's total 
tenant payment (TTP) must be lower than the gross rent. These changes 
in paragraph (c) ensure PHAs are aware of existing requirements, 
including that the family's TTP cannot be so high as to eliminate the 
need for assistance (commonly calling being ``zero-HAP'') at admission.
    HUD updates the exceptions applicable to paragraph (d), adding that 
the requirements are not applicable if the PHA is undertaking 
rehabilitation after HAP contract execution per Sec.  983.157 of this 
final rule. Also, because an Agreement may be executed prior to its 
effective date, HUD revises paragraph (d) to be clear that the 
construction or rehabilitation is prohibited prior to the Agreement's 
effective date rather than the execution date. HUD also modifies 
paragraph (d) to allow PHAs to approve exceptions, in recognition that 
there may be circumstances in which the prohibition is inappropriate.

Sec.  983.53 Prohibition of Assistance for Units in Subsidized Housing

    For better readability, in this final rule, HUD restructures the 
list of subsidized housing that is prevented from receiving PBV 
assistance. In paragraph (a), HUD replaces the introductory text with 
``A HAP contract may not be effective and no PBV assistance may be 
provided for any of the following:'' for several reasons. First, HUD 
determines that PBV program requirements should not prevent execution 
of an Agreement for the listed subsidized housing types, as this 
reduces administrative flexibility even though no HAP is paid when an 
Agreement is executed. HUD notes that this is a change from the prior 
regulatory requirement and use of this flexibility will be subject to 
any requirements of the relevant non-PBV subsidy program. Second, 
because a HAP contract must be executed prior to the effective date of 
the contract (when HAPs may begin), there was no need to separately 
specify that the HAPs cannot be made for the subsidized housing types. 
Finally, HUD believes the wording changes improve readability. This 
final rule also removes proposed rule paragraphs (e) and (j) concerning 
rental assistance payments (RAP) and rent supplement projects (Rent 
Supp) because the Rent Supp and RAP programs have ended. However, 
unlike the Rent Supp program, there were some RAP projects remaining 
less than five years prior to the effective date of this final rule. 
Consequently, units in a few former RAP projects may still qualify for 
a limited period of time as excepted units from the program cap and 
project cap under the requirements at Sec.  983.59. Please see the 
related discussion in the description of Sec.  983.59 below regarding 
the reference to units in former RAP projects in that section.

[[Page 38234]]

Sec.  983.54 Cap on Number of PBV Units in Each Project (Income-Mixing 
Requirement)

    In this final rule, HUD clarifies in Sec.  983.54(a) that a PHA 
cannot select a proposal where the project cap is not being met, in 
addition to the prohibition on entering the Agreement or HAP contract. 
HUD amends paragraph (b) to remove the separate exception categories, 
given the revision of the definition of an ``area where vouchers are 
difficult to use'' to include a census tract with a poverty rate of 20 
percent or less, as explained previously in the discussion of Sec.  
983.3 above. HUD further clarifies in paragraph (c) that exception 
categories in a project may be combined; expands the exception 
categories to include eligible youth using Family Unification Program 
(FUP) assistance in paragraph (c)(2)(ii); and provides that supportive 
services must be made available in a reasonable period of time not to 
exceed 120 calendar days in paragraph (c)(2)(iii). Additionally, in 
paragraph (c)(2)(iii), which was paragraph (c)(2)(ii) in the proposed 
rule, this final rule does not include a requirement that a PHA 
offering FSS must not solely rely on FSS to meet the exception to the 
project cap. HUD revises paragraph (c)(3) to specify that units covered 
by a PBV HAP contract under Sec.  983.59 will not count towards the 
project cap and that these units are removed to ensure accuracy when 
calculating the percentages of dwelling units. In paragraph (d), HUD 
updates and expands provisions applicable to HAP contracts already in 
effect to include HAP contracts in effect prior to December 27, 2020, 
when the FUP exception became available.

Sec.  983.55 Site Selection Standards

    HUD revises paragraph (b)(3) to include the site selection 
standards that were formerly found in Sec.  982.401(l) and were removed 
in the NSPIRE final rule (88 FR 30442 (May 11, 2023)). HUD also takes 
this opportunity to amend the standards to add a specific reference to 
contamination, which is particularly important to the health of 
occupants, and to add a qualification that the serious adverse 
environmental conditions at issue are those that could affect the 
health or safety of the project occupants. As recommended by 
commenters, use of these standards provides an important protection for 
families, especially in cases in which an environmental review is not 
performed. HUD also revises paragraph (e)(7) to remove a typo 
concerning ``new construction,'' which appears in the current 
regulations and the proposed rule.

Sec.  983.56 Environmental Review

    In the proposed rule, HUD proposed to revise the environmental 
review requirements for existing housing in accordance with section 
106(a)(8) of HOTMA to exempt existing housing 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.
    In endeavoring to give full effect to the words of section 
8(o)(13)(M)(ii) of the 1937 Act, HUD recognizes the statute provides 
only a partial exemption to environmental reviews. Specifically, the 
applicability of the provision is limited to ``existing projects.'' 
Environmental reviews 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.
    Upon consideration of comments, HUD revises paragraph (a)(2) to 
better balance the words of the amended section 8(o)(13)(M)(ii) of the 
1937 Act with Congress's continued environmental emphasis by excusing 
existing housing from undertaking an environmental review before 
entering into a HAP contract, except where a Federal environmental 
review is required by law or regulation relating to funding other than 
PBV housing assistance payments. This paragraph (a)(2) applies to 
projects selected using the site selection standards applicable upon 
the effective date of this final rule. In paragraph (a)(2), HUD changes 
the characterization of the exception for existing housing so as not to 
imply that the project has been determined to be ``exempt'' pursuant to 
an environmental review.
    HUD makes minor technical revisions throughout the section, such as 
to consistently use the phrasing of paragraph (a) of the proposed rule 
that environmental reviews apply to ``activities'' (see responses to 
comment on Sec.  983.56 for further discussion of technical changes). 
HUD amends the description of the ``responsible entity'' in paragraph 
(b) to explain more clearly which unit of general local government 
serves as the responsible entity. HUD also removes the final sentence 
of paragraph (b) of the proposed rule, as it was duplicative of text 
that appeared later in the regulation. HUD also removes the proposed 
rule's reference in paragraph (d) to amending a HAP contract, to 
conform to changes described below relating to Sec.  983.207. Further, 
HUD clarifies in (d)(2) that HUD will approve the Request for Release 
of Funds and Certification by issuing a Letter to Proceed or form HUD-
7015.16 when a responsible entity must complete an environmental 
review. In paragraph (e), HUD clarifies that the reference to the 
prohibited activities refers only to the listed actions by the PHA, the 
owner, or its contractors, rather than the actions by described in 
paragraphs (d)(1)-(3) that are taken by the responsible entity or HUD. 
Lastly, HUD revises paragraph (f) to require PHAs to document 
mitigating measures in accordance with part 50 or 58 of title 24, as 
applicable, and to complete or require the owner to carry out such 
measures and conditions.

Sec.  983.57 PHA-Owned Units

    This final rule makes an edit to paragraph (b) to remove 
superfluous words. HUD also revises paragraph (b)(1) to clarify that 
the independent entity calculates the amount of reasonable rent and any 
rent adjustments by an OCAF, due to confusion the wording in the 
proposed rule raised given that HUD determines the OCAF. In response to 
comments received, HUD removes paragraph (b)(2) from the proposed rule, 
which results in a renumbering of paragraphs (b)(3) and (b)(4) to 
paragraphs (b)(2) and (b)(3) in this final rule. HUD also revises 
redesignated paragraph (b)(3) to clarify that the independent entity is 
responsible for not only reviewing the work completion certification, 
but also determining if the units are compliant with Sec.  983.156. 
This final rule also makes this change to align redesignated paragraph 
(b)(3) with corresponding Sec.  983.212 (which was Sec.  983.157 in the 
proposed rule), per changes to Sec.  983.212 described below. This 
final rule adds paragraph (b)(4) to expand the independent entity 
functions to include determining whether to approve substantial 
improvement to units under a HAP contract, since PHAs are required to 
perform this function for substantial improvement on units under a HAP 
contract for non-PHA-owned units.
    Finally, HUD reorganizes and slightly modifies the language at 
paragraph (c) to

[[Page 38235]]

achieve consistency with a similar provision at 982.352(b)(1)(v)(B) 
regarding compensation of independent entities.

Sec.  983.58 PHA Determination Prior to Selection

    In this final rule, HUD revises proposed Sec.  983.58 for clarity 
purposes, to avoid any misinterpretation that budget authority is 
intertwined with the program cap. HUD also adds a new paragraph (b) to 
require that PHAs analyze the impact of having a high percentage of 
vouchers committed as PBVs. The PHA should consider the needs of the 
community, including families on the waiting list and eligible PBV 
families that wish to move under Sec.  983.261. The analysis performed 
by the PHA must be available as part of the public record.

Sec.  983.59 Units Excepted From Program Cap and Project Cap

    HUD clarifies in paragraph (b) that excluded units must fall into 
one of the outlined categories provided that the units are removed from 
all categories by the time of execution of the Agreement or HAP 
contract. This clarification aligns with the statutory language 
stating, ``units previously subject to federally required rent 
restrictions or receiving another type of long-term subsidy'' and means 
that the units must no longer be subject to the rent restriction or 
receiving subsidy.
    This final rule removes paragraph (b)(1)(v), because the Rent 
Supplement Program ended more than five years ago and no longer exists. 
HUD notes that the Rental Assistance Program (RAP) (section 236(f)(2) 
of National Housing Act of 1965) also expired, but, unlike the Rent 
Supplement Program, the RAP expired at the end of 2019, less than 5 
years ago. Because paragraph (b) of Sec.  983.59 allows project-basing 
of units that were removed from the listed programs up to 5 years prior 
to the request for proposals (RFP) or the proposal or project selection 
date, RAP units may still be eligible for project-basing under 
paragraph (b).
    HUD has amended Sec.  983.59(b)(2) and 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 HOTMA Implementation Notices \11\ 
in the Federal Register: (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). The final rule also amends Sec.  
983.59(b)(2) to provide that the list of excepted units ``previously 
subject to federally required rent restrictions'' shall also include 
any other program subsequently identified by HUD through a Federal 
Register notice that is subject to public comment.
---------------------------------------------------------------------------

    \11\ See 81 FR 73030 (Oct. 24, 2016); 82 FR 5458 (Jan. 18, 
2017); 82 FR 32461 (Jul. 14, 2017).
---------------------------------------------------------------------------

    Further, to provide regulatory streamlining, this final rule 
removes proposed rule paragraph (c) which provided that other excluded 
units include both HUD's Rental Assistance Demonstration (RAD) program 
and HUD VASH set-aside vouchers from the PBV program and project caps 
(these programs continue to be governed by the applicable notices and 
waivers therein). Instead, HUD redesignates proposed rule paragraph (d) 
as paragraph (c), which discusses replacement units. In redesignated 
paragraph (c), HUD clarifies that replacement units can be built on the 
original project site, instead of the ``public housing development.'' 
This clarification removes the limitation of ``public housing 
development'' and expands the qualification of an original project site 
to include all of the formerly assisted or restricted projects covered 
by this section. In new paragraph (e), this final rule clarifies that 
the 10 percent exception under Sec.  983.6 and the project cap 
exception under Sec.  983.54(c)(2) are inapplicable to units excluded 
under this section.

Sec.  983.101 Housing Quality Standards

    This final rule makes a conforming change to align paragraph (a) 
with the revised PBV program definition of HQS at Sec.  983.3.

Sec.  983.103 Inspecting Units

    HUD revises Sec.  983.103(a) to clarify that the regulatory 
inspection provisions of paragraph (c) of this section apply only when 
the pre-selection inspection determines the project meets the 
definition of existing housing.
    HUD amends paragraph (b) to specify the times at which an initial 
inspection is required for newly constructed or rehabilitated housing 
or for units that underwent substantial improvement prior to being 
added to the HAP contract. The times at which an initial inspection is 
required, and the specific units which are to be inspected, depend on 
whether the work was development activity or substantial improvement, 
and, in the case of rehabilitation, whether the development activity 
occurs before or after HAP contract execution. HUD believes separating 
the requirements in this final rule will improve readability. HUD also 
revises paragraph (c)(1) to better explain the Administrative Plan 
provisions that are applicable.
    Paragraph (c)(2)(ii) of the proposed rule provided that the PHA 
must give a notice to families offered a unit with non-life-threatening 
deficiencies that explains, among other things, that the owner's 
failure to correct the deficiencies within the cure period will result 
in removal of the unit from the HAP contract. This final rule revises 
paragraph (c)(2)(ii) to also require the PHA to provide a similar 
notice to families offered units without deficiencies, if some units in 
the project have non-life-threatening deficiencies and the PHA's 
Administrative Plan provides that the PHA will terminate the entire PBV 
HAP contract if the owner fails to correct the deficiencies within the 
cure period.
    In paragraph (c)(2)(iv), HUD revises the regulatory language to be 
clear that PHAs must release the withheld payment to the owner once the 
deficiencies are corrected within the cure period, as required by 
section 8(o)(8)(G)(ii) the 1937 Act. This statutory requirement 
provides that the PHA must resume assistance payments and must cover 
the withheld period if the owner made the repairs before the cure 
period ends. This change to align the regulations with the statute is 
also reflected in paragraphs (c)(3)(vii), (c)(4)(iv), and (c)(4)(v).
    This final rule also modifies paragraph (c)(2)(v) (which was 
mistakenly labeled as paragraph (c)(2)(iv) in the proposed rule) by 
requiring PHAs to provide any affected family tenant-based assistance 
when the PHA terminates the PBV HAP contract or removes the unit from 
the HAP contract due to the owner's failure to correct deficiencies. 
The provision of tenant-based assistance in this circumstance is 
required by section 8(o)(13)(F)(iv) of the 1937 Act and was 
inadvertently omitted from the proposed rule's description of the 
process. This final rule makes the same modification to paragraphs 
(c)(3)(viii) and (c)(4)(vi).
    HUD revises paragraphs (c)(3) and (c)(4) to align with changes in 
Sec.  982.406 that apply to PBV. This final rule subjects the PHA's 
adoption of an alternative inspection option to the procedures and 
requirements outlined in Sec.  982.406(b), (c), (d), and (g). The 
changes in paragraph (c)(3)(v) provide clarifying changes to existing 
established policy. To ensure that the PHA is transparent to families 
that are referred to and provided a unit with non-life-threatening 
deficiencies, this final rule revises paragraph (c)(4)(i) to require 
that PHAs provide these families

[[Page 38236]]

a list of those deficiencies and inform them of the option to decline 
the unit without losing their place on the PBV waiting list.
    In paragraph (c)(4)(v), HUD clarifies that PHAs make retroactive 
payments upon correction of deficiencies beginning at the later of the 
effective date of the HAP contract or the PBV lease effective dates. 
This final rule revises paragraph (c)(4)(v) and (c)(4)(vi) explaining 
the PHA's requirements when the owner fails to make repairs within the 
applicable time periods. For the safety of the family, this final rule 
adds a requirement to paragraph (c)(4)(v) that explicitly prohibits 
PHAs from referring families from the PBV waiting list to occupy units 
with life-threatening deficiencies. In alignment with Sec.  983.10, 
paragraph (c)(4)(vi)(B) clarifies that the PHA's Administrative Plan 
must specify whether the PHA will remove only a unit with deficiencies 
from the HAP contract for the owner's failure to correct the 
deficiencies, as opposed to terminating the entire HAP contract (only 
the latter, terminating the contract, had been included in paragraph 
(c)(4)(vi)(B) of the proposed rule).
    This final rule also amends paragraph (e) concerning periodic 
inspections, to provide that the alternative inspection option is 
available for periodic inspections and to specify which provisions of 
Sec.  982.406 apply. HUD makes changes to paragraph (e) to specify how 
to comply with the sampling requirement in the event that fewer than 20 
percent of contract units are available for occupancy in accordance 
with development activity occurring under Sec.  983.157. HUD also makes 
changes to align with the NSPIRE final rule (88 FR 30442 (May 11, 
2023)) in paragraph (e), which incorporates the requirement that small 
rural PHAs inspect random sample units at least once every three years. 
This final rule makes changes to paragraph (f), which specifies the 
PHAs' timing and inspection requirements for life-threatening 
deficiencies, non-life-threatening deficiencies, and extraordinary 
circumstances, to align with Sec.  982.405, which covers PHA 
inspections. The changes in paragraph (i) are a change in terminology 
to avoid conflict with the term ``mixed finance'' as used in public 
housing projects.

Sec.  983.152 Nature of Development Activity

    This final rule revises Sec.  983.152(a)(2) to remove discussion of 
substantial improvement to add previously unassisted units and instead 
provide reference to the development activity applicable to a 
rehabilitated project undergoing work after HAP contract execution per 
Sec.  983.157 of this final rule. As discussed in the description of 
changes to Sec.  983.3 above, HUD determines that ``development 
activity'' should be clearly distinguished from ``substantial 
improvement.'' As a result, HUD removes the corresponding reference to 
activities now classified as ``substantial improvement'' in (a)(2) and 
deletes paragraph (b)(2), moving pertinent requirements applicable to 
substantial improvement to add or substitute units to Sec.  983.207(d) 
of this final rule. The new language of paragraph (a)(2) is added to 
clearly describe the nature of the development activity under Sec.  
983.157, which is completed following HAP contract execution instead of 
beforehand. HUD also updates paragraph (b) to appropriately reference 
the new requirements applicable to Sec.  983.157.

Sec.  983.153 Development Requirements

    This final rule makes several minor revisions to citations in Sec.  
983.153 for consistency with the changes to Sec.  983.152 described 
above. Also, this final rule makes a minor clarifying revision to the 
first sentence in paragraph (b)(2), by requiring subsidy layering 
review before a PHA attaches assistance to a project, instead of 
subsidy layering review occurring before a PHA commits to provide 
assistance to a project. This clarifying change is to prevent any 
possible ambiguity about whether the subsidy layering review is 
required before the proposal or project selection date; in other words, 
HUD makes clear that the rule only requires that the subsidy layering 
review occur no later than execution of an Agreement or HAP contract.
    This final rule requires in Sec.  983.153(b)(4) that the owner 
disclose changes to the information provided for the subsidy layering 
review, to ensure that the change(s) may be reviewed and that it does 
not result in excessive public assistance to the project.
    This final rule revises paragraph (c) of the proposed rule to 
require Davis-Bacon compliance regardless of whether an Agreement is 
used. The PBV program is subject to statutory labor standards 
provisions in section 12(a) of the 1937 Act. Section 12(a) of the 1937 
Act requires the applicability of Davis-Bacon prevailing wages to the 
development of low-income housing projects containing nine or more 
section 8-assisted units, where there is an agreement for section 8 use 
before construction or rehabilitation is commenced. In reconsidering 
both HUD's current position and the alternative suggested in the 
proposed rule with respect to the meaning of ``agreement'' in section 
12(a), HUD has determined that an ``agreement'' under section 12(a) 
encompasses more than the PBV Agreement (i.e., Form HUD-52531) and 
includes the agreement that consists of the PHA's project selection and 
resulting offer of assistance to the owner, and the acceptance of PBV 
assistance by the owner. HUD also recognizes the importance of Davis-
Bacon prevailing wage requirements to the workers in the community 
where the owner has sought a commitment of PBVs in advance of 
development, as commenters suggested. Consequently, HUD will require 
the notice of proposal selection to require payment of Davis-Bacon 
prevailing wages for development of newly constructed or rehabilitated 
projects containing nine or more section 8-assisted units regardless of 
whether the PHA and owner will be using an Agreement. This final rule 
also makes a slight modification to paragraph (c)(1) to correct the 
citation in paragraph (c)(1). HUD also consolidates paragraphs (c)(2) 
and (c)(3) of the proposed rule into a single paragraph (c)(2), to 
better reflect that the labor requirements at issue apply in the case 
of development involving nine or more contract units. This final rule 
adds a citation to Sec.  983.51(f) in paragraph (c)(3) (which had been 
paragraph (c)(4) in the proposed rule) and makes paragraph (c)(3) 
consistent with Sec.  983.51(f), which discusses a PHA's written notice 
of proposal selection.
    This final rule revises the development requirements that apply to 
PBV development activity by removing the reference that section 3 of 
the HUD Act of 1968 \12\ applies (proposed rule paragraph (d)), since 
section 3 no longer applies to PBV per the final rule on Enhancing and 
Streamlining the Implementation of Section 3 Requirements for Creating 
Economic Opportunities for Low- and Very Low-Income Persons and 
Eligible Businesses (85 FR 61524 (Sep. 29, 2020)). As a result of this 
removal, this final rule also redesignates proposed rule paragraphs (e) 
through (g) as final rule paragraphs (d) through (g). Additional 
citation corrections occur in redesignated paragraphs (d), (e), and 
(f). Further, consistent with Sec.  983.51(k), this final rule expands 
paragraph (g) to include in the list of participants ineligible to 
participate in Federal programs and activities those who are debarred, 
suspended subject to a limited denial of participation, or otherwise 
excluded

[[Page 38237]]

under 2 CFR part 2424. Finally, HUD adds a cross-reference Sec.  
982.161 to paragraph (g)(2) of this final rule, to clarify the existing 
requirement of the conflict of interest provision.
---------------------------------------------------------------------------

    \12\ 12 U.S.C. 1701u.
---------------------------------------------------------------------------

Sec.  983.154 Development Agreement

    This final rule amends paragraph (a) to clarify project-basing of 
single-family scattered sites. As commenters suggested, paragraph (a) 
allows one Agreement to cover multiple projects that each consist of a 
single-family building. Finally, this final rule makes minor amendments 
to paragraph (a) to remove reference to Sec.  983.152, consistent with 
changes to that section as described above, and to add reference to the 
new paragraph (g).
    This final rule specifies in paragraph (b) that paragraph (f), 
concerning PHA discretion to execute an Agreement after construction or 
rehabilitation in compliance with Sec.  983.153, is an exception for 
the timing of the Agreement. HUD also adds clarification that the 
Agreement must be executed on the same day as or in advance of its 
effective date.
    This final rule inserts a new paragraph (c) to specify that the PHA 
and owner may agree to amend the Agreement per paragraph (e). In 
paragraph (d), this final rule clarifies that paragraphs (f) and (g) 
provide exceptions to the prohibition on entering into an Agreement if 
development activity has commenced. HUD also makes additional changes 
in paragraph (d) to clarify the timing of the Agreement that correspond 
to the change to paragraph (b) described above. This final rule revises 
paragraph (e) to expand the content of the agreement to include a 
description of any rehabilitation work agreed to, a deadline for the 
completion of work, and any additional design, architecture or quality 
requirements placed on the owner by the PHA. The addition of a deadline 
for completion of work addresses the oversight in the proposed rule 
wherein Sec.  983.155(a) of the existing regulation was removed rather 
than relocated.
    This final rule clarifies in paragraph (f) when the PHA may execute 
an Agreement later than the timing provided in paragraph (b) and 
corrects the applicability of requirements in the case of a project 
that is noncompetitively selected. The changes in paragraph (f) also 
provide PHAs with discretion to not use an Agreement or execute an 
Agreement after construction or rehabilitation for development activity 
in compliance with the requirements under Sec.  983.153. Paragraph (f) 
also requires that the PHA explain the circumstances under which the 
PHA will enter a PBV HAP contract without first entering into an 
Agreement and the circumstances the PHA will enter into an Agreement 
after construction or rehabilitation in the Administrative Plan. This 
paragraph also requires that the PHA comply with the new requirement at 
Sec.  983.153(c)(3) and confirm owner compliance with the owner's 
requirements under Sec.  983.153. Finally, this final rule makes a 
minor amendment to paragraph (f) to remove reference to Sec.  983.152, 
consistent with changes to that section as described above.
    This final rule adds paragraph (g) to explain the exception to the 
requirement to enter into an Agreement established in Sec.  983.157. 
Paragraph (g) also explains the relationship between the Agreement and 
the HAP contract in the event that some work occurs under an Agreement 
before the PHA exercises the option at Sec.  983.157.
    Lastly, this final rule adds paragraph (h) explaining the PHA's 
options when the units are PHA-owned with no separate legal entity to 
serve as the owner. A PHA cannot execute an Agreement with itself. In 
the proposed rule, HUD stated that a PHA-owned agreement certification 
is not needed as an alternative to an Agreement because projects may 
now be developed without an Agreement. Upon further review, HUD 
determined that there may be situations in which development without an 
Agreement is not feasible, such as when a lender requires use of an 
Agreement or equivalent commitment prior to development. Therefore, 
this final rule provides that unless a PHA is exercising its discretion 
not to use an Agreement, the PHA will need to follow a process similar 
to the process adopted in this final rule for executing the HAP 
contract or an equivalent certification (see Sec.  983.204). For 
consistency with Sec.  983.204 of this final rule, HUD provides that 
PHAs have the option to either establish a separate legal entity to 
execute the Agreement or use a PHA-owned agreement certification in 
this final Sec.  983.154(h).

Sec.  983.155 Completion of Work

    In tandem with requiring the owner to submit evidence and certify 
to the PHA that development activity or substantial improvement is 
completed, this final rule adds that a PHA must review the owner's 
completion evidence and determine whether development activity or 
substantial improvement was completed. This final rule also adds a new 
paragraph (b) for consistency throughout part 983 and to specifically 
address completion of work for PHA-owned units. Paragraph (b) provides 
in the case of a PHA-owned unit, the PHA must submit that evidence to 
the independent entity and the review is the responsibility of the 
independent entity. Finally, HUD clarifies that the form and manner of 
the submission and certification is specified in the PHA's 
Administrative Plan.

Sec.  983.156 PHA Acceptance of Completed Units

    This final rule makes a minor revision to paragraph (a) to clarify 
that the PHA inspection is to determine whether the units comply with 
HQS and additional PHA requirements. HUD revises paragraph (b) to 
provide specific instruction with regard to completion of units, 
depending on whether the units are completed prior to HAP contract 
execution, following HAP contract execution, or in order to be added to 
the HAP contract. These changes to paragraph (b) accommodate changes to 
Sec. Sec.  983.152 and 983.157, as discussed further in the description 
of changes to those sections. In response to public comments, this 
final rule adds a new paragraph (c) to provide that HAP contracts for 
projects that are not subject to Sec.  983.157 may be executed in 
stages, as units in a newly constructed or rehabilitated project are 
completed. This final rule also adds paragraph (d) for consistency 
throughout part 983, to separate PHA-owned units from other units. 
Under new paragraph (d), this final rule requires that independent 
entities inspect units and determine whether those units are HQS-
compliant.

Sec.  983.157 Rehabilitated Housing: Option for Development Activity 
After HAP Contract Execution

    In the proposed rule, HUD proposed to include provisions on 
substantial improvements (previously termed ``development activity,'' 
as explained in the discussion of Sec.  983.3 above) to units under a 
HAP contract in Sec.  983.157. However, HUD determines that such 
provisions are inappropriate under subpart D of part 983 (Requirements 
for Rehabilitated and Newly Constructed Units), as placing the 
provision there produced confusion about the distinction between 
development activity for newly constructed and rehabilitated projects 
and work to improve units well after a HAP contract is in effect (which 
could be performed in any type of project). Therefore, in this final 
rule, the provisions proposed to be in Sec.  983.157 have been moved to 
Sec.  983.212 and are discussed in that section below. Section Sec.  
983.157, as codified in this final rule, instead is new

[[Page 38238]]

to this final rule and discussed further here.
    This final rule adds the new provisions of Sec.  983.157 in 
response to public comment. Commenters described situations in which 
development activity would be undertaken in rehabilitated projects that 
are already occupied and may meet HQS. HUD determined that occupants of 
such projects, if they qualify for PBV assistance, would benefit from 
receipt of assistance as soon as possible. Accordingly, and in addition 
to the options already available to the PHA under current regulations 
and in this final rule, Sec.  983.157 of this final rule provides that 
the PHA may allow an owner of a rehabilitated housing project to 
conduct some or all of the development activity during the term of the 
HAP contract. Under this option, the PHA and owner place all proposed 
PBV units under the HAP contract before the owner completes development 
activity, subject to the limitations established in Sec.  983.157 of 
this final rule. During the period of development activity, the PHA 
makes assistance payments to the owner for the contract units that are 
occupied and meet HQS. HUD determines this option is permissible in 
accordance with section 106(a)(4) of HOTMA.
    Section 983.157 of this final rule provides for the PHA to exercise 
its discretion to use this option in accordance with the PHA's 
Administrative Plan. It establishes conditions that must be met to use 
this option and a contract framework, which applies a contract rider 
during the development period. Section 983.157 of this final rule also 
establishes requirements applicable to the occupancy of units during 
the rehabilitation period, completing the rehabilitation, and PHA-owned 
units. Under this option, 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 rider, the rider will terminate and the HAP contract will remain in 
effect. HUD makes conforming changes throughout part 983 to accommodate 
this option (discussed further in the review of general technical 
changes below). The final rule clarifies that existing households be 
given an absolute selection preference to return to the project when a 
household needed to vacate for development activity. HUD notes that the 
leasing of units in a PBV project must comply with federal fair housing 
and related requirements, including ensuring that any designated 
accessible units are occupied by households who need the accessibility 
features, and that emergency transfers under VAWA are provided.

Sec.  983.202 Purpose of HAP Contract

    In response to public comments, HUD revises paragraph (a) to better 
clarify the existing flexibility that allows PHAs and owners to place 
multiple projects that each consist of a single-family building under 
one HAP contract.

Sec.  983.203 HAP Contract Information

    HUD in this final rule revises Sec.  983.203(h) to require that the 
HAP contract include units that are restricted to certain occupants via 
the project cap or program cap. The purpose of the change is in hopes 
of minimizing the possibility of PHAs losing track of what units must 
be set aside by ensuring that the HAP contract clearly specifies units 
that are restricted to certain occupants by virtue of the project cap 
or program cap. The changes in this section are consistent with the 
Fostering Stable Housing Opportunities (FSHO) notice,\13\ which notes 
that the increased program cap applies only if a family eligible for 
that 10 percent authority resides in the unit--this means PHAs need to 
keep track of the units that are under the increased program cap that 
must be set aside for occupancy by qualifying families (as was already 
required for the project cap).
---------------------------------------------------------------------------

    \13\ See 87 FR 3570 (Jan. 24, 2022).
---------------------------------------------------------------------------

Sec.  983.204 Execution of HAP Contract or PHA-Owned Certification

    This final rule amends Sec.  983.204(b) and (c) to clarify that HAP 
contracts must be promptly executed and effective as described. This 
final rule also amends paragraph (c) to specify requirements applicable 
to projects undergoing development activity after HAP contract 
execution, as described further above in the discussion of changes to 
Sec.  983.157. This final rule inserts a new paragraph (d) to clarify 
that the effective date of a PBV HAP contract must be on or after the 
execution date of the PBV HAP contract. HUD also amends and reorganizes 
paragraph (e), which was paragraph (d) in the proposed rule, to align 
with corresponding requirements in Sec.  982.451(c). Redesignated 
paragraph (e)(1) now expressly states the requirement that the separate 
legal entity must execute the HAP contract with the PHA, and HUD 
deletes paragraph (d)(1)(ii) from the proposed rule. HUD has revised 
paragraph (e)(2)(i) of this final rule to clarify that the PHA-owned 
Certification obligates the PHA, as owner, to all of the requirements 
of the HAP contract. This revision prevents ambiguity with other 
regulations that reference HAP contracts but not the PHA 
certifications.

Sec.  983.205 Term of HAP Contract

    HUD amends the extension of term provision in Sec.  983.205(b) to 
clarify the process for HAP contract term extensions and, while it 
retained the maximum extension term of 20 years that was in the 
proposed rule, provides a mechanism to execute multiple extensions 
concurrently as supported by commenters. Also, HUD removes the proposed 
paragraph (c) concerning independent entity oversight of the contract 
term and extensions for PHA-owned units, in response to public 
comments.

Sec.  983.206 Contract Termination or Expiration and Statutory Notice 
Requirements

    HUD makes changes in this final rule to clarify the process for 
when a PHA manages the issuance of tenant-based vouchers to tenants at 
PBV contract termination, and related issues. Specifically, for Sec.  
983.206(a)(3), this final rule expands the definition of the term 
``termination'' to include termination of the HAP contract by agreement 
of PHA and owner. As a necessary precondition of the statutory right to 
remain, in paragraph (b), this final rule also adds provisions 
specifying that the right to remain in a unit depends on the unit 
continuing to be used for rental housing and clarifies procedures for 
voucher issuance. As suggested by public comments, HUD provides 
additional clarification in paragraph (b) to specify that the PHA must 
issue vouchers, provide a timeframe for issuance, and require units to 
be removed from the contract if the family moves. HUD also moved the 
language in proposed paragraphs (b)(4) and (b)(5) into paragraph (b) to 
cover all families that are issued a voucher as the result of a PBV 
contract termination or expiration. This final rule made this change 
because the language in paragraphs (b)(4) and (b)(5) are applicable 
regardless of whether the family uses the voucher in the same project 
or in other housing.
    After consideration of public comments, this final rule revises 
paragraph (b)(4) (proposed paragraph (b)(6)) to expand upon the 
exceptions in which an owner may refuse to initially lease and to limit 
``other good cause'' to tenant misconduct and where the owner uses the 
unit for a non-residential purpose or renovates the unit. However, HUD 
provides a process by which families must be permitted to remain in

[[Page 38239]]

or return to the project, if possible, when a renovation occurs, to 
best fulfill the PBV statutory requirement allowing the family to 
remain, as provided by HOTMA section 106(a)(4). This final rule also 
changes paragraph (c) to clarify that expiring funding increments, 
which are a normal part of PHA operations, do not constitute 
insufficient funding. Paragraph (c)(2) includes a change specifying the 
respective section and paragraph that applies for HAP contract breaches 
involving failure to comply with HQS and other contract breaches. 
Lastly, this final rule adds paragraph (e), which provides the PHA and 
owner the discretion to terminate and how the owner and PHA can 
terminate their HAP contract.

Sec.  983.207 HAP Contract Amendments (To Add or Substitute Contract 
Units)

    This final rule clarifies in paragraph (a) that substituted units 
may be vacant or, subject to paragraph (c), occupied. The final rule 
also removes the phrase ``and subject to all PBV requirements'' from 
paragraph (a) since the phrase is unnecessary and created confusion as 
to what requirements were at issue. HUD notes that this textual change 
is made for clarity only, and substitutions under paragraph (a) remain 
subject to all PBV requirements. HUD also clarifies the HQS and 
reasonable rent requirements to affirm that the unit must meet HQS and 
the rent must be reasonable in order to substitute the unit. Finally, 
the final rule includes in paragraph (a) a cross-reference to the 
requirements regarding units undergoing repairs or renovation before 
substitution (paragraph (d) in this final rule) and units that are 
newly built (paragraph (e) in this final rule).
    HUD adds a requirement in paragraph (b), which provides that prior 
to adding a unit, the PHA must inspect the unit to determine that it 
complies with HQS, and the PHA must determine the reasonable rent for 
the unit. These additional requirements correspond to the same 
requirements that apply when substituting a unit. This final rule 
removes from paragraph (b)(1), which covers excluded and excepted units 
to the program or project cap, the citation to Sec.  983.6, which 
discusses the percentage limitation for PBV units and discusses the 
types of units that will count toward the program cap.
    HUD also revises paragraph (b)(3), moving the content of the 
proposed paragraph (b)(3) to a new paragraph (d) and including in 
paragraph (b)(3) only a cross-reference to paragraph (d). Paragraph (d) 
also contains significantly different text than that which appeared in 
proposed paragraph (b)(3). In accordance with the change to the 
definition of ``development activity'' described above in the 
discussion of changes to Sec. Sec.  983.3 and 983.152, HUD replaces 
reference to ``development activity'' with reference to ``substantial 
improvement.'' Because projects containing units needing substantial 
improvement within the first two years must be categorized as 
rehabilitated housing (per discussion of changes to Sec.  983.3 above), 
this final rule establishes that units may not undergo substantial 
improvement to be added to the project during this timeframe, barring 
extraordinary circumstances. For units that will undergo substantial 
improvement, HUD adds explanation of applicable requirements within 
paragraph (d), rather than referencing Sec.  983.152 as proposed.
    HUD similarly revises paragraph (b)(4) by moving the content of the 
proposed paragraph (b)(4) to a new paragraph (e) and instead including 
in paragraph (b)(4) only a cross-reference to paragraph (e). Paragraph 
(e) of this final rule also contains additional criteria beyond those 
that appeared in paragraph (b)(4) of the proposed rule. This final rule 
adds, in paragraph (e)(2), an amendment to the proposed requirement to 
address instances in which contract units are completed in stages. 
Further, the rule adds, in paragraph (e)(3), that a unit can be added 
to a HAP contract under certain situations in which part of the 
building is reconfigured into additional units. This latter addition 
expands the type of units that may be added to a HAP contract.
    To clarify the requirements for adding units that are occupied, 
this final rule adds paragraph (b)(5), which cross-references the 
requirements regarding occupied units found in paragraph (c) of this 
final rule. This final rule moves paragraph (c) of the proposed rule to 
paragraph (g) and adds new paragraph (c) to address the requirements 
for substituting or adding occupied units and provide PHAs with the 
flexibility to place occupied units on the HAP contract.
    In alignment with the requirements under Sec.  983.10, HUD adds 
paragraph (f) requiring that PHAs describe in their Administrative Plan 
under what circumstances they will add or substitute contract units.
    Finally, this final rule adds a new paragraph (h) explaining that 
HUD may establish procedures via Federal Register notice for a PHA and 
owner to merge two or more HAP contracts or bifurcate a single HAP 
contract. Allowing merger would facilitate administrative efficiency, 
to avoid a PHA having to repeat the same administrative actions for 
multiple contracts with the owner of a single project. It also follows 
from the HOTMA provision allowing units to be added to a contract at 
any time. Under the prior policy, HUD is aware that there may be 
projects for which the PHA and owner were unable to add units to a HAP 
contract due to the three-year limitation and therefore selected the 
project again for a separate HAP contract. This change would enable the 
contracts to be aligned going forward. Allowing bifurcation would 
provide administrative relief in other scenarios, such as if there is 
cause to establish separate ownership or management of two or more 
portions of a project.

Sec.  983.208 Condition of Contract Units

    HUD revises Sec.  983.208(a)(3) to require that the PHA specify 
conditions under which it will require additional housing quality 
requirements in its Administrative Plan consistent with Sec.  983.10. 
To ensure that housing is decent, safe, and sanitary, this final rule 
requires in paragraph (b)(1) that the PHA take enforcement action 
against owners who fail to maintain a dwelling unit in accordance with 
HQS. HUD revises paragraph (b)(2) to align with Sec.  982.404, and to 
remove the unclear phrasing ``considered to be.'' This final rule also 
specifies in paragraph (b)(2)(i) that ``other inspector'' is a person 
who is authorized by the State or local government. The proposed rule 
cross-referenced to Sec. Sec.  982.401(a)(5) and 982.401(o) to cover 
the timeframes for units in noncompliance with HQS; however, in this 
final rule HUD outlines the timeframes for noncompliant units in 
paragraphs (b)(2)(iii)(A) and (B) in place of the cross-references. HUD 
clarifies in paragraph (b)(3) that the HAP is not withheld or abated in 
cases where the PHA waives the owner's responsibility for repairs, and 
revises the paragraph to better align with HOTMA in terms of when the 
waiver may be applied, namely for an HQS deficiency that the PHA 
determines is caused by the tenant, any member of the household, or any 
guest or other person under the tenant's control, other than damage 
resulting from ordinary use. HUD adds paragraphs (b)(4) and (5) to 
provide flexibility for PHAs to conduct substantial improvement in the 
case of an HQS deficiency caused by an extraordinary circumstance or to 
conduct development activity after HAP contract execution, 
respectively, and requires that the PHA withhold or abate HAP and 
remove or terminate HAP as long as the contract unit with deficiencies 
is occupied by an assisted family.

[[Page 38240]]

    HUD also inserts a new paragraph (c) addressing family obligation. 
The addition of paragraph (c) reflects the contents of Sec.  982.404, 
as Sec.  982.404 is no longer applicable to PBVs in accordance with 
Sec.  983.2 of this final rule. The changes in paragraph (c) outline 
how a family may be held responsible for a breach of the HQS, the 
family's required actions to cure the deficiency if the HQS breach is 
life-threatening, and the actions that the PHA must take in case of a 
breach of the HQS.
    In revised paragraph (d), proposed paragraph (c), HUD replaces the 
use of the undefined term ``regular inspections'' with the specific 
inspections referred to, consistent with changes throughout this final 
rule. Consistent with Sec.  983.10, revised paragraph (d) also requires 
that the PHA specify the conditions under which it will withhold HAP 
and abate HAP or terminate the contract for units other than the unit 
with HQS deficiencies in its Administrative Plan. Revised paragraph (d) 
also outlines the PHA's remedies when HQS deficiencies are identified 
in an inspection, excluding pre-selection, initial, or turnover 
inspections. In accordance with the 1937 Act as amended by HOTMA, this 
final rule revises paragraph (f) discussing the applicability of Sec.  
983.208 to HAP contracts. Per the statute, HUD determines that 
paragraph (f) applies to any dwelling unit for which a HAP contract is 
entered into or renewed after the effective date of this final rule, 
with ``renew'' under the statute meaning the earlier of agreement to 
extend or effective date of extension in the case of PBV.

Sec.  983.210 Owner Certification

    To clarify the meaning of the certification in paragraph (a), given 
that compliance with HQS can include complying with requirements under 
part 983 to take specific actions in certain circumstances in which 
units do not fully meet HQS, HUD amends paragraph (a) to specify that 
the owner's compliance with HQS is subject to the requirements of part 
983. To prevent a possible conflict with Sec. Sec.  983.157 and 
983.212, which allow the family to be temporarily housed while 
development activity or substantial improvement occurs, this final rule 
revises Sec.  983.210(d) to specifically provide Sec. Sec.  
983.157(g)(6)(ii) and 983.212(a)(3)(ii) as an exception to the 
requirement that the unit be the family's only residence.

Sec.  983.211 Removal of Unit From HAP Contract

    HUD moves from Sec.  983.211(c) to paragraph (b) the requirement 
that reinstatement or substitution must be permissible under Sec.  
983.207. For clarification, HUD revises this requirement to reference 
Sec.  983.207(a) and (b) specifically. This final rule also adds 
clarifying changes to paragraph (c) to require that the anniversary and 
expiration dates match all other units under the HAP contract. This 
clarification prevents the PHA and owner from matching the dates on the 
HAP contract for all other units with the dates for the reinstated or 
substituted units.

Sec.  983.212 Substantial Improvement to Units Under a HAP Contract

    In this final rule, HUD moves the proposed Sec.  983.157 to Sec.  
983.212 (as discussed further in the description of changes to Sec.  
983.157). HUD revises this section to address commenters' concerns over 
the timing of substantial improvement under a HAP contract. 
Specifically, HUD is breaking paragraph (a) into its components and 
revises paragraph (a) to outline the conditions under which the PHA may 
approve substantial improvement. The changes in paragraph (a)(1) set a 
reasonable expectation that the condition of housing placed under a PBV 
HAP contract should not need substantial improvement within the first 
two years of the HAP contract, barring the extraordinary circumstances 
subject to the exception in paragraph (a)(1)(i). To prevent tenants 
from being permanently displaced, paragraph (a)(1)(i) allows the PHA to 
approve the owner to undergo substantial improvement after a natural 
disaster or other ``extraordinary circumstances'' on a previously 
compliant unit and clarifies that ``extraordinary circumstances'' are 
unforeseen events that are not the fault of the owner. In paragraph 
(a)(1)(ii), HUD changes the relevant time period from five years to two 
years in response to public comment. Under paragraph (a)(2), HUD 
expands the description of the expected HQS deficiencies that must be 
reported to include the items at Sec.  5.703(a)(2): components within 
the primary and secondary means of egress, common areas, and systems 
equipment. Further, HUD clarifies in paragraph (a)(2) the substantial 
improvement at issue must not include demolition and new construction 
of replacement units.
    The changes in paragraph (a)(3) allow HUD to provide families with 
greater protection against being moved from the unit or project 
unnecessarily and against being required to remain in unsafe 
conditions. For paragraph (a)(3), this final rule adds several 
subsections to instruct the PHA and owner on what to do when families 
occupy units that will not comply with HQS during the substantial 
improvement. Paragraph (a)(3) also clarifies under what circumstances 
the family has to entirely vacate a unit during substantial 
improvement, which would only be when both in-place substantial 
improvement and temporary relocation cannot be achieved. HUD, in this 
final rule, explains whether families remain PBV participants or 
tenants under lease during re-housing and provides sufficient 
procedural information for a PHA and owner to carry out the moves. 
Paragraph (a)(3)(iii)(A) adds a requirement that a family that must be 
re-housed be offered an available vacant contract unit if there is one. 
In the case that the PHA issues the family a tenant-based voucher, 
paragraph (a)(3)(iii)(B) provides that the PHA must, either through 
voucher issuance based on family eligibility and willingness to request 
a voucher pursuant to Sec.  983.261 or through removal of the unit from 
the HAP contract, issue the family its voucher to move. Finally, 
paragraph (a)(3)(iii)(C) requires that families that vacate the project 
be offered an opportunity to return. HUD notes that the leasing of 
units in a PBV project must comply with federal fair housing and 
related requirements, including ensuring that any designated accessible 
units are occupied by households who need the accessibility features, 
and that emergency transfers under VAWA are provided.
    HUD clarifies that HAP and vacancy payments must be abated once the 
unit has any HQS deficiency during substantial improvement under 
paragraph (a)(4). This final rule adds paragraph (a)(5) to specify that 
vacant units are the units that may be temporarily removed from the 
contract and that failure to complete the substantial improvement as 
approved is a cause for a breach subject to Sec.  983.206(c)(2). 
Paragraph (a)(5) also requires that the contract specify the terms of 
the PHA approval, to facilitate the PHA options for breach if the owner 
fails to comply.
    This final rule amends the proposed paragraphs (b) and does not 
finalize the proposed paragraph (c) to conform to changes made across 
part 983 to separately characterize ``development activity'' and 
``substantial improvement'' and remove descriptions of requirements 
applicable to substantial improvement from subpart D of part 983. 
Accordingly, paragraph (b) describes requirements that apply to 
substantial improvement. This final rule also adds a new paragraph (c) 
to require that for PHA-owned units an independent entity must make the

[[Page 38241]]

determinations otherwise made by the PHA in this section, to avoid a 
conflict.

Sec.  983.251 How Participants Are Selected

    In this final rule, HUD clarifies in paragraph (a)(2) that the PHA 
determination of eligibility for a particular family must use 
information received and verified by the PHA. This is not a change to 
existing requirements, but the addition is necessary to ensure there is 
no confusion as a result of the explicit reference in Sec.  983.2 that 
Sec.  982.201(e) is inapplicable to the PBV program. This final rule 
also revises paragraphs (a)(2) and (b)(2) to clarify an existing 
requirement that the family cannot be zero-HAP at admission to the 
unit, and clarifies under paragraph (b)(1) that the eligibility of an 
in-place family is determined prior to attaching assistance to the unit 
(i.e., executing a HAP contract or amending a HAP contract by adding or 
substituting units), not at the time the project or unit is initially 
selected to receive PBV assistance. This final rule clarifies paragraph 
(b)(3)(ii) regarding when an owner chooses to terminate or not to renew 
the tenant-based lease to remove language that may have implied the 
tenant-based voucher rules on termination or non-renewal function 
differently in the case of a unit proposed to be project-based. 
Consistent with Sec.  983.10, this final rule also made changes to 
require that the PHA identify in the Administrative Plan details about 
how it structures the waiting list for the PBV program throughout 
paragraph (c). HUD also revises paragraph (c)(7)(x) for consistency and 
comprehensiveness with respect to the Department's nondiscrimination 
and equal opportunity regulations. Additionally, for organizational 
reasons, HUD relocates the requirement for PHAs to have some mechanism 
for referring to accessible PBV units a family that includes a person 
with a mobility or sensory impairment from Sec.  983.252(c)(2) to Sec.  
983.251(c)(9).
    To prevent the tenant from being subject to an impermissible 
requirement to accept services involuntarily, this final rule revises 
paragraph (d)(2) to state that the PHA must not require families to 
show they participate in their own equivalent services if they decline 
voluntary services. Consistent with Sec.  983.10, in added paragraph 
(e)(2)(iii), HUD requires the PHA define ``good cause'' in the 
Administrative Plan, which, at a minimum, must include HQS 
deficiencies; a unit that is inaccessible or otherwise does not meet 
the disability-related needs of a household member with disabilities; 
circumstances beyond the family's control; and health or safety risk 
due to being a victim of domestic violence, dating violence, sexual 
assault, or stalking covered by 24 CFR part 5, subpart L. To benefit 
the tenants and based on public comments, HUD determines that PHAs 
cannot remove families from the waiting list when they reject units for 
any reason but must allow families to reject units for ``good cause'' 
without losing their place on the waiting list. This protects families 
from being penalized when a unit is not truly available to the family 
because the unit does not meet the family's needs.

Sec.  983.252 PHA Information for Accepted Family

    HUD restructures proposed Sec.  983.252(a), and moves the 
requirements previously at paragraph (c)(1) to paragraph (a)(2) so that 
the requirements that PHAs take appropriate steps to ensure effective 
communication in accordance with 24 CFR 8.6 and 28 CFR part 35, subpart 
E, and provide information on the reasonable accommodation process, 
applies for all families, and not only where the family head or spouse 
is a person with a disability. HUD further revises proposed Sec.  
983.252 to add the requirement that the PHA include in the family 
information packet information about the family's right to move in a 
new paragraph (b)(5). HUD has also moved the requirement at paragraph 
(c)(2) regarding accessible PBV units to Sec.  983.251(c)(9), as 
discussed in the previous section. HUD also adds a new paragraph (c) to 
clarify the requirement that the PHA and family sign the statement of 
family responsibility. In accordance with Title VI of the Civil Rights 
Act of 1964 and HUD's implementing regulation at 24 CFR part 1, this 
final rule clarifies in redesignated paragraph (e) that it is a 
requirement that PHAs take reasonable steps to ensure meaningful access 
by persons with limited English proficiency. PHA's may reference HUD's 
Final Guidance to Federal Financial Assistance Recipients Regarding 
Title VI Prohibition Against National Origin Discrimination Affecting 
Limited English Proficient Persons (72 FR 2732) for additional 
information about how to ensure meaningful access to persons with 
limited English proficiency.

Sec.  983.254 Vacancies

    HUD aligns Sec.  983.254(a)(1) with the new requirements of Sec.  
983.157, as described in the discussion of changes to that section. HUD 
also makes minor changes to paragraphs (a)(1)(i) and (ii) of this 
section to specify that PHAs should make every reasonable effort to 
make eligibility determinations and refer sufficient numbers of 
families to owners within thirty days.

Sec.  983.255 Tenant Screening

    For consistency purposes and to align this section with Sec.  
983.10, HUD revises Sec.  983.255(a)(2) and (c)(4) to require that the 
PHA's tenant screening policies are in accordance with the policies in 
the PHA's Administrative Plan.

Sec.  983.257 Owner Termination of Tenancy and Eviction

    This final rule revises Sec.  983.257 to add that the owner may 
terminate the tenancy in accordance with Sec. Sec.  983.157(g)(6)(iii) 
and 983.212(a)(3)(iii).

Sec.  983.260 Overcrowded, Under-Occupied, and Accessible Units

    After considering public comments, HUD creates additional 
flexibilities as requested, while ensuring units do not continue to 
remain overcrowded, underoccupied, or, in the case of accessible units, 
occupied by families that do not require accessibility features. 
Accordingly, in paragraph (a)(2)(ii), HUD provides PHAs with 60 days 
(an additional 30 days) to make an offer of continued housing 
assistance once a determination has been made 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. HUD also reorganizes paragraph (b) 
and adds paragraphs (b)(2) to provide that the PHA must remove the 
wrong-size or accessible unit from the HAP contract to make voucher 
assistance available to issue the family a tenant-based voucher if 
continued housing assistance under paragraph (b)(1) is unavailable. HUD 
determined this policy change was necessary to ensure the family living 
in a wrong-size or accessible unit would be able to obtain voucher 
assistance when no options under paragraph (b)(1) were available.
    HUD revises paragraphs (c)(2)(i) and (ii) to clarify the 
requirements when the PHA's offer of assistance is project-based. HUD 
also adds paragraph (c)(2)(iii) to address the requirements when the 
PHA's offer of assistance is other comparable tenant-based rental 
assistance. In response to requests for additional flexibility, HUD 
creates under (c)(2)(i) and (c)(2)(iii) an opportunity for a family to 
request and a PHA to grant one extension not to exceed 90 days in 
circumstances where a family either declines project-based assistance 
or accepts or declines other

[[Page 38242]]

comparable tenant-based assistance in order to accommodate a family's 
efforts to locate affordable, safe, and geographically proximate 
replacement housing.
    Finally, HUD adds paragraph (d) to state that if units are removed 
under this section they can be reinstated later. This final rule also 
revises paragraph (b)(1)(iv) to align with the revised definition for 
the term ``comparable tenant-based rental assistance'' in Sec.  983.3.

Sec.  983.261 Family Right To Move

    In response to public comments, HUD at this final rule reorganizes, 
adds headings to, and revises Sec.  983.261. Paragraph (a) is revised 
to clarify that the family may terminate its lease at any time after 
one year of PBV assistance. To ensure PHAs properly manage voucher 
turnover, paragraph (b) requires that if the search term of a family 
that requested to move expires, the PHA must first issue a voucher to 
the next eligible family before issuing another voucher to the family 
that requested to move. This final rule moves the discussion in 
paragraphs (c)(1) and (2) of the rights of a family or a member of a 
family who has been the victim of domestic violence, dating violence, 
sexual assault, and stalking under the PBV program, to new paragraphs 
(e) through (g), and expands on these provisions. Paragraph (d) 
clarifies that if the family terminates its lease before one year of 
PBV assistance, the family relinquishes the opportunity for continued 
tenant-based assistance under this right to move section. Lastly, 
consistent with Sec.  983.10, this final rule requires PHAs to have a 
policy on the family's right to move in the Administrative Plan in 
paragraph (b) and (c).

Sec.  983.262 Occupancy of Units Under the Increased Program Cap and 
Project Cap Excepted Units

    This final rule makes overall changes to Sec.  983.262, to align 
the PBV rules with the Fostering Stable Housing Opportunities (FSHO) 
notice,\14\ and to specify the occupancy requirements under the 10 
percent cap. Additionally, for ease of reading, this final rule moves 
and revises paragraph (f) to paragraph (b)(4) and distinguishes 
paragraphs (c) and (d), the requirements for excepted units and units 
under an increased program cap. This final rule makes clarifying 
changes to paragraph (b) by explaining the requirements applicable to 
both excepted units and units under an increased program cap. For 
clarity, this final rule amends paragraph (b)(4)(ii) to provide PHAs 
with discretion on whether to reinstate a unit from the PBV HAP 
contract. The changes in paragraph (c) explain the requirements solely 
for units under the increased program cap, which includes homeless 
family, veteran family, supportive housing for persons with 
disabilities or elderly persons, and units for Family Unification 
Program (FUP) youth. This final rule requires at paragraph (c)(3)(ii) 
that PHAs include policies on supportive housing for persons with 
disabilities or elderly persons in their Administrative Plan 
requirement in alignment with Sec.  983.10. Revised paragraph (d) 
outlines the requirements solely for project cap excepted units.
---------------------------------------------------------------------------

    \14\ See 87 FR 3570 (Jan. 24, 2022).
---------------------------------------------------------------------------

    Paragraph (e) of this final rule specifically outlines the 
requirements for units for FUP youth under the increased program cap 
and project cap exceptions. This revision is made for better 
readability and to distinguish FUP youth requirements from other 
categories of excepted units and units under an increased program cap.

Sec.  983.301 Determining the Rent to Owner

    This final rule revises paragraphs (b)(1) and (c)(2)(i) to align 
with Sec.  983.10. This final rule changes (f)(3) to align with the 
changes made to the exception payment standard regulation in Sec.  
982.503. Paragraph (f)(3) is also amended to clarify the criteria for 
whether an exception payment standard applies. Finally, HUD amends 
paragraph (f)(3) to clarify the purpose for which an exception payment 
standard applies to PBV projects, which is as a factor for determining 
rent to owner under paragraph (a)(2) or a factor for determining if the 
unit is a qualifying tax credit unit for purposes of setting the rent 
to owner under paragraph (c), as applicable.
    HUD revises paragraph (f)(4) to provide HUD with the flexibility to 
develop a process to approve project-specific utility allowances. This 
final rule also adds paragraph (f)(5) to state that the PHA must use 
the applicable utility allowance schedule for the purpose of 
determining rent to owner and does not use a higher utility allowance 
from a reasonable accommodation for a person with a disability. This 
clarifies the existing requirement that a higher utility allowance as a 
reasonable accommodation is applied only to the particular family's 
tenant rent (or utility reimbursement) (see 24 CFR 983.353), rather 
than being used to determine the amount of the rent to owner per 24 CFR 
983.301(b)(1) or (c)(2)(i). This final rule removes the proposed rule 
requirement in paragraph (g) that independent entities determine 
project-specific utility allowance, with the purpose that HUD will 
ensure sufficient oversight through the Federal Register process to 
approve project-specific utility allowances.

Sec.  983.302 Redetermination of Rent to Owner

    This final rule revises paragraph (a)(2) to state that the PHA 
Administrative Plan must specify any advance notice the owner must give 
the PHA to request a redetermination of rent and the form of such 
request. This final rule revises paragraph (b)(2) to remove the term 
``maximum rent,'' which was undefined, and state specifically how to 
calculate the maximum adjustment by OCAF. Further, this final rule 
moves information that was in paragraph (b)(2) in the proposed rule to 
new paragraphs (b)(3), (b)(4), and (b)(5) with simplified language for 
readability. HUD amends paragraph (b)(6) to conform to applicable HQS 
provisions of Sec. Sec.  983.157 and 983.212.
    HUD also clarifies when the rent to owner must be decreased in the 
case of adjustment by OCAF in revised paragraph (c)(1), to include when 
there is a decrease in the fair market rent, tax credit rent, or 
reasonable rent, as applicable, that requires a decrease to the rent to 
owner. In response to public comments on the proposed changes to rent 
floors, HUD determined that PHAs should have discretion whether to 
elect at any time, within the HAP contract, to not reduce rents below 
the initial rent to owner, as reflected in revised paragraph (c)(2). 
This revision reflects HUD's opinion that PHAs are in the best position 
to balance local considerations in making such a determination. To 
accomplish this change, HUD removed from paragraph (c)(2) the 
limitation on establishing a rent floor, to account for circumstances 
where the rent floor may need to be established after rents have fallen 
beneath the initial rent to owner.

Sec.  983.303 Reasonable Rent

    HUD amends paragraph (b) to add two new situations in which rent 
reasonableness must be redetermined, which are when a unit is added to 
the contract and when development activity is completed and accepted 
for a unit subject to the new option in Sec.  983.157 of this final 
rule (described in greater detail in the discussion of Sec.  983.157 
above). This final rule adds paragraph (c)(3) to explain how to 
calculate rent reasonableness, which must be based on actual and 
documentable conditions

[[Page 38243]]

and not prospective information. HUD also deletes in paragraph (f)(2) 
the phrase ``where the project is located,'' as this language modified 
``the HUD field office'' which has been removed.

Sec.  983.352 Vacancy Payment

    This final rule aligns this section with Sec.  983.10 by clarifying 
that the Administrative Plan must contain the PHA policy on the 
conditions which it will provide for vacancy payments in a HAP 
contract, the duration and amount of any vacancy payments it will make 
to an owner, and the required form and manner of requests for vacancy 
payments.

Sec.  983.353 Tenant Rent; Payment to Owner

    This final rule revises paragraph (d)(2) to align it with Sec.  
983.10, requiring that the PHA describe its policies on paying the 
utility reimbursement in the Administrative Plan.

Sec.  985.3 Indicators, HUD Verification Methods and Ratings

    This final rule revises paragraphs (i)(1), (i)(3)(i), and 
(i)(3)(ii) to align them with Sec.  982.503. Further, this final rule 
clarifies paragraph (l)(1) to state that the initial unit inspection 
indicator includes both initial and turnover inspections for the PBV 
program. The purpose of this revision is to capture every time a family 
moves in and not just capture when a family moves in before the HAP 
contract. This final rule also revises the citation in paragraph (m)(1) 
from Sec.  982.405(a) to Sec. Sec.  982.405 and 983.103(e) to reflect 
changes made to those sections in this final rule.
    This final rule also revises paragraph (c)(3)(i)(A) to reflect 
changes made to self-certification of assets under 88 FR 9600 (Feb. 14, 
2023), which implemented HOTMA sections 102, 103, and 104. A revision 
has been made to the introductory text of this regulation to reflect 
that the Federal award expenditure threshold is established by 2 CFR 
subpart F and has changed from $300,000 to $750,000. The revision 
reflects the regulatory citation for audit thresholds to ensure that 
Sec.  985.3 is always aligned with Federal audit requirements.
    This final rule revises paragraph (p)(1) and (3)(i)(B) to reflect 
the renumbering of Sec.  982.503(e) to (f).

General Technical Changes

    Throughout parts 5, 50, 92, 93, 982 and 983, HUD moved, corrected, 
and removed outdated citations and revised headers for clarity 
purposes. This final rule also revises terminology throughout this 
final rule, including replacing all references to ``biennial 
inspection'' with ``periodic inspection;'' ``tenant selection plan'' 
with ``owner waiting list;'' and ``defects'' with ``deficiencies.'' 
This final rule also replaces references to ``tenant's rent'' with 
``total tenant payment'' and replaces references to ``rent to owner'' 
with ``gross rent.'' This final rule removes all references to the 
Project-based certification (PBC) program as it is no longer in 
existence. HUD also redesignated paragraphs for readability in 
Sec. Sec.  982.54, 982.406, 983.53, 983.54, 983.59, 983.153, 983.204, 
983.207, 983.211, 983.252 and 983.260. In addition, HUD moved the 
definition of the term ``Request for Release of Funds and 
Certification'' from Sec.  983.3 to Sec.  983.56(d)(2). HUD also 
amended Sec. Sec.  985.1 and 985.3 to incorporate the PBV program in 
SEMAP and to align with regulatory changes in Sec.  982.503 which 
permits additional flexibilities for PHAs inspections and the NSPIRE 
final rule.
    HUD also makes changes throughout this final rule to correspond 
with the changes described above adding an option to complete 
rehabilitation after HAP contract execution in Sec.  983.157, moving 
proposed Sec.  983.157 to Sec.  983.212 of this final rule, and 
changing the term ``development activity'' to ``substantial 
improvement'' for a portion of the work described as ``development 
activity'' in the proposed rule. HUD adds cross-references to Sec.  
983.157 in this final rule, and brief descriptions of conforming 
changes, in appropriate sections of part 983. Also, HUD removes 
citations to Sec.  983.157 that appeared in the proposed rule or 
changes them to instead reference Sec.  983.212 throughout this final 
rule. HUD changes ``development activity'' to ``substantial 
improvement'' where appropriate throughout this final rule. Finally, 
HUD removes references to activities that constitute substantial 
improvements from subpart D of part 983 of this final rule where 
appropriate and, accordingly, removes references to provisions of 
subpart D from Sec. Sec.  983.207 and 983.212 where appropriate.
    HUD is also revising the definition of ``household'' at 24 CFR 
5.100, consistent with HUD's rule implementing HOTMA at 88 FR 9600 
(Feb. 14, 2023), to include foster children and foster adults. This is 
a technical change consistent with the definitions of ``foster 
children'' and ``foster adults'' present in 24 CFR 5.100. For more 
information, see HUD's discussion of foster children and adults at 88 
FR 9600, 9602 (Feb. 14, 2023).
    Finally, some technical changes throughout the proposed rule were 
either made by the NSPIRE final rule or rendered moot by the NSPIRE 
final rule. For example, HUD proposed to amend Sec.  985.1 to update a 
reference to ``project-based component (PBC).'' This change was made in 
NSPIRE, and therefore not made here.

IV. Effective and Compliance Dates

Effective Dates

    Almost all changes in this final rule are effective thirty days 
after the publication of this rule. However, HUD is delaying the 
effective date for Sec. Sec.  982.451(c), 983.154(h), 983,154(g), 
983,157, and 983.204(e) while HUD completes and publishes the PHA-owned 
certification form and HAP contract rider that are necessary for PHAs 
to implement these changes. HUD will publish a subsequent publication 
establishing an effective date for these changes, once the form and 
rider are ready for use.

Compliance Dates

    Compliance with this final rule is required once the rule becomes 
effective, with some exceptions.
    Many changes require updates to PHAs' Administrative Plans. HUD 
recommends that PHAs update their Administrative Plans at their 
earliest convenience. However, to aid in providing a smooth transition, 
PHAs are not required to update their Administrative Plans in response 
to this rule until 365 days after the effective date of this rule. HUD 
notes that PHAs wishing to take advantage of many of the changes in 
this rule are required to update their Administrative Plan to 
incorporate those changes.
    Other sections have delayed compliance dates to provide PHAs with 
adequate time to update their forms, procedures, and any other written 
materials that reflect new requirements in accordance with this rule, 
and to provide HUD with time to provide additional resources advising 
PHAs. Also of note, Sec. Sec.  983.57 and 983.155(b) will require some 
PHAs to either amend their independent entity contracts or select a new 
independent entity, and HUD is therefore giving PHAs one year from the 
effective date to make those changes.

V. Public Comments

    HUD received 44 public comments from a wide range of commenters: 
individuals; PHAs; public housing and tenant interest groups; and legal 
services organizations. The public comments and responses to the 
substantive comments are found below.

[[Page 38244]]

1. Definitions (Sec.  982.4)

Definition of Request for Tenancy Approval (RFTA)

    One commenter stated that the definition of RFTA seems to imply a 
requirement that the RFTA be submitted by the voucher holder and 
suggested the definition be amended to clarify that either the family, 
or the owner on behalf of the family, may submit the form.
    HUD Response: In this final rule, HUD has amended the definition of 
RFTA to clarify that the form can be submitted by the family, or on 
behalf of the family to the PHA.

Definition of Tenant-Paid Utility

    A commenter suggested that HUD include the definition of 
``utility'' currently found in guidance to the regulation because the 
definition is a critical part of the program.
    HUD Response: The definition of tenant-paid utility has been added 
to the definitions section at Sec.  982.4 and this definition is now 
also referenced in the project-based voucher definition of tenant-paid 
utility at Sec.  983.3. The new definition in Sec.  982.4 clarifies 
that tenant-paid utilities are those services and utilities that are 
not included in the rent. HUD modified the definition from the proposed 
rule to remove the definition of which utilities may be considered as 
tenant-paid utilities since this is covered in Sec.  982.517.

Definition of PHA-Owned Units

    Commenters supported the proposed definition of a PHA-owned unit, 
which matches the statutory definition offered by HOTMA. These 
commenters stated this was clear and did not need expansion and 
supported tracking the statutory definition and conforming definitions 
across HCV and PBV regulations, notices, and guidance.
    A commenter recommended that for a unit to be PHA-owned that HUD 
not rely on a bright-line, percentage of ownership test to determine 
control when a PHA owns more than 50 percent of the managing member or 
general partner, and HUD should not find a unit to be PHA-owned when a 
PHA controls less than 50 percent of a managing member or general 
partner interest. Another commenter supported excluding units in 
buildings owned by entities in which either a PHA is in the ownership 
structure, and/or the entity is subject to a ground lease by a PHA. A 
commenter recommended the definition of ``owned by a public housing 
agency'' should allow the statutory text to stand on its own, so that 
only units located in a project ``owned by the PHA, by an entity wholly 
controlled by the PHA, or by a limited liability company (``LLC'') or 
limited partnership (``LP'') where the PHA holds a controlling 
interest'' will be considered ``owned by a public housing agency.'' The 
same commenter opined that should HUD wish to clarify the control and 
other factors it will evaluate when determining whether a unit will be 
considered PHA-owned, HUD can do so through notice or other non-binding 
guidance. This commenter further stated that the definition of 
``controlling interest'' conflates control and ownership contrary to 
Congressional intent, explaining that percentage of ownership does not 
guarantee control over the owner entity and that HUD should confirm 
whether the PHA exercises functional day-to-day control over the owner 
entity.
    HUD Response: HUD appreciates there are many different preferences 
regarding the level of ownership or control that rises to the level of 
PHA-owned. In the interest of consistency, HUD agrees with the 
commenters that supported a definition that follows the statutory 
definition, and therefore declines to accept the suggestions that HUD 
avoid a bright-line test or exclude units in buildings owned by 
entities in which either a PHA is in the ownership structure, and/or 
the entity is subject to a ground lease by a PHA. Additionally, HUD 
believes that providing a distinction in the regulation of what 
constitutes a controlling interest is important to clarify the nuances 
in the statutory definition of PHA-owned units, and thus does not 
accept the suggestion that any clarifications beyond the statute should 
only be made through non-binding guidance. HUD disagrees that its 
definition of the term controlling interest is contrary to 
Congressional intent. The common definition of ``controlling interest'' 
recognizes a majority ownership interest that serves as the basis for 
control; HUD's definition reflects the most basic and recognized 
meaning of the term. Therefore, this final rule maintains the proposed 
rule language without change.

Definition of Independent Entity

    A commenter supported the modified definition of independent entity 
in the proposed rule because it would provide relief to PHAs and 
maintain a level of scrutiny and prevent the appearance of self-
dealing. Another commenter doubted whether there is any circumstance 
under which a PHA and an independent entity should be connected 
financially, in the interest of complete fairness and impartiality 
under which an independent entity should be making decisions.
    One commenter suggested that the proposed rule would increase the 
shortage of vendors for PHAs, especially located in smaller areas, if 
every vendor were disqualified based on prior contracts with the PHA 
for services performed on non-PHA-owned units. The commenter viewed 
HUD's current procedures in tandem with the PHAs' inability to exercise 
control over the independent entity, as sufficient to ensure 
independence.
    The same commenter recommended that HUD revise the definition of 
independent entity because it is unclear what it means for an 
independent entity to ``be connected to'' a PHA, and the definition 
would prohibit a PHA from using a company it already contracts with as 
an independent entity. Another commenter stated the phrase ``or in any 
other manner that could cause the PHA to improperly influence the 
independent entity'' is vague and subjective, potentially leading to 
confusion, disputes, and conflict, and should be deleted.
    For clarity, a commenter suggested HUD revise the definition as 
follows: ``HUD-approved independent entities and PHAs cannot have a 
legal, financial (except regarding compensation for services performed 
for the PHA), or other connection that could cause either party to be 
improperly influenced by the other.'' The same commenter suggested that 
this final rule specify the meaning of ``connected to'' because the 
current meaning could prohibit a PHA from using an independent entity 
it currently contracts with, even when these vendor contracts are 
procured at arm's length.
    Another commenter suggested HUD allow PHAs that may have an 
allowable financial relationship with an independent entity to continue 
to use that independent entity if there is no chance that the PHA will 
``improperly influence'' the independent entity.
    HUD Response: HUD appreciates the comments related to the 
challenges of identifying independent entities in rural areas, as well 
as the need to ensure impartiality. HUD revises the proposed definition 
in an attempt to balance these competing interests and ensure that HUD-
approved independent entities are impartial and autonomous. HUD 
believes it is important to provide a regulatory definition of the term 
independent entity, and thus declines the request that the definition 
is consistent with current requirements, which provide that the PHA 
cannot perform any function that would present a clear conflict (e.g., 
conducting inspections and rent setting) for units it owns. In this 
final rule, HUD explains when the unit of general local

[[Page 38245]]

government meets the definition of an independent entity without 
requiring HUD approval. HUD believes keeping this option in this final 
rule will reduce administrative burden and reporting requirements. 
While HUD disagrees that there are financial connections where there is 
no chance that the PHA will ``improperly influence'' the independent 
entity, HUD further clarifies that for HUD-approved independent 
entities, a financial connection would not include compensation for 
services performed for PHA-owned units. HUD believes it is necessary to 
maintain language regarding impartiality of HUD-approved independent 
entities, which defines the types of relationships (e.g., financial 
connections) that could interfere with the entity's exercise of 
independent judgment in carrying out responsibilities with respect to 
PHA-owned units.

2. Administrative Plan (Sec.  982.54)

Objections Generally

    A commenter stated that HUD should not add items to the 
Administrative Plan that are not necessary for the daily and core 
operations of the PHA. Another comment stated that several of the 
proposed additions would require frequent and burdensome changes for 
otherwise insignificant policy changes.
    HUD Response: HUD disagrees that the requirements should not be 
added to the regulations. HOTMA offers significant flexibilities and 
HUD proposes to offer additional flexibilities to PHAs to establish 
discretionary policies through this rule. Therefore, it is critical 
that discretionary policies be applied consistently and that such 
policies are clearly and transparently published for the benefit of 
participant families, owners, and the general public.

Inclusion of Tenant Selection Plan (TSP)

    Another commenter suggested that the requirement that a TSP be 
included in the Administrative Plan must be mentioned in Sec.  982.54.
    HUD Response: In finalizing the rule, HUD replaced all references 
of the ``tenant selection plan'' with ``owner waiting list policy.''

Question 2: Where could HUD provide greater discretion to PHAs to 
support their efforts to operate their programs effectively?

    A commenter stated that all PHAs should be allowed to be Moving to 
Work (MTW) agencies to decrease regulatory burdens and provide 
additional discretion for PHAs to control their local market. This 
commenter also recommended that PHAs that have Affordable Housing 
Accreditation Board (AHAB) accreditation and are high performing under 
SEMAP and PHAS should be rewarded with more discretion because they 
have shown their ability to properly operate their programs.
    HUD Response: HUD appreciates the comments requesting that PHAs 
should be afforded additional discretion to reduce regulatory burdens 
and notes that HOTMA and HUD, in its implementation, has made 
significant modifications and clarifications intended to reduce the 
burden on PHAs where possible. HUD does not have the statutory 
authority to allow all PHAs to be MTW agencies as suggested by the 
commenter.

3. Information When Family Is Selected (Sec.  982.301)

Disability-Related Obligations in the Oral Briefing

    Commenters supported HUD's requirements wherein PHAs must provide 
families that include an individual with a disability a list of 
accessible units known to the PHA and assistance in locating an 
accessible unit. PHAs are already required to provide this information 
in the information packet, and as required in compliance with HUD's 
Section 504 requirements. One commenter suggested that PHAs be required 
to collaborate with local organizations that can provide housing search 
assistance to tenants with specific accommodation needs. Another 
commenter suggested that HUD require PHAs to keep track of whether 
tenants currently in accessible units require the accessible design 
features and use a lease addendum stating that the family may be 
required to move if they do not require the accessible design features. 
The same commenter suggested that HUD provide guidance to PHAs to 
proactively identify ways to make units accessible, including through 
new construction or other substantial rehabilitation.
    HUD Response: The HCV program allows families to choose any 
eligible unit in the rental market. In the tenant-based voucher 
context, an HCV family leaving a rental unit due to not needing its 
features does not mean that unit is then leased to another HCV family. 
In other contexts, such as public housing and project-based voucher 
housing, the owner or manager may require the applicant to agree to 
move to a non-accessible unit and may incorporate this agreement into 
the lease, in accordance with HUD's Section 504 regulations. HUD 
appreciates the comments and recommendations to provide guidance to 
PHAs on ways to proactively identify units that meet a household's 
disability-related needs and ways to make units accessible and will 
consider these ideas in future guidance.

Exception Payment Standards

    A commenter stated that HUD should include written and oral 
briefings on exception payment standards as a reasonable accommodation, 
and not solely include subsidy standards as required by regulations. 
The commenter suggested that PHAs be required to inform families of the 
availability of an exception payment standard, and particularly for 
when a more expensive new construction unit is needed as an 
accommodation for a family member's disability. Alternatively, another 
commenter suggested that the regulation should not detail that there is 
a reasonable accommodation possible for subsidy standards because 
reasonable accommodations are available for all PHA policies.
    HUD Response: HUD agrees with the commenters that PHAs must make 
reasonable accommodations in rules, policies, practices, services, and 
procedures to ensure persons with a disability have equal opportunity 
to participate fully in all the PHA's programs, privileges, benefits, 
and services. Therefore, the voucher briefing must include information 
on the PHA's reasonable accommodation policies and procedures. In 
addition, the PHA may not know or have reason to know if the family or 
families attending the oral briefing includes a person with 
disabilities. Similarly, a family member who is not disabled may 
subsequently become disabled, so it is important that all families 
receive information on the reasonable accommodation process. 
Consequently, HUD is revising Sec.  982.301(a)(3) to require that 
information on the reasonable accommodation process is provided at all 
oral briefings and not limited only to briefings where the PHA knows 
that a family in attendance includes a person with disabilities. While 
HUD does not require in this final rule that the reasonable 
accommodation exception payment standards must be covered in the oral 
briefing, HUD is requiring that an explanation of reasonable 
accommodation exception payment standards must be included in the 
briefing packet. HUD believes providing written guidance in the 
information packet will better address the commenter's concerns as the 
family will have access to guidance on this subject throughout their 
housing search.

[[Page 38246]]

Briefing Method

    A commenter recommended that the regulation for the briefing packet 
should outline the most critical information for families when they are 
provided their initial voucher, because excessive amounts of 
information can be overwhelming for families. The commenter also 
recommended that PHAs should have the discretion to determine which 
method of communication, including oral, print, and electronic 
communications, is proper for the briefing packet, and the regulation 
should explicitly state that the briefing can be provided in a manner 
that is not oral, according to the PHA's discretion, while 
acknowledging that accessibility and interaction between staff and 
families are required.
    Another commenter recommended referencing Sec.  982.301(a), the 
right to meaningful language access for families whose members are 
limited English proficient, and how to request and access meaningful 
language assistance from the PHA. The commenter further stated that in 
Sec.  982.301(b)(10), HUD should reference how tenants can request 
language assistance, whether via written translation of documents or 
oral interpretation, for the PHA; HUD should require that the PHA 
identify staff members who will coordinate the PHA's language access 
policies; and the tenant briefing should include translation and oral 
interpretation for individuals who are limited English proficient in 
Sec.  982.301(c).
    HUD Response: HUD regulations require that the briefing packet 
contain specific information that is important for families when they 
are provided with their initial voucher. HUD does not agree that the 
briefing packet should categorize which pieces of information are more 
important than others, as all information is required and important for 
voucher families. HUD does not agree that the regulation should allow 
for other types of briefings and believes requiring an oral briefing 
ensures that all families fully understand how the program works and 
have the opportunity to ask questions and discuss information 
presented. HUD notes that new paragraph (c) in Sec.  982.310 already 
addresses providing information for persons with limited English 
proficiency. HUD has also addressed access to translation in PIH Notice 
2020-32 which provides for alternative briefing methods, as well as how 
to ensure meaningful access for limited English proficient speakers and 
believes no additional changes to Sec.  982.301 are warranted.

4. Approval of Assisted Tenancy (Sec.  982.305)

60-Day HAP Contract Execution in Sec.  982.305(c)(4)

    A commenter disagreed with HUD's proposal to require a 60-day 
period to execute a HAP contract and a lease term and noted that 
requiring PHAs to get permission from HUD to execute a HAP contract in 
cases exceeding the 60-day period is unnecessary because it is not in 
the interest of the parties to unnecessarily delay the process. As an 
alternative, the commenter suggested increasing the contract execution 
time from 60 days to 90 days to eliminate the need for any additional 
action from the PHA or HUD and require PHAs to notify HUD when the PHA 
goes beyond the 60 days, so that HUD can track the prevalence of the 
extensions requests and re-examine this policy in the future while 
avoiding administratively burdening PHAs and landlords.
    Another commenter did not support a maximum 60-day timeframe 
between lease effective date and the date of HAP contract execution. 
The commenter opined that many HCVs are lease-in-place vouchers in rent 
stabilized units, so PHAs cannot request that the owner sign a new 
lease at the start of the subsidy without violating local rent laws.
    HUD Response: HUD appreciates the comments and clarifies that the 
requirement to execute a HAP contract no later than 60 days from the 
beginning of a lease term is already a requirement under current 
regulations at Sec.  982.305(c)(4) and not newly proposed. HUD also 
understands the concerns of commenters around extenuating circumstances 
and believes that the proposed change to allow a PHA to request an 
extension of HUD sufficiently addresses those concerns. Therefore, HUD 
will finalize Sec.  982.305(c)(4) as proposed.

5. Eligible Housing (Sec.  982.352)--Independent Entity Functions and 
Compensation

Questions 5 and 6: Functions, Other Than Those Identified in the 
Proposed Rule, That an Independent Entity Should Perform in the Case of 
PHA-Owned Units

Functions of Independent Entities
    Commenters opposed adding duties to independent entities. One 
commenter stated the functions identified in the proposed rule are the 
same as the current regulation, and that no other functions should be 
authorized to an independent entity. Another commenter stated that HUD 
should not require independent entities to perform other functions 
beyond those proposed because doing so would increase the costs as well 
as decrease funding availability for other program functions. One 
commenter stated that the independent entity requirements should be re-
examined so that PHAs are not burdened by the oversight of such 
entities, and that PHAs should be entrusted to carry out the 
activities, such as ensuring compliance with selection process, 
inspections and rent setting--just as PHAs are under the public housing 
program. The commenter suggested having the PHAs carry out these duties 
with proper documentation and subject to review through the required 
annual independent audit.
    Another commenter disapproved of HUD requiring an independent 
entity to conduct duties that the PHA can do itself, such as approve 
contract renewals, conduct inspections, and conduct rent reasonableness 
tests. The commenter further emphasized the burden of using independent 
entities for activities, such as performing inspections because there 
is a shortage of vendors trained in UPCS-V protocol, and many PHAs 
conduct rent reasonableness tests through third-party software, making 
the need for independent entities obsolete. The commenter recommended 
that HUD require an independent entity to conduct inspections only for 
special inspections or compliance to lessen the PHA's burden. While 
another commenter noted that HUD's proposed list of activities to be 
performed by an independent entity is too long, suggesting HUD 
reconsider the requirement that an independent entity receive evidence 
that the PHA is following regulations during the development activity 
or rehabilitation. This commenter noted that there are already several 
layers of review at local and Federal levels, and that, in the case of 
mixed-finance, HUD may have already reviewed the transaction.
    A commenter further suggested that independent entities not be 
required to review awards of Low-Income Housing Tax Credits (LIHTC) or 
HOME Investment Partnership Program (HOME) funds, as well as PHA-owned 
project selections and stated that HUD should defer to the PHA to 
determine when revitalization of a former public housing site is 
needed. Additionally, the commenter objected to the requirement that 
independent entities (rather than PHAs) must determine any rent 
adjustments by an OCAF as part of their rent calculation 
responsibilities for any PHA-owned units.

[[Page 38247]]

    HUD Response: HUD agrees that no additional duties need to be added 
to the independent entity functions but for the addition of one 
function under Sec.  983.57 requiring the independent entity to approve 
substantial improvement on units under a HAP contract in accordance 
with Sec.  983.212 (see the discussion of Sec.  983.57 later in this 
preamble). HUD has consistently maintained that PHAs cannot 
appropriately perform any function that would present a clear conflict 
for units they own. 42 U.S.C. 1437f(o)(11) reflects this view by 
requiring that the unit of general local government or a HUD-approved 
independent entity perform inspections and rent determinations. In 
addition, while the PHA is generally responsible for selecting PBV 
projects in accordance with Sec.  983.51, including developing the 
procedures for submission and selection of PBV proposals, HUD believes 
that, to ensure fairness and impartiality, it is necessary for an 
independent entity or the HUD field office to review the selection 
process the PHA undertook and determine that the PHA-owned units were 
appropriately selected based on the selection procedures specified in 
the PHA Administrative Plan. Finally, as previously noted, PHAs are 
statutorily prohibited from determining rents for PHA-owned units; 
calculating the amount of the reasonable rent and any rent adjustments 
by an OCAF are integral parts of the process. Accordingly, HUD 
maintains the requirement that the independent entity must calculate 
any rent adjustments by an OCAF for PHA-owned units.
Independent Entity Compensation
    A commenter suggested that HUD expressly permit a PHA to seek 
reimbursement of independent entity expenses from project owners as 
operating costs.
    HUD Response: Independent entity functions are not a project 
owner's responsibility. Tasks performed by the independent entity are 
administrative functions that the PHA would otherwise be performing if 
the units did not meet the definition of PHA-owned. PHAs may therefore 
compensate the independent entity from PHA administrative fees 
(including fees credited to the administrative fee reserve).
Support for PHAs Keeping Documents
    Commenters supported PHAs keeping rent reasonableness and 
inspection documents and providing copies to the field office only upon 
request. A commenter noted that this is not required for non-PHA-owned 
units, and the field offices lack capacity to review these reports.
    HUD Response: HUD retains the language proposed at Sec.  
982.352(b)(1)(v)(A) requiring rent reasonableness and HQS information 
be communicated to the family and PHA, but not submitted to HUD unless 
upon request. HUD agrees that this framework balances HUD's interest in 
proper oversight and PHAs' administrative burden.

6. Establishment of Life-Threatening Conditions (Sec.  982.401(o))

    Some commenters approved of the list of Life-Threatening Conditions 
(LTCs). Other commenters suggested that the list should include other 
items such as mold, due to its harmful impact on individuals with 
respiratory and immune deficiencies; non-functioning locks; roaches; 
asbestos; radon; rat infestations; non-functioning heating or hot water 
systems; properties determined uninhabitable by a city agency; 
inability of heating system to maintain a minimum of 55 degrees 
Fahrenheit during cold season; utilities not in service; an absence of 
a functioning toilet; and missing exterior doors or windows. Another 
commenter stated that a missing lightbulb should not be an LTC.
    One commenter suggested condensing and summarizing the list, as a 
high level of detail could lead to errors in inspections when multiple 
criteria must be met to be considered an LTC. Another commenter 
supported HOTMA's streamlining changes but stated that it is 
unwarranted to find minor HQS violations as a safety hazard or a reason 
to terminate HAP assistance. A separate commenter recommended that HUD 
immediately update the HQS inspector checklists to accurately reflect 
LTCs. Another commenter recommended that HUD only require the list for 
initial inspection and not for regularly scheduled annual or biennial 
inspections.
    One commenter stated that HUD should clarify that a unit without a 
carbon monoxide (CO) detector should not be considered an LTC if there 
is no CO source in the unit. Another commenter urged HUD not to add CO 
detectors to HQS through HOTMA and instead ensure consistency across 
HUD programs by implementing statutory CO requirements through 
standalone rulemaking. One commenter suggested that voucher applicants 
and those moving with continued assistance should receive notice of 
proximity to a Superfund site or contaminated sites on the National 
Priorities List (NPL) at application, lease signing, and at 
recertification. This commenter also recommended that HUD expand its 
Memorandum of Understanding (MOU) with the EPA, which is currently 
limited to Project-Based Rental Assistance (PBRA) and public housing, 
to all forms of HUD assistance, and suggested HUD and EPA map all 
assisted projects and their proximity to sites on the NPL.
    Commenters also suggested that PHAs should be allowed to add other 
conditions into their Administrative Plan. A commenter suggested that 
HUD allow PHAs to continue using their own pre-existing definitions as 
a replacement for HUD's NLT definitions. A commenter urged HUD not to 
require PHAs to adopt the NLT provisions as a prerequisite for adopting 
alternate inspections. One commenter stated that HUD should only 
require PHAs to outline deviations from the definition of ``life-
threatening conditions'' in the Administrative Plan instead of 
repeating HUD's regulations. Another commenter suggested HUD waive the 
on-site inspection requirement when PHAs use alternative procedures to 
correct NLT deficiencies.
    One commenter suggested that HUD undertake a thorough and public 
examination with significant stakeholder outreach and participation 
before changing to the proposed list of LTCs, which is based on UPCS-V 
and imposes a higher standard than is currently required.
    Commenters opposed the expansion and addition of new HQS fail items 
being categorized as life-threatening because it would limit the PHAs' 
ability to consider local conditions and hinder applicants from quickly 
accessing their units.
    HUD Response: HUD has decided not to finalize the revisions in the 
proposed rule to Sec.  982.401 through the HOTMA final rule. All 
comments made through this HOTMA rulemaking process were taken into 
consideration in the drafting of the NSPIRE Standards Notice. 
Commenters had another opportunity to provide feedback through that 
notice, published to the Federal Register (87 FR 36426) on June 17, 
2022. All current LTCs are defined in the final NSPIRE Standards Notice 
(88 FR 40832) published June 22, 2023. All future updates to the LTC 
list will also be subject to notice and comment in the Federal 
Register.

7. Enforcement of HQS (Sec. Sec.  982.404, 983.208)

Usage Suggestions for Abated Funds

    Commenters suggested various usages for abated funds, such as 
security

[[Page 38248]]

deposits, portion of rent, costs for families moving due to the 
termination, application fees, and other mandatory expenses.
    A commenter suggested relocation assistance for affected tenants 
should be mandatory, using funds from the abated PBV HAP or TPVs. 
Commenters also stated that the proposed rule is unclear as to whether 
the security deposits and moving costs are the only eligible expenses 
or if the PHA can determine additional expenses and suggested that the 
PHAs should determine what comprises eligible assistance expenses and 
refer to the URA cost schedule for moving costs.
    HUD Response: HUD appreciates these comments on the use of TPVs and 
abated funds. With respect to TPVs, these vouchers are not provided in 
connection with PBV contract terminations or abatement of assistance. 
In addition, HUD cannot mandate the use of abated funds for relocation 
assistance to families. The statute does not require the PHA to use 
abated funds for relocation assistance; instead, it provides the PHA 
with discretion to use funds for this purpose. Specifically, section 
8(G)(vii)(III) of the 1937 Act states: ``The [PHA] may provide 
assistance to the family in finding a new residence, including use of 
up to two months of any assistance amounts withheld or abated . . . for 
costs directly associated with relocation of the family to a new 
residence, which shall include security deposits as necessary and may 
include reimbursements for reasonable moving expenses incurred by the 
household, as established by the Secretary.''
    Consistent with the statutory language, and in response to the 
comments regarding the eligible expenses that may be covered, HUD has 
provided additional language regarding the permitted uses of abated 
funds for relocating tenants. Specifically, HUD has added that PHAs may 
assist families in finding a new unit, including using up to two months 
of the withheld and abated assistance payments for costs directly 
associated with relocating to a new unit, including security deposits, 
temporary housing costs, or other reasonable moving costs as determined 
by the PHA based on their locality. HUD has further clarified that if 
the PHA is using withheld or abated assistance payments to assist with 
the family's relocation costs, the PHA must provide security deposit 
assistance as necessary, as required by the statute.

Protection of Tenants

    Many commenters suggested going further to protect tenants from 
evictions and subsidy terminations in the event their unit fails an HQS 
inspection. Commenters warned that the proposed rule would allow PHAs 
to abate and terminate an entire HAP contract if a single unit fails 
HQS and tenants may face higher rent under HCV rules or face an owner 
that evicts them despite the regulatory language.
    Commenters stated that withholding HAP during the cure period for 
HQS violations may create an incentive to evict tenants. Commenters 
recommended HUD require that tenants cannot be held liable for amounts 
of HAP withheld or abated, such abatement is not grounds for eviction, 
and tenants cannot be held liable for their own portion of the rent 
during abatement. A commenter noted that, in some cases, the PHA 
withholds HAP for HQS violations that are not an immediate threat to 
health and safety and do not warrant a tenant to withhold rent under 
State law and HUD should clearly state that when the PHA is relieved of 
paying back rent, the tenant is as well, despite any State law 
discrepancies regardless of State law unless the State law provides 
stronger tenant protections. A commenter further expressed that when 
HAP is abated, the tenants should be notified.
    Commenters recommended that HUD explicitly state that if a PHA 
terminates a PBV HAP contract based on a breach of conditions 
requirements, any of the units that continue to meet or have been 
brought into compliance with HQS requirements should be allowed to 
continue under the program. Another commenter recommended that HUD 
should specify in Sec.  982.404(d)(2)(ii) that the family's assistance 
may only be terminated in accordance with Sec.  982.555 if a family 
fails to move within the allotted time. A commenter also suggested that 
HUD clarify Sec.  982.404(e)(1) to include that a PHA may extend the 90 
days for families as needed based on individual circumstances, without 
HUD approval, and state that for relocation protections, public housing 
includes properties either pre- or post-conversion under RAD, section 
18, or other provision of law, not to include section 9 public housing.
    One commenter requested further clarity on whether the requirement 
for families to be provided at least 90 days to find a new unit after 
the HAP contract is terminated, refers to 90 calendar days or 90 
``tolled'' days of voucher time, which is required under the Family 
Move regulations.
    A commenter also stated that a PHA must provide a preference to 
families who relocated due to HQS deficiencies. This commenter sought 
clarification from HUD on whether the preference for the public housing 
waiting list would take precedence over other existing public housing 
preferences. Another commenter stated that HUD's proposed language in 
Sec.  982.404(e)(2) does not consider that PHAs need to manage limited 
vacancies to best serve the residents already within the public housing 
program, or for the many applicants on that program's waiting list. 
This commenter recommended that HUD modify the proposed language within 
Sec.  982.404(e)(2) to clarify that HCV family participants transfer 
into public housing units shall not take preference over the PHA's 
needs for a Section 504, VAWA, or other emergency need.
    One commenter stated that HUD providing a public housing preference 
for families affected by HCV abatements unable to find a new voucher 
unit would potentially lead to decreased mobility for HCV participants. 
The commenter suggested that it would be advantageous to allow payments 
up to 120 percent of fair market rents for such families, which would 
enable them to access higher rental markets within the spectrum of ZIP 
codes served by the PHA. This commenter agreed with the HOTMA language, 
permitting the PHA to 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 because 
these provisions would provide greater mobility to HCV families.
    HUD Response: The language giving PHAs the option to withhold HAP 
during the cure period is required under HOTMA. In response to the 
comment regarding procedures under Sec.  982.555, HUD cannot override 
State and local law regarding enforcement of the lease agreement. HUD 
has further clarified that tenants relocated due to an HQS deficiency 
must be given a selection preference by the PHA for public housing, 
where applicable. HUD has clarified that the PHA must issue the family 
a voucher to move at least 30 days prior to termination of the HAP 
contract.
    HUD has clarified that the requirement for families to be provided 
at least 90 days to find a new unit after the HAP contract is 
terminated, refers to 90 calendar days.
    HUD appreciates the suggestion to allow payment standards up to 120 
percent of FMR. This change is not necessary as PHAs may currently 
apply for 120 percent fair market rents and/or SAFMRs under 982.503, 
which provides for expanded access to rental markets

[[Page 38249]]

for all families. FMRs are established for entire geographies, and not 
on a case-by-case basis, except in the case of a reasonable 
accommodation exception payment standard (RA EPS) for people with 
disabilities.
    HUD appreciates the recommendation that HCV participant transfers 
should not take preference over Section 504, VAWA, or other emergency 
transfers. HUD agrees and finds that 24 CFR 982.404(e)(2) as drafted in 
this final rule is sufficient and notes that Section 504 transfers must 
occur under the requirements of 24 CFR part 8, including 8.28, and VAWA 
emergency transfers must occur in accordance with HUD's VAWA 
regulations at 24 CFR part 5, subpart L, and program regulations.

Withholding HAP Harms Landlords

    A commenter warned that withholding HAP during the 30-day 
correction period would hurt smaller landlords and potentially 
discourage them from future participation.
    HUD Response: This language cannot be changed because the option 
for PHAs to withhold HAP during the cure period is required under 
HOTMA.

Mandatory Termination

    A commenter opposed requiring a mandatory termination after 180 
days of abatement because it would be an administrative burden and 
decrease availability of subsidized housing. Another commenter 
suggested clarification on whether the plural ``HAP contracts'' at 
Sec.  982.404(a)(2) reflects other contracts for units besides 
noncompliant contracts would be terminated due to the HQS noncompliance 
of one unit. Another commenter suggested that the 180-day proposed 
timeline for termination is a reasonable balance of interests, as 
required by statute.
    HUD Response: HUD has maintained the language around mandatory 
termination because HUD finds it necessary given the importance of 
assisted families' housing meeting quality standards. The 180 days 
maximum is consistent with Sec.  982.455.
    HUD has updated Sec.  982.404(a)(2) to read that if the owner fails 
to maintain the dwelling unit in accordance with HQS, the PHA must take 
enforcement action in accordance with this section.

Include Renewed Contracts or HAP Contracts Entered Into After the Rule 
Implementation

    A commenter stated that HUD should expand this rule to include 
renewed HAP contracts or HAP contracts that are entered into after the 
rule's implementation.
    HUD Response: This final rule applies to both new HAP contracts and 
HAP contracts renewed after this rule is implemented.

90-Day Voucher Terms

    One commenter supported the 90-day voucher terms for contracts 
cancelled due to abatement.
    HUD Response: HUD appreciates the supportive comment.

PHA Discretion To Waive and Reimburse

    A commenter also recommended clarifying in Sec.  982.404(a)(4) that 
the PHA has discretion to waive the requirement making the owner 
responsible for correcting deficiencies where the damage is not from 
ordinary use, and that the waiver is not just the requirement to be 
responsible for the deficiency, but the applicability of the entire 
subparagraph including abatement and withholding provisions. This 
commenter also urged HUD to clarify that PHAs have the discretionary 
authority to reimburse the property owner either for a portion or all 
HAP amounts withheld, which the commenter stated is clearly provided 
within HOTMA.
    HUD Response: HUD has clarified in this final rule that the PHA 
must identify in its Administrative Plan both the conditions and 
amounts for withholding HAP. This also includes the conditions and 
amounts of payments made for the period HAP was withheld.

Monitoring

    One commenter suggested that HUD monitor how many PHAs reimburse 
funds and review their reimbursement policies.
    HUD Response: HUD appreciates this suggestion and will consider 
this outside of this rulemaking.

Tenant-Caused Damage

    Commenters addressed whether the tenant or PHA should be 
responsible for repairs to unit damages. One commenter suggested that 
HUD provide an exception for Sec.  982.404(a)(4) to address damages 
that have been caused by domestic abusers and obligate PHAs to require 
the owner to make the repairs in instances of domestic abuse. This 
commenter also suggested not using incidents of abuse as a means to 
terminate a survivor's tenancy and to allow the PHA and owner to take 
all legal action against the abuser for the damage.
    Another commenter found the regulations to be confusing and 
potentially in conflict with State laws and local practice because in 
many states tenants are prohibited from carrying out their own repairs. 
The commenter suggested that for HUD to shift responsibility to the 
tenant to make the repairs, then HUD should place a higher burden on 
the landlord. The commenter additionally recommended that, if the 
landlord charges the tenants for repairs to tenant-caused damage, HUD 
should require a reasonable repayment plan and that the PHA must 
continue to pay the HAP during the term of the repayment agreement, so 
long as the tenant continues to abide by the terms of the lease. This 
commenter suggested the repayment plan allow landlords to charge an 
initial fee, which must not exceed 40 percent of the tenant's income, 
and then impose a reasonable period for the tenant to pay the remainder 
to the landlord, with longer repayment periods for tenants facing 
financial hardship. This commenter also recommended PHAs should 
terminate a HAP contract due to tenant-caused damages only after 
remedies, consistent with State landlord-tenant laws, have been 
exhausted and HUD should encourage maintaining units as part of the 
low-income housing stock.
    Another commenter recommended that HUD revise Sec.  982.404(a)(4) 
and (b)(2) as well as the procedure in the case of tenant-caused 
damages, consistent with HOTMA section 101(a)(3). Another commenter 
suggested waiving HQS deficiencies caused by tenants from the 
landlord's responsibility.
    HUD Response: HUD appreciates the comments around tenant-caused 
damage to the unit. HUD has revised Sec.  982.404(b)(2) and Sec.  
983.208(c)(2) to clarify that in cases of tenant-caused deficiencies, 
the tenant is not necessarily required to physically correct the 
deficiencies themselves. Rather, the tenant is responsible for ensuring 
that the deficiencies are corrected by taking all steps permissible 
under the lease and State and local law, which might include paying the 
owner for the costs of the necessary repairs. HUD has not gone further 
to require a PHA to establish a specific repayment plan. HUD has 
further revised Sec.  982.404 at paragraph (a)(4) and Sec.  983.208 at 
paragraph (b)(3) to better align with HOTMA section 101(a)(3) in terms 
of when the PHA may waive the landlord responsibility for HQS 
deficiencies that have been determined to have been caused by the 
tenant, any member of the household, or any guest or other person

[[Page 38250]]

under the tenant's control, other than damage resulting from ordinary 
use.
    HUD has chosen not to add specific language around tenant damages 
caused by domestic abusers in this section. However, all VAWA housing 
protections under 24 CFR part 5, subpart L apply. HUD appreciates the 
commentor's suggestion but has not added a regulatory requirement for a 
repayment plan for owner correction of tenant-caused deficiencies. HUD 
is concerned that imposing additional restrictions on the owner in 
terms of how and when the owner can recover amounts owed under the 
lease will discourage owner participation in the HCV program. Nothing 
in the final rule would prevent the owner from choosing to offer a 
repayment plan to the family. However, the manner in which the owner 
may collect amounts owed under the lease for tenant-caused damages 
should continue to rest with the owner, subject to the terms of the 
owner's lease.

Remote Visual Inspections

    Another commenter stated that Remote Visual Inspections (RVI) 
should not be used to verify a HQS deficiency correction where there is 
a life-threatening condition on the property. The commenter suggested 
HUD should require PHAs to conduct in-person inspections prior to a 
family moving into a unit that failed HQS for health and safety 
reasons. This commenter expressed that PHAs should be required to 
independently check for lead hazards in any Housing Choice Voucher 
(HCV) home and warned that the proxy to test for lead-based paint after 
watching a short video is insufficient. This commenter recommended a 
select use of RVI to reduce administrative burdens for PHAs and 
increase the speed at which voucher tenants can lease-up, without 
impacting the family's health.
    HUD Response: HUD appreciates this comment but is not addressing 
the use of RVI in this rule.

8. PHA Initial Unit Inspection (Sec.  982.405)

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?

    Commenters found HUD's proposed deadline reasonable because the 
adoption of the Non-Life-Threatening (NLT) process is optional. A 
commenter suggested that HUD include additional time in case a resident 
does not want to move and requests a ``final appeal,'' or courtesy 
inspection to remain in the unit if the deficiency is now remedied. 
Another commenter stated that HUD's proposal to allow flexibility in 
the rule for inspections and notification of deficiencies is adequate, 
and that the 30-day extension for inspections will permit adequate time 
for PHAs and owners to schedule the inspection and discuss 
deficiencies. One commenter stated that 24 hours for a PHA to notify 
the owner of any life-threatening deficiency is reasonable, but the 
commenter also suggested extending the timeline to inspect a unit and 
notify the landlord for emergency items to two days.
    Commenters supported HUD maintaining the current timelines for 
inspections and repairs due to PHAs' discretion over whether to 
undertake the LTC/NLT process. One commenter offered 15 days to repair, 
and another commenter suggested PHAs have absolute discretion to 
establish their own timelines. Another commenter opposed the 30-day 
repair requirement because PHAs would be required to define what 
constitutes ``receipt of written notice'' in their Administrative Plan, 
which can present a challenge for PHAs that do not use email. A 
commenter recommended modifying Sec.  983.103(c)(2) to specify that the 
30-day inspection period applies if a PHA adopts the NLT exception to 
inspections.
    Another commenter stated that HUD should extend the timeline for 
emergency inspections from 48 to 72 hours. This commenter further 
suggested that PHAs should be required to adopt HUD's NLT definition 
only if they implement the NLT inspection option. One commenter 
suggested that HUD clarify that the 24-hour correction period for LTCs 
should only apply when the family is in the unit, and that if the HAP 
is not being paid while the family is waiting for the landlord to 
correct a deficiency, the family is also not responsible for making the 
HAP payment. Another commenter stated that HUD is unnecessarily 
requiring NLT repairs to be made within 30 days of the owner receiving 
written notice of the defects, and that it is unclear whether requiring 
PHAs to proactively waive an owner's responsibility to correct defects 
will be conducted on a policy level or whether it will be conducted on 
a case-by-case basis, ultimately requiring notification.
    HUD Response: HUD appreciates the multiple comments about the 
timeframes for unit inspections and believes the timeframes in the 
proposed rule were reasonable. HUD notes that the requirements under 
NLT are distinct from other inspection types and HUD believes that it 
is reasonable for NLT repairs be made within 30 days, given that 
application of the NLT provision is voluntary, and, under the NLT 
provision, the unit has never been in compliance with HQS.
    HUD has clarified that, in the case of tenant-caused deficiencies, 
the owner is responsible until such time as it has been determined that 
the tenant is responsible in a particular case.

9. Housing Assistance Payments Contract (Sec. Sec.  982.451, 983.204)

PHA-Owned Unit Certification Option

    Commenters supported the proposal to not require the creation of a 
separate legal entity, which commenters stated would add costs and 
complexity and negatively impact PHAs participating in RAD and section 
18 conversions. One commenter stated that HUD should not allow a PHA to 
permit certifications instead of HAP contracts, explaining that such 
permission would create ambiguity in other regulations that reference 
HAP contracts but not certifications, hurting those that rely on those 
regulations to enforce and protect the rights of tenants.
    Another commenter suggested adding a statement that phasing groups 
of contract units into the HAP contract is acceptable in Sec.  
983.204(a). This commenter recommended adding, ``or phases thereof'' 
after ``HAP contract,'' for Sec.  983.204(c).
    HUD Response: HUD appreciates the support to not require the 
creation of a separate legal entity. Concerning PHA-owned 
certifications, in order to eliminate ambiguity of cross-references in 
other regulations, HUD has revised the language of Sec. Sec.  
982.451(c)(2), 983.204(e)(2) to clarify that the PHA-owned 
certification serves as the equivalent of the HAP contract as it 
relates to the obligations of the PHA as owner and that, where the PHA 
has elected to use the PHA-owned certification, all references to the 
HAP contract throughout parts 982 and 983 shall be interpreted to be 
references to the PHA-owned certification.
    Further, HUD determined the explanation of how to implement staged 
completion of contract units would be more appropriate in Sec.  
983.156. Therefore, HUD has added a paragraph addressing the 
commenter's concern to Sec.  983.156 and has cross-referenced Sec.  
983.156 in Sec.  983.204(c).

PBV HAP Contract Effective Date

    Another commenter stated that HUD should not establish a required 
maximum 60-day timeframe between the lease effective date and the HAP 
contract execution date, since complex

[[Page 38251]]

development and financing timetables may make the timeframe too short. 
Instead, the commenter recommended a 120-day period before a HAP 
contract is required to be prospective for PBV projects.
    HUD Response: The commenter seems to conflate the rules between the 
tenant-based and project-based voucher programs, as evidenced by 
submitting the above comment under the heading of Sec.  982.305. The 
long-standing requirement in the PBV program is that the effective date 
of a PBV HAP contract must be on or after the execution date of the PBV 
HAP contract, and the HAP contract must be effective before the 
effective date of the first lease covering a contract unit occupied by 
an assisted family. HUD has clarified this requirement at Sec.  
983.204(d).

10.A. Payment Standard Schedules and Basic Range Amounts (Sec.  
982.503(b) and (c))

    One commenter suggested that HUD revise Sec.  982.503(c)(3) to 
refer to 90 days instead of three months for consistency.
    HUD Response: This is current regulatory language, and no change 
was proposed in the rule. HUD, therefore, makes no changes in this 
final rule.

10.B. Exception Payment Standards (Sec.  982.503(d))

Greater Flexibility To Reduce Administrative Burden (Question 7)

    Several commenters stated that HUD should provide greater 
flexibility to PHAs to establish exception payment standards without 
HUD approval to reduce PHAs' administrative burden and allow more rapid 
responses to changing rental markets. Another commenter stated that HUD 
should grant PHAs this flexibility if the PHA has the budget authority 
to support the increased payment standard as demonstrated by HUD's Two-
Year Tool, which calculates the PHA leasing potential considering 
current Voucher Management System (VMS) data, HUD-held reserves (HHR), 
and Budget Authority (BA). This commenter remarked that HUD's Payment 
Standard Tool can also be used to establish exception payment 
standards.
    One commenter expressed that HUD should allow exception payment 
standards for individual projects rather than require PHAs to apply 
exception payment standards to every project in the same ZIP code.
    HUD Response: HUD appreciates the comments about the need for 
greater flexibility in establishing exception payment standards. In 
response to these comments, HUD will allow PHAs to go up to 120 percent 
of the published fair market rent upon notification to HUD so long as 
the PHA meets the required thresholds as set forth in 24 CFR 
982.503(d)(3). HUD disagrees with the comment that PHAs should be 
allowed to establish different payment standards for individual 
projects rather than the same payment standard for the applicable 
geographic area. 42 U.S.C. 1437(f)(o)(13)(H) requires that rents 
established under PBV HAP contracts must not exceed 110 percent of the 
applicable FMR, or any exception payment standard approved by the 
Secretary for the HCV program. Accordingly, there is no statutory 
authority to establish exception payment standards for individual PBV 
projects. HUD will continue to require PHAs to adopt one payment 
standard for an applicable geographic area.
Allow Higher Payment Standards
    Commenters generally urged HUD to allow for higher payment 
standards. Commenters stated that higher standards would allow PHAs to 
expand geographic choices, allow families to stay in gentrifying 
neighborhoods, and make the SAFMR exception payment tool more cost-
effective to expand housing opportunities in low-poverty areas. A 
commenter reasoned that in cases where the PHA chooses not to seek HUD 
approval, families would benefit from a higher SAFMR, which would 
ensure the prudence of policy because rents would remain subject to 
reasonableness.
    Another commenter suggested that increased payment standards up to 
120 percent of the SAFMR should apply for ZIP codes with SAFMRs that 
exceed the regional FMR. One commenter stated that PHAs should have 
discretion to set exception payment standards up to 150 percent of 
SAFMR. Commenters also supported HUD's proposed policy at Sec.  
982.503(d)(4) and (e)(1) allowing PHAs to choose to set payment 
standards up to 110 percent of the SAFMR without HUD approval, and 
asked HUD to clarify this allowance by explicitly stating it in Sec.  
982.503(d)(2). The commenters stated many PHAs are unaware of the 
flexibility the policy described in Sec.  982.503(d)(2) provides them.
    Commenters stated that HUD's proposal in Sec.  982.503(d)(2) to 
require the lowest SAFMR in an area with more than one FMR constrains 
PHA authority and HUD should instead allow PHAs to utilize the highest 
FMR. As an alternative, a commenter recommended that HUD implement a 
threshold that is not dependent on the FMR and instead use a threshold 
that is reflective of the risk of excessively high payment standards. 
Another commenter stated that HUD should rely on its own ZIP code 
grouping guidance, which allows PHAs to set payment standards for a 
group of ZIP codes as long as the payment standard is 90 to 110 percent 
of the SAFMR of each ZIP code in the group. This commenter also stated 
that SAFMRs are burdensome and undesirable for PHAs to determine 
payment standards, and as an alternative, PHAs should be allowed to 
provide data to HUD and have the local field office approve the payment 
standards based on actual current market data. The commenter noted that 
there is no reason to change the ability of owners to request increases 
below 110 percent of the FMR or the reasonable rent.
    A commenter supported payment standard increases as providing 
stability to families and landlords but urged HUD to ensure that rent 
increases occur at a reasonable rate and not forced with an abrupt 
increase.
    HUD Response: HUD agrees with the numerous public comments in 
support of allowing higher payment standards. This final rule allows 
PHAs to set payment standards up to 120 percent of the FMR upon 
notification to HUD that the PHA meets certain criteria. Since the 
publishing of the proposed rule, HUD has also seen the success of PIH 
Notice 2022-09, and successor notices, which provided a streamlined 
regulatory waiver process for PHAs to establish payment standards from 
111 to 120 percent of the FMR. Given this, HUD decided that added 
flexibility to set payment standards up to 120 percent of FMR is 
sufficient and notes that there are other avenues for PHAs to request 
to establish payment standards at higher levels.
    HUD notes that Sec.  982.503(d)(2) does explicitly allow PHAs that 
are not in designated SAFMR areas or have not opted voluntarily to 
adopt SAFMRs to establish exception payment standards up to 110 percent 
of SAFMR without HUD approval. Additionally, HUD will allow PHAs to 
opt-in to the SAFMR by notification to HUD, rather than requiring HUD 
approval by modifying Sec.  888.113(c)(3).
    HUD does not agree that requiring the lowest SAFMR in an exception 
area that crosses one or more FMR boundaries constrains PHA authority. 
Each ZIP code, regardless of whether it crosses one or more FMR 
boundaries has one established SAFMR amount. Therefore, a PHA adopting 
ZIP code-based SAFMRs will only have one SAFMR to choose from, which is 
how many PHAs establish exception payment standards

[[Page 38252]]

using the SAFMR under this provision. However, in some cases, PHAs 
group ZIP code-based SAFMRs into one FMR area to reduce administrative 
burden. In the case of grouping, the basic range of all of the selected 
ZIP codes is still applicable. Therefore, in lieu of establishing a 
unique payment standard for each ZIP code area, a PHA may use this 
flexibility to establish payment standards for ``grouped'' ZIP code 
areas, provided the payment standard in effect for each grouped ZIP 
code area is within the basic range of the SAFMR for each ZIP code area 
in the group. As a result, HUD finds that the policy is reasonable and 
will continue with this final rule as proposed. HUD also notes that 
Sec.  982.503(d)(4) allows PHAs the opportunity to provide rental 
market data to HUD to support their request for exception payment 
standards.
Consolidation of Exception Payment Standard Requirements
    A commenter supported consolidating exceptions to payment standards 
in a single location.
    HUD Response: HUD appreciates this comment and in this final rule 
HUD consolidates exception payment standard regulations in Sec.  
982.503(d).
Rental Market Data
    Several commenters opposed HUD requiring PHAs to submit rent 
comparability studies or require certification of the rental market 
data in exchange for higher payment standards. A commenter stated that 
HUD does not indicate that PHAs are providing insufficient rental data 
in requests for an exception payment standard. Commenters also noted 
that HUD requiring data for exception payment standards to be prepared 
through a market study or by a certified appraiser is administratively 
and financially burdensome for PHAs. One commenter proposed that HUD 
establish a procedure to extend payment standards in rapidly changing, 
low-vacancy, and high-cost rental markets, seeing as there are existing 
mechanisms to request exception payment standards within the HCV 
program. Other commenters proposed that HUD accept data from various 
sources including local market studies from the PHA or other local 
entities that use data from a reputable or verifiable source, online 
surveys of the local renter community, PHAs that use a third-party 
vendor to conduct rent reasonableness for rental market data, rental 
market studies prepared by institutions of higher education, industry 
data, or the rent reasonableness evaluations.
    A commenter proposed that HUD expand access to data on low-vacancy 
areas by unit size and exclude public housing developments from 
calculating FMR/SAFMR because a concentration of low rent units in 
large public housing developments are in exception payment standard 
areas. The commenter further stated that when there are differentials 
with the ACS data, HUD should allow PHAs to provide local data if the 
data is available.
    Another commenter encouraged HUD to establish clear rental data 
standards for the exception payment standards that require HUD's 
approval to decrease the administrative burden so that PHAs can obtain 
justified exceptions, while simultaneously providing reasonable 
assurance that the higher standard is needed to cover market rents in 
the area.
    Another commenter stated that the exception payment standard 
assessment HUD requires for a PHA should be easily accessible to under-
resourced PHAs and that HUD should provide funding grants to PHAs that 
will conduct a study for purposes of applying for an EPS. The commenter 
also stated that HUD should require PHAs to make their assessments of 
rental market data and rent comparability data publicly available, 
because this would improve advocates' and residents' understanding of 
the PHA's assessment of the rental market, as well as create 
transparency and an opportunity to challenge FMR policies that do not 
further fair housing goals. One commenter recommended that HUD set the 
data requirements by notice for easier adjustment based on lessons 
learned and when new types of data become available.
    HUD Response: HUD appreciates the comments and intends to issue a 
PIH notice with further clarification regarding data that must be 
submitted in support of an exception payment standard request. However, 
under this final rule at Sec.  982.503, PHAs no longer must submit 
supporting data for exception payment standard requests between 110 and 
120 percent of the FMR if they notify HUD that they meet certain 
criteria. Additionally, data submitted for exception payment standards 
greater than 120 percent usually relies on American Community Survey 
and Census data, and therefore is available to the public already.

Responses to Question 8 (Maximum Cap)

    Several commenters objected to HUD's maximum cap on exception 
payment standard amounts due to differences in high-cost markets and 
requested PHA flexibility. A commenter stated that limits on exception 
payment standards should be data driven. Another commenter recommended 
that HUD ensure that PHAs are setting payment standards to 
affirmatively further fair housing and reduce voucher concentration in 
high poverty communities, considering that some studies have shown that 
most SAFMR PHAs set higher payment standards in low-opportunity 
communities and lower payment standards in higher-opportunity 
communities. The commenter further suggested that HUD require PHAs to 
submit rent comparability studies and payment standard schedules to 
HUD, so that HUD can easily review them and compile them in a national 
database. According to the commenter, the database would easily allow 
voucher holders to explore their options regarding portability moves 
and would help HUD and advocates ensure that payment standards comply 
with the applicable requirements.
    A commenter stated an additional level of scrutiny is reasonable 
for PBVs, because requiring approval for an exception payment standard 
above 120 percent of FMR for project-basing vouchers could prevent 
abuse and make development deals financially acceptable and profitable 
for developers. A commenter stated that HUD should allow exception 
payment standards, even if they are high, if there is data showing that 
the higher standard is needed to cover typical market rents in an 
exception area. The commenter expressed that instituting a cap 
preventing PHAs from establishing exception payment standards would 
risk excluding voucher holders from areas of the metropolitan area, 
therefore reinforcing economic and racial segregation. In the 
alternative, the commenter suggested that if HUD establishes a cap, it 
should be set high enough to ensure that voucher holders have access to 
a substantial variety of low-poverty and high-opportunity areas, 
including areas where their own racial or ethnic group does not 
predominate. This commenter also recommended that HUD adjust the 
proposed rule to accommodate the use of SAFMRs for non-metropolitan ZIP 
codes and publish SAFMRs for those ZIP codes whenever sufficient data 
is available. The commenter stated that HUD should apply the same 
standard to SAFMRs in non-metro areas as it does in metro areas as well 
as establish SAFMRs in ZIP codes where there are sufficient data and 
defaulting to a county-based FMR in ZIP codes where there are not. The 
commenter added that HUD should

[[Page 38253]]

explicitly state in Sec.  982.503(d)(4) that PHAs may not require 
families to pay more than 30 percent of their income for rent as a 
condition for receiving an exception payment standard for a reasonable 
accommodation. The commenter further noted that the need for exception 
payment standards could be reduced by ensuring that FMRs reflect actual 
market rents, particularly in areas where rents are rapidly rising.
    A commenter encouraged HUD to implement methods for PHAs to 
increase payment standards where appropriate, such as requiring payment 
standards in areas with significant disparity between voucher 
concentration in impoverished neighborhoods and affordable unit 
distribution or financial incentives. The commenter found upper limits 
on exception payment standards as unnecessary and stated that PHAs 
should have maximum flexibility to seek higher standards, as there are 
already natural ``limits'' on requesting excessive rents. In 
conclusion, the commenter objected to using the success rate payment 
standards for metro areas with very low vacancy rates, while requiring 
other metro areas to use the SAFMR flexibilities.
    HUD Response: After considering these comments on HUD's questions 
about instituting a maximum cap on exception payment standard amounts, 
HUD will not institute a maximum cap. HUD recognizes the need to set 
payment standards that are responsive to the rent conditions in 
multiple areas. This final rule also allows voluntary use of SAFMRs in 
non-metropolitan ZIP codes for which HUD publishes SAFMRs, in order to 
provide PHA serving those area greater flexibility to set payment 
standards that reflect local market conditions. While HUD appreciates 
the comments on additional flexibilities, HUD is not making broader 
changes to exception payment standards in this final rule, other than 
those discussed above.

Reasonable Accommodation (Sec.  982.503(d)(4))

    A commenter recommended that HUD clarify that ``FMR boundaries'' 
refers to the ZIP code boundary and not the metropolitan boundary. This 
commenter further emphasized that HUD must revise the payment standard 
regulations as well as revise or rescind inconsistent PIH notices, to 
clearly state that tenants who request a reasonable accommodation for 
an increase in the payment standard are not required to pay 40 percent 
of their income in rent to see the benefits of the accommodation. The 
commenter mentioned that the fair housing laws allow individuals with 
disabilities to request higher payment standards as a reasonable 
accommodation if there is a disability-related need for a particular 
unit (for example, it has accessibility features or is located in 
proximity to services/supports which will be lost if the client has to 
relocate); however, the commenter noted that HUD should add to Sec.  
982.503(d)(4) because HUD has not fully implemented the third sentence 
of the HOTMA-revised section 8(o)(1)(D), which prohibits HUD from 
establishing additional requirements regarding the amount of adjusted 
income paid by a family receiving a reasonable accommodation.
    HUD Response: Tenants who request exception payment standards as 
reasonable accommodations are not required to pay 40 percent of their 
income in order to benefit from the accommodation, so no change to this 
rule is needed in order to achieve that result. HUD will issue guidance 
clarifying this point.

10.C. Payment Standard Below the Basic Range (Sec.  982.503(e))

    A commenter suggested proactive requirements, such as HUD 
establishing limits for when PHAs can set payment standards below the 
basic range (below 90 percent of the applicable FMR) because PHAs have 
financial incentives to set lower payment standards, regardless of 
adverse effects on families. The commenter also recommended that HUD 
require PHAs seeking approval for payment standards below the basic 
range to provide rent data showing that the requested standard would be 
adequate to cover rents and utilities for at least 40 percent of units 
in each ZIP code and show that no more than 40 percent of current 
voucher holders would be required to pay more than 30 percent of their 
income for rent. The commenter stated that HUD should eliminate the 
success rate payment standard option because the SAFMR-based payment 
standard flexibility could effectively accomplish more.
    A commenter opposed HUD's changes to how it will assess requests 
for payment standards below the basic range. The commenter expressed 
that the proposed language threatens the affordability characteristic 
of the voucher program because the proposed language sets low 
assessment standards, does not require PHAs to meet rent burden or 
market rents criteria, and removes the current prohibition on payment 
standards below the basic range at agencies where more than 40 percent 
of voucher families pay gross rents above 30 percent of their adjusted 
income. The commenter encouraged HUD to require PHAs seeking approval 
for a payment standard below the basic range to implement a policy that 
holds families harmless where the reduction in payment standard causes 
an increase in the family's rent. The commenter stated that requiring 
PHAs to hold families harmless would allow PHAs to incentivize new or 
moving voucher families to consider lower poverty communities, while 
not penalizing families who decide to remain in their current home.
    Another commenter objected to HUD's proposal to provide PHAs with 
discretion to determine lower payment standards without HUD approval 
because PHAs cut corners or costs which end up falling on the 
participant. The commenter remarked that lower payment standards tend 
to cause tenants to pay higher rents they cannot afford, and to prevent 
this HUD should ensure tenants will be held harmless should the family 
remain in the unit for a reasonable period until the family can 
relocate to a new affordable unit.
    HUD Response: HUD appreciates the comments and will continue to 
require the PHA to request approval to establish a payment standard 
lower than the basic range. This final rule states that unless 
necessary to prevent terminations, HUD will not approve payment 
standards below the basic range if the payment standard would cause the 
family share to exceed 30 percent of adjusted income for more that 40 
percent of families with tenant-based vouchers.

Responses to Question 9 (Sec.  982.503(h))

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)?
    Commenters stated that 40 percent is a reasonable ``significant 
percentage of families.'' Some commenters stated that a higher 
percentage would create a burden on families before an assessment is 
completed. One commenter stated that HUD should not increase the 
threshold for the share of families paying more than 30 percent of 
their income, as there are already more than 40 percent of voucher 
families paying more than 30 percent, and that HUD should lower the 
threshold below 40 percent. Another commenter stated that available 
data shows that HUD's monitoring has not lowered the cost-burden on 
households below 40 percent, which the commenter stated is a high 
definition of ``significant.'' This

[[Page 38254]]

commenter proposed that HUD require PHAs to raise their payment 
standard and reduce minimum rents when more than 40 percent of families 
pay more than 30 percent of their adjusted income or when success rates 
fall below a certain percentage, so that they must set payment 
standards that avoid rent burdens and allow voucher families to lease-
up.
    HUD Response: HUD appreciates the comments and maintains the 
current regulation measurement of 40 percent being a ``significant 
percentage of families'' as reasonable.
Make Data Public
    Commenters recommended that HUD make the data and evaluations used 
to determine rent burdened percentages public with the opportunity for 
public comment, which would allow voucher holders and other public 
members to know how the PHA is doing.
    HUD Response: Data on rent burden is already public in HUD's two-
year tool and the payment standard tool, which can be accessed at HUD's 
HCV Utilization page at https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/Tools.
Include Rent Burdens in SEMAP
    Commenters suggested that HUD incorporate rent burdens into SEMAP. 
A commenter recommended doing this by adding an indicator measuring 
compliance with the 40 percent standard. Another commenter recommended 
adding two new indicators measuring the portion of assisted families 
that are rent burdened and the percentage of voucher families who are 
not able to lease up within search periods.
    HUD Response: HUD appreciates the comments, but changes to SEMAP 
are beyond of the scope of this rulemaking.
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?
    Commenters objected to HUD's proposal to 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. One commenter stated that HUD's proposed 
standards are arbitrary because PHAs sufficiently conduct internal 
tracking to monitor rent burden and suggested that if HUD implements a 
rent burden standard, then PHAs should be exempt if they show that they 
are trying to address the rent burden issue by using SAFMRs or high 
opportunity payment standards or if they have an adequate success rate 
for voucher holders. Another commenter noted that it is unnecessary for 
HUD to add additional metrics for determining whether HUD should review 
a PHA's payment standards. One commenter suggested that the trigger for 
HUD's review should be when 50 percent of the families pay more than 30 
percent AMI as the family share of the rent. The commenter explained 
that families may stay in a unit and pay more than 30 percent of income 
in tight rental markets where locating a new unit may be financially 
and administratively burdensome. This commenter suggested consistently 
defining ``significant percentage'' in all section 8 programs, defining 
``significant percentage'' in regulation to prohibit PHAs from altering 
the definition, and providing additional information on what a PHA must 
do if the threshold is met.
    HUD Response: As explained above, HUD appreciates the comments and 
maintains the current regulation measurement of 40 percent being a 
``significant percentage of families'' as reasonable. HUD received 
multiple comments in opposition to changing the threshold of families 
paying more than 30 percent of their income as a trigger for review of 
a PHA's payment standard schedule. Therefore, HUD will continue its 
current practice of reviewing a PHA's payment standard schedule when 
HUD finds that 40 percent or more of families occupying units of a 
particular size pay more than 30 percent of their adjusted monthly 
income as the family share.

Responses to Question 10 Regarding Success Rate Payment Standards 
(Sec.  982.503(f))

    Many commenters supported retaining success rate payment standards. 
One commenter objected to HUD tying additional payment standard 
functions to SAFMRs due to the lack of adoption of SAFMRs. Another 
commenter explained that the utility of the success rate payment 
standard is essentially eliminated if PHAs are given the option of 
setting exception payment standards at up to 120 percent of FMR without 
HUD approval, and stated that moving to and from the 40th to 50th 
percentile of rent has an almost identical impact on the resulting 
payment standard. This commenter supported retaining the success rate 
payment standard if HUD approval will still be required for exception 
payment standards above 110 percent of FMR. One commenter opposed 
retaining success rate payment standards. The commenter stated that the 
standards, set at the 50th percentile of the metro FMR, were 
ineffective at the stated goal of increasing housing opportunity for 
voucher families. Additionally, the commenter noted that the SAFMR 
final rule eliminated the regulations that governed the establishment 
of FMRs using 50th percentile rents, and HUD is currently phasing out 
its use of success rate payment standards. Another commenter stated 
that HUD should eliminate the success rate payment standard option 
because the SAFMR-based payment standard flexibility could effectively 
accomplish more.
    HUD Response: Because this final rule increases flexibility for 
PHAs to set exception payment standards up to 120 percent of the FMR, 
HUD has determined that it is unnecessary to also retain success rate 
payment standards. This final rule eliminates the ability for PHAs to 
receive new success rate payment standards but allows them to continue 
to use previously approved success rate payment standard amounts.

11. How To Calculate Housing Assistance Payment (Sec.  982.505)

    A commenter stated that HUD must ensure that participants are 
provided due process and a reasonable opportunity to decide whether the 
family can afford to remain in the subsidized unit if HUD increases 
payment standards after the initial HAP contract. The commenter offered 
the following suggestions if HUD increases payment standards: (1) allow 
the tenant 60 days after the increase request to decide or request 
moving papers; (2) phase in the rent increase over time or require that 
the PHA make up the difference to the higher standard; or (3) mirror 
the timeframe in Sec.  505(c)(3) for increases and decreases. The 
commenter stated the proposed rule fails to adequately address arising 
problems when PHAs create payment standards that trap residents in low-
opportunity, high poverty, and high crime areas, when families may need 
higher exception rents to access better schools, employment, or other 
resources for self-sufficiency. As a remedy, the commenter recommended 
that HUD map where families can live within the PHA's payment 
standards. One commenter recommended that HUD remove Sec.  
982.505(c)(4)(iii) to streamline the rent change process and prevent 
confusion among families that expect changes during the recertification 
process and not outside of the recertification process.
    HUD Response: HUD appreciates the comments received on when to 
apply

[[Page 38255]]

increases in the payment standards to the family. This final rule, at 
Sec.  982.505, requires PHAs to apply increases in payment standards no 
later than the earliest of (1) the effective date of an increase in the 
gross rent will result in an increase in the family's share, (2) the 
family's first regular or interim reexamination, or (3) one year 
following the effective date of the increase in the payment standard 
amount. This approach provides participating families the benefit of 
these increases more consistently and helps ensure that their portion 
of the rent remains affordable. This final rule also allows PHAs to 
adopt a policy, at their option, to apply an increase in the payment 
standard before these events occur. HUD will not remove paragraph 
(c)(4)(iii) because this provision eliminates 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.

Timeline

    One commenter supported HUD's revisions on when to apply a 
reduction in the payment standard because the changes will promote 
fairness and consistency in the voucher program. Another commenter 
opposed the two-year adjustment timeline as an administrative burden 
for PHAs and believed it would provide no tangible benefit for families 
over a shorter timeline. This commenter stated that the current 
timeline of the second recertification already ensures adequate 
preparation for families and is when all contact with the family is 
planned from the PHA's perspective.
    HUD Response: HUD appreciates the range of comments. HUD in this 
final rule will continue with requiring PHAs to give families two full 
years from the date of the application of the payment standard decrease 
to ensure all families have the same period of time to adjust to the 
decrease in the payment standard.

Payment Standard Timeline

    A commenter supported requiring application of payment standard 
increases on the effective date of a gross rent increase instead of 
waiting until the next annual recertification or one year after the 
increase. The commenter recommended that HUD add a requirement to Sec.  
982.505(c)(4) that PHAs immediately address payment standard increases 
during the HAP contract term and before the effective date of the new 
payment standard, to protect tenants in rapidly rising rent markets.
    HUD Response: HUD appreciates the comments and this final rule 
creates additional required times for when a payment standard must be 
increased in Sec.  982.505(c)(4). HUD finds that these additional 
requirements sufficiently balance ensuring participants receive the 
benefit of payment standards and PHA administrative burden in applying 
increases in the payment standards.

Payment Standard Update Burden

    A commenter opposed HUD's proposal at paragraph (c)(4) of Sec.  
982.505 (How to calculate HAP), adding two new points at which the 
family's payment standard may be increased, as unnecessarily burdensome 
and expressed concern regarding whether the number of transactions that 
would trigger the payment standard calculation to determine if an 
``increase in the family share'' occurred will greatly outnumber the 
times the higher payment standard would be applied under the rule and 
expressed an appreciation for data supporting the proposed rule.
    HUD Response: HUD appreciates these concerns. When paragraphs 
(c)(4) and new paragraph (c)(5) are read in conjunction, HUD believes 
the burden on PHAs of this change is relatively small and outweighed by 
the benefit to the family.
    Specifically, the requirement that this commenter is concerned 
about, is as follows: when there is an increase in the payment 
standard, and when there is an increase in the gross rent, and the 
increase in gross rent would increase the family share, then the PHA 
must apply the increased payment standard, to reduce the burden on the 
family.
    This requirement is limited to situations where the gross rent 
increase would increase the family share is intended to decrease the 
burden on the PHA, not increase it. If a PHA would prefer not to make 
this calculation, the PHA may apply the new payment standard every time 
there is a gross rent increase, or indeed as soon as they want to, 
regardless of whether the gross rent increase changes the family share 
calculation, per paragraph (c)(5).

12.A. Utility Allowance (UA) Schedule (Sec.  982.517)

    Commenters suggested HUD allow PHAs to provide a UA for wireless 
internet to expand opportunity. A commenter noted that there is no 
statutory or regulatory prohibition on it and PHAs can use their own 
budgetary judgement to decide if they can afford to provide a UA for 
internet. Another commenter proposed that HUD consider broad ways to 
support assisted households during and after the pandemic. One 
commenter suggested that HCV UAs should include fees charged, as well 
as reflect the actual rates charged by the major utilities serving the 
units and the rate plans used by most tenants. This commenter also 
recommended that HUD not consider low-income discounts, unless there is 
universal access and verified tenant participation. To ensure 
transparency, the commenter also stated that supporting documentation 
for the calculation for the PHA's UA schedules for both HCV and PBV 
programs should be available to tenants' rights advocates, without 
resorting to cumbersome and vague FOIA and State public records acts. 
The commenter recommended that HUD's review should be retained and 
strengthened, to ensure compliance with the regulatory standards and 
consistency among UAs in similar climatic regions and markets, rather 
than ending the requirement for PHA submission of the schedule. Another 
commenter suggested that HUD continue to require PHAs to submit their 
UA schedules to HUD, which would provide a system of checks and 
balances and much needed oversight.
    HUD Response: HUD is currently reviewing ways to support internet 
access for the families it serves in all assisted housing programs and 
how to best complement subsidies provided through the Affordable 
Connectivity Program (ACP) and Lifeline administered by the Federal 
Communications Commission (FCC). HUD is working to raise awareness 
among PHAs so they can help families enroll in the ACP and Lifeline 
programs. In addition to supporting the FCC programs, HUD is reviewing 
its assisted housing program policies across the department to align 
policies and support broadband. At this time, HUD is not providing in 
this final rule that PHAs may use UA schedules for internet; however, 
HUD has removed the language that explicitly prohibits wireless 
internet. In place of language prohibiting wireless internet, HUD added 
language providing that HUD may add utilities required to pass HQS by 
Federal Register notice allowing for public comment.
    The language in Sec.  982.517(b)(1) states that ``the 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.'' The 
typical cost of utilities and services includes surcharges charged by 
the utility company. Many PHAs separate the surcharge out on the UA 
schedule. For

[[Page 38256]]

example, a family may have natural gas for their heating, cooking, and 
water heating and the natural gas company charges a monthly surcharge 
for this utility. A rate-based utility allowance is provided on the 
schedule for each of these utilities and the PHA also provides the 
family with an allowance for the surcharge if they have one or more 
natural gas-powered utilities in their home. While this is not a change 
in policy and HUD believes this is already the common practice at PHAs, 
HUD recognizes that it would be helpful for the regulation to be 
clearer. HUD is adding ``applicable surcharges'' to the list of 
utilities and services on the utility allowance schedule in Sec.  
982.517(b)(2)(ii).
    PHAs develop their area-wide utility allowance schedules, both the 
regular schedule described in Sec.  982.517(b)(v)(2)(i) and the new 
option for an energy-efficient schedule provided in Sec.  
982.517(b)(v)(2)(ii), based on the cost of utilities and services paid 
by energy-conservative households that occupy housing of similar size 
and type in the same locality. Household income or discounts provided 
to certain households are not a factor in the development of the 
utility allowance schedule.
    HUD understands the concerns expressed by commenters encouraging 
HUD to continue collecting utility allowance schedules from PHAs. While 
the proposed language would have allowed submission to HUD only upon 
request for utility allowance schedules from PHAs, HUD agrees with 
commenters that proactive submission of utility allowance schedules 
will help with oversight. HUD has reverted Sec.  982.517(a)(2) in this 
final rule to the existing codified language which requires submission 
of these schedules to HUD.

12.B. Area-Wide Energy-Efficient Utility Allowance Schedule (Sec.  
982.517(b)(2)(ii))

    Commenters stated that HUD should authorize PHAs to use energy-
efficient utility allowance (EEUA) schedules. Another commenter stated 
that PHAs should have the option to implement alternative utility 
allowance schedules though they may be burdensome to implement. One 
commenter suggested that HUD should not require entire buildings to 
achieve energy saving design certifications for an individual unit to 
qualify for an EEUA. Further, the commenter stated that due to the time 
and cost, many property owners may elect to only install energy-
efficient appliances and other design standard upgrades, and if so, 
property owners should not be penalized for their inability to achieve 
energy savings design certifications for entire buildings especially 
where the property owners can demonstrate that the EEUA schedule would 
best encourage conservation and the efficient use of HAP funds based on 
historic utility consumption data.
    Other commenters stated that EEUA schedules should be voluntary 
because they require annual updates and are costly, and, as a result, 
they are better suited to PBV where the owner can be required to 
commission an annual update to keep using the schedule, or PHAs could 
make their decision based on their market areas and funding. Another 
commenter stated that utility allowance options would present a high 
possibility for error and could open PHAs up to charges of 
discrimination because it would be hard to identify units where 
alternate utility allowances could be used. A commenter suggested that 
HUD use the HUD Utility Schedule Model (HUSM) for all project types to 
minimize project-specific utility's administrative burden as well as 
permit PHAs the ability to decide their HUSM approach to determine UAs 
and be required to publish this in their Administrative Plan.
    HUD Response: HUD appreciates the many comments supporting the 
option for PHAs to establish an EEUA. HUD believes that permitting EEUA 
for units that are located in buildings that do not have a full-scale 
energy savings design is premature. While HUD agrees that allowing PHAs 
to use an EEUA on substantially retrofitted units in an older building 
could encourage owners to make units more energy efficient, more 
guidance is needed to ensure the EEUA is not applied too liberally 
leaving many tenants with UAs that are too low. This final rule allows 
PHAs to implement an EEUA for units in Energy Star or LEED certified 
buildings; however, HUD will release more guidance before allowing 
additional units to use the EEUA schedule. PHAs must be careful to 
ensure that their EEUAs will work for most energy efficient properties. 
It would not be appropriate to use LEED estimates for UA costs if 
Energy Star certified units make up the majority of energy efficient 
units in the area. In that case, a PHA may decide to only apply the 
EEUA to LEED certified units or base the EEUA on Energy Star estimates. 
The establishment of an EEUA schedule is voluntary. PHAs in areas that 
have a large percentage of units that are energy efficient may wish to 
have a separate schedule to ensure the utility allowances for these 
units are not unnecessarily high. This may also reduce requests for 
project-specific allowances in the PBV program that are often needed 
due to energy efficient requirements, since the area-wide EEUA schedule 
will also apply to PBV projects that meet energy efficient 
requirements.

12.C. Utility Allowance Based on Flat Fees (Sec.  982.517(b)(2)(iii))

    Several commenters offered suggestions for HUD's proposal to 
provide PHAs the discretion to substitute flat fees charged for certain 
utilities. One commenter recommended that HUD modify Sec.  
982.517(b)(2)(iii)'s current language of ``only if the flat fee charged 
by the owner is less than,'' to ``only if the flat fee charged by the 
owner [is] no greater than,'' to account for the possibility that the 
flat fee is equal. One commenter objected to HUD's flat fee proposal by 
stating that flat fee UAs do not ensure that a tenant is exceeding 
their maximum share of the rent, stating that UA should be based on 
actual use.
    HUD Response: HUD will adopt in Sec.  982.517(b)(2)(iii) the 
suggested language changing ``less than'' to ``no greater than'' to 
make flat fees easier for PHAs to administer. HUD would like to clarify 
that flat fees are meant to be used only when the landlord charges a 
set fee for certain utilities and the fee does not change based on 
consumption or other criteria. If the landlord charges a variable fee 
for a utility, then the PHA would not have the option of using the flat 
fee to calculate the utility allowance. Instead, the PHA would use the 
appropriate area-wide utility allowance based on the size and type of 
unit. Applied correctly, tenants will not pay more than the flat fee 
used to calculate the utility allowance.

13. Manufactured Home Space Rental (Sec. Sec.  982.620-982.623)

    Commenters recommended that HUD amend Sec.  982.620 to require that 
PHAs must provide the option for tenants to use voucher funds for the 
costs of purchasing a manufactured home because without the 
requirement, the HOTMA amendments will be undermined. A commenter also 
noted that section 112 of HOTMA eliminated the option for a PHA to 
offer only assistance under a voucher for the cost of leasing land on 
which a manufactured home is sited (but not for the annual cost of 
purchasing a home) and therefore recommended HUD amend Sec.  
982.620(b)(2) to delete the phrase ``to a manufactured homeowner to 
lease a manufactured home space'' and add in its place, the words 
``under paragraph (a)(3) of this section.''
    A commenter suggested the following modification for Sec.  
982.620(a)(3): ``The

[[Page 38257]]

PHA may provide assistance for a family that owns a manufactured home 
(including a family that has recurring expenses to amortize the cost of 
purchasing a manufactured home) and leases only the space. The PHA 
shall make this option available upon a bona fide request from any 
party in the PHA's jurisdiction.'' The commenter also recommended 
deleting the clause, ``to a manufactured homeowner to lease a 
manufactured home space'' from Sec.  982.620(b)(2), since that type of 
assistance is no longer authorized. The commenter requested 
clarification behind why HUD proposed to require PHAs to make separate 
payments to the landowner and to the family for debt costs, rather than 
only making a single payment to the family. The commenter opposed HUD's 
requirement that space owners sign a HAP contract with the PHA, if the 
owner waives receiving a direct PHA payment. The commenter also 
proposed that HUD delete the first sentence under Sec.  982.623(d)(2) 
regarding the HAP contract and revise the second sentence to state that 
the owner's acceptance of the family's rent payment is a certification 
that the space complies with HQS as specified in Sec.  982.621(a) and 
(b). Some commenters stated it is unnecessary to require the tenant pay 
for the landowner's HAP contract of manufactured home space, because 
regardless of the tenant timely paying rent, the landowners must go to 
the PHA for payment, which has the contract. A commenter claimed that 
incidental protections that a HAP contract with the landowner might 
provide are not commensurate with the creation of an additional barrier 
to using the voucher option.
    HUD Response: HUD does not have the authority under the statute to 
require that PHAs provide manufactured home space rental assistance. 42 
U.S.C. 1437f(o)(12) states, ``A public housing agency may make 
assistance payments in accordance with this subsection on behalf of a 
family that utilizes a manufactured home as a principal place of 
residence and rents the real property on which the manufactured home 
owned by any such family is located'' (emphasis added). The use of the 
word ``may'' in the statute unambiguously means provision of this 
assistance is at the PHA's discretion. To be eligible for manufactured 
home space rental assistance, the family must own the manufactured 
home. The ownership does not need to be outright, and they may still be 
making monthly payments to amortize the purchase of the manufactured 
home. Both scenarios are considered ownership similar to how a person 
who owns a home with a mortgage is still considered the homeowner. For 
this reason, HUD is finalizing the language in the proposed rule for 
adoption in this final rule. Owners of manufactured space rental will 
still be required to sign a HAP contract even if the PHA does not pay 
them rent directly. The HAP contract is more than a vehicle for 
conveyance of rent payments. The HAP contract is essential to ensuring 
compliance with HQS, including the appropriate utility hookups, and the 
owner's agreement to comply with rent reasonableness, among other 
requirements.

14. Homeownership Counseling (Sec.  982.630(e))

    A commenter stated that homeownership counseling services should 
only be provided by HUD-certified counselors working with a HUD-
approved housing counseling agency. Another commenter approved of HUD 
requiring certified counseling for the homeownership program as well as 
supported HUD excluding home equity as an asset and not decreasing the 
payment standard of the homeownership program.
    HUD Response: HUD appreciates the comments and will be moving 
forward with requiring any homeownership counseling to be conducted by 
a HUD-certified housing counselor working for a HUD-approved housing 
counseling agency. This requirement conforms with current Housing 
Counseling requirements.

15. Amount and Distribution of HAP (Sec.  982.641(f))

    A commenter supported maintaining utility amounts for homeownership 
families based on housing size, instead of family size.
    HUD Response: HUD appreciates the supportive comment and will 
continue with the proposed language at Sec.  982.641(f)(3) stating that 
the use of a utility allowance schedule under Sec.  982.517(d) does not 
apply to the homeownership option because the utility allowance is 
always based on the size of the home bought by the family receiving 
homeownership assistance.

16. PBV: When the Tenant-Based Voucher Rule Applies (Sec.  983.2)

    A commenter supported HUD's policy to not require new verification 
at briefing for the PBV program and making the 60-day timeframe 
inapplicable under the PBV program because this approach improves PHAs' 
ability to administer PBVs.
    HUD Response: HUD appreciates the support and agrees that the 
standard at Sec.  982.201(e) is inapplicable to the PBV program, as 
families are not issued vouchers in the PBV program, but notes that the 
applicable timeframe for PBV is codified in Sec.  983.251(a)(2).

17. PBV Definitions (Sec.  983.3)

Definition of ``Development Activity''

    A commenter expressed concern with HUD's definition of 
``development activity,'' due to its potential harmful impact given its 
lack of previous implementation for other HUD programs. Another 
commenter stated that the definition is adequate because minor 
renovations are not included in the definition of development work. A 
commenter stated that the definition of ``development activity,'' was 
unclear and broad and should be limited to new construction, adaptive 
reuse, or substantial rehabilitation of existing housing in compliance 
with HQS. Another commenter suggested that including replacement of 
equipment and materials with items that are of improved quality in the 
definition of ``development activity'' would deter project owners from 
modernizing and completing other updates to properties, which neither 
HUD's regulations nor form of HAP contract require a project owner to 
report to a PHA. This commenter also recommended that the development 
activity should be limited to instances of new construction or 
substantive rehabilitation of housing that fails to substantially 
comply with HQS. This commenter further expressed that development 
requirements, such as subsidy layering review, should not continue to 
apply to units once they are placed under HAP contract or when units 
are being added to an existing HAP contract. A commenter warned that 
HUD is exceeding its statutory authority by having a broad definition 
of development activity, because HUD does not have the Congressional 
authority to regulate a project owner's ability to engage in 
development work following execution of a HAP contract, and HUD has not 
historically regulated this type of development activity. This 
commenter stated that the 1937 Act provides PHAs with discretion on 
when to allow owners to engage in development work.
    HUD Response: Upon review of comments regarding this definition and 
other sections of the proposed rule, HUD determined using a single term 
to refer to both rehabilitation and new construction done in order for 
the project to receive PBV assistance and for other work occurring 
later during the

[[Page 38258]]

term of the PBV HAP contract produced significant confusion. Similarly, 
the corresponding regulatory structure resulting from the dual-purpose 
definition, such as using the development requirements of subpart D 
(Requirements for Rehabilitated and Newly Constructed Units) of part 
983 to address certain requirements applicable to work occurring later 
during the term of the PBV HAP contract, produced significant 
confusion. As a result, HUD has removed work occurring later during the 
term of the HAP contract from the proposed definition of ``development 
activity,'' and instead covers this work under the new definition of 
``substantial improvement.'' The regulatory structure also is revised 
in this final rule to eliminate this confusion, as described throughout 
this preamble. The public comments on the proposed definition regarded 
the portion of the proposed rule definition of ``development activity'' 
that is instead covered in this final rule by the definition of 
``substantial improvement.''
    HUD disagrees with the commenter's characterization of previous 
implementation, given HUD's prior use of a similar definition, as 
provided in the former 24 CFR 983.210(j) (which is removed in this 
final rule) and described in 80 FR 52511 (Mar. 9, 2015), which drew 
from requirements of other programs. HUD appreciates the positive 
comment. HUD does not adopt the proposal to define substantial 
improvement as new construction, adaptive reuse, or substantial 
rehabilitation, as HUD believes those terms are less clear than the 
proposed definition. HUD does not believe that including in the 
definition a substantial improvement in the quality or kind of 
equipment and materials will deter owners from modernizing projects, 
since this final rule implements a reasonable process for such activity 
to occur. HUD does not adopt the proposal to define substantial 
improvement as new construction or substantive rehabilitation of 
existing housing that fails to substantially comply with HQS, as HUD 
finds there is a compelling need to encompass additional activities 
that may greatly impact occupants in the rules governing substantial 
improvement. HUD also notes that it has a clear mandate under law to 
ensure housing occupied by assisted families is decent, safe, and 
sanitary, which includes establishing rules governing substantial 
improvement that occurs following contract execution, as such activity 
necessarily impacts occupants.

Definitions of ``Newly Constructed Housing'' and ``Rehabilitated 
Housing''

    Another commenter proposed that the definitions of ``newly 
constructed housing'' and ``rehabilitated housing'' should incorporate 
the concept of housing ``under construction'' that HOTMA inserted in 
new section 8(o)(13)(F)(iii). This commenter suggested that HUD's 
proposed rule failed to account for this provision's direction that HUD 
allow PHAs to enter a HAP contract for ``any unit that does not qualify 
as existing housing and is under construction[.]'' This commenter 
suggested HUD make clear that projects which are under construction 
qualify as newly constructed.
    HUD Response: HUD disagrees that the wording of the definition of 
newly constructed housing forecloses selection of a project that is 
under construction. For example, projects for which development 
activity occurred prior to PBV selection would nevertheless meet the 
definition of newly constructed housing if any of the units in the 
project ``do not exist on the proposal or project selection date and 
are developed after the date of selection for use under the PBV 
program.'' Likewise, projects may qualify as rehabilitated housing 
despite any development activity that occurred prior to PBV selection 
where the project will be developed for use under the PBV program and 
meets the other components of the definition of ``rehabilitated 
housing.'' Further, as previously provided in the regulations, 
contracts for newly constructed and rehabilitated projects may be 
executed in stages, even though the construction has not been 
completed, which is not in conflict with the definitions. Neither 
definition contains language barring projects for which some of the 
development occurred earlier from being considered newly constructed or 
rehabilitated; rather, the definitions affirm that there will be 
development that occurs after the proposal or project selection date 
for purposes of using the projects as PBV units. HUD recognizes that in 
many cases projects may engage in development activity for legitimate 
reasons unrelated to the plans to project-base a project prior to the 
PHA selection of the project for PBVs. In order to effectuate the 
applicable development requirements at Sec.  983.153 without 
foreclosing selection of projects under construction, the regulation at 
Sec.  983.154 requires that, in cases in which the PHA and owner use an 
Agreement prior to development activity, development activity does not 
commence from the date of proposal submission or board resolution, as 
applicable, until the effective date of the Agreement, and that, in 
cases of development without an Agreement or use of an Agreement after 
construction or rehabilitation has commenced, all development occurring 
after the date of proposal submission or board resolution, as 
applicable, complies with Sec.  983.153. Further, while HUD does not 
change the definitions for the purpose the commenter proposed, HUD has 
provided an additional mechanism for execution of a HAP contract for a 
rehabilitated housing project while it is under construction in this 
final rule, as further explained in the summary of changes to Sec.  
983.157 above. Taken together, HUD believes Sec. Sec.  983.3, 983.154, 
and 983.157 provide an appropriate balance between effectuating the 
development requirements and providing a mechanism to allow a PHA to 
project-base projects under construction. HUD therefore declines to 
expand the definition of newly constructed housing to provide an 
explicit reference to housing under construction, as doing so would 
change the definition from a statement of the meaning of the term to a 
provision that could appear to conflict with the development 
requirements in subpart D of part 983.

Definition of ``Project''

    Commenters approved of HUD's proposal to keep its current 
definition of ``project,'' which is statutory, and which a commenter 
preferred for administrative consistency and clarity purposes. Another 
commenter recommended that HUD delineate the definitions for each 
program. Commenters suggested that HUD create a definition that allows 
for buildings in scattered sites (i.e., non-contiguous sites), and 
establish conditions for the scattered sites, such as requiring 
buildings to have the same owner and containing a certain number of 
subsidized units in each building. A commenter noted that this would be 
consistent with HUD's position in the PBV, RAD, and ``Mod'' programs. 
Another commenter noted that buildings that span multiple blocks in a 
city grid and have historically been operated as part of one project 
are classified as individual projects for purposes of PBV, which 
creates an incongruous result. This commenter further expressed that 
the statute appears to support limiting the definition of ``project'' 
to only assessing whether a project complies with the income-mixing 
requirement.
    HUD Response: HUD agrees that retaining the prior definition of 
``project,'' consistent with the statutory

[[Page 38259]]

definition of ``project'' for purposes of the income-mixing requirement 
(project cap), supports the goals of administrative consistency and 
clarity. However, HUD found that the proposed rule as written appeared 
to inadvertently remove the discretion PHAs previously had, through the 
Administrative Plan, to further define ``project'' within the statutory 
parameters. HUD finds that PHAs may need such discretion for optimal 
program operation in certain cases. Given these considerations and 
positive comments received, HUD restores and codifies in this final 
rule the meaning of the term ``project'' as it was previously 
understood. For programs other than the PBV program, the definition of 
``project'' applicable to such programs can be found in those programs' 
governing rules.
    HUD declines to further define ``project'' to allow scattered sites 
to constitute one project. Doing so would increase the complexity of 
determining what constitutes a project, for purposes of the income-
mixing requirement and for other purposes, to a level unwarranted by a 
relatively small administrative advantage in a small number of cases. 
However, HUD will continue to allow multiple projects, each consisting 
of a single-family building (defined in this Sec.  983.3(b) as no more 
than four total dwelling units), to be under one HAP contract. HUD has 
taken this opportunity to update the language in Sec.  983.202(a) to 
more clearly state that placing multiple projects, each consisting of a 
single-family building, under one HAP contract is allowable. HUD has 
also updated Sec.  983.154(a) to clarify that it is allowable to place 
under one Agreement multiple projects that each consist of a single-
family building and Sec.  983.51(a) to clarify that PBV proposals may 
cover multiple projects where each consists of a single-family 
building. HUD agrees that whenever a HAP contract covers multiple 
projects all such projects must be owned by a single owner because, as 
a general principle, an owner can only execute a HAP contract for units 
the owner has authority to commit in a HAP contract (or a 
certification, in the case of a PHA-owned project exercising the option 
in Sec.  983.204(e)(2)). The number of subsidized units in each project 
will continue to be governed by existing PBV requirements, particularly 
the income-mixing requirement (see Sec.  983.54(a)).
    Regarding the concern about buildings that span multiple blocks 
being classified as individual projects for purposes of PBV, HUD 
clarifies that the definition of ``project'' can include parcels 
separated by a public way, so long as such parcels can reasonably be 
considered contiguous (defined in this Sec.  983.3(b) for this purpose 
to include ``adjacent to'' or ``touching along a boundary or a 
point''). For simplicity, the definition describes in general terms the 
buildings and parcels of land that qualify as ``projects'' in the vast 
majority of cases. Where natural or engineered features make up a 
boundary between buildings or parcels, PHAs are expected to reasonably 
determine if the buildings or parcels make up a project. Considerations 
include the extent and difficulty of access from one building to 
another, public regard of the buildings as interrelated, and whether 
the classification proposed would serve the statutory purpose of the 
income-mixing requirement. HUD intends to publish further guidance on 
this matter.

Definition of Request for Release of Funds and Certification

    A commenter suggested HUD delete the definition of ``request for 
release of funds and certification,'' which is not used in the 
regulations and creates an unintended parallel process to the 
environmental review and replace it with the definition of ``letter to 
proceed,'' which is used in the regulations. This commenter suggested 
in the alternative to change ``PHAs'' to ``responsible entities,'' 
because the responsible entity signs the request for release of funds 
under 24 CFR part 58 for environmental reviews, and reorder the current 
language under 24 CFR part 58 because it suggests that Authority to Use 
Grant Funds (AUGF) would authorize a HAP, which is inaccurate.
    HUD Response: HUD has considered this comment and determined that, 
while ``request for release of funds and certification'' is in fact 
used in Sec.  983.56 of the regulation and is not the same as a 
``letter to proceed,'' which is issued by HUD, the lack of clarity the 
commenter points out is best addressed by moving the content of the 
definition of ``request for release of funds and certification'' from 
Sec.  983.2 to the appropriate section of Sec.  983.56.

Definition of Comparable Rental Assistance

    A commenter stated that the definition of comparable rental 
assistance does not explicitly include the statutory requirement that 
assistance must be tenant-based. This commenter suggested HUD specify 
that comparable assistance cannot be time-limited or subject to 
requirements that do not apply under section 8(o).
    HUD Response: HUD agrees that the definition of comparable rental 
assistance should include the statutory requirement that assistance 
must be tenant-based. HUD therefore amends the definition, in this 
final rule termed ``comparable tenant-based rental assistance'' at 
Sec.  983.3(b) to be consistent with the statute. HUD notes that the 
terminology used in Sec.  983.261(b)-(c) before publication of this 
final rule was consistent with section 8(o)(13)(E) of the 1937 Act. HUD 
therefore views this change only as a clarifying change to the 
definition. HUD additionally specifies the essential elements of 
comparable tenant-based rental assistance in this final rule. That is, 
comparable tenant-based rental assistance enables a family to obtain 
decent, safe, and sanitary housing in which: (1) a family's monthly 
payment is not more than 40 percent of adjusted income; (2) the rental 
assistance is not time-limited; (3) the rental assistance is not 
conditioned on a work or supportive service requirement; and (4) the 
rental assistance affords the family a portability option. HUD does not 
in this final definition prohibit the assistance being subject to 
requirements that do not apply under 8(o) because doing so would reduce 
options available to PHAs and families, as many tenant-based rental 
assistance programs across the country likely do not meet every HCV 
program requirement. Such a requirement could increase wait times for 
families wishing to move from PBV units with tenant-based assistance.
    HUD in this final rule also takes this opportunity to clarify that 
the ``gross rent'' calculation refers to the family's share of the 
gross rent, and not the total gross rent. This is a clarifying change 
consistent with how HUD already applies this definition. Additionally, 
to consolidate definitional language, this final rule removes language 
explaining the meaning of ``comparable tenant-based rental assistance'' 
at Sec.  983.260(b)(4) such that the complete definition is in this 
final rule at Sec.  983.3(b).

Existing Housing

Support and Disagreement
    A commenter supported the proposed definition of ``existing 
housing'' in relation to how long it would take to make any repairs 
needed to comply with applicable quality standards and stated that it 
is a significant improvement over the use of a fixed and arbitrary cost 
of repairs as HUD proposed previously.
    Other commenters found the current existing housing definition more 
flexible for PHAs. The commenters stated that the proposed definition 
did not clarify the existing requirement and

[[Page 38260]]

could create different implementation across the country. One commenter 
stated that PHAs should retain discretion to determine whether a 
project constitutes existing housing and to define substantial 
compliance with HQS in their Administrative Plans.
    HUD Response: HUD appreciates the supportive comment and proceeds 
with a standard that does not include cost, as further discussed below. 
HUD finds that including a definition of ``substantially comply'' in 
this final rule will improve consistency and predictability in 
implementation of the PBV program across the country.
Potential Regulatory Burdens
    One commenter urged HUD to reconsider the definition change due to 
the potential regulatory burden of narrowly defining ``existing 
housing'' while simultaneously expanding the definition of 
``development activity,'' which could have chilling implications on PBV 
programs. Another commenter stated that treating some of the units as 
``existing'' and some as ``rehabilitation'' would be confusing and 
regulatory burdensome for PBV purposes.
    HUD Response: HUD concludes that, given the strong use of 
rehabilitated housing in the PBV program, clarification that a project 
is rehabilitated housing when an owner is undertaking extensive or 
lengthy work will not chill participation. However, HUD believes that 
the new option at Sec.  983.157 for rehabilitated housing to complete 
development activity after HAP contract execution will provide 
additional flexibility needed to attract more PBV owners. In response 
to comments, HUD has revised the definitions of existing housing, newly 
constructed housing, and rehabilitated housing to clarify that the 
classification of project type is on a project basis.
Potential Rent Cost Burdens
    A commenter opposed shifting from building condition (e.g., current 
HQS status) to building correction plan (e.g., ability to make repairs) 
as too high a burden, especially as the standard correction period is 
30 days. This commenter warned that the proposed definition would 
likely result in additional rent burdens for tenants in units that 
cannot qualify as existing housing and encouraged HUD to define 
existing housing based on the percentage of units that pass HQS.
    HUD Response: HUD agrees with the commenter that it is appropriate 
to incorporate into the definition of ``substantially comply with HQS'' 
the standard deficiency cure period applicable to the program, since 
that period best represents an overall correction timeline that remains 
compliant with HQS enforcement standards. This change is reflected in 
this final rule's definition of ``existing housing'' at Sec.  983.3. 
HUD considered the suggestion to use, instead of the proposed 
definition, percentage of units passing HQS but determined such a 
standard would inappropriately allow classification of units with 
rehabilitation needs as existing housing. HUD appreciates the concern 
for the rent burden of tenants while awaiting assistance but determines 
that it is better addressed by adding the new option at Sec.  983.157 
for rehabilitated housing to complete development activity after HAP 
contract execution and maintaining the options at Sec.  983.103(c) for 
initial execution before HQS compliance is determined via inspection. 
In other words, amending the definition of existing housing to include 
units immediately undergoing extensive work would have been an 
inappropriate mechanism to address the concern.
General Comments About Existing Housing Restriction
    One commenter supported HUD's putting restrictions on the 
applicability of the definition of existing housing and noted it had 
experience with projects seeking to circumvent executing an Agreement 
for rehabilitation by requesting the project be defined as existing 
housing based on the units being already occupied, even though the 
owner was planning some level of rehabilitation.
    Another commenter disagreed with the framing of the question 
because it suggests that PHAs and project owners are ``circumventing'' 
rehabilitation program requirements when selecting existing housing 
projects that comply with HUD's definition of existing housing.
    HUD Response: HUD appreciates commenters' perspectives regarding 
circumventing rehabilitation requirements and believes that PHAs and 
owners will be better able to determine when rehabilitation rules apply 
using this final rule's definitions.
Question 13. Is the 48-hour standard reasonable, particularly for 
larger projects?
    One commenter supported HUD's proposed definition of 
``substantially complies with Housing Quality Standards (HQS).'' Other 
commenters stated that the 48-hour timeframe is unreasonable, 
especially for large projects with multiple units requiring minor 
repairs or in housing markets where contractors are scarce because some 
units require renovations that are impossible to complete in a 48-hour 
timeframe.
    HUD Response: Commenters' explanations of when a 48-hour standard 
may be infeasible were persuasive, and HUD has changed the standard in 
this final rule.
Alternative Timeframes
    One commenter suggested that the 48-hour timeframe only apply to 
individual units and not the entire building. Commenters also suggested 
alternative timeframes to cure HQS deficiencies including 72 hours for 
projects with more than 20 failed inspections, and a maximum of 5 or 10 
business days to cure deficiencies.
    A commenter expressed that the HOTMA alternatives to initial 
inspections are unusable if HUD requires a PHA to conduct and a project 
to pass an HQS inspection before making an existing housing 
determination.
    One commenter proposed allowing PHAs to integrate in their policies 
a specific timeline for completion of the repairs based on local 
conditions.
    Another commenter recommended defining the timeframe based on the 
time it takes to complete a repair, rather than the time it takes to 
begin a repair.
    HUD Response: In this final rule, HUD adopts a timeframe based upon 
the standard deficiency cure period as part of a reasonable 
representation of substantial compliance with HQS. Under this final 
rule, PHAs must determine whether, taking into consideration the 
totality of the deficiencies in the project, the owner will be able to 
correct the deficiencies in a 30-day period. HUD does not impose 
through this definition a requirement that correction occur at a 
specific time; the standards at Sec.  983.103(c) dictate when the 
corrections must occur, depending in large part on whether the PHA has 
adopted the discretionary options for initial inspection. HUD believes 
that this definition provides sufficient flexibility to account for 
local conditions and differences in unit repair times while still 
adequately distinguishing existing housing from housing properly 
characterized as rehabilitated.
    HUD's Previous Proposed Definition of Existing Housing ($1,000) 
\15\
---------------------------------------------------------------------------

    \15\ See The Housing and Economic Recovery Act of 2008 (HERA): 
Changes to the Section 8 Tenant-Based Voucher and Section 8 Project-
Based Voucher Programs, 77 FR 28741 (May 15, 2012).
---------------------------------------------------------------------------

    One commenter supported the prior proposed definition because it 
was clear

[[Page 38261]]

and unambiguous. However, other commenters disagreed with the prior 
proposed rule and suggested that existing housing projects should not 
be permitted to make over $1,000 of improvements per unit within the 
first year of their HAP contract or to make significant improvements 
within the first 5 years, unless there are extenuating circumstances as 
determined by the PHA.
    Commenters suggested that the definition should include units where 
planned rehab exceeds $1,000 over the next year per unit, as this 
amount is too low in many high-cost areas. Another commenter stated 
that the $1,000 limit previously proposed by HUD was not required by 
HOTMA. A commenter suggested that HUD permit PHA discretion to create 
alternative standards based on a reasonable cost for each unit, 
considering that 48 hours for deficiency correction may be impractical 
for large projects or in national emergency situations.
    HUD Response: HUD appreciates the benefit mentioned by commenters 
of a clear dollar threshold or PHA discretionary amount but determines 
not to adopt the suggestion because the differing impact of a dollar 
threshold across markets with different local conditions will result in 
an inconsistent meaning of ``existing housing'' nationwide. HUD 
considered the suggestion to define ``existing housing'' based on cost 
or extent of work occurring shortly after contract execution. In this 
final rule, HUD adopts that suggestion in part. HUD defines ``existing 
housing'' based on the condition of the units at the proposal or 
project selection date and incorporates a requirement that the PHA 
determine, and the owner certify, the units will not need or undergo 
substantial improvement from the date of proposal submission or board 
resolution, as applicable, to two years after the HAP contract. In 
conjunction with this change, HUD codifies in this final rule complete 
standards for correction of deficiencies (see discussion of Sec.  
983.103 below) and substantial improvement (see discussion of Sec.  
983.212 below) following contract execution.
Alternative Definitions of Existing Housing
    Commenters suggested that the standard should be a percentage of 
local rehabilitation or development costs or whether the apartment is 
occupied or available for occupancy. Another commenter supported the 
proposed definition of ``existing housing,'' but found the reliance on 
proposal selection date as impractical compared to using the HAP 
execution date because there can be a significant gap between selection 
and HAP execution. One commenter opposed the imposition of a bright 
line threshold that fails to account for PHA discretion and local 
circumstances as well as thresholds based on time or money because the 
test will affect project owners differently based on availability and 
costs of materials and labor associated with routine maintenance. 
Another commenter suggested that the standard for existing housing 
should be ``housing that does not need to be rehabilitated,'' which 
would require HUD to chart the cost threshold and number of PBV units 
in a development, and developments that must spend above the threshold 
to make PBV units HQS-compliant would not be considered ``existing 
housing.''
    HUD Response: HUD does not adopt the suggestion to use a percentage 
of local costs in the definition out of concern that the approach may 
make housing type classification unpredictable over time and may 
require significant administrative burden to estimate costs in advance 
of work. HUD declines to adopt a standard that defines ``existing 
housing'' based on whether the unit is occupied or available for 
occupancy; HUD finds the former does not afford sufficient protection 
against assistance being provided to units that do not meet HQS and the 
latter is not sufficiently clear to be applied uniformly. In addition, 
HUD does not adopt the suggestion to use the contract execution date 
rather than the proposal or project selection date, as the PHA must 
establish the housing type well before the contract execution date to 
follow the appropriate pre-contract program requirements.
    HUD believes the linkage in this final rule to a standard cure 
period addresses the concern regarding a bright line threshold. HUD 
generally agrees that the nature of existing housing should be 
``housing that does not need to be rehabilitated,'' but has implemented 
this principle in a manner different from what the commenter suggests. 
HUD has in this final rule defined ``substantially comply'' based on 
the nature of the correction of HQS deficiencies--whether they require 
only repairs to the unit's current components or replacement of 
equipment and/or materials by items of substantially the same kind to 
correct--in addition to the likelihood of compliance with HQS within 
the standard cure period.
PHA Determination Whether a Project Will be Ready To Be Placed Under a 
HAP Contract
    Commenters stated that PHAs should have discretion to determine 
whether a project is ready to be placed under a HAP contract with 
``minimal delay'' because the PHA is best positioned to judge whether 
the owner will quickly complete repairs and make the determination 
consistent with PHAs' own policies regarding the time that may elapse 
between the initial inspection and the HAP contract's execution.
    HUD Response: Upon consideration of comments, HUD finds that the 
timing of execution of the HAP contract is difficult to estimate based 
on condition of units alone, given the many factors impacting 
execution, and will not provide sufficient clarity to use the 
definition consistently. Therefore, HUD removes the proposed ``minimal 
delay'' element from the definition of ``existing housing'' in this 
final rule at Sec.  983.3.

Definition of ``Building''

    One commenter suggested that HUD define the word ``building'' under 
Sec.  983.103(d), and specifically as it relates to conducting an 
inspection of 20 percent of a building's units. The commenter stated 
that while the definition of ``building'' may be obvious, the 
definition is obscure, and the commenter suggested changing 
``building'' to ``project.''
    HUD Response: HUD agrees with the commenter that the term 
``building'' may not always be clear. Therefore, HUD adopts in Sec.  
982.4 the following definition: ``a structure with a roof and walls 
that contains one or more dwelling units.'' Where the term ``building'' 
is used regarding periodic inspection of a sample of units (now located 
in Sec.  983.103(e)), HUD intends that the requirement apply to 
buildings, not projects. HUD believes that the sample should be drawn 
on a building basis to get a good cross-section of the condition of the 
units in a project. Further discussion of this matter is at 70 FR 
59892, 59905 (Oct. 13, 2005).

Definition of ``Areas Where Vouchers Are Difficult To Use''

Give PHAs Discretion
    Several commenters suggested HUD should allow PHAs to define areas 
where vouchers are ``difficult to use'' because PHAs can consider local 
and recent conditions and handle complex calculations.
    HUD Response: HUD declines to give PHAs discretion to define areas 
where vouchers are ``difficult to use'' because

[[Page 38262]]

such an approach could lead to highly inconsistent application of the 
program and project caps across the country.
Opposition to Proposed Definition
    A commenter warned that the proposed definition of ``difficult to 
use'' may inaccurately reflect the current status of rental markets at 
either end of the income spectrum and may insufficiently adjust if 
rapid market changes occur.
    HUD Response: HUD determined that the proposed measure is 
appropriate given the targeted incomes that the voucher program is 
intended to serve. HUD agrees that FMRs may take time to adjust to 
market changes but determines the benefit of using FMR data, which is 
held to a high standard of accuracy, outweighs this concern. HUD 
continues its commitment to continually improving FMR calculations in 
order capture the most current market conditions.
Base on Vacancy Rates
    Commenters supported HUD's proposal to define areas where vouchers 
are ``difficult to use'' based on vacancy rates. Some commenters stated 
that HUD should use a three or four percent or lower target vacancy 
percentage for metropolitan Fair Market Rent areas and use ZIP code 
areas to analyze vacancy rates and allow exceptions in areas with 
accurate data at lower levels, such as census tracts. A commenter noted 
that it would be beneficial to examine vacancy rates separated by 
bedroom size, since bedroom size may impact vacancy rates. One 
commenter opposed HUD defining ``difficult to use'' based on vacancy 
rates because of the challenges and inaccuracies behind identifying 
vacancy rates based on ZIP code.
    HUD Response: HUD appreciates the commenters' support of HUD's 
proposal to define areas where vouchers are ``difficult to use'' based 
on vacancy rates. HUD considered a more restrictive target vacancy 
percentage as some commenters proposed but determined the proposed four 
percent threshold provides PHAs an appropriate level of discretion to 
respond to local conditions and is consistent with other uses of a 
vacancy threshold in HUD programs. HUD does not provide for additional 
definition on the basis of areas smaller than ZIP code or of bedroom 
size because such data are not consistently available. Determining 
vacancy rates based on ZIP code is currently possible using reliable 
and available data, so HUD maintains this change in this final rule.
Other Suggestions
    A commenter suggested that HUD add three additional criteria to 
define areas where it is ``difficult to use'' vouchers: (1) in areas 
experiencing rapid rent appreciation as shown by increases in fair 
market rent, (2) areas with low vacancy rates, and (3) areas undergoing 
revitalization. The commenter pointed out that these additional 
criteria would allow PHAs to preserve affordability in rapidly changing 
areas as well as present residents with the ability to choose whether 
to move or remain in areas of opportunity when they may otherwise be 
priced out. Moreover, this commenter stated that HUD should consider 
areas with defined exception payment standards as ``difficult to use,'' 
and ``difficult to develop,'' because it consolidates efforts to 
improve fair housing opportunities. Another commenter recommended that 
HUD identify areas where costs are high relative to metropolitan area 
FMRs based on a median salary comparison to SAFMR because it would 
identify areas where rent dramatically increases, but salaries remain 
stagnant.
    One commenter suggested that defining areas where vouchers are 
``difficult to use'' should include a poverty threshold to avoid 
voucher concentrations in high-poverty areas. This commenter also 
stated that the Small Area FMR (SAFMR) standard is a good proxy for 
areas of opportunity. Another commenter expressed that another means to 
identify areas where vouchers are difficult to use is by comparing 
actual costs to the area's FMR, since using other parameters may be 
complex to calculate and labor-intensive.
    HUD Response: This final rule incorporates into the definition of 
``area where vouchers are difficult to use'' the proposed rule's 
measure of low vacancy rates. HUD reviewed the suggestion to add areas 
experiencing rapid rent appreciation and areas undergoing 
revitalization but determined that data on such measures are not 
available or updated frequently enough to be meaningful. HUD 
appreciates the benefit of preserving affordability in rapidly changing 
areas and allowing residents to remain in areas of opportunity but 
determined that the data limitation will require that PHAs explore use 
of the 20 percent program cap and other exceptions to the cap to meet 
these objectives. HUD disagrees that areas with exception payment 
standards in place should be incorporated into the definition, as 
exception payment standard use can reflect conditions beyond the sole 
criterion this definition is intended to reflect (whether vouchers are 
difficult to use) and their use in the definition would result in broad 
and inconsistent application of the program and project cap exceptions.
    HUD appreciates the commenter's recommendation to incorporate high-
cost areas but retains the proposed rule's definition because the 
criteria therein appear to provide adequate coverage of areas where 
vouchers are difficult to use. HUD intends to monitor the impact of 
this definition over time and consider this additional criterion for 
future rulemaking if the definition proves insufficient. HUD also 
declines to add a poverty threshold to this definition because the 
standards regarding deconcentration of poverty when siting PBV projects 
are adequately covered by existing requirements at Sec.  983.55. HUD 
reviewed other methods to determine actual costs as recommended by 
commenters but determined none are available and verifiable in a manner 
adequate to be relied upon consistently on a national scale.

18. Description of PBV Program (Sec.  983.5)

Operating Without an Agreement

    A commenter supported HUD's proposal to allow development without 
an Agreement to increase flexibility and reduce burdens on PBV 
developments. Other commenters suggested that HUD clearly state, 
potentially in the definition of ``newly constructed,'' that a PHA may 
enter an Agreement contract with prospective units of a property under 
construction.
    HUD Response: HUD appreciates the positive comment and discusses 
further comments on the topic of development without an Agreement in 
the discussion of Sec.  983.154 later in this preamble. The comments 
concerning the definition of ``newly constructed'' have been addressed 
in the discussion of Sec.  983.3 earlier in this preamble.

19. Maximum Amount of PBV Assistance (Sec.  983.6)

Outline Calculation Situations

    One commenter requested that HUD outline in the preamble the 
situations in which a PHA would have to conduct a calculation.
    HUD Response: In this final rule at Sec.  983.58, HUD clarifies 
that the PHA must calculate the number of authorized voucher units that 
it is permitted to project-base in accordance with Sec.  983.6. The 
calculation must include a determination of the amount of budget 
authority that it has available for

[[Page 38263]]

project-basing in accordance with Sec.  983.5(b). The PHA's 
calculations must occur before it issues a request for proposal 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 noncompetitively selects a project in accordance with Sec.  
983.51(c). Further, PHAs must perform an analysis of the impact if 
project-basing 50 percent or more of the units under the Consolidated 
Annual Contributions Contract (ACC). The analysis should consider the 
ability of the PHA to meet the needs of the community across its 
tenant-based and project-based voucher portfolio, including the impact 
on, among others, families on the waiting list and eligible PBV 
families that wish to move under Sec.  983.261.

Reducing Units

    A commenter recommended that a PHA should never be required to 
reduce units under an Agreement or HAP contract but should only be 
unable to enter new commitments, Agreements, or HAP contracts until 
they are back below the cap. This commenter stated that owners and PHAs 
need stability in the PBV program and should not be subject to 
reduction after Agreements or HAP contracts are entered. Therefore, 
this commenter recommended that HUD strike the first clause of Sec.  
983.6(a)(3), limiting the paragraph to paragraphs (a)(1) and (2) of the 
same section.
    HUD Response: HUD has reviewed the comment and determined that this 
final rule already affords relief when a PHA would otherwise be out of 
compliance with the statutory program cap simply because of a change in 
the number of authorized voucher units. In such cases, this final rule 
maintains the proposed rule provision that states the PHA is not 
required to reduce the number of units to which it has committed PBV 
assistance under an Agreement or HAP contract. Notwithstanding, this 
final rule prohibits the PHA from adding units to PBV HAP contracts or 
entering into new Agreements or HAP contracts (except for HAP contracts 
resulting from Agreements entered into before the reduction of 
authorized units or April 18, 2017, as applicable). Further, the PHA 
could add units if the unit meets one of the increased cap exceptions 
and adding the unit does not place the PHA outside of the program cap 
or increased program cap. The same principle applies where the 
noncompliance is simply the result of the change in statute (from 
budget authority to authorized units). Conversely, HUD has an 
obligation to ensure that statutory requirements are met, and, 
therefore, has no discretion to allow for the same policy where the 
noncompliance with the statutory requirement is based on PHA error and 
under this final rule, HUD will not strike the first clause of Sec.  
983.6(a)(3). HUD takes this opportunity, however, to clarify that the 
PHA may also add units in the instances described above, if the unit 
does not count toward the program cap under the requirements of Sec.  
983.59.

Technical Edit

    A commenter recommended using ``authorized units'' instead of 
``budget authority'' in Sec.  983.6(c).
    HUD Response: HUD reviewed the comment and determined that the 
reference is accurate and 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.

The Census Tract Data

    A commenter stated that the use of census tract data ``as 
determined by HUD'' in Sec. Sec.  983.6(d)(2)(iv) and 983.54(b)(1) is 
unclear whether it is determined by census data or other metrics, as 
the commenter believed it would be determined by census data, but the 
text suggests HUD may seek to use other metrics.
    HUD Response: This final rule maintains HUD discretion to determine 
the most appropriate data source and metric to use in making this 
determination. HUD will ensure that stakeholders are notified and fully 
informed once such determinations are made. HUD notes that these 
provisions have now moved to the definition of ``area where vouchers 
are difficult to use'' in Sec.  983.3.

Definition of Veterans

    Commenters objected to HUD excluding dishonorably discharged 
veterans in its proposed definition of ``veterans'' and find it is 
counter to both other HUD programs and Congressional intent, because 
the proposed definition undermines local efforts to end veteran 
homelessness by denying assistance to dishonorably discharged veterans, 
who are likely to face barriers to stable housing. A commenter 
suggested that HUD should allow PHAs to define ``families with 
veterans.''
    HUD Response: Under this final rule, HUD makes the change 
commenters suggested in defining veteran, solely for purposes of 
applying the additional 10 percent veteran exception to the PBV program 
cap, to ``a person who served in the active military, naval, air, or 
space service, and who was discharged or released therefrom.'' HUD 
determines that the change from the proposed rule definition is likely 
to better prevent and address homelessness and unstable housing among 
those who served and their families by providing PHAs an option to 
attach more PBV assistance to projects serving this population. HUD 
does not make the change suggested by a commenter to give PHAs 
discretion to establish the definition of ``veteran'' for this purpose. 
HUD is concerned about the different treatment of applicants that would 
result from divergent definitions around the country.

Supportive Services Limitation

    One commenter disagreed with HUD's proposal to continue its 
existing policy that allows PHAs to exceed the 20 percent limitation on 
project-basing of authorized voucher units for ``units that provide 
supportive housing to persons with disabilities or elderly persons'' 
only when ``the project makes supportive services available for all the 
assisted families in the project.'' The commenter recommended that the 
statutory requirement to offer services to ``all the assisted families 
in the project'' be removed from this final rule.
    HUD Response: HUD appreciates the commenter's suggestion; however, 
HUD is unable to implement such a change through regulation because it 
would be in conflict with the current statutory language under section 
106(a)(2) of HOTMA, which amends section 8(o)(13)(B) of the 1937 Act. 
Under HOTMA, a PHA may project-base an additional 10 percent of its ACC 
authorized units above the 20 percent program limit, provided the 
additional units fall into one of the eligible exception categories, 
one of which is providing supportive housing to persons with 
disabilities or elderly persons. The use of the term ``supportive 
housing'' in section 8(o)(13)(B) of the 1937 Act means that the project 
must be making the supportive services available for all the assisted 
families in the project, not just individual families.

Survivors of Domestic Violence

    A commenter suggested including survivors of domestic violence, 
sexual assault, and stalking to the list of circumstances under which 
PBV units may exceed the cap.
    HUD Response: HUD appreciates the commenter's suggestion; however, 
HUD is unable to implement such a change through regulation because it 
would be

[[Page 38264]]

in conflict with the current statutory language.

20. PBV Provisions in the Administrative Plan (Sec.  983.10)

    A commenter stated that Sec.  983.10(a) is unclear in its 
requirements and recommended this paragraph be guidance instead of a 
requirement. This commenter also suggested HUD clarify in Sec.  
983.10(b)(7)(ii) that PHAs can use a combination of general, site-
based, and owner-maintained waiting lists, as determined by the PHA's 
discretion. Finally, this commenter suggested that HUD create a section 
similar to Sec.  983.10 for PHA Plan requirements or, if already 
identified in part 903, create a cross-reference, because combining 
requirements makes monitoring and compliance easier.
    HUD Response: HUD's longstanding requirement has been that the 
Administrative Plan must state PHA policy on matters for which the PHA 
has discretion to establish local policies. As provided in Sec.  983.2, 
the HCV program regulation governing Administrative Plans (Sec.  
982.54) applies to the PBV program. Section 983.10, as amended in this 
final rule, provides a list of additional Administrative Plan policies 
that a PHA must also adopt, to the extent applicable, if it has 
implemented or plans to implement a PBV program. HUD has reviewed the 
language of Sec.  983.10(a) in response to this comment and edited it 
to better explain these requirements.
    HUD's position is that Sec.  983.251(c) is the appropriate location 
to explain PHAs' options to use a combination of general, site-based, 
and owner-maintained waiting lists. Section 983.10(b)(7) merely 
requires the PHA to include in the Administrative Plan a description of 
the waiting list policies the PHA has chosen to adopt; it does not 
impose a limitation different from Sec.  983.251(c). To prevent any 
potential confusion, HUD revised this section to limit the discussion 
of each PHA policy in Sec.  983.10 to a short description only. PHAs 
must look to the cross-referenced section for complete information 
about the contents of and requirements for each PHA policy.
    As provided in Sec.  983.2, the HCV program regulation explaining 
the relationship between the Administrative Plan and PHA Plan (Sec.  
982.54(b)) applies to the PBV program. PHA Plan requirements themselves 
are contained in 24 CFR part 903 and HUD finds that repeating them in 
part 983 would be duplicative. However, HUD has clarified in Sec.  
983.3(b) that the definition of PHA Plan in Sec.  982.4(b), which 
cross-references part 903, applies to the PBV program, to address the 
commenter's concern.

21. Prohibition of Excess Public Assistance (Sec.  983.11)

Subsidy Layering, Standards, and Review

    Several commenters opposed HUD's proposal to permit subsidy 
layering review upon rehabilitation or development activity. Commenters 
found the change administratively burdensome and recommended that 
subsidy layering reviews be limited to additional Federal resources for 
operating assistance or recommended that SLR only be applied at the 
time of signing an Agreement. Another commenter objected to the 
language in Sec.  983.12(d)(1) (Sec.  983.11(d)(1) in this final rule) 
as harmfully broadening subsidy layering requirements, which is not 
done in other programs and, historically in PBV and Project Based 
Rental Assistance, has only been required when the PBVs are awarded, 
not for any subsequent rehabilitation or assistance. The commenter 
stated that this will be administratively burdensome for owners and 
PHAs, especially given the ninety-day plus review periods.
    A commenter suggested that HUD clarify that rehabilitation projects 
which may be done without any additional funding, and which are 
unlikely to result in a rent increase, are exempt from the subsidy 
layering requirements. A commenter questioned whether HUD has the 
capacity and expertise to conduct the additional subsidy layering 
reviews that would be required by the proposed regulations. Another 
commenter stated that HUD's Regulatory Impact Analysis (RIA) is silent 
with respect to subsidy layering reviews.
    HUD Response: HUD has considered the comments and agrees that it 
would be unnecessarily administratively burdensome for a new SLR to be 
performed every time any amount of additional related assistance is 
added to a newly constructed or rehabilitated project after the HAP 
contract is effective. As such, HUD has revised the rule to clarify 
that the criteria for whether the addition of assistance requires a new 
SLR will continue to be located in the PBV SLR Administrative 
Guidelines published in the Federal Register. With regard to the 
concern that Sec.  983.11(d)(1) broadens subsidy layering requirements, 
HUD clarifies that it is and has long been a requirement in the PBV HAP 
contract for newly constructed and rehabilitated housing that the owner 
must disclose public assistance that is made available during the term 
of the HAP contract. This requirement was reinforced and further 
explained in 75 FR 39561 (Jul. 9, 2010), 79 FR 57955 (Sep. 26, 2014), 
85 FR 12001 (Feb. 28, 2020), and the most recently applicable notice at 
88 FR 15443 (Mar. 13, 2023).
    Section 983.153(b)(1) clarifies that an SLR is required for 
rehabilitated housing projects only when housing assistance payment 
subsidy under the PBV program is combined with other governmental 
housing assistance from Federal, State, or local agencies. HUD confirms 
it has the capacity and expertise to conduct the required SLRs. HUD's 
statement in the RIA was that changes that are merely codifications of 
current HUD practice would not be analyzed. As discussed above, this 
final rule aligns with the policy in effect in the most recently 
applicable SLR Guidelines.

22. Proposal and Project Selection Procedures (Sec.  983.51)

Responses to Question 15 Regarding Additional Exemptions

    Several commenters supported HUD exempting the placement of PBVs 
that are used to replace previously federally assisted or rent-
restricted property from the competitive selection requirements.
    One commenter stated that PHAs and project owners of affordable 
housing units should not have to compete with private owners to 
preserve existing units through on-site or off-site development. This 
commenter expressed that PHAs and owners can use the voucher commitment 
to obtain additional financing to rehabilitate and preserve the 
affordable housing units, many of which have struggled due to 
insufficient appropriations, below-market rents, and unfunded capital 
needs. Another commenter stated that HUD should allow exceptions to the 
competitive selection process in housing-emergency situations, such as 
when the PHA is part of a local partnership to save Naturally Occurring 
Affordable Housing (NOAH) or to relieve homeless encampments.
    Other commenters suggested that HUD exempt tax credit properties 
where the compliance period has come to an end to help protect the 
affordability of the units. One commenter stated that HUD should add 
Project-based Veterans Affairs Supportive Housing (VASH) vouchers on 
the condition that the local Veteran Affairs Office supports doing so. 
One commenter stated that HUD should remove the competitive selection 
requirements when PBVs are submitted with an application for a LIHTC 
credit, to ease the ability of entities to submit

[[Page 38265]]

LIHTC proposals. Another commenter stated that PBVs in income-
restricted developments create a mix of incomes while providing 
financial stability for affordable developments.
    HUD Response: HUD considered the comments and determined an 
additional exemption category should be added at Sec.  983.51(c)(3) to 
include PHA-owned units as defined under Sec.  982.4. The exemption 
from the proposed rule requires for a PHA to be ``engaged in an 
initiative to improve, develop, or replace a public housing property or 
site,'' but in all cases HUD means housing assisted under section 9 of 
the 1937 Act when referring to public housing. Adding PHA-owned units 
to the exemption will streamline and support a PHA's ability to develop 
long term affordable units in its community.
    If a PHA has identified preserving affordable housing or serving 
veterans and the homeless as a local priority, the PHA can incorporate 
that goal into their RFP or strategically utilize other funding 
competitions to select such projects. As a limited resource, PBV should 
be used to address local needs and priorities using a method that is 
intended to identify the best project.

Previous Competition Requirement

    A commenter encouraged HUD to remove the requirement that projects 
be selected solely based on previous competition, if the previous 
competition did not involve consideration of the PBVs, because most tax 
credit and other funding selections will require a provisional 
commitment of PBV assistance. The commenter warned that this puts PHAs 
and project owners in an untenable position, since they cannot compete 
for vouchers without tax credits, and PHAs cannot compete for tax 
credits without PBV assistance.
    HUD Response: HUD understands the limitations presented by the 
commentor because of the provision that prohibits a PHA from selecting 
a housing assistance proposal that included any consideration that the 
project would receive PBV assistance; however, this provision maintains 
the integrity of a competitive selection method and will not be revised 
in this final rule.
    Language was added to Sec.  983.51(b)(1) clarifying that a PHA may 
establish selection procedures that combine or are in conjunction with 
other Federal, State, or local government housing assistance, community 
development, or supportive services competitive selection processes, 
and HUD intends to provide future guidance to support PHAs in using 
these methods in combination with other funding sources.

Clarification Request

    A commenter suggested removing ``regard to,'' from Sec.  
983.51(c)(1) and (2) and modifying the statement, ``newly developed or 
replacement housing,'' in Sec.  983.51(c)(1) to ``newly developed, 
rehabilitated, or replacement housing.''
    HUD Response: HUD agrees with the commenter and has removed the 
language ``regard to'' and revised the language ``newly developed or 
replacement housing.'' Additional language revisions were made to Sec.  
983.51(c) for better readability.

23. Prohibition of Assistance for Ineligible Units (Sec.  983.52)

    One commenter recommended deleting Sec.  983.52(d). In the 
alternative, the commenter urged HUD to revise the requirement from 
applying upon ``proposal submission'' to only be triggered following 
``proposal selection.'' According to the commenter, if the owner 
submits a proposal and that proposal is not successful (perhaps because 
there are not enough PBVs at that time or it is simply not awarded), 
this language will foreclose the owner's future participation in the 
PBV program.
    HUD Response: HUD has retained proposed Sec.  983.52(d) in this 
final rule. The provision has not changed from the requirement in place 
under the prior regulation, except with respect to units developed 
without the use of an Agreement and rehabilitated projects developed 
after HAP contract execution, and it continues to be necessary to 
ensure critical development requirements are followed. HUD declines to 
amend the language to require applicability only after proposal 
selection, because doing so could result in development occurring prior 
to completion of critical development requirements. HUD clarifies, 
however, that if the PHA does not select the project for PBVs, the 
project is not subject to program requirements and the provision does 
not apply.
    HUD also takes this opportunity to amend the prohibition on using 
PBVs in manufactured homes. Under this final rule, PHAs may use PBVs in 
manufactured homes so long as they are permanently affixed to a 
permanent foundation and the owner owns the land on which the 
manufactured home is located, as these are necessary preconditions for 
compliance with the PBV program rules (all standard PBV rules continue 
to apply). Using PBVs in manufactured homes also means that the 
manufactured home can be made accessible in accordance with HUD's 
accessibility requirements, including requirements under HUD's Section 
504 requirements at 24 CFR part 8. HUD finds this change necessary 
given the changes in industry practice since the rule was written.

24. Cap on Number of PBV Units in Each Project (Sec.  983.54)

Question 16: Whether the proposed rule sufficiently addressed the 
project cap requirements in relation to a unit losing its excepted 
status?

    One commenter supported HUD's changes as beneficial for families 
and PHAs. Other commenters suggested that HUD permit a continued 
excepted status for families that lose their excepted status, whether 
due to the death of an elderly family member or other reasons. 
Commenters warned that removing the unit could have negative financial 
implications especially when the project has been underwritten against 
the number of subsidized units. A commenter stated that this would 
align HUD with PIH Notice 2017-21, because this would allow units to 
remain excepted until turnover if the family no longer qualifies for 
the exception through no fault of its own.
    One commenter proposed that HUD adopt a ``next available unit'' 
rule, which would allow a PHA and project owner to continue counting 
units as excepted so long as the next available unit is subsequently 
leased to an eligible family at turnover. In the alternative, this 
commenter suggested a cure period of 90 days, in which the project 
owner and PHA could avoid default under the HAP contract while 
assessing options, ensuring compliance, amending the HAP contract, and 
engaging in other related tasks. Another commenter suggested that PHAs 
should enforce families' excepted status without HUD intervention and 
that a de minimis standard should be set so a minimal number of units 
can be out of excepted status without changes needed to the PBV 
contract.
    HUD Response: HUD reviewed the comment and determined that Sec.  
983.262 of this final rule already affords discretion to PHAs to allow 
the elderly exception to continue to apply to the unit where, through 
circumstances beyond control of the family (e.g., death of the elderly 
family member, long term or permanent hospitalization, or nursing 
care), the elderly family member no longer resides in the unit. 
Further, should HUD adopt a ``next available unit'' policy, such a 
policy would be at odds with statutory requirements, as would be the 
``de minimis'' standard suggested by another commenter.

[[Page 38266]]

Question 17: Whether other options not considered by the proposed rule 
should be available to the PHA when a unit loses its excepted status?

Alternative Options
    A commenter noted that no other options need to be considered. 
Another commenter suggested unit substitution as an option to PHAs when 
a unit loses its excepted status.
    HUD Response: HUD has reviewed the comment and has determined that 
Sec.  983.262 of the proposed rule already offers unit substitution as 
an option.
HCV Conversion
    A commenter suggested PHAs have discretion, but not the obligation, 
to provide families with an HCV because requiring PHAs to provide all 
families in formerly excepted units with an HCV could create a loophole 
where families who are initially eligible for the excepted unit move in 
and promptly remove a household member from the lease to prematurely 
access an HCV. One commenter expressed that the option to temporarily 
convert to HCV seems burdensome to PHAs. Another commenter suggested 
that for Sec.  983.262(f) (now moved to Sec.  983.262(b)(4) in this 
final rule), HUD should require the owner to accept the tenant-based 
voucher issued to the family if the family chooses to remain or is 
unable to locate another suitable unit.
    HUD Response: HUD appreciates the perspective provided by 
commenters concerning the option to temporarily remove the unit from 
the PBV HAP contract and provide the family with a tenant-based voucher 
when a unit loses its excepted status; however, under the proposed 
rule, this was meant to be one of several options that a PHA could use 
to manage the loss of the exception. Additionally, given the discretion 
provided at Sec.  983.262(c)(3) and (d)(1)-(2), HUD expects a unit 
losing its excepted status not to be a frequent occurrence. 
Additionally, there is no reason to assume that families will start 
removing members from the lease just to receive a tenant-based voucher.
Combining Exception Categories
    One commenter encouraged HUD to retain references to combining 
exception categories in a project and to permit the designation of 
units as elderly or eligible for supportive services in projects that 
are exempt from the income-mixing requirement. This commenter stated 
that HUD is not statutorily required to prohibit PHAs from designating 
units under the HAP contract once the income-mixing requirement does 
not apply, due to reasons beyond income-mixing, such as complying with 
various set asides and pointing allocations in LIHTC applications or 
seeking to convert existing elderly designated public housing to PBV.
    HUD Response: HUD agrees with commenters that reinstating Sec.  
983.56(b)(3) in this final rule would be helpful. While the provision 
was initially removed because the supportive services exception 
requires that supportive services are made available to all PBV 
families in the project, HUD agrees that this ``combining exception 
categories'' provision is not at odds with that requirement and re-
inserting it makes clear that PHAs may designate units in the HAP 
contract for specific exceptions. This final rule restores the 
provision at Sec.  983.54(c)(1) with textual changes to clarify that 
the provision allows that some units may be under different exception 
or exclusion categories than others in a single project. HUD disagrees 
with the comment that a unit may be excepted when it is already 
excluded. Where a unit is excluded, the statute provides no basis for 
an additional exception.

Supportive Services

    One commenter supported HUD's emphasis that the use of supportive 
services is voluntary. Another commenter thought that families 
receiving drug and alcohol treatment as a condition of living in an 
excepted unit should agree to supportive services, if needed, and to 
comply with PBV regulations including following their supportive 
service plan and timely paying their rent.
    HUD Response: HUD does not make participation in supportive 
services mandatory and the statute conveys that participation in such 
supportive services is voluntary.

Question 18: Does the regulation clearly convey how the Family Self-
Sufficiency (FSS) program may be used in meeting the supportive 
services exception?

    Many commenters stated that the proposed rule is clear on how FSS 
can be used in meeting supportive services. A commenter supported the 
change that prohibits owners from terminating a family's lease for 
failure to complete an FSS contract without good cause. In response to 
question 18, one commenter found the proposed rule unclear on whether 
``supportive services used in connection to the FSS program'' could be 
the sole services offered to families to meet the exception. Another 
commenter suggested putting the proposed rule on hold until HUD 
finalizes the FSS proposed rule \16\ to avoid any potential conflict 
between both rules.
---------------------------------------------------------------------------

    \16\ 85 FR 59234 (Sep. 21, 2020).
---------------------------------------------------------------------------

    HUD Response: While HUD appreciates the comments received 
concerning the clarity of the FSS provisions, upon reflection, HUD has 
determined that a PHA that administers an FSS program can choose to 
solely use FSS in meeting the supportive services exception. This is 
because PBV families are eligible to enroll in FSS (and, therefore, 
eligible for the supportive services that are made available through 
the FSS program) and enrollment in FSS is voluntary. However, if the 
family fails to comply, without good cause, with the requirements of 
the FSS contract of participation, the family may be terminated from 
FSS. If the family's FSS contract of participation is terminated, the 
PBV unit would lose its excepted status if the PHA solely uses FSS in 
meeting the supportive services exception and the PHA policy in the FSS 
Action Plan prohibits the re-enrollment of all members of a household 
that enrolled in FSS but did not complete the program successfully 
(were terminated from FSS or left the program voluntarily); as provided 
in Sec.  983.262(d)(3)(iii) of this final rule, the unit loses its 
excepted status only if the entire family becomes ineligible for all 
supportive services for a reason other than that the family 
successfully completed the services.
    PHAs that choose to rely solely on FSS to meet the supportive 
services exception must, therefore, plan carefully for such an 
eventuality. The PHA may consider the following in making a 
determination on whether to rely solely on FSS: (a) FSS graduation 
rates, because if the PHA has low FSS graduation rates and a policy 
prohibiting the re-enrollment of previous FSS participants, this could 
potentially result in a high number of PBV units losing their excepted 
status; and (b) availability of an FSS slot at the time of the PBV 
family's request for enrollment since the supportive services must be 
made available to the family within a reasonable time, as defined by 
the PHA but not to exceed 120 calendar days from the family's request, 
for the exception to apply. Further, the PHA could avoid the potential 
loss of the PBV unit's excepted status by making the supportive 
services used in connection with the FSS program available to non-FSS 
PBV families at the project. Notwithstanding, PHAs cannot use the FSS 
grant-funded coordinators to serve non-FSS PBV families but non-

[[Page 38267]]

FSS services can serve non-FSS PBV families.
    With respect to the commenter's suggestion to put this proposed 
rule on hold, the FSS rule was published on May 17, 2022, with an 
effective date of June 16, 2022 (compliance with the FSS rule was 
required no later than November 14, 2022). As a result, HUD can ensure 
all HOTMA final rule provisions are aligned with the FSS rule to avoid 
any potential conflict between both rules. HUD has also taken this 
opportunity to clarify that, to meet the exception, the supportive 
services must be made available to the family within a reasonable time, 
as defined by the PHA but not to exceed 120 calendar days from the 
family's request.

25. Site Selection Standards (Sec.  983.55)

    Another commenter supported permitting PHAs to use project-based 
vouchers in new construction developments in areas with poverty rates 
greater than 20 percent, but suggested HUD does not require the PHA to 
have gathered five years of information regarding poverty rates first.
    HUD Response: HUD appreciates the commenter's support pertaining to 
permitting PHAs to use project-based vouchers in new construction 
developments in areas with poverty rates greater than 20 percent. In 
this final rule, HUD continues to require the PHA to have gathered five 
years of information regarding poverty rates first, which must be 
consistent with the PHA Plan under 24 CFR part 903 and the PHA 
Administrative Plan, because HUD believes doing so will improve 
compliance with the requirement at section 8(o)(13)(c)(ii) of the 1937 
Act that the PBV HAP contract be consistent with the goal of 
deconcentrating poverty and expanding housing and economic 
opportunities.

26. Environmental Review (Sec.  983.56)

Support for the Proposed Rule

    One commenter supported an environmental review exception for 
existing housing that is formerly federally assisted property. Another 
agreed with the proposed rule but suggested broadening the definition 
of existing housing to encompass more properties.
    HUD Response: HUD has not adopted this aspect of the proposed rule, 
as further explained below in this discussion of comments regarding 
Sec.  983.56.

Responses to Questions 19 and 20 Regarding Evidence of Past 
Environmental Reviews

    Commenters warned that requiring owners to demonstrate that an 
environmental review was previously conducted would be an 
administrative burden. A commenter stated that it is unreasonable to 
require that new owners of older buildings provide environmental review 
documentation. Commenters stated that an exemption should be allowed 
even if documentation of prior review is unavailable. Commenters also 
stated that HUD should infer that those previous federally assisted 
projects must have conducted an environmental review and HUD should 
assume that the review was properly conducted and met environmental 
review requirements especially if the owner is in good standing with 
HUD. A commenter suggested an owner should be allowed to self-certify 
that the property was formerly federally assisted. Another commenter 
expressed that Congress set a bright line standard to exempt all 
existing housing from demonstrating that an environmental review was 
previously conducted, and, as such, there should be a rebuttable 
presumption that the existing housing received a proper environmental 
review, unless HUD can show otherwise. A commenter stated that if the 
PHA's environmental review records are unavailable, then a new review 
should be conducted.
    HUD Response: HUD agrees that requiring owners to demonstrate that 
an environmental review was previously conducted would have presented 
some administrative burden and has removed this requirement.
HUD Should Exempt All Existing Housing
    Commenters expressed that HUD should exempt all existing housing 
that only receives HAP Federal assistance. A commenter suggested this 
exemption should not expire. Commenters stated that the statute clearly 
provides an exemption broader than HUD's proposal and noted legislative 
history shows that Congress intended such an exemption. A commenter 
stated that HUD's citation of Church of the Holy Trinity v. United 
States, 143 U.S. 457 (1892), as support for the proposed rule's 
environmental review position is inapplicable because there is no 
evidence that a plain reading of the text would be in contravention of 
Congress's intent that site-based housing comply with environmental 
review requirements. This commenter expressed that the HUD's Regulatory 
Impact Assessment concedes that the Housing and Economic Recovery Act 
(HERA) and HOTMA requirements contradict Congressional support for 
environmental review.
    One commenter stated that HUD should exempt existing housing to 
prioritize environmental review for new construction and rehabilitation 
projects because they pose the greatest environmental risk. Another 
commenter stated that this requirement would do nothing to protect 
tenants from adverse environmental conditions. Another commenter found 
HUD's proposal legally questionable and unnecessary to protect 
subsidized tenants from living in areas with adverse environmental 
conditions. Commenters suggested that HUD allow exemption of existing 
housing from environmental review if it meets the criteria for 
environmental acceptability under Sec.  982.401(l)(2). Another 
commenter also questioned HUD's statutory authority to impose an 
environmental review requirement on project owners of existing 
structures and suggested that HUD eliminate this requirement because it 
is significantly burdensome on responsible entities, PHAs, and project 
owners as the document retention policies adopted by responsible 
entities are not uniform.
    HUD Response: HUD agrees that requiring owners to submit past 
reports of environmental reviews may result in a burden to the owner 
without reducing the risk of unhealthy environmental conditions. Upon 
consideration of this and other comments, HUD determines that revising 
the rule to provide that environmental review is not required to be 
undertaken before entering into a HAP contract for existing housing, 
except where the review is required by law or regulation relating to 
funding other than PBV housing assistance payments, best balances 
HOTMA's textual change with Congress's continuing emphasis on the 
importance of Federal assistance being used in an environmentally sound 
manner. HUD agrees that existing housing projects pose lesser 
environmental risk than newly constructed and rehabilitated projects 
given that the existing housing structures at issue are not altered, 
though HUD recognizes existing housing is not without risk. HUD agrees 
with commenters that compliance with standards for environmental 
acceptability as part of the review of site selection standards in 
Sec.  983.55 (formerly under Sec.  982.401(l)(2)) can contribute to the 
mitigation of environmental harm to and the risk of exposure to adverse 
environmental conditions in existing housing.

[[Page 38268]]

Requirements Following Contract Effective Date
    A commenter stated that adding units generally does not create an 
environmental impact. The commenter encouraged HUD to provide technical 
and financial assistance to responsible entities and PHAs if HUD 
requires an environmental review for a project that seeks to add units 
to an existing HAP contract that has already undergone review, to 
ensure sufficient capacity and expertise. Another commenter suggested 
that HUD should not require review at the five-year review period if 
environmental conditions have not changed in the intervening years.
    HUD Response: HUD agrees that adding units generally does not have 
an environmental impact. PBV regulations do not require review every 
five years nor was such a requirement proposed. HUD appreciates the 
comment encouraging technical and financial assistance to responsible 
entities and PHAs. HUD intends to provide additional technical 
assistance regarding changes to the PBV program following publication 
of this final rule. HUD will consider the need for financial assistance 
in existing HUD programs and any relevant new funding opportunities 
that become available.
Allow Alternatives
    Commenters supported the current environmental review requirements, 
and requested HUD allow acceptable alternatives, such as an abbreviated 
review or other local environmental review reports.
    HUD Response: HUD considered whether the regulation previously in 
effect should be amended to allow for alternatives, but determined that 
such an approach would not be appropriate for newly constructed or 
rehabilitated housing, which are subject to environmental review under 
law, and that requiring no environmental review before entering into a 
HAP contract for existing housing is a better approach, given that the 
housing remains as it was prior to receiving PBV assistance and 
assisted families remain protected by HQS.
Require Environmental Review Near Documented Hazard Sites
    One commenter recommended that existing housing projects be 
required to undergo environmental review if the site is located near a 
documented hazard site and suggested that HUD require PHAs to notify 
tenants and update HQS inspection lists when a housing project is close 
to a Superfund site or on the National Priorities List.
    HUD Response: HUD finds that it would be impractical to require 
environmental review when environmental issues are near the housing 
because, in many cases, the issue would become known only through 
environmental review and in the remaining cases, the PHA would be 
prohibited from selecting any such site if it presented a hazard in 
accordance with site selection standards.
Use HEROS To Track Environmental Reviews
    One commenter encouraged HUD to continue tracking environmental 
reviews via HUD's Environmental Review Online System (HEROS).
    HUD Response: HUD intends to continue use of HEROS.
Technical Edit Suggestions
    A commenter stated that Sec.  983.56 should refer to parts 50 and 
58 instead of summarizing the requirements to prevent inconsistencies. 
This commenter also stated that if there are differences between parts 
50 and 58, the regulations should identify the deviations. This 
commenter further suggested that HUD revise Sec.  983.56(d)(2) to read, 
``The responsible entity has completed the environmental review 
procedures required by 24 CFR part 58, and HUD has either issued 
authority to use grant funds or Letter to Proceed.'' The commenter 
recommended revising Sec.  983.56(e) to ensure consistent use of 
terminology with part 58. The commenter additionally expressed that 
Sec.  983.56(f) is inapplicable to HUD, because PHAs cannot direct 
HUD's compliance with its own requirements. Another commenter suggested 
HUD clarify that a transfer of ownership of a property should not 
impact the definition of existing housing for environmental review 
purposes.
    HUD Response: In this final rule, HUD amended some of the language 
of proposed Sec.  983.56 to ensure there were no inconsistencies with 
parts 50 and 58. HUD amends paragraph (f) to better reflect part 50 and 
58 requirements and paragraph (d)(2) to clarify the applicability of 
the Letter to Proceed. HUD does not find clarification regarding 
transfer of ownership to be necessary, as the definition of existing 
housing is clear that the condition of the units, rather than the 
ownership of the units, is the relevant criterion, and the 
environmental review regulation clearly provides that no environmental 
review is required before entering into a HAP contract for existing 
housing.
Expand Definition To Match PIH Notice
    A commenter suggested expanding the definition of existing housing 
to include the entirety of the PIH Notice 2016-22 definition, which 
``clarifies the applicability of environmental reviews under 24 CFR 
parts 50 and 58 to all PHA activities at project site(s) assisted or to 
be assisted by HUD.''
    HUD Response: HUD has determined to change the requirements for 
environmental review for the reasons explained above in this discussion 
of comments regarding Sec.  983.56; upon the effective date of this 
final rule, portions of PIH Notice 2016-22 relating to PBV will become 
obsolete. HUD intends to issue guidance replacing PIH Notice 2016-22.
Change the Deadline for Submitting an Environmental Review
    A commenter suggested that HUD allow two years to write an 
environmental review.
    HUD Response: HUD determined that procedural changes to the manner 
in which HUD or a responsible entity conducts environmental reviews are 
beyond the scope of this rulemaking.

Question 21: Time Limit for Accepting Previously Assisted Properties' 
Environmental Reviews

    Some commenters stated that there should be no time limit for when 
prior environmental reviews must have been conducted to be accepted for 
purposes of the exemption if no changes occurred during the intervening 
years. Other commenters suggested time ranges. One commenter suggested 
an environmental review for federally assisted property that has 
undergone significant work or rehabilitation in the past ten years. 
Another commenter objected to HUD establishing a time limit but 
suggested a review if the property has changed use. A commenter 
suggested every thirty years to remain coterminous with early PBV HAP 
contracts. Another commenter recommended every five years consistent 
with HUD's general recommendation. One commenter expressed that there 
should be a ten-year limit for the exemption since neighborhoods often 
change on a decadal scale, and another commenter stated that time 
limits should be tied to past evolution of the rule, rather than an 
arbitrary period.
    HUD Response: HUD does not proceed with the proposed reliance on 
prior environmental reviews in this final rule for the reasons 
explained above in this discussion of comments regarding Sec.  983.56, 
and therefore does not adopt any time limit for prior environmental 
reviews.

[[Page 38269]]

Question 22: Alternative Approaches To Conducting NEPA Reviews

    Commenters stated that no national standard would be an adequate 
substitute for the National Environmental Policy Act of 1969 (NEPA) (42 
U.S.C. 4321 et seq.) review. One commenter expressed that most lending 
institutions will require an American Society for Testing and Materials 
(ASTM) Phase I site assessment but believed this would not be adequate 
because most will not include review of historic building elements, 
endangered species, noise, airport waste storage and groundwater flow. 
Some commenters suggested that HUD allow projects to use local 
requirements to conduct environmental reviews because most local 
jurisdictions have rigorous environmental review requirements.
    HUD Response: HUD appreciates the examples of environmental 
standards other than Federal environmental review provided by 
commenters and the discussion of the limitations of those standards. 
HUD finds that none of the examples provided are easily determined to 
address the same criteria as Federal environmental review nor are they 
uniformly applicable on a national basis. HUD appreciates that many 
projects will be subject to these alternative standards and expects 
PHAs will thoroughly consider the results of reviews undertaken in 
response to lender or local requirements, including whether the results 
impact the PHA's site selection determination.

27. PHA-Owned Units (Sec.  983.57)

    A commenter stated that it is unclear the conflict HUD is 
attempting to avoid by requiring independent entity oversight of 
development activity. Another commenter suggested that the PHA plan 
should contain details about the rights and obligations of the 
independent entity with respect to both the PHA and the tenants, and 
that HUD should require that applicants and tenants receive a written 
disclosure explaining: (1) the relationship between the PHA and 
independent entity; (2) contact information for the independent entity; 
(3) what rights the tenants may have; and (4) what to do in the case of 
a complaint. That same commenter stated that special care is needed to 
achieve the intended quality results from PBV investments, suggesting 
that HUD should ensure that PHA affiliate-owned PBV units receive 
adequate independent oversight--including compliance with HQS and civil 
rights obligations--by another public entity or HUD.
    HUD Response: HUD maintains the position that the PHA cannot 
perform any function that would present a clear conflict (ensuring 
compliance with selection process, inspections and rent setting) for 
units they own. 42 U.S.C. 1437f(o)(11) requires that the unit of 
general local government or a HUD-approved independent entity perform 
inspections and rent determinations for any PHA-owned units. When the 
owner carries out development activity under Sec.  983.152 or 
substantial improvement under Sec. Sec.  983.207(d) or 983.212, the 
independent entity is required to review the evidence and work 
completion certification submitted by the owner in accordance with 
Sec.  983.155(b) and determine if the units are in complete accordance 
with Sec.  983.156. This is an inspection function. To assist 
independent entities in carrying out these inspection responsibilities 
and avoid further conflicts, one function was added to Sec.  983.57, 
requiring the independent entity to approve substantial improvement on 
units under a HAP contract in accordance with Sec.  983.212 (which was 
Sec.  983.157 in the proposed rule).
    HUD does not believe it is necessary to add additional disclosures. 
When a family is accepted into the PBV program, Sec.  983.252 requires 
the PHA to conduct an oral briefing and provide a written information 
packet. Although the topics listed in the comments are not explicitly 
covered in the rule, HUD believes that many of these items would be 
covered in meeting the requirements at Sec.  983.252, such as how the 
program works and family and owner responsibilities. Additionally, 
Sec.  982.352(b) sets conditions on assisted units that are PHA-owned, 
including that 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; the PHA-owned unit must be freely selected by the 
family, without PHA pressure or steering; and the PHA must obtain the 
services of an independent entity.

28. Units Excepted From Program Cap and Project Cap (Sec.  983.59)

Question 23: Should PHAs that wish to PBV 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 available within a reasonable period of time for 
eligible PBV families that wish to move?

    Some commenters disagreed with a cap on the number of PBVs a PHA 
can use based on the number of available HCVs. Commenters supported 
PHAs allocating PBVs and tenant-based vouchers (TBVs) based on local 
conditions, which some noted as Congressional intent for PHAs. One 
commenter expressed that HUD lacks the statutory authority to restrict 
a PHA's ability to project-base vouchers. This commenter stated that 
HUD's concerns about unintended consequences of cap exceptions are 
unfounded, given studies finding that Moving to Work (MTW) agencies 
usually fall within statutory program caps, and PHAs already consider 
the availability of vouchers due to families' right to move. The 
commenter further criticized HUD's analysis requirement of available 
vouchers for eligible PBV families as an unfunded mandate and 
duplicative of existing efforts. This commenter also recommended that 
the list of formerly assisted housing excluded from the portfolio cap 
should include HOME, and that replacement units excluded from the 
portfolio cap should include off-site replacement units, to enable 
owners and PHAs to site replacement housing in high opportunity areas, 
low vacancy areas, and areas outside of minority concentrations, which 
are locations that HUD has prioritized as important fair housing goals 
and has recognized as being better for the residents. The commenter 
further suggested that, in the case of newly constructed units 
developed to replace units that meet the criteria of Sec.  983.59(b), 
units should be excluded even if the replacement units are built on a 
different site and the requirement at proposed Sec.  983.59(d)(2) 
should require that the identification of the housing as replacement 
housing occur prior to PBV award rather than prior to demolition.
    Commenters recommended that HUD establish an overall hard cap of 50 
percent of vouchers, with exceptions to allow PHAs to project-base 
vouchers if local conditions warrant. Another commenter preferred PBV 
assistance over tenant-based assistance because it eliminates the 
barriers to lease from a private landlord in the open rental market. A 
commenter suggested the threshold at which the PHA or HUD should focus 
on the impact of providing PBV families with a meaningful opportunity 
should be when the waiting list is five years long.
    HUD Response: HUD appreciates all the comments received regarding 
this question. With respect to the comments that HUD establish a hard 
cap of 50 percent of the number of vouchers the PHA may project-base 
(with exceptions based on local services) or remove the limitation cap 
entirely, the cap and the

[[Page 38270]]

exceptions to the cap are statutory requirements and consequently HUD 
cannot alter or remove the cap through rulemaking. HUD further agrees 
with the comments that the determination to choose to project-base 
vouchers rests with the PHA, including the decision to project-base 
vouchers in units that, as a result of the HOTMA amendments to 42 
U.S.C. 1437f(o)(13)(B), do not count against the percentage limitation 
on PBV units. However, nothing in the HOTMA provision that excludes 
units previously subject to federally required rent restrictions or 
that were receiving another type of long-term housing subsidy provided 
by HUD from the percentage limitation relieves the PHA of its 
responsibility to administer its PBV program in accordance with all 
other program requirements. In cases where the percentage of units the 
PHA is contemplating project-basing is over 50 percent of ACC units, 
HUD is concerned about the potential impact on the PHA's ability to 
fulfill its obligations under 42 U.S.C. 1437f(o)(13)(E). Section 
1437f(o)(13)(E) provides that families may move from the PBV unit at 
any time after the family occupied the unit for 12 months, and that 
upon such a move, the PHA shall provide the family with HCV tenant-
based assistance or other comparable tenant-based assistance, and 
further provides that if such assistance is not immediately available, 
this requirement may be met by providing the family priority to receive 
the next voucher or comparable tenant-based rental assistance.
    The use of PBV assistance can be an effective preservation tool and 
HUD is supportive of the use of PBV to prevent the loss of affordable 
housing units in their communities. However, in cases where a PHA is 
selecting a project for PBV assistance that would result in a situation 
where the PHA would be project-basing 50 percent or more of the PHA's 
authorized units, HUD believes that it is critical that the PHA has 
first fully considered the ramifications of that decision for its 
program, including if and how the PHA will be able to fulfill its 
statutory obligation to provide priority for tenant-based rental 
assistance to PBV families that wish to move consistent with 42 U.S.C. 
1437f(o)(13)(E). Furthermore, since available vouchers would need to be 
prioritized for PBV families exercising their statutory right to move 
with tenant-based assistance, PHAs should also want to take the 
potential impact on families on the PHA's tenant-based waiting list 
into consideration. Consequently, this final rule provides that PHAs 
must perform an analysis of the impact prior to selecting a project for 
PBV assistance if project-basing 50 percent or more of the PHA's 
authorized voucher units, and the analysis should consider the PHA's 
ability to fulfill its responsibilities to provide tenant-based 
assistance to PBV families that wish to move and the impact on the 
tenant-based waiting list in such cases.
Replacement Housing and Units
    One commenter proposed that HUD exempt off-site public housing 
replacement from caps to help deconcentrate poverty. Another commenter 
recommended that HUD allow off-site public housing replacement to 
maximize flexibility to use PBVs to replace public housing. Another 
commenter expressed concern over Sec.  983.59, because replacement 
units should reflect the number and size of units required by the 
original residents to maximize their preference to return, reduce 
displacement, and maximize the preservation of site-based units in the 
community, according to the commenter. The commenter requested a civil 
rights review if there is any loss of units or change in unit size. As 
part of the redevelopment process, the commenter suggested that 
developers be required to survey residents about their housing size 
needs and only alter unit sizes if the survey demonstrates that the 
original residents require fewer or different sized units. The 
commenter further recommended the following: (1) that a reduction in 
the total assisted replacement units should be prohibited, unless the 
civil rights review makes no adverse finding; (2) the developer must 
demonstrate that the unit is in a voucher friendly area as well as 
located in a census tract where the poverty rate is greater than 20 
percent; and (3) the resident notice and consultation reflect a desire 
not to return to PBV units. Commenters additionally opposed HUD's 
limitations that replacement units be on the same physical site as 
improper on fair housing grounds and overly restrictive, which the 
commenters stated was an unnecessary restriction and reinforced racial 
segregation.
    HUD Response: First, HUD clarifies that nothing in the proposed 
rule prohibited off-site replacement. The provision at Sec.  983.59(d) 
of the proposed rule served only to clarify which units are excluded, 
by statute (section 106(a)(2) of HOTMA), from the percentage limitation 
and income-mixing requirement. Under both the proposed rule and this 
final rule, PHAs may project-base units to replace formerly assisted or 
rent-restricted units off-site. However, a PHA's choice to replace 
units off-site does not result in those units being excluded from the 
percentage limitation or income-mixing requirement. Because the 
exclusion in section 106(a)(2) of HOTMA provided only that ``units of 
project-based assistance that are attached to units previously subject 
to federally required rent restrictions or receiving another type of 
long-term housing subsidy provided by the Secretary shall not count 
toward the percentage limitation,'' units located on an entirely 
different site from those replaced do not qualify for the statutory 
exclusion from the percentage limitation. Similarly, such units do not 
qualify for the statutory exclusion from the income-mixing requirement 
at section 106(a)(3) of HOTMA, which excluded only ``units previously 
subject to federally required rent restrictions or receiving other 
project-based assistance provided by the Secretary.''
    HUD recognizes Congress's intent to preserve public and other 
affordable housing under the PBV program by (1) providing that on-site 
replacement units do not count toward the PBV percentage limitation and 
(2) giving HUD the authority to create additional exception categories. 
HUD acknowledges that sometimes attaching PBVs at an off-site location 
may better advance fair housing goals, including to racially integrate 
communities and to provide replacement housing of adequate bedroom 
size, which commenters cited as concerns. In many cases, the off-site 
project would be eligible for the increased cap at Sec.  
983.6(d)(1)(iv) (projects in areas where vouchers are difficult to 
use). In addition, to more directly facilitate opportunities to replace 
housing off-site, HUD is adding at Sec.  983.6(d)(v) of this final rule 
an exception category specifically for off-site PBV replacement housing 
under the PHA's increased cap authority (under which the PHA may 
project-base an additional 10 percent of authorized voucher units). HUD 
believes this additional category will address the concerns raised and 
further notes that PHAs have other options beyond this new exception 
authority to develop off-site replacement housing with PBV assistance. 
Under the RAD PBV program, HUD waived section 8(o)(13)(B) of the 1937 
Act so that covered projects, including those RAD PBV projects 
developed at a new location, do not count against the PBV percentage at 
all. Finally, PHAs can and should be making efforts to improve their 
tenant-based voucher programs to better address the aforementioned fair 
housing concerns.

[[Page 38271]]

Exclusion for LIHTC and 515 Loans
    Commenters supported HUD's proposal to include units that 
previously received LIHTC allocations or 515 loans as excepted units. 
However, commenters stated HUD lacks statutory authority to limit this 
exclusion to properties that have been subject to rent limitations or 
received specified types of assistance within five years prior to PHA 
commitment of PBVs. Commenters recommended removing this limitation or 
incorporating an exception for replacement of old public housing 
properties.
    HUD Response: HUD has reviewed the comments and has determined that 
HUD has the statutory authority to limit this exclusion to properties 
that have been subject to rent limitations or received specified types 
of assistance within five years prior to PHA commitment of PBVs.
General Opposition
    A commenter stated that requiring PHAs to analyze the impact on the 
availability of vouchers and demonstrate that they will still have 
sufficient tenant-based vouchers available within a reasonable period 
of time for eligible PBV families that wish to move is costly and 
burdensome to PHAs. One commenter opposed HUD requiring an analysis as 
a pre-requisite for project-basing additional vouchers, due to a 
concern that an analysis will remove the PHA's discretion to decide to 
project-base, which would impact PHAs' broader plans to serve their 
communities.
    HUD Response: In this final rule, an analysis of impact in Sec.  
983.58 appropriately addresses the risk of unintended or unanticipated 
consequences that over-use of PHAs' broad and unlimited exception 
authority to project-base formerly restricted or assisted units may 
have without creating undue burden.
Opposition to Setting a Specific Threshold
    A commenter opposed HUD setting additional thresholds based on the 
percentage of vouchers and found the current turnover method for PBV 
assistance sufficient. This commenter stated that high rates of 
turnover at a property indicate the need for improvement and retention 
of tenants. Another commenter recommended that HUD provide PHAs with 
additional discretion in allowing PBV tenants to leave with their 
voucher or extending the occupancy requirement in PBV to two years, 
which is consistent with RAD, due to PBVs' higher turnover rate than 
other developments, which increases HCV waitlists. Commenters also 
recommended alternating the turnover voucher issuance between 
households on the HCV list or other waiting list.
    HUD Response: HUD is unable to modify families' option to move with 
tenant-based assistance because it is required by statute.
Recommended Threshold Percentage of Vouchers
    A commenter stated that the increase in a PBV household's 
eligibility to request vouchers leads to a waitlist backlog and an 
impact on occupancy in some locations, increased vacancy rates, and 
higher turnover costs. This commenter recommended that PHAs have the 
flexibility to administer a 25 percent cap on tenant-based attrition 
vouchers to eligible requesting PBV households, so that 75 percent of 
attrition vouchers go to HCV waitlist families. The commenter suggested 
this approach as equitable to house unsubsidized families faster while 
preserving PBV residents' rights to continued HCV assistance.
    HUD Response: HUD reviewed the comment and has determined that HUD 
is unable to modify PBV families' option to move with tenant-based 
assistance because it is required by statute.
Alternative Suggestions
    A commenter stated that the uncertain availability of tenant-based 
vouchers due to attrition, being over-leased or under-leased, and 
spending shortfalls, makes it difficult to set a threshold that would 
ensure that PBV participants can be issued a tenant-based voucher 
within a certain timeframe. This commenter stated that the PBV cap as a 
percentage of a PHA's total allocation is a better predictor that 
tenant-based vouchers will be anticipated to be available for program 
transfers. The commenter also stated that PBV assistance is preferable 
over tenant-based assistance because PBV property owners target certain 
special needs population, eliminating the barriers experienced to lease 
from a private landlord in the open rental market.
    HUD Response: HUD has reviewed the comment and determined that this 
final rule will require an analysis of impact in Sec.  983.58, which is 
required if project-basing 50 percent or more of units under the ACC.
Congressional Authority
    Commenters stated that HUD does not have the statutory authority to 
control a PHA's authority to project-base vouchers. One commenter 
stated that if HUD decides to place more restrictions on PHAs, then it 
should be Congressionally authorized. Another commenter recommended 
that HUD increase the number of housing vouchers in general.
    HUD Response: With regard to the comment that if HUD decides to 
place more restrictions on PHAs in terms of the number of vouchers that 
may be project-based, the restrictions should be Congressionally 
authorized, HUD agrees that the determination to choose to project-base 
vouchers rests with the PHA, including the decision to project-base 
vouchers in units that do not count against the percentage limitation 
on PBV units. The final rule does not place additional restriction on 
the number or percentage of vouchers that the PHA may project-base. 
However, nothing in the HOTMA provision that excludes units previously 
subject to federally required rent restrictions or that were receiving 
another type of long-term housing subsidy from the percentage 
limitation relieves the PHA from its responsibility to administer its 
PBV program in accordance with all other program requirements. HUD is 
concerned about the PHA's ability to fulfill its obligations under 42 
U.S.C. 1437f(o)(13)(E) in cases where most or all of the PHA's vouchers 
are project-based. Section 1437f(o)(13)(E) provides that families may 
move from the PBV unit at any time after the family occupied the unit 
for 12 months, and that upon such a move, the PHA shall provide the 
family with HCV tenant-based assistance or other comparable tenant-
based assistance, and further provides that if such assistance is not 
immediately available, this requirement may be met by providing the 
family priority to receive the next voucher or comparable tenant-based 
rental assistance. The use of PBV assistance can be an effective 
preservation tool and HUD is supportive of the use of PBV to prevent 
the loss of affordable housing units in their communities. However, 
when a PHA is considering project-basing a high percentage of its 
authorized units, HUD believes that it is critical that the PHA should 
take into account if and how the PHA will be able to fulfill its 
statutory obligation to provide tenant-based rental assistance to PBV 
families that wish to move. Further, since available vouchers would 
need to be prioritized for PBV families exercising their statutory 
right to move with tenant-based assistance, PHAs would also want to 
take the potential ramifications for reaching families on the PHA's 
tenant-based waiting list into

[[Page 38272]]

consideration. Consequently, this final rule provides that in cases 
where a PHA is selecting a project for PBV assistance that would result 
in a situation where the PHA would be project-basing 50 percent or more 
of the PHA's authorized units, the PHA must perform an analysis of the 
impact of its program.
    With regard to the commenter recommendation that HUD increase the 
number of housing vouchers in general, HUD cannot increase the number 
of authorized vouchers through this final rule. New vouchers and the 
funds to support them are provided by Congress through HUD's 
appropriations acts.
HUD Report/Study
    A commenter stated that families should not be forced to wait in 
potentially unsafe housing while they wait for the PHA to process the 
PBV-to-HCV transfer. Therefore, commenters suggested that HUD and PHAs 
monitor and report from the next three to five years increases in wait 
times for HCV assistance from PBV families where PHAs have increased 
the availability of PBV assistance, due to HOTMA.
    HUD Response: HUD's position has always been that families should 
not be forced to wait in potentially unsafe housing while they wait for 
the PHA to process a family's right to move.

29. Inspecting Units (Sec.  983.103)

Question 24: Non-Life-Threatening (NLT) Conditions for New Construction 
and Rehabilitation Housing

    One commenter stated that NLTs could effectively be used when newly 
constructed developments have units ready for occupancy, but the public 
space areas are still not fully developed, and the development can 
obtain a temporary certificate of occupancy. A commenter proposed that 
HUD continue to use the current definition for NLT conditions for new 
construction and rehabilitation housing because it streamlines 
standards and provides owners with the opportunity to address minor 
issues that arise from construction or rehabilitation work.
    A commenter stated that there is no reason for new construction or 
rehabilitation to fail HQS when they have the final certificate of 
occupancy, especially where new construction is built under strict 
county and local requirements. Another commenter urged that new 
construction or rehabilitated units should be subject to regular HQS 
inspections, and not NLT or alternative inspections. However, this 
commenter suggested that PHAs should have discretion in applying NLT or 
alternative inspection options.
    Another commenter expressed that while NLT conditions may occur in 
new construction or rehabilitated properties, other units, including 
PBVs, can use NLT/alternative inspections as well. A commenter stated 
that NLT provisions could be helpful on rehabilitation or new 
construction when minor defects fail HQS and NLT conditions are found. 
This commenter expressed that for rehabilitation or new construction, 
the NLT option could be helpful in expediting assistance approvals. 
This commenter also recommended changing the allowable timeframe, 
rather than eliminating the alternative inspection option, would be a 
better solution to the problem of the alternative inspection occurring 
prior to rehabilitation.
    One commenter recommended that under Sec.  983.103(b), inspection 
timing and procedures of new construction and rehabilitation projects 
be consistent with the NLT option, and that under Sec.  983.103(f) 
additional time should be permitted for inspections of units in which 
the owner or family refuse access to the PHA, unless the regulation 
states otherwise. This commenter also supported HUD revising the repair 
time under Sec.  983.103(f) to 30 days after the PHA provides owner 
notification of the deficiency.
    One commenter supported HUD's proposal of alternative inspections, 
by stating that alternative inspections can fulfill the obligation for 
initial HQS inspection in unsafe circumstances for tenants and 
inspectors to enter units that are occupied. Another commenter noted 
the administrative burdens of alternative inspections such as tracking 
the units, notifying the landlords and tenants, scheduling the 
inspections, and obtaining results from the owner, or the agency doing 
the inspection. This commenter stated that this may create delays in 
assisting tenants, especially for units that must pass a PHA 
inspection. This commenter recommended that HUD use alternative 
verification methods of corrections to failed inspection items, which 
will help administratively and with producing positive relationships 
with landlords as well as assisting families quickly. This commenter 
also noted that PHA-owned housing should not have a problem passing 
HQS.
    A commenter stated that PHAs should have the ability to utilize 
alternative inspection and NLT options with respect to PBV new 
construction and rehabilitation projects, because these projects must 
meet local code standards to receive a certificate of occupancy, and, 
therefore, they are unlikely to be uninhabitable. The commenter stated 
that, while minor items may remain, these items do not threaten the 
lives of renters, and they should not prevent a PHA from placing the 
unit under a HAP contract.
    Commenters expressed that PHAs should have discretion deciding 
whether to implement NLT inspections for units because requiring NLT 
inspections for certain units makes implementation overly complex. 
Other commenters noted confusion and requested HUD clarify that PHAs 
can decide whether to apply initial inspection flexibilities project-
by-project. Another commenter stated that another form of acceptable 
alternative inspections could include a city inspection or a 
certificate of occupancy. One commenter suggested that HUD incorporate 
alternative requirements from PIH Notice 2020-33.
    HUD Response: HUD appreciates the comments both in favor of and 
against extending the NLT provision to new construction and 
rehabilitation PBV. HUD has chosen not to extend the NLT option to new 
construction or rehabilitation at this time. Additionally, HUD is not 
extending the alternative inspection option to new construction or 
rehabilitation to ensure the PHA inspects the newly completed work. HUD 
agrees with the comments stating that the NLT provision may be applied 
to existing housing at the discretion of the PHA and this is reflected 
in this final rule.

30. Nature of Development Activity (Sec.  983.152)

Previously Unassisted Units

    A commenter stated that adding previously unassisted units to a HAP 
contract should not be considered development activity, as it is often 
due to availability of funding and/or eligibility of in-place families, 
and, as such, no additional regulatory approvals should be necessary.
    HUD Response: Section 983.152(b)(2) of the proposed rule did not 
operate to include in the definition of ``development activity'' the 
act of adding previously unassisted units to a HAP contract. Rather, 
``development activity'' was defined in Sec.  983.3(b) and Sec.  
983.152(b)(2) of the proposed rule addressed cases in which development 
activity occurred to add previously unassisted units in the project to 
the HAP contract. However, HUD determined that including such activity 
under the definition of ``development activity'' and in subpart D of 
part 983 led to significant confusion among commenters in interpreting 
the rule as a whole. As a result, in this final rule HUD amends the 
definition of

[[Page 38273]]

``development activity'' as described above in discussion of comments 
pertaining to Sec.  983.3, such that ``substantial improvements'' 
undertaken in order to add units to a contract are clearly distinct. 
Accordingly, HUD removes discussion of substantial improvements from 
Sec.  983.152 of this final rule. Section 983.207 of this final rule 
contains provisions applicable to adding units, including when 
substantial improvement will occur in order to add the units.

Broadband

    A commenter suggested that the broadband requirements referenced in 
Sec.  983.152(b)(2) should not apply when adding previously unassisted 
units to a HAP contract because the installation of broadband 
infrastructure requires construction work and should be triggered only 
if work is being done.
    HUD Response: The proposed Sec.  983.152(b)(2), as restructured and 
moved in this final rule to Sec.  983.207(d), applies only when 
substantial improvement is undertaken to add previously unassisted 
units in the project to the HAP contract, and the requirement to 
install broadband infrastructure is further limited as provided 
therein. As a result, this final rule does align with the commenter's 
proposed limitation that the broadband infrastructure requirement 
applies only when work is being done.

31. Development Requirements (Sec.  983.153)

Subsequent Rehabilitation or Development Activity

    A commenter recommended that HUD continue to only require subsidy 
layering review for initial awards of PBV assistance and not upon 
subsequent rehabilitation or development activity because it will be 
administratively burdensome for project owners and PHAs.
    HUD Response: This comment is addressed in the discussion of Sec.  
983.11 above.

Section 3 Compliance

    This commenter also stated that HUD's section 3 compliance proposal 
is neither authorized by statute nor consistent with regulations in 
part 135, and, therefore, the commenter proposed that HUD delete 
section 3 compliance as a development requirement, because section 3 
does not apply to monthly rental assistance payments.
    HUD Response: Pursuant to the section 3 final rule published at 85 
FR 61524 (Sep. 29, 2020) and codified at 24 CFR 75.3, which eliminated 
the applicability of section 3 to assistance under section 8 of the 
1937 Act, HUD does not retain section 3 compliance as a development 
requirement in this final rule. The section 3 rule does make clear that 
residents of housing receiving section 8 assistance and who are 
employed by a section 3 business concern are included in the definition 
of section 3 worker. The PHA must report the number of hours worked by 
section 3 workers.

Applicability of Davis-Bacon Requirements

    Commenters stated that it would be unreasonable for HUD to require 
a PHA to enforce owner compliance with labor standards, specifically 
Davis-Bacon, in circumstances where there was no Agreement. A commenter 
further added that where a project's development does not depend on the 
provision of PBVs, as few obstacles as possible should be provided to 
permit affordability, because these developments do not need PBV 
assistance to be built and they are often the most desirable, best 
located, and most advantageous developments. Another commenter 
expressed that it is unclear how to reconcile the exemption of non-
Agreement projects from Davis-Bacon (Sec.  983.153(c)(1) of the 
proposed rule) and the proposal that projects that do not enter 
Agreements must comply with the development requirements of Sec.  
983.153 (Sec.  983.154(e)(2) of the proposed rule, which has been moved 
to Sec.  983.154(f)(2) of this final rule). Some commenters opposed 
excluding rehabilitated and newly constructed projects from the Davis-
Bacon wage rate requirements. A commenter stated that PHAs do not have 
flexibility under the statute to exclude rehabilitation or new 
construction of PBV projects from Davis-Bacon coverage. A commenter 
suggested giving PHAs discretion to exclude rehabilitation or new 
construction from Davis-Bacon wage requirements.
    HUD Response: HUD appreciates the comments in support of the 
exclusion of units developed without an Agreement from the labor 
standards at Sec.  983.153(c)(1) of the proposed rule, but does not 
adopt the proposed language in this final rule. While the impact of 
paying prevailing wages on a project's development cost could be viewed 
as an obstacle to development, HUD agrees with commenters who pointed 
out that this cost must be balanced against the historical reasons for 
the labor standards, including ensuring that federally assisted 
projects do not depress local wage standards. HUD appreciates the 
commenter's support of PHA discretion regarding use of Davis-Bacon wage 
requirements, but has determined upon further reflection that the PHAs' 
new option to decline to use an Agreement does not impact the 
applicability of Davis-Bacon wage requirements. In the case of a newly 
constructed or rehabilitated project, the owner is seeking a commitment 
of PBVs in advance of development of the project, regardless of whether 
the PHA and owner enter into an Agreement, and the PHA's pre-
construction offer and owner's acceptance of the PBV offer constitutes 
the agreement triggering Davis-Bacon requirements in accordance with 
section 12 of the 1937 Act. Therefore, HUD provides in this final rule 
that a PHA decision to use no Agreement or to execute an Agreement 
after construction or rehabilitation has commenced will not relieve an 
owner's responsibility to pay Davis-Bacon prevailing wages, consistent 
with the statutory intent of section 106(a)(4) of HOTMA and section 12 
of the 1937 Act.
    HUD appreciates the comment regarding the relationship between 
Sec.  983.153(c) and Sec.  983.154(e) (now Sec.  983.154(f) in this 
final rule). In response, HUD amends Sec.  983.154(f) to better clarify 
that the owner need only comply with development requirements of Sec.  
983.153 that are applicable to the particular project when the 
development occurs without Agreement. For example, the Davis-Bacon 
compliance requirement is applicable only if the HAP contract will 
assist nine or more units.

Use of an Alternative Document

    A commenter stated that HUD should not require Davis-Bacon coverage 
through an alternate document. Another commenter suggested using an 
alternate document or a document created by a PHA. One commenter urged 
HUD to provide a clear and consistent policy regarding how to execute 
alternate documents to avoid confusion.
    HUD Response: HUD determines that, where the PHA will not use an 
Agreement, the PHA's notice of selection of the project and the owner's 
acceptance is the mechanism by which the owner agrees to compliance 
with Davis-Bacon requirements. This final rule adds explanatory text 
regarding the notice of selection in Sec. Sec.  983.51(f) and 
983.153(c), in response to comment.

32. Development Agreement (Sec.  983.154)

Begin After Environmental Abatement

    A commenter suggested that development activity for new 
construction should exclude environmental abatement.

[[Page 38274]]

    HUD Response: Environmental abatement may constitute a significant 
or inseparable portion of work involved in new construction. Therefore, 
in cases in which the nature of environmental abatement itself 
constitutes commencement of development activity or in which 
environmental abatement involves work that occurs following the 
commencement of development activity, HUD determines it is appropriate 
for such abatement to be subject to the standard rules governing 
development activity in this part 983.

Consult With Interested Parties

    A commenter recommended that HUD consult with industry groups and 
interested parties and utilize nonbinding notice documents to define 
and develop additional guidance on the term, ``rehabilitation 
activity'' noted in Sec.  983.154(c)(2).
    HUD Response: HUD appreciates this comment and will consider it 
when developing guidance on the PBV program.

33. Term of HAP Contract (Sec.  983.205)

Question 27: Contract Extensions

    Commenters urged HUD to allow HAP contract extensions beyond 40 
years to permit sufficient time to secure recapitalization and 
facilitate preservation. A commenter explained that HAP contracts do 
not always align with other regulatory agreements and projects may need 
to secure long-term financing during their regulatory agreement. 
Another commenter suggested that HUD allow for extensions 60 months 
prior to the contract expiration instead of the existing contract 
extension beyond 40 years until 24 months prior to the HAP contract 
expiration. Other commenters proposed that HUD allow PHAs to commit PBV 
contract extensions where re-syndication extends the affordable term 
tied to financing beyond the term of the PBVs and allow PHAs to 
establish the terms of the PBV HAP contracts as provided by PIH Notice 
2017-21.
    A commenter stated that HUD should modify Sec.  983.205(b)(4) to 
allow the PHA and the owner to agree in advance to additional 
conditions applying to continuation, termination, or expiration of the 
contracts; instead of keeping the existing language, which the 
commenter stated requires that PHAs only use the contracts provided by 
HUD. One commenter stated that independent entities are unsuitable to 
determine the appropriateness of contract renewals, and that PHAs 
should make this determination because PHAs can assess resources and 
the local housing market demand to determine the best interests of the 
PHA's portfolio and residents.
    HUD Response: In review of comments received, it became apparent 
that the language of Sec.  983.205(b) in the proposed rule was not 
sufficiently clear that HUD does allow a HAP contract to be extended 
beyond 40 years. Therefore, HUD has revised Sec.  983.205(b) in this 
final rule to clarify this point.
    In consideration of public comments, HUD also revises Sec.  
983.205(b) in this final rule to provide that, at any given time before 
a PBV HAP contract expires, the PHA may execute any number of 
extensions (with terms up to 20 years each) such that there are up to 
40 remaining years on the contract. HUD believes this will provide PHAs 
sufficient flexibility to extend the HAP contract term as needed to 
meet the needs of the local community and align with common 
preservation efforts as described by commenters, while striking a 
reasonable balance with the PHA's obligation to make its statutorily 
required determination prior to extension. As such, the rule continues 
to require the PHA to determine that each extension is appropriate to 
continue providing affordable housing for low-income families or to 
expand housing opportunities but recognizes PHAs are in the best 
position to determine the appropriate time to consider an extension. 
Additionally, this change streamlines and simplifies PBV processes.
    With respect to comments that propose that HUD allow the PHA and 
the owner to agree in advance to additional conditions applying to 
continuation, termination, or expiration of the contracts, the statute 
authorizes HUD (not the PHA) to impose such conditions. HUD has chosen 
not to do so. Lastly, with respect to the comment concerning the role 
of the independent entity in making determinations on HAP contract 
extensions, HUD finds the commenter's explanation persuasive and, 
further, determines that PHAs are best positioned to set the initial 
term of the contract. Therefore, HUD removes the independent entity 
function in agreeing to the initial term and extensions in this final 
rule.

34. Contract Termination or Expiration and Statutory Notice 
Requirements (Sec.  983.206)

    Commenters suggested adding to Sec.  983.206(d) a requirement that 
an owner's termination of the PBV contract because the PHA has lowered 
the rent below the initial rent cannot be effective until the PHA has 
(1) notified tenants of the upcoming change to HCVs; (2) executed the 
required tenant-based voucher HAP contract between the owner and PHA; 
and (3) provided tenant-based vouchers to the tenants. This commenter 
recommended requiring PHAs to complete these tasks within a specified 
timeframe (and PHAs can avoid this by agreeing in the initial contract 
or extension not to reduce rents below the initial rent to the owner).
    Some commenters supported prohibiting owners from terminating the 
family's housing assistance due to the termination or expiration of a 
PBV HAP contract. Another commenter supported HUD not requiring that 
families be allowed to stay in their same units, and instead, allowing 
a PHA and owner to make decisions about handling terminations locally. 
This commenter claimed that HUD lacks the statutory authority to 
mandate that families be allowed to stay in their own units, since the 
statute explicitly mentions remaining in the same project.
    Another commenter suggested modifying Sec.  983.206, to state that 
tenants whose PBV units are re-developed should not be treated as 
contract terminations. One commenter supported families remaining in 
the same unit and not just the same project. In Sec.  983.206(b) and 
(b)(6), regarding tenants' right to remain, a commenter recommended 
that the ``other good cause'' reference to the HCV rule at Sec.  
982.310 be limited to tenant misconduct; there should also include 
conforming language inserted into the HUD PBV tenancy addendum. This 
commenter also suggested that section 106 of the HOTMA statute extends 
the tenant's right to remain to the project, and not just the unit, as 
a guarantee for tenant housing stability upon subsidy expiration or 
termination in circumstances where family size has changed, or the 
current unit may need rehabilitation that requires extended absence. 
Another commenter supported families with disabled individuals or 
children remaining in the same unit due to hardships caused by moving 
and recommended letting the extension expire when they voluntarily 
leave or become ineligible for PBV.
    A commenter recommended stating in Sec.  983.206(d) that under 
situations of PBV HAP contract termination, that the PHA may not re-
screen for eligibility beyond income when providing HCVs to former PBV 
tenants. The commenter suggested clearly stating tenants' right to 
replacement assistance and housing stability, despite PHA or HUD 
administrative delays in providing the required assistance. The 
commenter also stated that under Sec.  983.206(d), the proposed 
exception to the one-year notice requirement for an owner who

[[Page 38275]]

terminates a PBV HAP contract after the PHA reduces the contract rent 
below the initial rent to owner is statutorily unauthorized. A 
commenter suggested revising Sec.  983.206(a)(4) to clarify that the 
tenant has the right to remain at prior rent until the owner has 
provided legally required notice and that notice period has elapsed, 
not just for the one-year period.
    HUD Response: HUD has adopted commenters' recommendations in part. 
Section 983.206 in this final rule provides a timeframe by which a PHA 
must issue families a tenant-based voucher before planned contract 
termination, except in limited circumstances specified by HUD, and 
requires sufficient notice by the owner to the PHA to allow such 
voucher issuance. HUD declines to adopt the recommendation that the PBV 
HAP contract not be terminated until execution of a tenant-based 
voucher HAP contract. The provision implemented in this final rule, at 
Sec.  983.206(b), requires the PHA to issue families tenant-based 
vouchers, not to assure that families locate units to lease with the 
vouchers. The tenant-based voucher HAP contracts for tenants who stay 
in place must not be effective prior to the date of termination (end 
date) of the PBV HAP contract, and circumstances may arise in which the 
actual end date must change from the planned end date. In this final 
rule, Sec.  982.305 provides PHAs sufficient flexibility to execute the 
tenant-based HAP contracts retroactively if all contracts cannot be 
executed timely in relation to termination of the PBV HAP contract. In 
cases in which families choose to use their tenant-based assistance 
elsewhere, using target dates for execution of each tenant-based HAP 
contract to determine the end date of the PBV HAP contract would be 
unworkable.
    HUD has considered the comments regarding whether a family should 
have the ability to remain in the same unit and has determined to 
retain the proposed rule language allowing a family instead to remain 
in the same project. While HUD recognizes that moves may cause hardship 
for families, HUD determines that PHAs are in the best position to 
consider conditions and limitations surrounding specific contract 
terminations and expirations and assist families to secure the best 
possible housing for them given those considerations. Notwithstanding, 
retaining the proposed language on allowing a family to remain in the 
same project does not exempt a PHA from receiving, processing, or 
granting a reasonable accommodation to remain in the unit. Regarding 
the comments concerning redevelopment, HUD is not adopting the proposed 
change. Section 983.212 in this final rule allows PHAs and owners to 
engage in substantial improvement on units under HAP contract without 
terminating the HAP contract, and where PHAs and owners agree to do so 
they must follow the rules set forth in Sec.  983.212. Section 983.206, 
by contrast, has the requirements in cases of contract termination.
    With regard to good cause for termination, HUD adopts the 
commenter's suggestion in part. HUD in this final rule allows for lease 
terminations on the basis of certain grounds in Sec.  982.310, to 
include family duties, which the family has failed to fulfill and other 
family misconduct, as well as when the owner will use the unit for a 
non-residential purpose or to renovate the unit. Nothing in this final 
Sec.  983.206 is intended to preempt operation of State and local laws 
that provide additional limitations regarding allowable causes for 
lease termination. HUD intends to issue a tenancy addendum specific to 
families who were residing in a PBV project at contract termination who 
elected to remain in the project with tenant-based assistance, which 
will also reflect the specific grounds on which the family's lease may 
be terminated. HUD determines this final rule allows for meaningful 
election by families to remain in the project while also providing 
exceptions for situations under which the owner cannot reasonably be 
expected to allow a family to remain.
    HUD does not make changes in this final rule in response to the 
comment on re-screening when families get tenant-based vouchers, as the 
proposed Sec.  983.206(b)(4), retained in this final rule, adequately 
explains that such families are not new admissions; rather, they are 
and remain section 8 voucher participants, subject to the rules 
relating to participants (as further explained in the definition of 
``admission'' in Sec.  983.3). As discussed above, HUD has clarified 
some of the provisions in Sec.  983.206 to better explain the 
timeframes involved in provision of tenant-based assistance. Finally, 
section 8(c)(8) of the U.S. Housing Act of 1937 defines the term 
``termination'' for purposes of the owner notice requirement as ``the 
expiration of the assistance contract or an owner's refusal to renew 
the assistance contract. . . .'' HUD declines to further extend the 
one-year notification requirement to an owner's termination of the 
contract during its term due to a reduction below initial rent, to 
preserve the existing authority of the owner to terminate timely, given 
the owner's substantial interest in maintaining sufficient project 
income. However, HUD has added a 90-day notice requirement, so as to 
provide the PHA sufficient time for voucher issuance per Sec.  
983.206(b). HUD has also taken this opportunity to clarify when mutual 
termination of a PBV HAP contract during its term would be allowable 
and to specify that in those cases the full notice period is required.
    With regard to the comment on Sec.  983.206(a)(4), HUD does not 
believe a change is necessary as the text is already clear that the 
family may remain ``for the required notice period,'' which aligns with 
the comment.

Insufficient Funding

    A commenter stated that HUD's implementation of the insufficient 
funding requirement (HOTMA section 106(a)(4), to be codified at 42 
U.S.C. 1437f(o)(13)(F)(i)(I)), is critical to developers' ability to 
finance PBVs with minimal transition reserves. Commenters also 
recommended modifying language in Sec.  983.206(c)(1) to clarify that 
sufficient funding is not necessary for a PHA to make PBV contract 
payments for a full year, despite unpredictable timing of full-year 
appropriations bills and the frequency of continuing resolutions.
    A commenter stated that the legislative history indicates that 
Congress intended PHAs to prioritize project-based HAP contracts and 
provided neither HUD nor PHAs with the discretion contemplated by the 
proposed regulations.
    HUD Response: HUD appreciates the comments regarding the nature of 
sufficient funding and agrees that PHAs need not consider sufficient 
funding as requiring a full year's PBV contract payments to be on hand. 
HUD has amended Sec.  983.206(c)(1) accordingly.
    Regarding the comment on prioritizing project-based HAP contracts, 
HOTMA section 106(a)(4), to be codified at 42 U.S.C. 
1437f(o)(13)(F)(i)(I), provides ``that in the event of insufficient 
appropriated funds, payments due under contracts under this paragraph 
shall take priority if other cost-saving measures that do not require 
the termination of an existing contract are available to the agency . . 
.'' (emphasis added). Per this language, PHAs retain discretion to 
establish an Administrative Plan policy, as described in Sec.  
983.206(c)(1), for actions it will take if no cost-saving measures 
other than HCV or PBV contract termination are available.

[[Page 38276]]

35. HAP Contract Amendments (To Add or Substitute Contract Units) 
(Sec.  983.207)

Cost of Reinstating Units

    A commenter suggested that HUD should revise Sec.  983.207(b)(3) to 
reinstate units under a HAP contract without being subject to 
development requirements at Sec.  983.152(b) because without it, PHAs 
would be subject to subsidy layering reviews and other burdens and it 
would place a significant burden and cost upon project owners. This 
commenter also urged that HUD does not apply the set of ``development 
activity'' requirements to projects that undertake modifications to PBV 
units which result in adjustments to pre-existing contracts because 
PHAs may need to add units or substitute units after HAP signing, and 
this would make that process very burdensome.
    HUD Response: In all cases in which units are added to a PBV HAP 
contract per Sec.  983.207(b), including where a unit is being 
reinstated after having previously been removed, HUD determines it is 
appropriate for certain requirements at Sec.  983.207(d) to apply when 
the unit is undergoing substantial improvement. As discussed earlier in 
this preamble, this final rule separately defines ``substantial 
improvement'' and ``development activity,'' and applies appropriate 
requirements to each. Substantial improvement undertaken during the 
term of the HAP contract, as defined in Sec.  983.3(b), is significant 
work and, as such, application of the specific requirements listed in 
Sec.  983.207(d) represents a reasonable balance of the costs to 
project owners and the interests of HUD in maintaining housing quality 
and program integrity. As for the comment about ``development 
activity'' requirements, HUD determined that the limited requirements 
applicable to substantial improvement undertaken to add units to a 
contract, including when the added unit is a substitution for a 
contract unit, represent the minimum necessary requirements for such 
relatively intensive activity. Therefore, HUD retains both requirements 
in this final rule.

36. Owner Certification (Sec.  983.210)--Davis Bacon, Other Conforming 
Changes

    Commenters supported the proposed Davis-Bacon changes that would 
remove the current owner certification under the HAP contract at Sec.  
983.210(j) that repair work on a project selected as an existing 
project may constitute development activity and, if determined to be 
development activity, the repair work shall be in compliance with 
Davis-Bacon requirements. One commenter supported HUD's Davis-Bacon 
wage rate requirement proposal due to its potential reduction in 
development costs; permittance of State independence to apply their own 
wage requirements; and the reduction of administrative burden on 
projects that have multiple funding sources. Another commenter 
expressed that the Davis-Bacon changes would encourage owners and 
operators of existing housing to incorporate PBVs while maintaining and 
improving living conditions for residents.
    Commenters supported the removal of ``existing housing'' from the 
Davis-Bacon wage rate requirement. One commenter stated that excluding 
existing housing provides clarity, because it aligns with the language 
and spirit of the 1937 Act. Another commenter stated that applying the 
wage requirement to existing housing significantly increases the cost 
of developing affordable housing and reducing the number of households 
that could be served by the PBV program. One commenter stated that 
eliminating existing housing from the Davis-Bacon wage rate 
requirements would allow owners to utilize more PBVs and potentially 
erase operating deficits, reach more ELI and VLI residents, and reduce 
reliance on gap financing when seeking to refinance.
    HUD Response: HUD appreciates the comments in support of removing 
Sec.  983.210(j), and in this final rule proceeds with the removal as 
proposed. As previously discussed in the preamble of the proposed rule, 
HUD acknowledges that the broad, open-ended definition of ``existing 
housing'' in place prior to this final rule has proven insufficient to 
ensure that PHAs properly classify PBV housing types and contributed to 
the Davis-Bacon issues that HUD attempted to address through the 
addition of the owner certification in Sec.  983.210(j) in 79 FR 36146 
(Jun. 25, 2014). In order to remedy this problem and other related 
issues with respect to other Federal requirements such as subsidy 
layering reviews, this final rule provides a much more specific and 
tighter definition of ``existing housing,'' which is described in 
detail elsewhere in this preamble.

37. Substantial Improvement to Units Under a HAP Contract (Sec.  
983.212)

Support

    Several commenters supported HUD's proposal to establish a five-
year timeframe, within which development work would not be permitted 
except in extraordinary circumstances. A commenter stated that 
permitting development work within the first five years is only 
reasonable to prevent the circumvention of certain requirements that 
would normally be stipulated in an Agreement.
    HUD Response: HUD appreciates the supportive comments, but reduces 
the general five-year limitation proposed to two years in this final 
rule (both the proposed and final rule contain exceptions to the 
general limitation). HUD believes doing so continues to ensure housing 
intended for immediate rehabilitation is subject to appropriate 
requirements governing rehabilitation. However, HUD believes a two-year 
period in which work will not occur is more reasonable to foresee.

Opposition

    Other commenters opposed HUD's proposal to establish a five-year 
timeframe because it is overly restrictive. Commenters stated that 
requiring a burdensome permitting process would disincentivize owners 
of older housing from making periodic substantial repairs and 
renovations to maintain the housing in good condition. A commenter 
expressed that it is challenging to anticipate all physical needs in a 
five-year period. Another commenter stated that HUD's proposal would 
have a significant impact on residents by discouraging owners from 
conducting voluntary repairs and replacements that would improve the 
quality of life for residents and may stall or prevent the start of a 
HAP contract for units that would otherwise be eligible to receive 
PBVs.
    A commenter warned that the five-year period would impact projects 
that may need work within five years of being built due to flawed work 
by the original builder. A commenter stated that the HUD-prescribed 
process to request development activity (called ``substantial 
improvement'' in this final rule, per discussion of changes to Sec.  
983.3 above) would create an additional administrative burden for PHAs 
without the process and expertise to assess development requests and 
determinations. A commenter warned that HUD's proposal would require 
non-MTW PHAs to obtain a waiver or to adopt a MTW demonstration 
activity to complete the unit rehabilitation and would require non-MTW 
agencies attempting to pursue public housing repositioning to need 
regulatory waivers. Another commenter stated that HUD's proposal may 
present challenges to create affordable housing through the PBV program 
because of the disincentive to perform capital work within five years 
of HAP contract signing and would force owners to

[[Page 38277]]

conduct a heavier workload upfront, which may be unsupported through 
existing financing tools.
    HUD Response: HUD agrees that it would have been difficult for PHAs 
and owners to anticipate all physical needs requiring a significant 
improvement over a five-year period, and therefore changes the period 
to two years in this final rule.
    HUD disagrees that the rule discourages repairs, replacements, and 
renovations. The owner is required to meet HQS and continues to be able 
to replace equipment and materials rendered unsatisfactory because of 
normal wear and tear by items of substantially the same kind (this is 
not substantial improvement as defined in Sec.  983.3(b)), which should 
enable the owner to maintain the housing in good condition. An owner 
that instead has an immediate desire to undertake development activity 
remains able to do so through the process of project-basing 
rehabilitated housing, and HUD provides further flexibility at Sec.  
983.157 of this final rule to better accommodate these situations. An 
owner faced with an urgent, unanticipated need to engage in substantial 
improvement during the first two years of the contract may be able to 
receive PHA approval to do so under the exception for extraordinary 
circumstances. Taken as a whole, HUD determines that this final rule 
provides the greatest latitude possible to owners while still ensuring 
appropriate projects are subject to pre-development requirements such 
as subsidy layering review, Federal funds are used only in quality 
housing, and PBV-assisted families are housed stably.
    The PHA (or independent entity, in the case of PHA-owned units) 
approval process codified in this final rule reflects minimum oversight 
necessary to ensure compliance with PBV requirements and protection of 
families. HUD incorporates into this final rule additional clarity for 
PHAs regarding the basis upon which to approve or disapprove owner 
requests. HUD does not anticipate that this final rule increases the 
potential need for waiver, as the prior rule also contained divergent 
processes to project-base rehabilitated housing versus existing 
housing, including limitations on development activity that could occur 
after HAP contract execution. This final rule improves the clarity and 
safeguards of existing limitations.
    HUD is aware that project-basing rehabilitated housing entails a 
heavier workload upfront. Completing the development activity upfront 
typically has the intended result that the housing is in good condition 
longer and therefore is better positioned to serve as long-term housing 
for families. HUD expects that PHAs select existing housing for PBVs 
when the housing is in good enough condition to serve families for the 
contract period, without immediate housing instability due to 
substantial improvement. PBV funding supports rents to house assisted 
families, which may cover a project's ongoing operating expenses; it is 
not development funding.

Suggestions and Alternatives

    Some commenters suggested HUD allow for exceptions in instances 
where improvement or upgrading is needed for the substantial 
improvement, such as energy efficiency efforts, security precautions, 
and previously scheduled projects that are part of effective long-term 
property maintenance plans. A commenter also stated that HUD should 
include a catch-all provision to allow improvements to protect the 
housing quality for assisted families or protect the viability of the 
project. Another commenter suggested that HUD create a ``pass-through'' 
of rental assistance where construction improvements are to be made in 
a property, similar to what is allowed in other project-based rental 
assistance. Commenters also recommended that PHAs have the discretion 
over permissibility, oversight, and monitoring of substantial 
improvement that commences after the beginning of the HAP contract as a 
means for PHAs to remain accountable to HUD for monitoring compliance 
and development requirements. Another commenter suggested that HUD 
adopt a three-year timeframe instead of a five-year timeframe.
    HUD Response: HUD reviewed the examples commenters provided and 
determines they are adequately addressed by this final rule. HUD does 
not anticipate that projects that met HQS applicable to qualify for PBV 
assistance will then require non-emergency substantial improvement soon 
after contract execution to remain viable and compliant with HQS; usual 
maintenance should suffice. HUD does not add a pass-through option 
because doing so is not consistent with PBV program requirements. For 
example, section 8(o)(13)(K)(i) of the 1937 Act allows payment for 
vacant units only when vacancies are not the fault of the owner, 
section 8(o)(10)(A) requires that rent for a unit receiving HAP be 
reasonable at all times, and section 8(o)(8)(G) prescribes the required 
PHA actions with respect to HAP for units that do not comply with HQS 
and is incompatible with providing HAP for the purpose of housing a 
family who is leasing a noncompliant unit and living elsewhere. This 
final rule provides significant discretion to PHAs, balanced against 
adequate safeguards for assisted families and reasonable limitations to 
ensure the PBV program operates as intended. HUD adopts a two-year 
timeframe in this final rule rather than the three-year timeframe 
suggested by the commenter, because HUD believes the owner and PHA are 
better able to anticipate the need for substantial improvement over a 
two-year period.
Proposal Would Have No Effect
    A commenter expressed that because project owners are often 
required to utilize several funding sources to fund substantial 
rehabilitation, it is likely that other funding sources used to finance 
the substantial improvement may independently trigger many of the 
cross-cutting requirements that HUD cites in question 25. Another 
commenter further stated that PHAs have mechanisms in place to ensure 
that projects comply with development requirements; adding an 
additional mechanism to substantial improvement after HAP contract 
signing would be burdensome.
    HUD Response: HUD supports the additional oversight that other 
funding sources and PHAs independently require but finds it necessary 
to retain and clarify this section in this final rule to ensure PHAs 
can easily reference and comply with the PBV-specific requirements 
relevant to post-contract substantial improvement.
Rehousing During Rehabilitation
    Commenters suggested that HUD add clarifying language stating that 
owners are permitted to continue receiving HAP for the family's re-
housing during a fixed period of rehabilitation.
    HUD Response: Housing assistance payments provide rental assistance 
for participant families, and therefore must not be paid to owners for 
units not occupied by participants. Under this final rule, the PHA may 
pay HAP for occupied contract units that meet HQS, except when the unit 
is temporarily vacant for a calendar month or less.
Emergency Site Work
    A commenter asked HUD to provide detail regarding emergency site 
work performed for health and safety, emergency rehabilitation work 
conducted for health and safety, and fit-out of non-residential spaces 
occurring under a different general contractor contract. The commenter 
also expressed uncertainty pertaining to the applicability of these 
types of activities under the definition of ``substantial

[[Page 38278]]

improvement'' (which was included in the definition of ``development 
activity'' in the proposed rule) and the requirements pertaining to 
substantial improvement because this work is done in a manner that is 
either unanticipated in the project planning phase or falls outside a 
typical PBV project planning scope.
    HUD Response: This final rule clarifies the term ``extraordinary 
circumstances'' in response to this comment. Emergencies generally 
qualify as extraordinary circumstances under this rule, though 
situations may arise in which an emergency instead constitutes a breach 
of HAP contract or a matter falling under the provisions for 
enforcement of HQS.

38. How Participants Are Selected (Sec.  983.251)

Site-Based Waiting Lists

    One commenter suggested that HUD allow owners to maintain their own 
site-based waiting lists to expedite the tenant selection process as 
well as allow PHAs to establish compliance reviews to oversee owners. 
Another commenter encouraged HUD to maintain provisions describing 
roles and responsibilities of the owner and PHA in the guidance 
documents. This commenter disagreed with HUD requiring PHAs to formally 
incorporate site-specific tenant selection plans into their 
Administrative Plans if the plan is on file with the PHA and available 
to the public because incorporating the plans into the Administrative 
Plan will be burdensome for PHAs, due to frequent minor updates. The 
commenter also expressed concern regarding the statement in Sec.  
983.251(c)(7)(x) that HUD may act against the owner, PHA, or both, and 
suggested that if HUD intends to hold PHAs responsible for an owner's 
project-based waiting list, the regulations need to state that the PHA 
also has the right to take enforcement action directly against the 
owner. The commenter stated that in cases where a PHA has commenced 
enforcement actions against an owner, then HUD should not seek 
additional enforcement against the PHA.
    Another commenter suggested deleting Sec.  983.251(c)(7)(i). A 
commenter objected to the proposed requirement that a tenant selection 
plan (TSP) be included in the Administrative Plan for every owner. The 
commenter stated that owners may make frequent adjustments to their 
TSP, such as to respond to updates under the Violence Against Women Act 
or updated screening standards, and therefore every small TSP change, 
even if unrelated to waiting lists or preferences, would require an 
Administrative Plan amendment, and the PHA's Administrative Plan would 
have to be amended for every PBV project when the project is selected 
and then again when the TSP is approved by the PHA. The commenter 
suggested that selection plans should be on file with the PHA and 
posted online with the Administrative Plan but should not be 
specifically part of the Administrative Plan.
    HUD Response: Under this final rule, HUD provides PHAs discretion 
to allow owners to maintain their own site-based waiting lists to 
expedite the tenant selection process. HUD requires PHAs that exercise 
this discretion to establish oversight procedures, which may include 
compliance reviews to oversee owners. HUD determined it is necessary 
for the minimum requirements codified in this final rule describing the 
roles and responsibilities of the owner and PHA to be located in the 
regulation so as to be easily located and consistently enforced, rather 
than only in guidance documents. As noted in this final rule, PHAs must 
formally incorporate the site-specific owner waiting list policies into 
their Administrative Plans. HUD does not believe incorporating the 
owner waiting list policy into the Administrative Plan will be 
cumbersome for PHAs because of frequent minor updates.
    HUD maintains Sec.  983.251(c)(7)(x) to ensure that the owner, PHA, 
or both, are held accountable and responsible for an owner's project-
based waiting list. The administrative policy that is incorporated in a 
PHAs' Administrative Plan may state that the PHA also has the right to 
take enforcement action directly against the owner. Although there may 
be cases where a PHA has commenced enforcement actions against an 
owner, depending on the nature of the enforcement actions, HUD may 
still take additional enforcement actions against the PHA, if 
applicable.
    HUD does not delete the requirement, as suggested by a commenter, 
at Sec.  983.251(c)(7)(i). This final rule, however, does revise both 
Sec. Sec.  983.251 and 983.10 by replacing tenant selection plan with 
owner waiting list policy. As a result of this change, the owner 
waiting list policy, not tenant selection plan, must be incorporated in 
the PHA's Administrative Plan.

Civil Rights

    A commenter recommended that the proposed rule's preamble 
discussion that projects using preferences for families eligible for 
supportive services, including disability-specific services, must 
comply with Section 504, the Americans with Disabilities Act, and the 
Home and Community-Based Settings requirements be placed in Sec.  
983.251. Another commenter suggested Sec.  983.251 be revised to 
require that tenant selection plans, criteria, and preferences must 
comply with all applicable civil rights requirements, and that all 
tenant selection criteria must be demonstrably related to the 
applicant's ability to fulfill the obligations of a subsidized tenancy, 
which would eliminate poor credit or eviction for nonpayment of 
unassisted rent or most criminal history as grounds for denial of 
tenancy. The commenter further stated that the rejection notice should 
require specific content, such as sufficient facts and the legal basis 
supporting the rejection as well as due process procedures to enable a 
fair review, even absent a tenant's request for a hearing. The 
commenter also suggested modifying Sec.  983.251(c)(6) to require that 
applicants on the HCV waitlist receive a PHA offer to be placed on the 
PBV waitlists.
    One commenter approved of HUD's modification to Sec.  983.251 to 
require eligible families to qualify for services as well as removing 
restrictions that limit service preferences only to families with 
severe disabilities for whom such services cannot be provided in non-
segregated housing. Another commenter urged HUD to revise Sec.  
983.251, to prioritize housing survivors of violence who are in the PBV 
program and require an emergency transfer under VAWA. Another commenter 
opposed banning preferences for people within a category of disability 
under Sec.  983.251(d)(1) and stated that this conflicts with the 
Section 504 rules and is a violation of HOTMA, which permits 
preferences based on the class of disability associated with a 
project's supportive services. This commenter stated that a ban on 
disability-specific preferences also interferes with procuring capital 
resources for housing because non-PBV resources often target permanent 
supportive housing for people within specific categories of disability. 
The commenter suggested that HUD defer to the PHA's preference plan for 
people who qualify for disability-specific services. The commenter also 
explained that the waiver and remedial action process conflicts with 
HOTMA, which delegates the decision to the PHA, and the process is 
intrusive as well as costly. The commenter encouraged HUD to adopt a 
similar process to RAD, where the PHA and project owner in consultation 
with the partnering State and local officials, determine the scope of a 
disability-specific preference.

[[Page 38279]]

    This commenter also suggested that HUD adopt the Centers for 
Medicare & Medicaid Services Homes and Community-Based Services (CMS 
HCBS) rules on what is the most integrated setting possible, found in 
42 CFR 441.710(a), because projects meeting those standards do not 
require additional waiver or remedial action approval. The commenter 
recommended that HUD use flexible approaches to concentration, because 
the existing rigid policies applied to projects with dwellings for 
families receiving supportive services conflict with the exception to 
PBV income-mixing standards, which permits owners to exceed the PBV 
project cap for units providing supportive services. Therefore, the 
commenter concluded that HUD should define, within the PBV rule, 
integrated places that do not impose fixed limits on the concentration 
of disabled individuals in a development and, ultimately, meet the 
standards for a community-based setting.
    HUD Response: HUD appreciates the commenters' recommendations. A 
PHA's preference for families who qualify for voluntary services, 
including disability-specific services under Sec.  983.251(d), must not 
conflict with Section 504 rules.\17\ Further, PHAs have a duty to 
ensure that the PBV project is compliant with all applicable 
nondiscrimination and equal opportunity requirements, including, but 
not limited to, the requirement to administer services, programs, and 
activities in a nondiscriminatory manner and meet the needs of 
qualified individuals with a disability under Section 504 of the 
Rehabilitation Act, Title II of the Americans with Disabilities Act, 
and the Fair Housing Act. See 24 CFR 5.105(a), 24 CFR part 8; 28 CFR 
part 35; 24 CFR part 100. In addition, this language allowing a 
preference to families who qualify for voluntary services, including 
disability-specific services, must be implemented consistent with the 
integration mandate under Section 504 and Title II of the ADA, wherein 
entities are obligated to administer their programs and activities in 
the most integrated setting appropriate to the needs of qualified 
individuals with disabilities. 24 CFR 8.4(d) and 28 CFR 35.130(d)).\18\ 
Additionally, if a PBV project offers Medicaid-funded home and 
community-based services as part of ``disability-specific services,'' 
the PHA 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''). In addition, PHAs are obliged to 
ensure that assisted units for persons with a disability are 
distributed throughout a project (24 CFR 8.26) and to make housing 
assistance available in the most integrated setting appropriate to the 
needs of qualified individuals with disabilities--i.e., a setting that 
enables individuals with disabilities to interact with nondisabled 
persons to the fullest extent possible. (See the Statement of the 
Department of Housing and Urban Development on the Role of Housing in 
Accomplishing the Goals of Olmstead at https://www.hud.gov/sites/documents/OLMSTEADGUIDNC060413.PDF).
---------------------------------------------------------------------------

    \17\ HUD notes that Sec.  983.251(d)(1) of this final rule 
cross-references the prohibition against adopting a preference for 
admission of persons with a specific disability at 24 CFR 
982.207(b)(3). The prohibition at 24 CFR 982.207(b)(3) is not 
intended to detract from PHAs' discretion to give preferences to 
families who qualify for disability-specific services.''
    \18\ See also The Statement of the Department of Housing and 
Urban Development on the Role of Housing in Accomplishing the Goals 
of Olmstead at https://www.hud.gov/sites/documents/OLMSTEADGUIDNC060413.PDF.
---------------------------------------------------------------------------

    In response to the commenter that suggested revision of Sec.  
983.251 to provide that tenant selection criteria be demonstrably 
related to the applicant's ability to fulfill the obligations of a 
subsidized tenancy and proposing that HUD prescribe the contents of the 
rejection notice, HUD believes the commenter's concerns would not be 
appropriately addressed in Sec.  983.251. Given the revision to Sec.  
983.251 in this final rule (described above in this discussion of Sec.  
983.251) to require the owner waiting list policy, not tenant selection 
plan, to be incorporated in the PHA's Administrative Plan where there 
will be an owner-maintained waiting list, Sec.  983.251 is not an 
appropriate location for requirements relating to the owner's screening 
and selection of tenants.\19\ The elements of the owner tenant 
selection policies and procedures at issue are instead covered by 
Sec. Sec.  983.253 and 983.255. Section 983.255(b) of the current PBV 
regulations contains owner screening requirements and was not proposed 
for revision in this rulemaking. HUD determines the changes to the 
owner screening requirements the commenter proposes would require 
separate rulemaking, with opportunity for public comment. HUD notes, 
however, that the owner's practices under Sec.  983.255(b) remain 
subject to Sec.  983.253(a)(2), which states: ``The owner is 
responsible for adopting written tenant selection procedures that are 
consistent with the purpose of improving housing opportunities for very 
low-income families and reasonably related to program eligibility and 
an applicant's ability to perform the lease obligations.'' HUD believes 
these current requirements governing the owner's screening practices 
adequately reflect the PBV program's purpose of serving low-income 
families. The owner notice of grounds for rejection is currently 
codified at Sec.  983.253(a)(3). HUD adds to that provision, in this 
final rule, a requirement for the owner to provide a copy of the notice 
to the PHA. If, upon receipt of the notice, the PHA finds that the 
owner is noncompliant with program requirements, including Sec.  
983.253(a)(2), the PHA may take action for breach of the HAP contract. 
HUD intends to provide further guidance on the operation of Sec. Sec.  
983.253 and 983.255.
---------------------------------------------------------------------------

    \19\ HUD notes that in the case of an owner-maintained waiting 
list, the notice and hearing requirements when a family is denied 
admission to the waiting list are at 24 CFR 982.554, which was not 
proposed for change in this rulemaking, and, per Sec.  
983.251(c)(7)(vii) of this final rule, the owner provides the notice 
to the family.
---------------------------------------------------------------------------

    HUD notes that PHAs already have the authority to and are 
encouraged to prioritize victims of domestic violence, dating violence, 
sexual assault, or stalking who are in the PBV program and require an 
emergency transfer under VAWA in its Administrative Plan. As stated 
earlier, VAWA emergency transfers must occur in accordance with HUD's 
VAWA regulations at 24 CFR part 5, subpart L, and program regulations.
    HUD declines to modify Sec.  983.251(c)(6). If the PHA chooses 
under its Administrative Plan to use a separate waiting list for 
admission to PBV units, under paragraphs (c)(2)(i) and (iii) of Sec.  
983.251 as proposed the PHA already 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).

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?

    One commenter recommended that HUD streamline the PBV waiting lists 
process for easier oversight and efficient enforcement. Other 
commenters stated that HUD should allow PHAs to develop their own 
procedures to remove families from the PBV waiting list if the 
procedures are outlined in the Administrative Plan. Another commenter 
stated that PHAs should manage the removal of the family from

[[Page 38280]]

the PBV waiting list when a family rejects an offer as adopted within 
their Administrative Plan. This commenter expressed that it should be 
optional for PHAs to monitor owner-maintained waiting lists because HUD 
would hold the PHA accountable for actions beyond the PHA's control. 
Another commenter stated HUD should not establish additional criteria; 
if a family rejects the unit, they should be removed from the list; and 
if an owner rejects the family, they should be removed from the 
project-based list.
    One commenter stated that if a family meets the eligibility 
criteria and fulfilled all its obligations, an owner's rejection should 
not adversely affect the family's position on the PBV waiting list. One 
commenter stated there is no additional administrative burden involved 
in leaving a family on the general PBV list if the family rejects an 
opportunity or an owner rejects the family.
    Another commenter expressed that owner-managed waiting lists have a 
history of discrimination, and that the proposed rule does not require 
enforcement, only an undefined ``oversight.'' The commenter stated that 
the authorities cited at Sec.  5.105(a) are solely a list of Federal 
civil rights laws covering housing programs, and do not provide for 
specific oversight. A commenter suggested that HUD should revise Sec.  
983.251 to identify safety concerns for domestic violence survivors as 
a good cause to reject a unit, to prevent the survivor from choosing 
between housing and safety.
    HUD Response: HUD appreciates the commenters' recommendations. This 
final rule provides PHAs with the procedural tools within their 
Administrative Plans to effectively streamline their PBV waiting list 
to create effective oversight and efficient enforcement as addressed in 
Sec.  983.251. Further, this final rule allows PHAs to develop their 
own procedures to remove families from the PBV waiting list as long as 
the procedures are legally permissible and are outlined in their 
Administrative Plans in the case of a central PBV waiting list. Under 
this final rule, for 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.
    Although HUD appreciates the commenters' suggestions that HUD 
should not establish additional criteria, there can be situations in 
which the unit in question is not conducive to the needs of the family 
and is rejected, but the family still needs suitable housing, and, as a 
result, should not be removed from the project-based list. Therefore, 
HUD requires in this final rule that if a family rejects the offer of 
PBV assistance for good cause then the family cannot be removed from 
the PBV waiting list. Moreover, separate from this process, a family 
can always request a reasonable accommodation that may be necessary for 
a household member with a disability to remain on the PBV waiting list, 
including when the unit does not meet one's disability-related needs. 
Further, PHAs and owners are subject to all applicable Federal fair 
housing and civil rights requirements, including in their 
administration of this process. Even if the circumstances do not rise 
to the level of ``good cause'' as determined by the entity, a family 
may request a reasonable accommodation in accordance with Federal civil 
rights laws.
    As for revising Sec.  983.251 to identify safety concerns for 
domestic violence survivors, HUD already has protections for victims of 
domestic violence, dating violence, sexual assault, or stalking in 24 
CFR part 5, subpart L, and these protections apply to admission to the 
project-based voucher program. Additionally, the provision added to 
this final rule specifying that if a family that rejects the offer of 
PBV assistance for good cause then the family cannot be removed from 
the PBV waiting list applies to these families; the safety concerns 
described in the comment constitute good cause.

Other Questions and Suggested Modifications

    One commenter stated that HUD should revise Sec.  983.251(c)(7)(x) 
to not take enforcement action against a PHA due to actions of an 
owner. This commenter stated that HUD should have the ability to act 
against the owner, and HUD should explicitly state it will not act 
against the PHA, especially when the PHA is acting in good faith to 
provide oversight. Another commenter recommended that HUD streamline 
the process for PHAs, families, and owners, modifying Sec.  
983.251(c)(7)(viii) to state that PHAs should provide the oral briefing 
while the owner refers a family to the PHA for a final eligibility 
determination to provide the family with the information needed to 
determine whether to accept an owner's offer and eliminate the need to 
submit income and other eligibility-related information to the PHA.
    Commenters suggested that PHAs should be given the discretion to 
manage their waiting lists, including how families reject the offer of 
assistance or if the owner rejects the family. One commenter favored 
HUD keeping the provisions under Sec.  983.251(c), regarding selection 
from a waiting list, in nonbinding guidance. Another commenter stated 
that PHAs should have discretion over owner-maintained waiting lists 
because the PHA cannot control whether an owner would comply. Other 
commenters suggested that HUD's rule should clearly state that PHAs may 
permit owners to maintain their own lists, regardless of whether the 
PHA itself maintains separate waiting lists for some or all its PBV 
properties in Sec.  983.251(c)(2)(iii) and (c)(7)).
    A commenter suggested that the rule should explicitly state that 
owners and PHAs are subject to all civil rights and fair housing 
requirements throughout Sec.  983.251(c)(7). Another commenter 
suggested that HUD amend Sec.  983.251(e)(1) and (3) to allow PHAs 
additional discretion in deciding how to handle the family's position 
on the PHA waiting list if the family turns down PBV. This commenter 
also supported PHAs having discretion over the number of offers a 
family may reject. Another commenter recommended that HUD should not 
permit PHAs to alter a family's place on a central PBV waiting list 
based on an owner's rejection of a family because it would harmfully 
impact a family's admission with respect to any other property with a 
PBV contract and violate a pre-HOTMA sentence of section 8(o)(13)(J) of 
the 1937 Act.
    Commenters also recommended deleting the final sentence of Sec.  
983.251(b)(2), because HCV participants are not subject to a denial of 
assistance, and deleting the part explaining that the usual termination 
grounds would apply, as well as signaling that rescreening by PHAs is 
allowed.
    HUD Response: HUD declines to revise Sec.  983.251(c)(7)(x). 
Section 983.251(c)(7)(x) allows HUD to take enforcement actions for 
non-compliance against the PHA and the owner. If the PHA is not acting 
in good faith to provide oversight in accordance with Sec.  
983.251(c)(7)(x), HUD has the authority to enforce HUD's requirements.
    As for Sec.  983.251(c)(7)(viii), HUD maintains the process for 
PHAs to determine eligibility for the program. This ensures that all 
parties appropriately coordinate the placement of the family in the 
unit and will ensure compliance by PHAs with their continued 
responsibility for eligibility determinations. This final rule also

[[Page 38281]]

maintains the authority for PHAs, consistent with their Administrative 
Plan, to determine whether to allow for owner-maintained waiting lists. 
Further, HUD's final rule explicitly states that PHAs may permit owners 
to maintain their own lists regardless of whether the PHA itself 
maintains separate waiting lists for some or all its PBV properties in 
Sec.  983.251(c)(2)(iii) and (c)(7). HUD will not amend Sec.  
983.251(e)(1) and (3) to limit flexibility to the PHA and owner and HUD 
maintains the proposed rule's option that the PHA may alter a family's 
place on a central PBV waiting list based on an owner's rejection of a 
family. HUD also declines to adopt the commenter's request to delete 
the final sentence of Sec.  983.251(b)(2), because families remain 
subject to standard requirements for denial or termination of 
assistance. Lastly, HUD's final rule maintains the proposed rule 
requirements that owners and PHAs must comply with all applicable 
Federal, State, and local nondiscrimination and equal opportunity 
requirements (see 24 CFR 983.251(c)(7)(x) of the final rule (below)).

39. PHA Information for Accepted Family (Sec.  983.252)

    One commenter suggested that the briefing packet include written 
information on the selected family's right to move with the next 
available voucher, because the right is unavailable to the family until 
after one year and so the family should be informed of the right in 
writing. The commenter also suggested that HUD modify Sec.  983.252 to 
apply to both families selected by the PHA from its waiting list and to 
families selected from an owner-maintained list.
    HUD Response: HUD agrees with the commenter about providing such 
written information and has revised the requirement to include written 
information on the selected family's right to move at Sec.  
983.252(b)(5). HUD will not make a change to the language regarding 
families selected off the waiting list but notes that the language in 
the proposed rule and finalized in this rule does apply to any accepted 
family, including participants selected from an owner-maintained list.

40. Leasing of Contract Units (Sec.  983.253)

    A commenter recommended that HUD add the following language to 
Sec.  983.253: ``PHAs are responsible for monitoring owner actions that 
may indicate rejection of applicants for legally impermissible reasons, 
as well as for informing applicants of other tenant-based and PBV 
waiting list options, whether referred by the PHA or on an owner's 
site-based waiting list.''
    HUD Response: HUD declines to implement the commenter's suggested 
change in this final rule. PHAs have a duty and responsibility to 
monitor owner's actions that may indicate rejection of applicants for 
impermissible reasons.

41. Vacancies (Sec.  983.254)

Question 32. What would be a reasonable timeframe for the PHA to 
complete this final eligibility determination?

    Commenters suggested a broad set of timeframes for the PHA to 
complete its final eligibility determination. Some commenters agreed 
that two weeks, 30 or 60 days is a reasonable timeframe for PHAs to 
complete final eligibility determinations. Other commenters noted that 
more time may be required on a case-by-case basis, to ensure proper 
eligibility review. Some commenters also suggested a 15-day timeframe 
to complete final eligibility determination for applicants on owner-
maintained waiting lists. A commenter suggested that PHAs determine the 
timeframe for final eligibility determinations, because the PHAs may 
face uncontrollable factors that require more time than 30 days.
    One commenter encouraged HUD to include in this final rule a 
reference to the authority granted to applicants by the last sentence 
of section 8(o)(13)(K), the Vacancies statutory provision, to bring 
legal actions to compel a PHA to reduce the number of PBV units 
committed under the contract if a unit is vacant for more than 120 days 
and use the funds for additional tenant-based assistance.
    A commenter encouraged HUD to provide PHAs 30 calendar days to make 
an eligibility determination, and another commenter proposed two weeks 
for a PHA to make final eligibility determination. Another commenter 
objected to HUD's requirement that owners notify PHAs of actual or 
expected vacancies, and instead, the commenter proposed that owners 
refer families on waiting lists to the PHA, in advance of an actual 
vacancy, to reduce delay in filling the unit. This commenter stated 
that there is no reason to require a notification because the PHA is 
not responsible for referring applicants to the owner, rather than 
referring the selected family to the PHA. The commenter added that 
owners and PHAs should have a coordinated system to schedule PHA 
appointments as quickly as possible for the PHA and the selected 
family. This commenter recommended that PHAs be obligated to make 
reasonable efforts to promptly make the final eligibility determination 
and schedule the required oral briefing as well as eligibility. A 
commenter expressed that HUD should not specify a timeframe for the PHA 
to complete a final eligibility determination after receiving an 
application from an owner because PHAs have an interest in making 
determinations quickly, but frequent extenuating circumstances prolong 
resolving issues in the interest of the family, owner, or PHA.
    HUD Response: HUD has reviewed the comments and has determined that 
in this final rule a 30-day notification to applicants to determine 
final eligibility determinations is reasonable. If PHAs face 
uncontrollable factors that require more time than 30 days to complete 
their final eligibility determinations, then the PHA remains compliant 
with the regulation so long as PHAs make every reasonable effort to 
complete the determination within the required timeframe. This final 
rule also continues to require an owner to notify the PHA of actual or 
expected vacancies.

42. Security Deposit: Amounts Owed by Tenant (Sec.  983.259)

    A commenter supported HUD's proposed prohibition on charging a PBV-
assisted family a higher security deposit than an unassisted family 
because it encourages and authorizes source of income discrimination.
    HUD Response: HUD appreciates the public comment supporting the 
addition of Sec.  983.259(b) prohibiting a PHA from charging assisted 
tenants security deposits in excess of private market practice, or in 
excess of amounts charged by the owner to unassisted tenants and adopts 
this language in this final rule.

43. Overcrowded, Under-Occupied, and Accessible Units (Sec.  983.260)

Question 33. Are these proposed timeframes reasonable?

    Several commenters viewed the 30-day timeframe for the PHA to 
provide notice to the family and owner to remain in a wrong-sized unit, 
as well as the 90-day timeframe in which the family must move out, as 
reasonable if PHAs are permitted to extend the timeframe when needed.
    Other commenters opposed HUD's timeframes for a family to move from 
wrong-sized or accessible units. One commenter stated that the 
timeframes are overly strict for the PHA to notify a family and owner 
that they are placed in either an overcrowded, under-

[[Page 38282]]

occupied, or accessible unit. This commenter stated that a longer 
timeframe is reasonable because PHAs need time for processing, and the 
family should be given adequate time to find a suitable home rather 
than taking the first unit available. Some commenters suggested 
increasing the maximum time for a family to move from 90 days to 180 
days since this timeframe is for a scenario where the PHA offers 
``another form of continued housing assistance (other than a tenant-
based voucher)'' which will be subject to the availability of other 
units within the PBV portfolio which are outside of the family's 
control. One commenter proposed 180 days to eliminate PHAs having to 
decide between terminating families or skipping their continued 
assistance policies. Another commenter suggested that the timeframe 
should be 90 days or the next annual recertification, whichever is 
longer, while another commenter found 90 days as a more appropriate 
notification deadline and 180 days sufficient time to move. One 
commenter disagreed with the 90-day timeframe because PHAs with a large 
population in RAD units may lack sufficient turnover to support 
families moving out of wrong-sized units, and the 90-day limit would 
create an inconsistency and an unfair standard for PHAs in low-vacancy 
areas which usually allow 120 days for use of vouchers. This commenter 
supported PHAs having discretion to determine appropriate timeframes 
for local conditions and specify those policies in the Administrative 
Plan. Another commenter found the 90-day timeframe insufficient 
considering the current housing crisis and the need for additional time 
for families to locate alternative units.
    One commenter requested that HUD clarify Sec.  983.260(c)(2) to 
express that the timeframe begins once the PHA offers the family 
assistance in another unit and not from the time that the PHA 
determines the family is in the wrong-sized unit. Another commenter 
stated that HUD's proposal is not required by HOTMA and does not 
recognize the limits imposed by PBV turnover and right-sized unit 
availability, whether with external partners or within a PHA's agency-
owned portfolio. Another commenter expressed that for families that 
live in a wrong-sized PBV unit or a unit with unneeded accessible 
features, the PHAs should offer the option to move with the next 
available tenant-based voucher, and if the voucher is unavailable or is 
not the family's preference, then the PHA should offer the family 
alternative housing assistance. The commenter also disagreed with the 
option of reducing the number of units under the PBV contract because a 
PHA is unlikely to reduce the subsidy attached to the project to offer 
the tenant a suitable alternative unit, unless the PHA has no tenant-
based voucher available within a reasonable time and does not own 
public housing, and the owner has no turnover in a suitable unit. The 
commenter further stated that the rule should require PHAs to help 
families locate a new suitable unit with the tenant-based voucher they 
receive to relinquish correct-sized and accessible units, which is 
required under Sec.  982.403 and is consistent with HOTMA requirements 
to assist families that need to move due to unrepaired unit defects. 
One commenter stated that the proposed timeframes are overly 
prescriptive and administratively burdensome for PHAs to follow.
    HUD Response: This section outlines steps the PHA must take when 
they have determined a family is occupying a wrong-sized unit 
(according to the PHA subsidy standards), or a unit with accessibility 
features that the family does not require, and the unit is needed for 
another family that requires the unit's accessible features. Under 
these circumstances, it is necessary that the family move and to 
provide certainty regarding the amount of time a family may remain in 
the unit. In response to concerns raised, in this final rule, HUD 
lengthens the amount of time the PHA is afforded to offer a form of 
continued assistance, in accordance with Sec.  983.260(b), to within 60 
days of the PHA's determination.
    The 90-day timeframe, related to the termination of the housing 
assistance payments for the wrong-sized or accessible unit and removal 
of the unit from the HAP contract, begins once the PHA offers a form of 
continued assistance. The comments submitted to HUD are persuasive that 
a more flexible timeframe would be more practical to suit the needs of 
the family moving out, the unit owner, a prospective family moving in, 
and the PHA. At the same time, for certainty, accountability, and to 
encourage the owner to continue to make their unit with accessible 
features available to the PHA's HCV program, some limits on the 
timeframe need to be maintained. Therefore, HUD has included revisions 
at Sec.  983.260(c)(2)(i) and (iii) to include additional flexibility 
in the form of the option for a family to request and the PHA to grant 
one extension not to exceed up to an additional 90 days to accommodate 
the family's efforts to locate affordable, safe, and geographically 
proximate replacement housing.
    In accordance with Sec.  983.260(b)(1), the continued assistance 
offered may be in the form of project-based voucher assistance in an 
appropriate-size unit (in the same project or in another project); 
other project-based housing assistance (e.g., by occupancy of a public 
housing unit); tenant-based rental assistance under the voucher 
program; or other comparable tenant-based assistance. Based on comments 
received, a new section was added at Sec.  983.260(b)(2) that requires 
the PHA to remove the wrong-size or accessible unit from the HAP 
contract to make voucher assistance available to issue the family a 
tenant-based voucher if no continued housing assistance under paragraph 
(b)(1) is available. The unit can then be reinstated after the family 
vacates the property under a new provision at Sec.  983.260(d). This 
will support the availability of funding the PHA can use to assist the 
family with continued assistance.

44. Family Right To Move (Sec.  983.261)

Question 40: Right To Move and Sec.  983.261

    One commenter suggested that HUD clearly define the first year of 
occupancy in Sec.  983.261(a). A commenter recommended that Sec.  
983.261 clearly state the roles and responsibilities of domestic 
violence survivors and PHAs, considering that some PHAs view their 
obligation to provide continued assistance to a survivor as 
discretionary. This commenter suggested clarifying that a ``PHA must 
assure that the victim retains assistance'' and ``must'' offer 
continued tenant-based assistance, subject to availability of funds. 
One commenter suggested Sec.  983.261(d) have a VAWA exception, because 
survivors should not be penalized and lose tenant-based assistance if 
they must terminate their lease before the end of the one-year 
requirement because of violence. This commenter offered the following 
suggestions: (1) allowing a survivor to request another form of 
assistance before the family issues a written notice to vacate, at the 
time it issues the notice, or thereafter; (2) the PHA should also offer 
a tenant-based voucher or comparable tenant-based rental assistance if 
the notice to vacate is due to violence; and (3) if such assistance is 
not available, then the survivor should receive priority for the next 
tenant-based voucher and the PHA should be encouraged to reach out to 
area PHAs (with survivor consent) about available units or vouchers. In 
case the survivor

[[Page 38283]]

does not feel safe in the existing unit, the commenter recommended that 
the PHA provide a safe unit in the interim while the survivor waits for 
the tenant-based voucher or allow the survivor to transfer to another 
PBV unit.
    Another commenter stated that under Sec.  983.261, the PHA should 
demonstrate the availability of tenant-based vouchers for eligible PBV 
families that exercise their right to move based on tenant-based 
voucher attrition rate. This commenter also recommended that HUD expand 
the PHA's discretion to set timeframes, and not be limited to ``any 
time after the first year of occupancy'' under Sec.  983.261(a)), if 
the project provides housing assistance to families that require 
intensive supportive services. Another commenter recommended that HUD 
clarify Sec.  983.261 to include language on terminations, by stating 
that a family living in a PBV-assisted unit for 12 months that has 
requested an HCV need not stay in the PBV unit while waiting for the 
transfer, as well as that a PHA may not terminate the tenants from the 
PBV program. One commenter suggested that HUD expand the list of 
reasons for transfer to include intimidated witnesses and crime victims 
before the one-year transfer period. A commenter suggested HUD clarify 
that the tenant is not automatically provided HCV assistance after 1 
year of lease, and that the tenant may apply for the transfer list and 
may receive assistance when a voucher is available.
    One commenter recommended clarifying in the rule that PHAs should 
periodically notify families of the right to move with continued 
tenant-based rental assistance, which could be provided as part of the 
regular income recertification process. This commenter suggested that 
HUD clearly state the actions the PHA must take if neither a regular 
voucher nor ``comparable tenant-based rental assistance'' is available 
at the family's requests because basic due process requires that PHAs 
maintain a written list of families that have requested a voucher to 
move from a PBV property after 12 months of occupancy and have a right 
to receive the next available voucher or comparable assistance.
    Other commenters stated that Sec.  983.261 is clear, but suggested 
splitting Sec.  983.261(c)(1) into additional sentences for clarity.
    HUD Response: HUD has revised this section by adding titles and 
reorganizing information so that the requirements are easier to follow. 
HUD added language to Sec. Sec.  983.261(a) and 983.261(d) that 
clarifies the family must have received PBV assistance for at least a 
year to be eligible for continued assistance under Sec.  983.261(b). 
The eligibility for continued assistance is based on the total length 
of time a family has received PBV assistance and not the length of time 
the family has resided in the PBV unit. Section 983.261(a) does not 
prohibit a family from terminating their lease prior to a year, just 
doing so would make them ineligible for continued assistance. At any 
time, the family must give the owner advance written notice of intent 
to vacate (with a copy to the PHA) in accordance with the lease, unless 
the family meets the exclusion criteria at Sec.  983.261(e) related to 
VAWA.
    The new Sec.  983.261(f) further clarifies that PHAs must address 
project-based vouchers in their Emergency Transfer Plan consistent with 
the requirements in 24 CFR 5.2005(e), including when the victim has 
received PBV assistance for less than one year and is not eligible for 
continued assistance under Sec.  983.261(b). Under a PHA's existing 
VAWA obligations, a family may still potentially receive tenant-based 
rental assistance as an external emergency transfer, even if they have 
not received PBV assistance for more than a year. The emergency 
transfer requirements do not supersede any eligibility or occupancy 
requirements that may apply under a covered housing program (Sec.  
5.2005(e)(13)). This language was added to clarify the requirement of 
planning for these situations, but HUD cannot supersede the eligibility 
requirements of continued assistance. To assist the family's 
understanding of their right to move and the PHA's implementation of 
these policies, HUD has added language to Sec. Sec.  983.261(b) and 
983.261(c) that outlines the right to move information that must be 
included in the Administrative Plan, including their written policy on 
whether the PHA will offer families continued assistance under the 
voucher program or other comparable tenant-based rental assistance, 
procedures for how the family must contact the PHA, and how the PHA 
documents families waiting for continued tenant-based rental 
assistance.

45. When Occupancy May Exceed the Project Cap (Sec.  983.262)

Question 34: Does the proposed rule sufficiently address the project 
cap requirements in relation to a unit losing its excepted status?

    A commenter stated that Sec.  983.262(f) (now moved to Sec.  
983.262(b)(4) in this final rule) sufficiently addresses the project 
cap requirements in relation to a unit losing its excepted status. 
Another commenter suggested adding: ``or a family eligible for 
supportive services, or a family that otherwise qualifies to reside in 
an excepted unit under paragraphs (c) or (d) of this section'' to Sec.  
983.262(b). The commenter encouraged HUD to clearly state in Sec.  
983.262(c) (now moved to Sec.  983.262(d)(3) in this final rule) the 
qualifications for the supportive services exception, including: (1) if 
any member of the family is eligible for one or more of the available 
services; (2) if a member of the family successfully completes a 
service program and subsequently no other member of the household is 
eligible for one of the offered services. The commenter also proposed 
that HUD revise the third sentence of Sec.  983.262 to clearly state 
that the exception applies even if the household member who 
successfully completes a service program leaves the household.
    HUD Response: HUD appreciates the edits offered by commenters and 
believes changes to this section provide additional clarity. The 
proposed regulation conveyed that the unit retains its exception if any 
member of the family resides in the unit (not just the member that 
successfully completed the supportive services) and HUD, therefore, 
does not believe an edit is required to provide that clarification.

46. Determining the Rent to Owner (Sec.  983.301)

Question 37: Streamlining HUD's Utility Allowance Policies Across the 
RAD PBV, Traditional PBV, and HCV Programs

    One commenter recommended providing PHAs with maximum flexibility 
in setting utility allowances for RAD PBV, traditional PBV, and HCV, 
noting that the statute is not very proscriptive. Another commenter 
stated that HUD should allow all of these programs to use the same 
utility allowance. A commenter stated that allowing project owners and 
PHAs to utilize project-specific UAs at traditional PBV properties will 
streamline policies between RAD PBV units and traditional PBV units and 
will streamline UA requirements between traditional PBV units and HOME 
program requirements which are incompatible and require regulatory 
waiver.
    HUD Response: PHAs have the ability to use the same UA for RAD PBV, 
traditional PBV, and HCV by using the PHA's HCV UA schedule for all of 
these programs. Through this final rule, PHAs will have the additional 
flexibility of setting an area-wide EEUA that may also

[[Page 38284]]

be used for qualified energy-efficient RAD PBV and traditional PBV 
properties. Project-specific UAs add complexity, but they are optional 
for PHAs to implement. HUD may provide additional flexibility for 
setting project-specific UAs, however, HUD must ensure the policy 
results in accurate UAs that do not overly burden tenants. HUD 
recognizes the need to consider the alignment of project-specific UAs 
with other programs like HOME and will consider this in a notice 
implementing project-specific UAs.

Question 38: Should HUD permit the use of a project-specific utility 
allowance schedule for the HCV program?

    Many commenters supported HUD allowing project-specific UAs. Some 
commenters said PHAs should have maximum flexibility in setting 
project-specific UAs, while others recommended HUD issue more 
requirements to ensure project-specific UAs do not negatively impact 
families. Commenters stated that project-specific UA schedules would 
eliminate conflicts with other funding sources, including HOME. One 
commenter recommended that PHAs have the discretion to allow project-
specific UAs on a case-by-case basis or throughout their HCV program to 
ensure families neither experience an undue cost nor are discouraged 
from conserving energy.
    Commenters stated that any requirement to implement site-specific 
UAs would be administratively burdensome for the PHA, stating that it 
would not streamline requirements across programs and that PHAs' SEMAP 
scores may be negatively impacted due to difficulties in applying the 
correct UA schedule. Commenters stated that HUD's efforts to reduce 
program expenditures and promote energy efficiency need to be 
consistent with statutory tenant affordability protections. Another 
commenter noted that HUD has not provided evidence that reduced UAs 
will promote energy conservation and that the relationship between 
reducing UAs and avoiding wasteful consumption is tenuous considering 
the relative inelasticity of demand for energy among low-income 
households.
    Another commenter stated that while a project-specific UA is 
appropriate in instances where another housing program has established 
an alternative EEUA, the standard should be based on accuracy and not 
whether allowances would create an undue cost on families or discourage 
efficient use of HAP funds. A commenter recommended that HUD should 
remove the requirement to have PHAs update UA schedules when there is a 
rate change of 10 percent or more; streamlining would be achieved if 
the local HUD field office performs the UA analysis for their 
respective geographic areas. Another commenter proposed that HUD issue 
UAs based on locality like FMRs.
    Commenters recommended that HUD delay making this provision 
effective until it can issue further guidance providing specific 
standards and requirements for developing the project-specific UAs and 
how to ensure tenants are not negatively impacted and allowing for 
public comment. Commenters additionally expressed that using average 
consumption of the dataset is unreasonable for low-income tenants 
because it results in effectively 50 percent of the tenants receiving a 
UA that is too low. Commenters also supported consideration of the 
impact of time-of-use rate plans and tenants with special needs or 
larger families, which require higher consumption for special equipment 
or because tenants spend more time at home. Project-specific UAs that 
are determined based on an engineering analysis need to be carefully 
reviewed and subject to a periodic adjustment to ensure they reflect 
actual costs in the project. This commenter recommended HUD apply the 
same methodology for multifamily properties, which uses actual 
consumption data. One commenter recommended that HUD's approval process 
include adequate notice and comment for PBV tenants affected by any PHA 
proposal submitted to HUD, as well as require that PBV tenants timely 
complete supporting information, and receive adequate time for analysis 
(at least 60 days), because the data complexity will usually require 
additional expertise.
    One commenter stated that there should be no need for a PHA to 
engage another independent entity to approve proposed project-specific 
UAs, as HUD's independent review and approval should be sufficient to 
avoid a conflict of interest.
    HUD Response: HUD appreciates commenters' support of project-
specific UAs. Project-specific UAs provide an opportunity for 
streamlining and a more accurate UA based on project-specific 
consumption data that will (1) allow projects to be viable where the 
area-wide utility allowance is unnecessarily high, and (2) ensure 
participants living in the same property are receiving the same UA 
subsidy. Per Sec.  983.301(f)(4) PHAs that implement a project-specific 
UA for a PBV property must use the same UA for tenant-based 
participants residing in that project. To ensure this policy is clear, 
HUD has added this requirement into this final rule in part 982 (Sec.  
982.517(b)(2)(iv)). While project-specific allowances may cause some 
burden to administer, they are completely optional. PHAs must consider 
the costs and benefits to their specific program and the impact on 
families before deciding to request a project-specific UA.
    Many suggestions were made on how to protect participant families 
from having a project-specific UA that is too low. HUD agrees that 
further protections are needed to ensure that families are not 
negatively impacted. HUD clarified under Sec.  983.301(f)(4) that Sec.  
982.517(c) applies and an annual review of rates is required. HUD added 
that PHAs must review project-specific UAs after one year if they were 
not based on actual consumption data. Additional time is required to 
develop a process that ensures PHAs and PBV property owners are 
adequately considering the impact of project-specific UAs on families. 
HUD will continue to process these requests as waivers at HUD 
Headquarters until more guidance is issued via notice.
    HUD appreciates the commenter's suggestion that PHAs should have 
the flexibility to apply project-specific or case-specific UAs for any 
HCV tenant, but this policy would be very difficult to manage and even 
more difficult to provide effective oversight. UAs provide for some 
adjustments through specific policies without creating a separate 
utility allowance for every HCV participant. Families that have 
additional utility allowance needs due to individual circumstances 
related to a disability are always able to request a reasonable 
accommodation (Sec.  982.517(e)). This applies to participants in the 
project-based and tenant-based programs. HUD is amending this final 
rule to clarify that reasonable accommodation UAs will not impact the 
determination of the contract rent for project-based units. Instead, 
the cap on contract rent will be determined using the appropriate area-
wide UA (Sec.  983.301(f)(5)).
    HUD has removed the regulatory requirement in Sec.  983.301(g) that 
PHAs have an independent entity determine the project-specific UA for 
PHA-owned units. HUD will establish requirements for project-specific 
UAs in PHA-owned units in a Federal Register notice.

Request for Clarification

    A commenter suggested HUD clarify Sec.  983.301(b)(1) by including 
that the rent to owner can differ from the PHA's payment standard for 
the HCV program, as the statute specifies, since many

[[Page 38285]]

PHAs and other stakeholders have not understood this flexibility.
    HUD Response: HUD believes that Sec.  983.301(b)(1) is sufficiently 
clear that the rent to owner can differ from the PHA's payment standard 
for the HCV program. However, HUD has taken this opportunity to clarify 
the corresponding provision at Sec.  983.2(c)(6)(i) and the Sec.  
983.301(b)(1) language regarding when the PHA may use an amount greater 
than 110 percent of the applicable FMR in its calculations.

47. Redetermination of Rent to Owner (Sec.  983.302)

Question 39: Agreeing to Maximum OCAF Adjustments

    Commenters supported implementing the HOTMA provisions allowing an 
owner to request additional changes up to the statutory maximum if the 
OCAF is insufficient because these changes would help make PBV projects 
more competitive. A commenter suggested HUD consider this limit to be 
duplicative, because rent reasonableness standards must still be met, 
in effect keeping the rent amount in check. Another commenter stated 
that owners subject to OCAF should have the benefit of having the full 
OCAF percentage applied to better manage operations and improve on a 
property's ability to cover existing debt, and that further reducing 
the applicable percentage increase to properties puts additional 
financial strain on owners.
    HUD Response: HUD appreciate the comments; however, HUD does not 
consider the PHA's rent limit to be duplicative rent reasonableness 
standards because the PHA may have reason to set the limit below the 
reasonable rent. Under this final rule, HUD retains the requirement 
that the increases through OCAF may not exceed the maximum rent for the 
PBV project, as determined by the PHA pursuant to Sec.  983.301 as 
proposed.

Align OCAF Adjustments With Other Programs

    Commenters recommended a ``lesser of'' test, like that used in the 
Mod Rehab program, of OCAF or 110 percent of FMR. A commenter suggested 
PHAs should have sole discretion to choose OCAF or 110 percent of FMR, 
if HUD determines that the PBV rent increase amount should be 
discretionary. A commenter recommended HUD treat OCAF adjustments in a 
traditional PBV context the same as it would in a RAD PBV context and 
as permitted elsewhere for properties with HUD section 8 contracts. 
This commenter noted that OCAF adjustments applied elsewhere in the PBV 
program should not be arbitrarily capped by the FMR and SAFMR 
established by HUD. The commenter also encouraged HUD to explore ways 
in which the FMRs and SAFMRs can be better aligned with rent 
reasonableness assessments to ensure that FMRs and SAFMRs are able to 
keep up with the OCAF adjustments that properties receive, which would 
avoid this problem altogether.
    HUD Response: HUD declines to adopt the commenter's recommendation 
to use a ``lesser of'' test and retains the proposed rule policy, as 
described earlier in this section of the preamble. HUD intends to 
consider this rule's applicability to RAD, given HUD's waiver authority 
with respect to RAD, following publication of this final rule. HUD 
continues its commitment to ensuring FMRs and SAFMRs are accurate and 
updated.

OCAF Adjustments to Units Not Otherwise Regulated by Local Rent 
Increase Regulation Related Rules

    A commenter suggested providing the option of OCAF adjustments to 
those units that are not otherwise regulated by local rent increase 
regulations or any other regulatory agreement.
    HUD Response: HUD has reviewed the comment and has determined, as a 
matter of equitable treatment, all OCAF adjustments will remain aligned 
in accordance with the statutory provision in section (8)(o)(13)(H) of 
the 1937 Act.

Automatic Adjustments

    A commenter supported the inclusion of OCAF rent increases as a 
discretionary option for PHAs. One commenter stated that PHAs would 
risk funding shortfalls if they guaranteed annual rent adjustment, and 
some owners may not request an increase every year, which benefits the 
PHA because it allows for those funds to be used elsewhere and for 
units in higher-cost areas.
    HUD Response: HUD acknowledges commenters' support. HUD is 
maintaining automatic adjustments pursuant to Sec.  983.302(b) which 
states that 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. However, the OCAF option is optional and 
PHAs concerned about shortfalls or anticipating a lower owner request 
may decide not to use OCAFs.

Periodic Adjustment Frequency

    One commenter recommended that HUD also clarify proposed Sec.  
983.302(b)(2)(ii)(B) to state that periodic adjustments above the OCAF-
adjusted rent level may be less frequently than annually. This 
commenter also suggested that the contract specify how frequently a PHA 
must consider such requests if made by the owner, because allowing 
increases annually, beyond the OCAF level, would undermine the time- 
and cost-saving purpose of using an OCAF.
    HUD Response: HUD appreciates the commenter's suggestion. HUD 
decided to allow adjustments to occur during the term of the contract 
and prohibit a rent adjustment by an OCAF from exceeding the maximum 
rent (see Sec.  983.302(b)(2)(i)). HUD also declines to require that 
the HAP contract specify how frequently a PHA must consider rent 
increase requests. Instead, as noted in this final rule, an owner can 
make a written request for a rent increase at any time during the term 
of a HAP contract. Lastly, as a point of clarification, the proposed 
Sec.  983.302(b)(2)(ii)(B) has been relocated in this final rule to 
Sec.  983.302(b)(3)(i).

Rent Floor

    One commenter supported HUD's proposal to allow PHAs to reduce PBV 
rents below the initial rent to owner at any time during the HAP 
contract. The commenter further urged HUD to provide PHAs the tools to 
rectify unintended negative consequences stemming from an unestablished 
floor for rents and PBV rents falling below their initial rents, 
harming the initial underwriting.
    HUD Response: HUD has considered the comment and determined that it 
should remain within PHA discretion whether to reduce rents below the 
initial rent to owner at any time during the HAP contract. HUD believes 
that PHAs are in the best position to balance local considerations in 
making such a determination. Therefore, in this final rule, HUD has 
deleted the sentences of the proposed rule that said: ``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.''

[[Page 38286]]

48. Additional Requests for Comment

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

    One commenter recommended modifying PBV affordability terms to 30-
year contracts to mirror HTF to address the incompatibility between 
affordability requirements as well as remove the challenge in obtaining 
financing.
    Other commenters supported HTF requirements conforming to the HCV/
PBV requirements, rather than the opposite. A commenter encouraged HUD 
to work with state HTF funding recipients to incorporate preferences 
and/or additional points in the HTF Allocation Plans for applicants 
that seek to couple the receipt of HTF funds with section 8 project-
based vouchers. This commenter also supported streamlining 
environmental review requirements under Sec.  983.301(f) and 
substantial rehab/new construction through parts 50 and 58, as well as 
HUD allowing a single environmental review to satisfy the requirements 
for both HTF and the PBV program. The commenter stated that the 
proposed suggestion is needed because of HUD's increased flexibility 
due to the absence of a HTF statutory environmental review requirement. 
Furthermore, the commenter stated that the current requirements often 
result in projects receiving HTF and PBV funding to undergo separate 
and duplicative environmental reviews.
    Another commenter suggested that additional vouchers be made 
available to communities that offer resources for low-income 
households, including access to public transportation and jobs, where 
rents are prohibitive. This commenter also suggested using a voucher 
pool to connect developments that have HTF investments to bring 
development and operation funding to create more opportunities.
    HUD Response: HOTMA section 106(a)(4) does not allow for the 
contract to go beyond an initial term of 20 years; however, a PHA may 
execute any number of extensions (for terms up to 20 years each) such 
that there are up to 40 remaining years on the contract, further 
explained above in this discussion of comments regarding Sec.  983.205.
    Amendments to the HTF program requirements are beyond the scope of 
this rulemaking. Nonetheless, where the State is selecting HTF 
applications submitted by eligible recipients, HUD notes that the HTF 
Allocation Plan requires HTF grantees to provide priority for funding 
for projects with Federal project-based rental assistance. See 24 CFR 
91.320(k)(5). The underlying PBV environmental review requirements 
generally are statutory; HUD cannot unilaterally amend the 
applicability of NEPA and other laws and executive orders. HUD notes 
that the HTF environmental provisions are outcome-based and exclude 
certain consultation procedures that are otherwise required for 
environmental reviews under 24 CFR parts 50 and 58. HUD intends to 
consider these comments for future collaborations with the HTF program.
    HUD allocates funding that can be used for project-based vouchers 
at the PHA's discretion. How PBV funding is allocated is an essential 
program requirement and revising it is beyond the scope of this 
rulemaking. See response below to Question 43 for additional 
information on how PBV works and is funded.

RAD and Transfers of Assistance (Answers to Question 42)

    Commenters suggested that HUD create a new regulatory provision 
governing the transfer of assistance. One commenter suggested that HUD 
should allow both partial and full transfer of PBV assistance from one 
project to another. Other commenters suggested that the transfer be a 
voluntary agreement modeled after the PBRA provision. Some commenters 
stated that HUD should keep the transfer of assistance process as clear 
and simple as possible, as it has progressively become overregulated, 
with two of these commenters citing specifically the environmental 
review process and the inspection process. One commenter stated that 
the local PHAs can and should make the appropriate policy regarding 
when PBV assistance, which they awarded and oversee, can be transferred 
to another property.
    A commenter stated that PHAs should continue to use their vouchers 
awarded in connection with the Rental Assistance Demonstration (RAD) 
where appropriate and in compliance with the HAP contract. Another 
commenter stated that additional regulatory provisions are not required 
to govern transfers of HAP contracts because PHAs will not experience a 
reduction in Annual Contributions Contract (ACC) authorized units when 
terminating a PBV HAP contract; instead, HUD should address needs on a 
case-by-case basis. This commenter also stated that HUD should 
eliminate the 1-year notice of termination when PBV assistance is 
relocated without a gap in subsidy, so long as any relocation is 
conducted in accordance with applicable Federal requirements.
    One commenter recommended defining a RAD project based on its 
funding stream or ownership structure, rather than lots or sites. One 
commenter also recommended that HUD allow PHAs flexibility to develop 
new PBV or public housing units if it does not exceed its Faircloth 
limit.
    A commenter suggested that regulations governing RAD transfers of 
assistance consider the following factors: (1) placing proposed 
transfers of assistance in the PHA Annual or MTW Plan and ensuring 
consistency with the Consolidated Plan as well as improving the 
resident notification and consultation requirements triggered with a 
transfer of assistance and having each transfer meet the notice and 
comment requirements; (2) transfers of assistance must receive 
certificates of compliance for fair housing and civil rights 
requirements and undergo multiple reviews such as: HUD's civil rights 
review, review for compliance with site selection standards under Sec.  
983.55, 8(bb), poverty concentration standards, change in number of 
units, availability of accessible units or units for families with 
children, change in admission preferences, relocation, and change in 
income eligibility; (3) explicitly prohibiting re-screening tenants for 
factors such as criminal history and credit scores as well as not 
applying new screening criteria to a family coming from public housing 
and prohibiting unreasonable screening criteria in subsequent 
recertifications; (4) prohibiting PHAs from changing unit type or size 
without the written consent of the individual tenants; (5) refusing 
involuntary permanent relocation, however explicitly stating the 
voluntary relocation processes, including the option to select a public 
housing unit of the PHA, and the PHA/owner must document compliance 
with Uniform Relocation Act (URA) and RAD relocation rights and 
publicize those records to HUD upon request; (6) HUD should closely 
evaluate and promulgate specific rules for transfers of assistance far 
from the current RAD site, and consider whether the distance would 
impose a significant burden on residents' access to existing 
employment, transportation options, schooling or other critical 
services, and whether the transfer advances or impedes fair housing and 
de-concentration goals; and (7) section 3 obligations once transfers 
are combined with rehabilitation and new construction.

[[Page 38287]]

    HUD Response: HUD has considered the comments and agrees that it is 
unnecessary to create a new regulatory process by which PBV assistance 
may be transferred from one property to another (though HUD has 
expanded options for termination of PBV contracts at Sec.  983.206). 
Under this final rule, a PBV contract may terminate, as provided in 
Sec.  983.206, with no corresponding reduction in the PHA's ACC units 
or HAP allocation. A PHA may, in conjunction with such termination, 
engage in the selection process in Sec.  983.51 to select and place 
under contract a different PBV project, subject to all requirements of 
part 983. A PHA may give preference to families living in the former 
PBV project who wish to move (voluntarily) to the new PBV project, so 
long as such preference is consistent with the requirements of Sec.  
982.207, and subject to the provisions regarding in-place families at 
Sec.  983.251(b), accessible units at Sec.  983.251(c)(9), and excepted 
units at Sec.  983.262(b)(2). This final rule therefore gives 
sufficient flexibility to PHAs to end PBV assistance at one project and 
begin PBV assistance at another.
    HUD has reviewed the suggestions that transfer of assistance be 
modeled on Project-Based Rental Assistance (PBRA) transfers and 
determined that parallel conditions, namely with respect to HUD 
oversight and funding authority, do not exist in the PBV program that 
would enable use of the same process. Additionally, HUD does not have 
the statutory authority to alter several provisions of part 983 to 
facilitate a transfer of PBV assistance as other commenters suggested. 
These provisions include environmental review, inspection, and the one-
year notice of contract termination. HUD notes that, aside from this 
statutory limitation, these aspects of the PBV program are critical 
elements to the purpose and functionality of the PBV program and to 
ensuring PBV tenants reside in decent, safe, and sanitary housing.
    HUD notes that the provisions for RAD transfer of assistance, and 
other RAD requirements, continue to be located in the governing notices 
for the RAD program and are not altered by this final rule. HUD finds 
it inappropriate to codify in part 983 the alternative provisions 
created pursuant to waiver authority specific to the Demonstration. HUD 
encourages commenters wishing to revise the RAD requirements to respond 
to requests for comment on RAD provisions in the Federal Register. HUD 
further notes that PBV units are unrelated to PHAs' Faircloth authority 
and HUD will not consider changes to Faircloth authority as it relates 
to the public housing program as part of this rulemaking, given the 
need for robust public comment on that topic.

Question 43: Executive Order 13878 and Affordable Housing

    Commenters suggested that HUD condition its funding to localities 
that reduce local barriers against expensive projects and provide 
funding only if local governments provide local fee reductions for 
affordable housing or adopt by-right zoning.
    One commenter recommended that HUD increase the allocation of PBVs 
that PHAs could apply for. This commenter also suggested making the 
applications for the new PBVs available to jurisdictions that 
demonstrate that they are reducing local regulatory burden such as 
permitting streamlining, fee waivers, and caps on local developer fees, 
to incentivize decreased development and production cost.
    Another commenter suggested that HUD should not consider any 
policies relating to PBVs designed to incentivize communities to reduce 
local regulatory barriers to development and production of housing. 
Instead, the commenter proposed that local housing authorities should 
be allowed to implement PBVs based on their local conditions. This 
commenter suggested that HUD use direct rewards and other programs 
relating to those municipal jurisdictions as an incentive to change 
local rules, instead of using the PHA as the middleman.
    HUD Response: The PBV program is administered by a PHA that already 
administers the tenant-based voucher program under an annual 
contributions contract (ACC) with HUD (Sec.  983.5(a)(1)). 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 and to 
pay PHA administrative fees for administration of tenant-based and 
project-based voucher assistance, and there is no special or additional 
funding for project-based vouchers (Sec.  983.5(b)). Additionally, A 
PHA has discretion whether to operate a PBV program (Sec.  983.5(c)). 
These are essential program requirements HUD will not change and 
implementing the recommendations would fundamentally alter how the PBV 
program works and is funded.

Typographic Corrections

    One commenter had the following typographical corrections: 
corrected Sec.  983.5(3) to cite to Sec.  983.154(e) and not Sec.  
983.155(e), which does not exist; corrected the reference in Sec.  
983.52(d) to Sec.  983.155(e), which should be to Sec.  983.154(e); 
suggested HUD use ``new'' instead of ``newly'' in Sec.  983.12(a) and 
elsewhere for consistency; in Sec.  983.59(a), suggested HUD delete 
``for exclusion'' to avoid redundancy; in Sec.  983.59(e), corrected 
two references to ``program limitation'' that should be ``program 
cap;'' and in Sec.  983.204(d)(2)(iii), this commenter suggested 
replacing ``PHA functions in accordance'' with ``PHA functions 
identified in.''
    HUD Response: HUD thanks the commenter for these comments. HUD has 
revised the reference to Sec.  983.155(e) in Sec.  983.5(a)(3) (the 
reference is now to Sec.  983.154(f), due to this correction and 
renumbering that occurred in this final rule) and has removed Sec.  
983.52(d). The term ``newly'' must continue to be used in the context 
of regulations concerning ``newly constructed housing'' as defined in 
Sec.  983.3(b), to maintain consistency with that term and definition, 
as well as to avoid confusion with the activity of new construction 
applicable in other contexts within the PBV regulations. However, HUD 
notes that ``rehabilitation'' as used in proposed Sec.  983.12(a) was 
not consistent with the term ``rehabilitated housing'' at Sec.  
983.3(b), so has amended that term accordingly. HUD disagrees with 
removal of the term ``for exclusion'' in Sec.  983.59(a). However, HUD 
notes that the two references to ``program limitation'' as used in 
proposed Sec.  983.59(e) were not consistent with the term ``program 
cap,'' so HUD has amended that term accordingly. HUD agrees with the 
commentor's suggestion to replace the language ``PHA functions in 
accordance'' with ``PHA functions identified in'' at Sec.  
982.451(c)(2)(iii) and Sec.  983.204(f)(iii).

General Comment

    One commenter suggested that HUD allow PHAs to convert public 
housing to PBV without HCV to retain the PBVs, for ACC unit consistency 
and to benefit PHAs going through the RAD process.
    HUD Response: PHAs must have an ACC to administer a voucher 
program, per Sec.  982.151. This is an essential requirement which HUD 
will not change.

VI. Findings and Certifications

Regulatory Review--Executive Orders 12866, 13563, and 14094

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory

[[Page 38288]]

alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health, and safety effects; distributive impacts; 
and equity). Executive Order 13563 emphasizes the importance of 
quantifying both costs and benefits, of reducing costs, of harmonizing 
rules, and of promoting flexibility.
    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget (OMB) in accordance with the requirements of the order. 
Executive Order 14094 (Modernizing Regulatory Review) amends section 
3(f) of Executive Order 12866, among other things.
    This final rule would update HUD's regulations for the HCV and PBV 
programs to conform to changes made by HOTMA. These changes include 
alternatives to HUD's HQS 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 final 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 a Regulatory Impact Analysis (RIA) that addresses the costs 
and benefits of this final rule. HUD's RIA is part of the docket file 
for this rule, which is available for public inspection at 
www.regulations.gov.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    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 this final 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 final rule revises HUD regulations to reduce the burden on or 
provide flexibility for all PHAs, owners, and other responsible 
entities, irrespective of whether they are small entities. For example, 
this final rule leverages Small Area Fair Market Rents to provide PHAs 
with greater autonomy in setting exception payment standard amounts. It 
will 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 will 
eliminate extraneous requirements specific to the project-basing of 
HUD-VASH and FUP vouchers, if project-basing is done consistent with 
PBV program rules. It will provide PHAs with greater flexibility in the 
establishment of utility allowance schedules. It will also 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 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.

Information Collection Requirements

    The information collection requirements contained in this final 
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 final 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.

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.

Lists of Subjects

24 CFR Part 5

    Administrative practice and procedure, Aged, Claims, Crime, 
Government contracts, Grant programs-housing and community development, 
Individuals with disabilities, Intergovernmental relations, Loan 
programs-housing and community development, Low and moderate income 
housing, Mortgage insurance, Penalties, Pets, Public housing, Rent 
subsidies, Reporting and recordkeeping requirements, Social security, 
Unemployment compensation, Wages.

[[Page 38289]]

24 CFR Part 8

    Administrative practice and procedure, Civil rights, Equal 
employment opportunity, Grant programs-housing and community 
development, Individuals with disabilities, Loan programs-housing and 
community development, Reporting and recordkeeping requirements.

24 CFR Part 42

    Administrative practice and procedure, Grant programs, Loan 
programs, Manufactured homes, Rates and fares, Relocation assistance, 
and Reporting and recordkeeping requirements.

24 CFR Part 50

    Environmental impact statements.

24 CFR Part 91

    Aged, Grant programs-housing and community development, Homeless, 
Individuals with disabilities, Low and moderate income housing, and 
Reporting and recordkeeping requirements.

24 CFR Part 92

    Administrative practice and procedure, Low and moderate income 
housing, Manufactured homes, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 93

    Administrative practice and procedure, Grant programs-housing and 
community development, Low and moderate income housing, Manufactured 
homes, Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 247

    Grant programs-housing and community development, Loan programs-
housing and community development, Low and moderate income housing, and 
Rent subsidies.

24 CFR Part 290

    Loan programs-housing and community development, Low and moderate 
income housing, Mortgage insurance, and Reporting and recordkeeping 
requirements.

24 CFR Part 882

    Grant programs-housing and community development, Homeless, Lead 
poisoning, Manufactured homes, Rent subsidies, and Reporting and 
recordkeeping requirements.

24 CFR Part 888

    Grant programs-housing and community development, rent subsidies.

24 CFR Part 891

    Aged, Grant programs-housing and community development, Individuals 
with disabilities, Loan programs-housing and community development, Low 
and moderate income housing, Public assistance programs, Rent 
subsidies, and Reporting and recordkeeping requirements.

24 CFR Part 903

    Administrative practice and procedure, Public housing, Reporting 
and recordkeeping requirements.

24 CFR Part 908

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

24 CFR Part 943

    Public Housing and Reporting and recordkeeping requirements.

24 CFR Part 945

    Aged, Grant programs-housing and community development, Individuals 
with disabilities, Public housing, Reporting and recordkeeping 
requirements.

24 CFR Part 960

    Aged, Grant programs-housing and community development, Individuals 
with disabilities, Pets, and Public housing.

24 CFR Part 972

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

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.

24 CFR Part 1000

    Aged, Community development block grants, Grant programs-housing 
and community development, Grant programs-Indians, Indians, Individuals 
with disabilities, Public housing, Reporting and recordkeeping 
requirements.

    Accordingly, for the reasons stated in the preamble, HUD amends 24 
CFR parts 5, 8, 42, 50, 91, 92, 93, 247, 290, 882, 888, 891, 903, 908, 
943, 945, 972, 982, 983, 985, and 1000 as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

0
1. The authority for part 5 continues to read as follows:

    Authority: 12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437f, 
1437n, 3535(d); 42 U.S.C. 2000bb et seq.; 34 U.S.C. 12471 et seq.; 
Sec. 327, Pub. L. 109-115, 119 Stat. 2396; E.O. 13279, 67 FR 77141, 
3 CFR, 2002 Comp., p. 258; E.O. 13559, 75 FR 71319, 3 CFR, 2010 
Comp., p. 273; E.O. 14156, 86 FR 10007, 3 CFR, 2021 Comp., p. 517.


0
2. Amend Sec.  5.100 by revising the definitions of ``Household'' and 
``Responsible entity'' to read as follows:


Sec.  5.100  Definitions.

* * * * *
    Household, for purposes of 24 CFR part 5, subpart I, and parts 960, 
966, 882, and 982 of this title, means the family, foster children and 
adults, and PHA-approved live-in aide.
* * * * *
    Responsible entity means the person or entity responsible for 
administering the restrictions on providing assistance to noncitizens 
with ineligible immigrations status. The entity responsible for 
administering the restrictions on providing assistance to noncitizens 
with ineligible immigration status under the various covered programs 
is as follows:
    (1) For the Section 235 Program, the mortgagee.
    (2) For Public Housing, the Section 8 Rental Voucher, and the 
Section 8 Moderate Rehabilitation programs, the PHA administering the 
program under an ACC with HUD.
* * * * *

0
3. Amend Sec.  5.504 by revising and republishing the definition of 
``Responsible'' to read as follows:


Sec.  5.504  Definitions.

* * * * *
    Responsible entity means the person or entity responsible for 
administering the restrictions on providing assistance to noncitizens 
with ineligible immigrations status. The entity responsible for 
administering the restrictions on providing assistance to noncitizens 
with ineligible immigration status under the various covered programs 
is as follows:

[[Page 38290]]

    (1) For the Section 235 Program, the mortgagee.
    (2) For Public Housing, the Section 8 Rental Voucher, and the 
Section 8 Moderate Rehabilitation programs, the PHA administering the 
program under an ACC with HUD.
* * * * *


Sec.  5.514  [AMENDED]

0
4. Amend Sec.  5.514 by:
0
a. Adding to the end of paragraph (f)(2)(i)(A), the word ``and'';
0
b. Amending paragraph (f)(2)(i)(B) by removing ``; or'' and adding, in 
its place, a period;
0
c. Removing paragraph (f)(2)(i)(C); and
0
d. In paragraphs (i)(1) introductory text and (i)(2), removing the 
phrase ``Rental Certificate,''.


Sec.  5.630  [AMENDED]

0
5. Amend Sec.  5.630(a)(2) by removing the phrase ``, and 
certificate''.


Sec. Sec.  5.632, 5.653, 5.655, 5.657, and 5.659  [AMENDED]

0
6. Remove the words ``certificate or'' in the following places:
0
a. Section 5.632(b)(2);
0
b. Section 5.653(a);
0
c. Section 5.655(a);
0
d. Section 5.657(a); and
0
e. Section 5.659(a).


Sec.  5.801  [AMENDED]

0
7. Amend Sec.  5.801 by:
0
a. In paragraph (a)(2)(ii) removing the word ``Certificate'' and 
adding, in its place, the word ``Voucher;
0
b. In paragraph (a)(2)(iv) removing the words ``Certificate and'';
0
c. In paragraph (a)(3)(ii) removing the word ``Certificate'' and 
adding, in its place, the word ``Voucher''.


Sec. Sec.  5.853, 5.902, and 5.903  [AMENDED]

0
8. Remove ``project-based certificate or'' in the following places:
0
a. In Sec.  5.853(b), in the definition of ``Responsible entity'';
0
b. In Sec.  5.902, in the definition of ``Responsible entity''; and
0
c. Section 5.903(e)(1)(i)(C).

PART 8--NONDISCRIMINATION BASED ON HANDICAP IN FEDERALLY ASSISTED 
PROGRAMS AND ACTIVITIES OF THE DEPARTMENT OF HOUSING AND URBAN 
DEVELOPMENT

0
9. The authority for part 8 continues to read as follows:

    Authority: 29 U.S.C. 794; 42 U.S.C. 3535(d) and 5309.


0
10. Amend Sec.  8.28 by:
0
a. Revising the section heading;
0
b. Removing from paragraph (a) introductory text the words ``Existing 
housing Certificate program or a'';
0
c. Removing ``Housing Certificate or'' from paragraph (a)(3);
0
d. Removing ``Housing Certificates or'' from paragraph (a)(4); and
0
e. Revising paragraph (a)(5).
    The revisions read as follows:


Sec.  8.28  Housing voucher programs.

    (a) * * *
    (5) If necessary as a reasonable accommodation for a person with 
disabilities, approve a family request for an exception payment 
standard under Sec.  982.503(d)(5) for a regular tenancy under the 
Section 8 voucher program so that the program is readily accessible to 
and usable by persons with disabilities.
* * * * *

PART 42--DISPLACEMENT, RELOCATION ASSISTANCE, AND REAL PROPERTY 
ACQUISITION FOR HUD AND HUD-ASSISTED PROGRAMS

0
11. The authority for part 42 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), 4601, 5304, and 12705(b).


Sec.  42.350  [AMENDED]

0
12. Amend Sec.  42.350(e)(1) by removing, both times it appears, the 
phrase ``certificate or''.

PART 50--PROTECTION AND ENHANCEMENT OF ENVIRONMENTAL QUALITY

0
13. The authority for part 50 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 4321-4335; and Executive Order 
11991, 3 CFR, 1977 Comp., p. 123.


Sec.  50.17  [AMENDED]

0
14. Amend Sec.  50.17(e) by removing the word ``Certificate'' and 
adding, in its place, the word ``Voucher''.

PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND 
DEVELOPMENT PROGRAMS

0
15. The authority for part 91 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-11388, 
12701-12711, 12741-12756, and 12901-12912.


Sec.  91.2  [AMENDED]

0
16. Amend Sec.  91.2(c) by removing the words ``Certificate and''.

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

0
17. The authority for part 92 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 12701-12839, 12 U.S.C. 1701x.


Sec.  92.202  [AMENDED]

0
18. Amend Sec.  92.202(b) by removing the citation ``24 CFR 
983.57(e)(2) and (3)'' and adding, in its place, the citation ``24 CFR 
983.55(e)(2) and (3)''.


Sec.  92.253  [AMENDED]

0
19. Amend Sec.  92.253(d)(4) by removing the words ``certificate or'', 
and by removing the phrase ``certificate, voucher,'' and adding, in its 
place, the word ``voucher''.


Sec.  92.508  [AMENDED]

0
20. Amend Sec.  92.508(a)(3)(xiii) by removing the citation to ``24 CFR 
983.57(e)(2) and (e)(3)'' and adding, in its place, the citation to 
``24 CFR 983.55(e)(2) and (3)''.

PART 93--HOUSING TRUST FUND

0
21. The authority for part 93 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), 12 U.S.C. 4568.


Sec.  93.150  [AMENDED]

0
22. Amend Sec.  93.150(b) by removing the citation to ``24 CFR 
983.57(e)(2)'' and adding, in its place, a citation to ``24 CFR 
983.55(e)(2)''.

PART 247--EVICTIONS FROM CERTAIN SUBSIDIZED AND HUD-OWNED PROJECTS

0
23. The authority for part 247 continues to read as follows:

    Authority: 12 U.S.C. 1701q, 1701s, 1715b, 1715l, and 1715z-1; 42 
U.S.C. 1437a, 1437c, 1437f, and 3535(d).


Sec.  247.1  [AMENDED]

0
24. Amend Sec.  247.1(a) by removing the words ``Section 8 Existing 
Housing Certificate or''.

PART 290--DISPOSITION OF MULTIFAMILY PROJECTS AND SALE OF HUD-HELD 
MULTIFAMILY MORTGAGES

0
25. The authority for part 290 continues to read as follows:

    Authority: 12 U.S.C. 1701z-11, 1701z-12, 1713, 1715b, 1715z-1b, 
1715z-11a; 42 U.S.C. 3535(d) and 3535(i).


Sec.  290.3  [AMENDED]

0
26. In Sec.  290.3, amend the definition of ``Sufficient, habitable, 
affordable, rental

[[Page 38291]]

housing is available'' by removing the words ``certificates or'' from 
paragraph (4).


Sec.  290.9  [AMENDED]

0
27. Amend Sec.  290.9 by:
0
a. In paragraph (b)(2), removing the words ``or rental certificate'';
0
b. In paragraph (b)(4):
0
i. Removing the words ``or rental certificate'' from the paragraph 
heading; and
0
ii. Removing the words ``or certificates''.

0
28. Revise and republish Sec.  290.19 to read as follows:


Sec.  290.19  Restrictions concerning nondiscrimination against Section 
8 voucher holders.

    The purchaser of any multifamily housing project shall not refuse 
unreasonably to lease a dwelling unit offered for rent, offer to sell 
cooperative stock, or otherwise discriminate in the terms of tenancy or 
cooperative purchase and sale because any tenant or purchaser is the 
holder of a Voucher under Section 8 of the United States Housing Act of 
1937 (42 U.S.C. 1437f), or any successor legislation. The purchaser's 
agreement to this condition must be contained in any contract of sale 
and also may be contained in any regulatory agreement, use agreement, 
or deed entered into in connection with the disposition.


Sec.  290.39  [AMENDED]

0
29. Amend Sec.  290.39(a) by removing the words ``certificate or''.

PART 882--SECTION 8 MODERATE REHABILITATION PROGRAMS

0
30. The authority for part 882 continues to read as follows:

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


Sec.  882.514  [AMENDED]

0
31. Amend Sec.  882.514(e) by removing the words ``certificate or'' 
wherever they appear.

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

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

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


0
33. Amend Sec.  888.113 by:
0
a. Revising paragraphs (a) and (c)(3), and revising and republishing 
paragraph (h);
0
b. In paragraph (i)(2), removing the citation ``24 CFR 982.503(f)'' and 
adding, in its place, the citation ``24 CFR 982.503(g)''; and
0
c. Revising the first sentence of paragraph (i)(3).
    The revisions read as follows:


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

    (a) Basis for setting fair market rents. Fair Market Rents (FMRs) 
are estimates of rent plus the cost of utilities, except telephone. 
FMRs are housing market-wide estimates of rents that provide 
opportunities to rent standard quality housing throughout the 
geographic area in which rental housing units are in competition. The 
level at which FMRs are set is expressed as a percentile point within 
the rent distribution of standard quality rental housing units in the 
FMR area. FMRs are set at the 40th percentile rent, the dollar amount 
below which the rent for 40 percent of standard quality rental housing 
units fall within the FMR area. The 40th percentile rent is drawn from 
the distribution of rents of all units within the FMR area that are 
occupied by recent movers. Adjustments are made to exclude public 
housing units and substandard units.
* * * * *
    (c) * * *
    (3) If a metropolitan area meets the criteria of paragraph (c)(1) 
of this section, Small Area FMRs will apply to the metropolitan area 
and all PHAs administering HCV programs in that area will be required 
to use Small Area FMRs. A PHA administering an HCV program in either a 
metropolitan area not subject to the application of Small Area FMRs or 
in a non-metropolitan area for which HUD publishes Small Area FMRs may 
choose to use Small Area FMRs after notification to HUD. A PHA that 
exercises this option in one metropolitan area or non-metropolitan 
county is not required to exercise this option in other metropolitan 
areas or non-metropolitan counties.
* * * * *
    (h) Small Area FMRs and project-based vouchers. Unless one of the 
following exceptions apply, Small Area FMRs do not apply to project-
based vouchers regardless of whether HUD designates the metropolitan 
area or the PHA notifies HUD and implements the Small Area FMRs under 
paragraph (c)(3) of this section. (See 24 CFR 983.301(f)(3) for 
separate requirements regarding the applicability of exception payment 
standards based on Small Area FMRs to PBV projects.)
    (1) Where the proposal or project selection date under 24 CFR 
983.51(g) was on or before the effective dates of either or both the 
Small Area FMR designation/implementation and the PHA administrative 
policy, the PHA and owner may mutually agree to apply the Small Area 
FMR. The application of the Small Area FMRs must be prospective and 
consistent with the PHA Administrative Plan. The owner and PHA may not 
subsequently choose to revert back to the use of the metropolitan-wide 
or county-wide FMRs for the PBV project. If the rent to owner will 
increase as a result of the mutual agreement to apply the Small Area 
FMRs to the PBV project, the rent increase shall not be effective until 
the next annual anniversary of the HAP contract in accordance with 24 
CFR 983.302(b).
    (2) Where the proposal or project selection date under 24 CFR 
983.51(g) was after the effective dates of both the Small Area FMR 
designation/implementation and the PHA administrative policy, the Small 
Area FMRs shall apply to the PBV project if the PHA Administrative Plan 
provides that Small Area FMRs are used for all future PBV projects. If 
the PHA chooses to implement this administrative policy, the Small Area 
FMRs must apply to all future PBV projects located within the same 
metropolitan area or non-metropolitan county where the Small Area FMRs 
are in effect for the PHA's HCV program. An owner and the PHA may not 
subsequently choose to apply the metropolitan area or county FMR to the 
project, regardless of whether the PHA subsequently changes its 
Administrative Plan to revert to the use of metropolitan-wide or 
county-wide FMR for future PBV projects.
    (3) For purposes of this section, the term ``effective date of the 
Small Area FMR designation'' means:
    (i) The date that HUD designated a metropolitan area as a Small 
Area FMR area; or
    (ii) The date that HUD approved a PHA request to voluntarily opt to 
use Small Area FMRs for its HCV program, as applicable.
    (4) For purposes of this section, the term ``effective date of the 
PHA administrative policy'' means the date the administrative policy 
was formally adopted as part of the PHA administrative plan by the PHA 
Board of Commissioners or other authorized PHA officials in accordance 
with Sec.  982.54(a).
    (i) * * *
    (3) HUD will calculate the 50th percentile rents for certain 
metropolitan areas for this purpose. * * *

[[Page 38292]]

PART 891--SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH 
DISABILITIES

0
34. The authority for part 891 continues to read as follows:

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.


Sec.  891.125  [AMENDED]

0
35. Amend Sec.  891.125(c)(3)(iii)(F) by removing the words 
``Certificate and''.

PART 903--PUBLIC HOUSING AGENCY PLANS

0
36. The authority for part 903 continues to read as follows:

    Authority: 42 U.S.C. 1437c; 42 U.S.C. 1437c-1; Pub. L. 110-289; 
42 U.S.C. 3535d.


Sec.  903.3  [AMENDED]

0
37. Amend Sec.  903.3(b)(2) by adding the words ``and project-based'' 
after the words ``tenant-based''.

0
38. Revise Sec.  903.4(a)(2)(i) to read as follows:


Sec.  903.4  What are the public housing agency plans?

    (a) * * *
    (2) * * *
    (i) Section 8 assistance (tenant-based assistance (24 CFR part 982) 
and project-based assistance (24 CFR part 983) under Section 8(o) of 
the U.S. Housing Act of 1937, 42 U.S.C. 1437f(o)); or
* * * * *

0
39. Amend Sec.  903.6 by adding paragraph (c) to read as follows:


Sec.  903.6  What information must a PHA provide in the 5-Year Plan?

* * * * *
    (c) If a PHA intends to select one or more projects for project-
based assistance without competition in accordance with Sec.  
983.51(c), the PHA must include a statement of this intent in its 5-
Year Plan (or an amendment to the 5-Year Plan) in order to notify the 
public prior to making a noncompetitive selection.
0
40. Amend Sec.  903.7 by:
0
a. In the introductory text, removing the phrase ``both public housing 
and tenant-based assistance'' and adding, in its place, the phrase 
``public housing, tenant-based assistance, and project-based 
assistance'';
0
b. Revising paragraph (a)(1) introductory text, and paragraphs (b)(3), 
(c), (d), and (e)(4);
0
c. In paragraph (f), adding ``and project-based assistance'' after the 
phrase ``tenant-based assistance'';
0
d. Revising paragraphs (l)(1)(iii) and (2); and
0
e. Redesignating paragraph (r) as paragraph (s) and adding new 
paragraph (r).
    The revisions and addition read as follows:


Sec.  903.7  What information must a PHA provide in the Annual Plan?

* * * * *
    (a) * * *
    (1) This statement must address the housing needs of the low-income 
and very low-income families who reside in the jurisdiction served by 
the PHA, and other families who are on the public housing and Section 8 
tenant-based and project-based assistance waiting lists, including:
* * * * *
    (b) * * *
    (3) Other admissions policies. The PHA's admission policies that 
include any other PHA policies that govern eligibility, selection and 
admissions for the public housing (see part 960 of this title) and 
tenant-based assistance programs (see part 982, subpart E of this 
title) and project-based assistance programs (see part 982, subpart E 
of this title except as provided in Sec.  983.3, and subpart F of 983). 
(The information requested on site-based waiting lists and 
deconcentration is applicable only to public housing.)
    (c) A statement of financial resources. This statement must address 
the financial resources that are available to the PHA for the support 
of Federal public housing, tenant-based assistance, and project-based 
assistance programs administered by the PHA during the plan year. The 
statement must include a listing, by general categories, of the PHA's 
anticipated resources, such as PHA operating, capital and other 
anticipated Federal resources available to the PHA, as well as tenant 
rents and other income available to support public housing, tenant-
based assistance, and project-based assistance. The statement also 
should include the non-Federal sources of funds supporting each Federal 
program, and state the planned uses for the resources.
    (d) A statement of the PHA's rent determination policies. This 
statement must describe the PHA's basic discretionary policies that 
govern rents charged for public housing units, applicable flat rents, 
and the rental contributions of families receiving tenant-based 
assistance and project-based assistance. For tenant-based assistance 
and project-based assistance, this statement also shall cover any 
discretionary minimum tenant rents and payment standard policies.
    (e) * * *
    (4) The information requested on a PHA's rules, standards and 
policies regarding management and maintenance of housing applies only 
to public housing. The information requested on PHA program management 
and listing of administered programs applies to public housing, tenant-
based assistance, and project-based assistance.
* * * * *
    (l) * * *
    (1) * * *
    (iii) How the PHA will comply with the requirements of section 
12(c) and (d) of the 1937 Act (42 U.S.C. 1437j(c) and (d)). These 
statutory provisions relate to community service by public housing 
residents and treatment of income changes in public housing, tenant-
based assistance, and project-based assistance recipients resulting 
from welfare program requirements. PHAs must address any cooperation 
agreements, as described in section 12(d)(7) of the 1937 Act (42 U.S.C. 
1437j(d)(7)), that the PHA has entered into or plans to enter into.
    (2) The information required by paragraph (l) of this section is 
applicable to public housing, tenant-based assistance, and project-
based assistance, except that the information regarding the PHA's 
compliance with the community service requirement applies only to 
public housing.
* * * * *
    (r) A statement of participation in the project-based assistance 
program. If a PHA participates in the project-based assistance program, 
the PHA's Annual Plan must include a statement of the projected number 
of project-based units, the general location of the project-based 
units, and how project-basing would be consistent with its Annual Plan.
* * * * *


Sec.  903.11  [AMENDED]

0
41. Amend Sec.  903.11 by:
0
a. In paragraph (a)(3), adding ``and/or project-based assistance'' 
after ``tenant-based assistance'';
0
b. In paragraph (c)(1), removing the reference ``Sec.  903.7(a), (b), 
(c), (d), (g), (h), (k), (m), (n), (o), (p) and (r)'' and adding, in 
its place, the reference ``903.7(a), (b), (c), (d), (g), (h), (k), (m), 
(n), (o), (p), (r), and (s)'';
0
c. In paragraph (c)(3), adding ``and/or project-based assistance'' 
after ``tenant-based assistance'', and removing the reference 
``903.7(a), (b), (c), (d), (g), (h), (k), (m), (n), (o), (p) and (r)'' 
and adding, in its place, the reference ``903.7(a), (b), (c), (d), (g), 
(h), (k), (m), (n), (o), (p), (r), and (s)''.

0
42. Amend Sec.  903.12 by:
0
a. Revising paragraphs (b) and (c)(1);

[[Page 38293]]

0
b. Removing paragraph (c)(2) and redesignating paragraph (c)(3) as 
paragraph (c)(2); and
0
c. In redesignated paragraph (c)(2), removing the reference to ``and 
(r)'' and adding. in its place, a reference to ``and (s)''.
    The revisions read as follows:


Sec.  903.12  What are the streamlined Annual Plan requirements for 
small PHAs?

* * * * *
    (b) Streamlined Annual Plan requirements for fiscal years in which 
its 5-Year Plan is also due. For the fiscal year in which its 5-Year 
Plan is also due, the streamlined Annual Plan of the small PHA shall 
consist of the information required by Sec.  903.7(a), (b), (c), (d), 
(g), (h), (k), (o) (r), and (s). The information required by Sec.  
903.7(a) must be included only to the extent it pertains to the housing 
needs of families that are on the PHA's public housing and Section 8 
tenant-based assistance and project-based assistance waiting lists. The 
information required by Sec.  903.7(k) must be included only to the 
extent that the PHA participates in homeownership programs under 
Section 8(y) of the 1937 Act. The information required in Sec.  
903.7(r) must be included only to the extent that the PHA participates 
in the project-based assistance program.
    (c) * * *
    (1) The information required by Sec.  903.7(g) and (o) and, if 
applicable, Sec.  903.7(b)(2) with respect to site-based waiting lists, 
Sec.  903.7(k)(1)(i) with respect to homeownership programs under 
Section 8(y) of the 1937 Act, and Sec.  903.7(r) with respect to 
participation in the project-based assistance program;
* * * * *


Sec.  903.13  [AMENDED]

0
43. Amend Sec.  903.13(b)(1) and (3) by adding ``and/or project-based 
assistance'' after ``tenant-based assistance'' every time it appears.

0
44. Amend Sec.  903.15 by revising paragraph (c) introductory text to 
read as follows:


Sec.  903.15  What is the relationship of the public housing agency 
plans to the Consolidated Plan and a PHA's Fair Housing Requirements?

* * * * *
    (c) Fair housing requirements. A PHA is obligated to affirmatively 
further fair housing in its operating policies, procedures, and capital 
activities. All admission and occupancy policies for public housing and 
Section 8 tenant-based and project-based housing programs must comply 
with Fair Housing Act requirements and other civil rights laws and 
regulations and with a PHA's plans to affirmatively further fair 
housing. The PHA may not impose any specific income or racial quotas 
for any development or developments.
* * * * *

PART 908--ELECTRONIC TRANSMISSION OF REQUIRED FAMILY DATA FOR 
PUBLIC HOUSING, INDIAN HOUSING, AND THE SECTION 8 RENTAL VOUCHER, 
AND MODERATE REHABILITATION PROGRAMS

0
45. The authority citation for part 908 continues to read as follows:

    Authority: 42 U.S.C. 1437f, 3535(d), 3543, 3544, and 3608a.


0
46. Revise the part heading to read as set forth above.


Sec.  908.101  [AMENDED]

0
47. Amend Sec.  908.101 by removing the phrase ``Rental Certificate,''.

PART 943--PUBLIC HOUSING AGENCY CONSORTIA AND JOINT VENTURES

0
48. The authority for part 943 continues to read as follows:

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


Sec.  943.120  [AMENDED]

0
49. Amend Sec.  943.120(a)(2) by:
0
a. Removing the words ``and certificate'' and ``certificate and''; and
0
b. Removing the word ``programs'' and adding, in its place, the word 
``program''.

PART 945--DESIGNATED HOUSING--PUBLIC HOUSING DESIGNATED FOR 
OCCUPANCY BY DISABLED, ELDERLY, OR DISABLED AND ELDERLY FAMILIES

0
50. The authority for part 945 continues to read as follows:

    Authority: 42 U.S.C. 1473e and 3535(d).


Sec.  945.103  [AMENDED]

0
51. Amend Sec.  945.103(b)(2) by removing the words ``certificates 
and''.

PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING

0
52. The authority citation for part 960 continues to read as follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, 1437z-3, and 
3535(d).


0
53. Amend Sec.  960.202 by redesignating (c) as paragraph (d) and 
adding new paragraph (c) to read as follows:


Sec.  960.202  Tenant selection policies.

* * * * *
    (c) Priority for tenant-based and project-based voucher families 
displaced due to HQS non-compliance. The PHA must adopt a preference 
for tenant-based and project-based families displaced due to HQS 
noncompliance in accordance with Sec.  982.404(e)(2) and Sec.  
983.208(d)(6)(ii).
* * * * *

PART 972--CONVERSION OF PUBLIC HOUSING TO TENANT-BASED ASSISTANCE

0
54. The authority citation for part 972 continues to read as follows:

    Authority: 42 U.S.C. 1437t, 1437z-5, and 3535(d).


Sec.  972.218  [AMENDED]

0
55. Amend Sec.  972.218(c)(2)(i) by removing the words ``certificates 
or''.

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

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

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

PART 982 [AMENDED]

0
57. Amend part 982 by revising all references to ``administrative 
plan'' and ``Administrative plan'' to read ``Administrative Plan.''

0
58. Amend Sec.  982.4 by:
0
a. Revising paragraph (a); and
0
b. In paragraph (b):
0
c. Adding in alphabetical order definitions for ``Abatement'', 
``Authorized voucher units'', and ``Building'';
0
d. Revising the definition of ``Fair market rent (FMR)'';
0
e. Adding in alphabetical order definitions for ``Foster adult'', 
``Foster child'';
0
f. Revising the definition of ``Housing quality standards (HQS)'';
0
g. Adding 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

[[Page 38294]]

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 following terms are defined in 24 CFR part 5, subpart D: 
Disabled family, Elderly family, Near-elderly family, and Person with 
disabilities.
    (3) The following terms are defined in 24 CFR part 5, subpart F: 
Adjusted income, Annual income, Extremely low income family, Total 
tenant payment, Utility allowance, and Welfare assistance.
    (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 its annual 
contributions contract.
* * * * *
    Building. A structure with a roof and walls that contains one or 
more dwelling units.
* * * * *
    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.
* * * * *
    Foster adult. A member of the household who is 18 years of age or 
older and meets the definition of a foster adult under State law. In 
general, a foster adult is a person who is 18 years of age or older, is 
unable to live independently due to a debilitating physical or mental 
condition and is placed with the family by an authorized placement 
agency or by judgment, decree, or other order of any court of competent 
jurisdiction.
    Foster child. A member of the household who meets the definition of 
a foster child under State law. In general, a foster child is placed 
with the family by an authorized placement agency (e.g., public child 
welfare agency) or by judgment, decree, or other order of any court of 
competent jurisdiction.
* * * * *
    Housing quality standards (HQS). The minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for the HCV program, 
including any variations approved by HUD for the PHA under 24 CFR 
5.705(a)(3).
    Independent entity. (i) The unit of general local government; 
however, if the PHA itself is the unit of general local government or 
an agency of such government, then only the next level of general local 
government (or an agency of such government) or higher may serve as the 
independent entity; or
    (ii) A HUD-approved entity that is autonomous and recognized under 
State law as a separate legal entity from the PHA. The entity must not 
be connected financially (except regarding compensation for services 
performed for PHA-owned units) or in any other manner that could result 
in the PHA improperly influencing the 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.
    (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) 
submitted by or on behalf of a family 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 or Small Area FMRs). Small 
Area FMRs are FMRs established for U.S. Postal Service ZIP code areas 
and are calculated in accordance with 24 CFR 888.113(a) and (b).
* * * * *
    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 HQS. The utilities and services 
may also include those required by HUD through a Federal Register 
notice after providing opportunity for public comment.
* * * * *
    Withholding. Stopping HAP payments to an owner while holding them 
for potential retroactive disbursement.

0
59. Amend Sec.  982.54 by:
0
a. In paragraph (b), removing the term ``PHA plan'' and adding, in its 
place, the term ``PHA Plan'';
0
b. Revising paragraph (d) introductory text and paragraph (d)(4)(iii);
0
c. Adding new paragraph (d)(4)(iv);
0
d. Revising paragraphs (d)(14), (18), (21), (22), and (23); and
0
e. Adding paragraphs (d)(24) through (26).
    The revisions and additions read as follows:


Sec.  982.54  Administrative Plan.

* * * * *
    (d) The PHA Administrative Plan must cover all the PHA's local 
policies for administration of the program, including the PHA's 
policies on the following subjects (see 24 CFR 983.10 for a list of 
subjects specific to the project-based voucher (PBV) program that also 
must be included in the Administrative Plan of a PHA that operates a 
PBV program):
    (4) * * *
    (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; and
    (iv) Policies concerning residency by a foster child, foster adult, 
or live-in aide, including defining when PHA consent for occupancy by a 
foster child, foster adult, or live-in aide must be given or may be 
denied;
* * * * *
    (14) Payment standard policies, including:

[[Page 38295]]

    (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(c)(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;
* * * * *
    (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;
* * * * *
    (21) Procedural guidelines and performance standards for conducting 
required HQS inspections, including:
    (i) Any deficiency that the PHA has adopted as a life-threatening 
deficiency that is not a HUD-required life-threatening deficiency.
    (ii) For PHAs that adopt the initial inspection non-life-
threatening deficiency option:
    (A) The PHA's policy on whether the provision will apply to all 
initial inspections or a portion of initial inspections.
    (B) The PHA's policy on whether the provision will be applied to 
only some inspections and how the units will be selected.
    (C) The PHA's policy on using withheld HAP funds to repay an owner 
once the unit is in compliance with HQS.
    (iii) For PHAs that adopt the alternative inspection provision:
    (A) The PHA's policy on how it will apply the provision to initial 
and periodic 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) For initial inspections, 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's policy on charging a reinspection fee to owners.
    (22) The PHA's policy on withholding HAP for units that do not meet 
HQS (see Sec.  982.404(d)(1));
    (23) The PHA's policy on assisting families with relocating and 
finding a new unit (see Sec.  982.404(e)(3));
    (24) The PHA's policy on screening of applicants for family 
behavior or suitability for tenancy;
    (25) Whether the PHA will permit a family to submit more than one 
Request for Tenancy Approval at a time (see Sec.  982.302(b)); and
    (26) 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
60. Amend Sec.  982.301 by:
0
a. Revising and republishing paragraph (a)
0
b. Revising paragraphs (b)(8), (10), (12), (14) and (15);
0
c. Adding paragraph (c).
    The revisions, addition, and republication read as follows:


Sec.  982.301  Information when family is selected.

    (a) Oral briefing. When the PHA selects a family to participate in 
a tenant-based program, the PHA must give the family an oral briefing.
    (1) The briefing must include information on the following 
subjects:
    (i) A description of how the program works;
    (ii) Family and owner responsibilities;
    (iii) Where the family may lease a unit, including renting a 
dwelling unit inside or outside the PHA jurisdiction, and any 
information on selecting a unit that HUD provides;
    (iv) An explanation of how portability works; and
    (v) An explanation of the advantages of areas that do not have a 
high concentration of low-income families.
    (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 which may affect the family's assistance.
    (3) The PHA must take appropriate steps to ensure effective 
communication in accordance with 24 CFR 8.6 and 28 CFR part 35, subpart 
E, and must provide information on the reasonable accommodation 
process.
    (b) * * *
    (8) PHA subsidy standards, including when the PHA will consider 
granting exceptions to the standards as allowed by 24 CFR 
982.402(b)(8), and when exceptions are required as a reasonable 
accommodation for persons with disabilities under Section 504, the Fair 
Housing Act, or the Americans with Disabilities Act;
* * * * *
    (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 (including 
information on requesting exception payment standards as a reasonable 
accommodation) under Section 504, the Fair Housing Act, and the 
Americans with Disabilities Act;
* * * * *
    (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) to 
provide a current listing of accessible units known to the PHA and, if 
necessary, other assistance in locating an available accessible 
dwelling unit;
* * * * *
    (14) The advantages of areas that do not have a high concentration 
of low-income families which may include, access to accessible and 
high-quality housing, transit, employment opportunities, educational 
opportunities, recreational facilities, public safety stations, retail 
services, and health services; and
    (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 (LEP). The PHA must 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 and HUD's 
implementing regulations at 24 CFR part 1.

0
61. Amend Sec.  982.305 by:
0
a. Revising paragraph (a) introductory text and paragraph (b)(1) 
introductory text;

[[Page 38296]]

0
b. Adding paragraph (b)(2) introductory text;
0
c. Revising paragraph (b)(2)(ii);
0
d. Redesignating paragraph (b)(3) as paragraph (b)(4), and adding new 
paragraph (b)(3);
0
e. Revising paragraph (c)(4); and
0
f. Adding paragraph (f).
    The revision and additions 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) The following must be completed before the beginning of the 
initial term of the lease for a unit:
* * * * *
    (2) The timeframes for inspection:
* * * * *
    (ii) The 15-day clock (under paragraph (b)(2)(i) of this section) 
is suspended during any period when the unit is not available for 
inspection.
    (3) If the PHA has implemented, and the unit is covered by, the 
alternative inspection option for initial inspections under Sec.  
982.406(e), the PHA is not subject to paragraphs (a)(2), (b)(1)(i), and 
(b)(2) of this section.
* * * * *
    (c) * * *
    (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, unless 
there are extenuating circumstances that prevent or prevented the PHA 
from meeting the 60-day deadline, then the PHA may submit to the HUD 
field office a request for an extension. The request, which must be 
submitted no later than two weeks after the 60-day deadline, must 
include an explanation of the extenuating circumstances and any 
supporting documentation. HUD at its sole discretion will determine if 
the extension request is approved.
* * * * *
    (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(j), the unit must be inspected by the PHA and must have no 
life-threatening deficiencies 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
62. Amend Sec.  982.352 by:
0
a. Adding ``or'' at the end of paragraph (a)(5); and
0
b. Revising paragraph (b).
    The revision reads as follows:


Sec.  982.352  Eligible housing.

* * * * *
    (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. 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.
    (2) [Reserved]
* * * * *

0
63. Revise Sec.  982.401 to read as follows:


Sec.  982.401  Housing quality standards.

    As defined in Sec.  982.4, HQS refers to the minimum quality 
standards developed by HUD in accordance with 24 CFR 5.703, including 
any variations approved by HUD for the PHA under 24 CFR 5.705(a)(3).


Sec.  982.402  [Amended]

0
64. Amend Sec.  982.402(b)(2) by removing the words ``housing quality 
standards (HQS)'' and adding, in their place, the term ``HQS''.

0
65. Revise and republish Sec.  982.404 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 has HQS deficiencies based upon an inspection, the agency 
or inspector notifies the owner in writing of the HQS deficiencies, and 
the deficiencies are not remedied within the appropriate timeframe.
    (2) If the owner fails to maintain the dwelling unit in accordance 
with HQS, the PHA must take enforcement action in accordance with this 
section.
    (3) If a deficiency is life-threatening, the owner must correct the 
deficiency within 24 hours of notification. For other deficiencies, the 
owner must correct the deficiency within 30 calendar days of 
notification (or any reasonable PHA-approved extension).
    (4) In the case of an HQS deficiency that the PHA determines is 
caused by the tenant, any member of the household, or any guest or 
other person under the tenant's control, other than

[[Page 38297]]

any damage resulting from ordinary use, the PHA may waive the owner's 
responsibility to remedy the violation. The HAP to the owner may not be 
withheld or abated if the owner responsibility has been waived. 
However, the PHA may terminate assistance to a family because of an HQS 
breach beyond damage resulting from ordinary use caused by any member 
of the household or any guest or other person under the tenant's 
control.
    (b) Family obligation. (1) The family may be held responsible for a 
breach of the HQS that is caused by any of the following:
    (i) The family fails to pay for any utilities that the owner is not 
required to pay for, but which are to be paid by the tenant;
    (ii) The family fails to provide and maintain any appliances that 
the owner is not required to provide, but which are to be provided by 
the tenant; or
    (iii) Any member of the household or guest damages the dwelling 
unit or premises (damages beyond ordinary wear and tear)
    (2) If the PHA has waived the owner's responsibility to remedy the 
violation in accordance with paragraph (a)(4) of this section, the 
following applies:
    (i) If the HQS breach caused by the family is life-threatening, the 
family must take all steps permissible under the lease and State and 
local law to ensure the deficiency is corrected within 24 hours of 
notification.
    (ii) For other family-caused deficiencies, the family must take all 
steps permissible under the lease and State and local law to ensure 
that the deficiency is corrected within 30 calendar days of 
notification (or any PHA-approved extension).
    (3) If the family has caused a breach of the HQS, the PHA must take 
prompt and vigorous action to enforce the family obligations. The PHA 
may terminate assistance for the family in accordance with Sec.  
982.552.
    (c) Determination of noncompliance with HQS. The unit is in 
noncompliance with HQS if:
    (1) The PHA or authorized inspector determines the unit has HQS 
deficiencies based upon an inspection;
    (2) The PHA notified the owner in writing of the unit HQS 
deficiencies; and
    (3) The unit HQS deficiencies are not corrected in accordance with 
the timeframes established in paragraph (a)(3) of this section.
    (d) PHA remedies for HQS deficiencies identified during inspections 
other than the initial inspection. This subsection covers PHA actions 
when HQS deficiencies are identified as a result of an inspection other 
than the initial inspection (see Sec.  982.405). For PHA HQS 
enforcement actions for HQS deficiencies under the initial HQS 
inspection NLT or alternative inspection options, see Sec. Sec.  
982.405(j) and 982.406(e), respectively.
    (1) A PHA may withhold assistance payments for units that have HQS 
deficiencies once the PHA has notified the owner in writing of the 
deficiencies. The PHA must identify in its Administrative Plan the 
conditions under which it will withhold HAP. If the unit is brought 
into compliance during the applicable cure period (within 24 hours of 
notification for life-threatening deficiencies and within 30 days of 
notification (or other reasonable period established by the PHA) for 
non-life-threatening deficiencies), the PHA:
    (i) Must resume assistance payments; and
    (ii) Must provide assistance payments to cover the time period for 
which the assistance payments were withheld.
    (2)(i) The PHA must abate the HAP, including amounts that had been 
withheld, if the owner fails to make the repairs within the applicable 
cure period (within 24 hours of notification for life-threatening 
deficiencies and within 30 days of notification (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 to move at least 
30 days prior to the termination of the HAP contract.
    (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, whichever is earlier. The PHA must 
promptly issue the family its voucher to move.
    (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 selection preference for an appropriate-size 
public housing unit that first 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, temporary 
housing costs, or other reasonable moving costs as determined by the 
PHA based on their locality. If the PHA uses the withheld and abated 
assistance payments to assist with the family's relocation costs, the 
PHA must provide security deposit assistance to the family as 
necessary. PHAs must assist families with disabilities in locating 
available accessible units in accordance with 24 CFR 8.28(a)(3). 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 after or renewed after June 6, 2024. For 
purposes of this paragraph, a HAP contract is renewed if

[[Page 38298]]

the HAP contract continues beyond the initial term of the lease. For 
all other HAP contracts, Sec.  982.404 as in effect on June 6, 2024 
remains applicable.

0
66. Revise Sec.  982.405 to read as follows:


Sec.  982.405  PHA unit inspection.

    (a) Initial Inspections. The PHA must inspect the unit leased to a 
family prior to the initial term of the lease to determine if the unit 
meets the HQS. (See Sec.  982.305(b)(2) concerning timing of initial 
inspection by the PHA.)
    (b) Periodic Inspections. The PHA must inspect the unit at least 
biennially during assisted occupancy to ensure that the unit continues 
to meet the HQS, except that a small rural PHA, as defined in Sec.  
902.101 of this title, must inspect a unit once every three years 
during assisted occupancy to ensure that the unit continues to meet the 
HQS.
    (c) Supervisory Quality Control Inspections. The PHA must conduct 
supervisory quality control HQS inspections.
    (d) Interim Inspections. When a participant family or government 
official notifies the PHA of a potential deficiency, the following 
conditions apply:
    (1) Life-Threatening. If the reported deficiency is life-
threatening, the PHA must, within 24 hours of notification, 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.
    (2) Non-Life-Threatening. If the reported deficiency is non-life-
threatening, the PHA must, within 15 days of notification, 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.
    (3) Extraordinary circumstances. In the event of extraordinary 
circumstances, such as if a unit is within a presidentially declared 
disaster area, HUD may approve an exception of the 24-hour or the 15-
day inspection requirement until such time as an inspection is 
feasible.
    (e) Scheduling inspections. In scheduling inspections, the PHA must 
consider complaints and any other information brought to the attention 
of the PHA.
    (f) PHA notification of owner. The PHA must notify the owner of 
deficiencies shown by the inspection.
    (g) Charge to family for inspection. The PHA may not charge the 
family for an initial inspection or reinspection of the unit.
    (h) 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 (h) 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.
    (i) 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 non-initial 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 deficiency has been 
corrected.
    (j) 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 deficiencies. A PHA that implements 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)(i) and (ii).
    (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
67. Revise and republish Sec.  982.406 to read as follows:


Sec.  982.406  Use of alternative inspections.

    (a) In general. A PHA may comply with the inspection requirements 
in Sec.  982.405(a) and (b) 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 periodic inspections or may limit the use of alternative 
inspections to either initial or periodic inspections. The PHA may 
limit the use of alternative inspections to certain units, as provided 
in the PHA's Administrative Plan.

[[Page 38299]]

    (b) Administrative Plan. A PHA relying on an alternative inspection 
must identify in the PHA Administrative Plan all the optional policies 
identified in Sec.  982.54(d)(21)(iii).
    (c) Eligible inspection methods. (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.
    (i) A PHA may rely upon such alternative inspection method only 
upon receiving approval from REAC to do so.
    (ii) A PHA that uses an alternative inspection method approved 
under this paragraph must monitor changes to the standards and 
requirements applicable to such method. If any change is made to the 
alternative inspection method, then the PHA must submit to REAC a copy 
of the revised standards and requirements, along with a revised 
comparison to HQS. If the PHA or REAC determines that the revision 
would cause the alternative inspection to no longer meet or exceed HQS, 
then the PHA may no longer rely upon the alternative inspection method 
to comply with the inspection requirement at Sec.  982.405(a) and (b).
    (d) Use of alternative inspection. (1) If an alternative inspection 
method employs sampling, then a PHA may rely on such alternative 
inspection method for purposes of an initial or periodic inspection 
only if units occupied by voucher program participants are included in 
the population of units forming the basis of the sample.
    (2) In order for a PHA to rely upon the results of an alternative 
inspection for purposes of an initial or periodic inspection, a 
property inspected pursuant to such method must meet the standards or 
requirements regarding housing quality or safety applicable to 
properties assisted under the program using the alternative inspection 
method. To make the determination of whether such standards or 
requirements are met, the PHA must adhere to the following procedures:
    (i) If a property is inspected under an alternative inspection 
method, and the property receives a ``pass'' score, then the PHA may 
rely on that inspection.
    (ii) If a property is inspected under an alternative inspection 
method, and the property receives a ``fail'' score, then the PHA may 
not rely on that inspection.
    (iii) If a property is inspected under an alternative inspection 
method that does not employ a pass/fail determination--for example, in 
the case of a program where deficiencies are simply identified--then 
the PHA must review the list of deficiencies to determine whether any 
cited deficiency would have resulted in a ``fail'' score under HQS. If 
no such deficiency exists, then the PHA may rely on the inspection. If 
such a deficiency does exist, then the PHA may not rely on the 
inspection.
    (3) Under any circumstance described in paragraph (d)(2) of this 
section in which a PHA is prohibited from relying on an alternative 
inspection method for a property, the PHA must, within a reasonable 
period of time, conduct an HQS inspection of any units in the property 
occupied by voucher program participants and follow HQS procedures to 
remedy any identified deficiencies.
    (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(j) 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 unit 
selected by the family is eligible for the alternative inspection 
option. The PHA must provide the family with the PHA list of HQS 
deficiencies that are considered life-threatening 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.  982.405(d) 
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 deficiency is life-threatening, 
the owner must correct the deficiency within 24 hours of notification 
from the PHA. For other deficiencies, the owner must correct the 
deficiency 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.
    (f) Initial inspection: using the alternative inspection option in 
combination with the non-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 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.  982.405(d) or within 30 days of the effective date

[[Page 38300]]

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 deficiencies, 
the owner must correct the deficiency 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.
    (g) Records retention. As with all other inspection reports, and as 
required by Sec.  982.158(f)(4), reports for inspections conducted 
pursuant to an alternative inspection method must be obtained by the 
PHA. Such reports must be available for HUD inspection for at least 
three years from the date of the latest inspection.

0
68. Amend Sec.  982.451 by:
0
a. Adding paragraph headings to paragraphs (a) and (b);
0
b. Revising paragraph (b)(4)(i) introductory text;
0
c. In paragraph (b)(5)(iii) removing the phrase ``program; or'' and 
adding in its place the phrase ``program or''.
    The revision and additions 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:
* * * * *

0
69. Delayed indefinitely, amend Sec.  982.451 by adding paragraph (c) 
to read as follows:


Sec.  982.451  Housing assistance payments contract.

* * * * *
    (c) PHA-owned units. For PHA-owned units that are 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 following options:
    (1) Prior to execution of a HAP contract, the PHA must establish a 
separate legal entity to serve as the owner. That separate legal entity 
must execute the HAP contract with the PHA. The separate legal entity 
must have the legal capacity to lease units and must be one of the 
following:
    (i) A non-profit affiliate or instrumentality of the PHA;
    (ii) A limited liability corporation;
    (iii) A limited partnership;
    (iv) A corporation; or
    (v) Any other legally acceptable entity recognized under State law.
    (2) The PHA signs the HUD-prescribed PHA-owned certification 
covering a PHA-owned unit instead of executing the HAP contract for the 
PHA-owned unit. By signing the PHA-owned 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.
    (i) The PHA-owned certification serves as the equivalent of the HAP 
contract, and subjects the PHA, as owner, to all of the requirements of 
the HAP contract contained in part 982. Where the PHA has elected to 
use the PHA-owned certification, all references to the HAP contract 
throughout part 982 must be interpreted to be references to the PHA-
owned certification.
    (ii) The PHA must obtain the services of an independent entity to 
perform the required PHA functions identified in Sec.  
982.352(b)(1)(v)(A) before signing the PHA-owned certification.
    (iii) 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
70. 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 U.S. Postal Service ZIP code 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 other 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).
    (3) The PHA may designate payment standard areas within each FMR 
area. The PHA may establish different 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.

[[Page 38301]]

    (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 any dollar amount that is in the range from 90 
percent up to 110 percent of the published FMR for a unit size.
    (1) The PHA may establish a payment standard amount within the 
basic range without HUD approval or prior notification to HUD.
    (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. The exception payment 
standard may be established for a designated part of the FMR area 
(called an ``exception area'') or for the entire FMR 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 or county 
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. If the PHA qualifies for an exception 
payment standard above 110 percent of the applicable FMR under 
paragraph (d)(3) or (4) of this section, it may establish exception 
payment standards up to the same percentage of the SAFMR for the 
applicable ZIP code.
    (3) A PHA may establish exception payment standard amounts between 
110 percent and 120 percent of the applicable FMR for such duration as 
HUD specifies by notice upon notification to HUD that the PHA meets at 
least one of the following criteria:
    (i) Fewer than 75 percent of the families to whom the PHA issued 
tenant-based rental vouchers during the most recent 12-month period for 
which there is success rate data available have become participants in 
the voucher program;
    (ii) More than 40 percent of families with tenant-based rental 
assistance administered by the agency pay more than 30 percent of 
adjusted income as the family share; or
    (iii) Such other criteria as the Secretary establishes by notice.
    (4) Except as provided in paragraphs (d)(2), (3), and (5) of this 
section, the PHA must request approval from HUD to establish an 
exception payment standard amount 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 for families to access rental units. The rental market 
data must include a rent estimate for the entire FMR area compared with 
a rent estimate for the proposed exception area. To apply the exception 
payment standard to the entire FMR area, the rental market data 
provided by the PHA must also provide data that demonstrates that the 
annual percentage of rent inflation in the FMR area is greater than the 
rental inflation adjustment factor in the calculation of the published 
FMR. 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.
    (5) 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 or prior notification to HUD, an exception payment 
standard amount for an individual family 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. 
HUD may consider a PHA request for approval to establish a payment 
standard amount that is lower than the basic range. At HUD's sole 
discretion, HUD may approve PHA establishment of a payment standard 
lower than the basic range. In determining whether to approve the PHA 
request, HUD will consider appropriate factors, including rent burden 
of families assisted under the program. Unless it is necessary to 
prevent termination of program participants, HUD will not approve a 
lower payment standard if the proposed payment standard would, if it 
were used to calculate the housing assistance payments for current 
participants in the PHA's voucher program using currently available 
data, cause the family share for more than 40 percent of participants 
with tenant-based rental assistance to exceed 30 percent of adjusted 
monthly income.
    (f) Phaseout of success rate payment standard amounts. HUD will no 
longer approve success rate payment standards. However, a PHA that was 
approved to establish a success rate payment standard amount under this 
paragraph as in effect prior to June 6, 2024 shall not be required to 
reduce such payment standard amount as a result of the discontinuance 
of success rate payment standards.
    (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 rent if the PHA scored the 
maximum number of points on the deconcentration bonus indicator in 24 
CFR 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

[[Page 38302]]

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 with tenant-based rental 
assistance 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
71. Amend Sec.  982.505 by revising and republishing paragraph (c) and 
removing paragraph (d) to read as follows:


Sec.  982.505  How to calculate housing assistance payment.

* * * * *
    (c) Payment standard for family--(1) Applying the payment standard. 
The payment standard for the family is the lower of:
    (i) The payment standard amount for the family unit size; or
    (ii) The payment standard amount for the size of the dwelling unit 
rented by the family.
    (2) Separate payment standards. If the PHA has established a 
separate payment standard amount for a designated part of an FMR area 
in accordance with Sec.  982.503 (including an exception payment 
standard amount as determined in accordance with Sec.  982.503(d)), and 
the dwelling unit is located in such designated part, the PHA must use 
the appropriate payment standard amount for such designated part to 
calculate the payment standard for the family.
    (3) Decrease in the payment standard amount during the HAP contract 
term. 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.
    (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.
    (4) Increase in the payment standard amount during the HAP contract 
term. 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 or interim reexamination; or
    (iii) One year following the effective date of the increase in the 
payment standard amount.
    (5) PHA policy on payment standard increases. The PHA may adopt a 
policy to apply a payment standard increase at any time earlier than 
the date calculated according to paragraph (c)(4).
    (6) Changes in family unit size during the HAP contract term. 
Irrespective of any increase or decrease in the payment standard 
amount, if the family unit size either increases or decreases during 
the HAP contract term, the new family unit size may be used to 
determine the payment standard amount for the family immediately but no 
later than the family's first regular reexamination following the 
change in family unit size.

0
72. Amend Sec.  982.517 by revising the first sentence of paragraph 
(a)(2), and paragraphs (b) and (e) to read as follows:


Sec.  982.517  Utility allowance schedule.

    (a) * * *
    (2) The PHA must provide a copy of the utility allowance schedule 
to HUD. * * *
    (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 HQS. The PHA's utility allowance 
schedule and utility allowance for families must also include any 
utilities and services required by HUD after publication in the Federal 
Register for public comment.
    (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); applicable surcharges; 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 or satellite television.
    (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 Leadership in

[[Page 38303]]

Energy and Environmental Design (LEED) or Energy Star standards. HUD 
may subsequently identify additional Energy Savings Design standards or 
criteria for applying the allowance to retrofitted units in a building 
that does not meet the standard, 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 
standards and the date on which the modifications take effect. The 
energy-efficient utility allowance (EEUA) 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 no greater 
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) For tenant-based participants residing in units within a 
project that has an approved project-specific utility allowance under 
Sec.  983.301(f)(4), the PHA must use the project-specific utility 
allowance schedule (see 24 CFR 983.301(f)(4)).
    (v) 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 household 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 household member with a disability.


Sec.  982.552  [AMENDED]

0
73. Amend Sec.  982.552 by removing paragraph (c)(1)(viii) and 
redesignating paragraphs (c)(1)(ix) through (xi) as paragraphs 
(c)(1)(viii) through (x) respectively.

0
74. Amend Sec.  982.605 by revising the first sentence of paragraph (a) 
to read as follows:


Sec.  982.605  SRO: Housing quality standards.

    (a) * * * As defined in Sec.  982.4, HQS refers to the minimum 
quality standards developed by HUD in accordance with 24 CFR 5.703 for 
housing assisted under the HCV program, including any variations 
approved by HUD for the PHA under 24 CFR 5.705(a)(3). * * *
* * * * *

0
75. Amend Sec.  982.609 by revising the first sentence of paragraph (a) 
to read as follows:


Sec.  982.609  Congregate housing: Housing quality standards.

    (a) * * * As defined in Sec.  982.4, HQS refers to the minimum 
quality standards developed by HUD in accordance with 24 CFR 5.703 for 
housing assisted under the HCV program, including any variations 
approved by HUD for the PHA under 24 CFR 5.705(a)(3). * * *
* * * * *

0
76. Amend Sec.  982.614 by revising paragraph (a) to read as follows:


Sec.  982.614  Group home: Housing quality standards.

    (a) Compliance with HQS. The PHA may not give approval to reside in 
a group home unless the unit, including the portion of the unit 
available for use by the assisted person under the lease, meets HQS. As 
defined in Sec.  982.4, HQS refers to the minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for housing assisted 
under the HCV program, including any variations approved by HUD for the 
PHA under 24 CFR 5.705(a)(3).
* * * * *

0
77. Amend Sec.  982.618 by revising paragraph (a) and the first 
sentence of paragraph (b) to read as follows:


Sec.  982.618  Shared housing: Housing quality standards.

    (a) Compliance with HQS. The PHA may not give approval to reside in 
shared housing unless the entire unit, including the portion of the 
unit available for use by the assisted family under its lease, meets 
HQS.
    (b) * * * As defined in Sec.  982.4, HQS refers to the minimum 
quality standards developed by HUD in accordance with 24 CFR 5.703 for 
housing assisted under the HCV program, including any variations 
approved by HUD for the PHA under 24 CFR 5.705(a)(3). * * *
* * * * *

0
78. Amend Sec.  982.621 by revising the first sentence of the 
introductory text to read as follows:


Sec.  982.621  Manufactured home space rental: Housing quality 
standards.

    As defined in Sec.  982.4, HQS refers to the minimum quality 
standards developed by HUD in accordance with 24 CFR 5.703 for housing 
assisted under the HCV program, including any variations approved by 
HUD for the PHA under 24 CFR 5.705(a)(3). * * *
* * * * *

0
79. 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

[[Page 38304]]

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 HQS 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
80. Amend Sec.  982.625 by adding headings to paragraphs (a), (b), 
(c)(1), (f), and (g) to read as follows:


Sec.  982.625  Homeownership option: General.

    (a) Applicability. * * *
    (b) Family status. * * *
    (c) * * *
    (1) Allowable forms of homeownership assistance. * * *
* * * * *
    (f) Live-in aide. * * *
    (g) PHA capacity. * * *
* * * * *

0
81. Amend Sec.  982.628 by:
0
a. In paragraph (a)(1), removing ``, (a)(7)'' from the citation; and
0
b. Revising paragraphs (d) introductory text, (d)(3) introductory text, 
and (e)(3).
    The revisions 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 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 Sec.  
982.352(b)(1)(v)(B), to perform the following PHA functions:
* * * * *
    (e) * * *
    (3) The unit has passed the required HQS inspection (see Sec.  
982.631(a)) and independent inspection (see Sec.  982.631(b)).

0
82. Amend Sec.  982.630 by:
0
a. Adding headings to paragraphs (a), (b), (c), and (d); and
0
b. Revising paragraph (e).
    The revision and additions read as follows:


Sec.  982.630  Homeownership option: Homeownership counseling.

    (a) Pre-assistance counseling. * * *
    (b) Counseling topics. * * *
    (c) Local circumstances. * * *
    (d) Additional 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
83. Amend Sec.  982.635 by:
0
a. Revising paragraph (b)(3); and
0
b. In paragraphs (c)(2)(vii) and (3)(vii), removing ``part 8 of this 
title'' and adding, in its place, ``parts 8 and 100 of this title''.
    The revision reads 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.
* * * * *

0
84. Amend Sec.  982.641 by removing ``and'' from the end of paragraph 
(d)(2), revising paragraph (d)(3), adding paragraph (d)(4), and 
revising paragraph (f)(3) to read as follows:


Sec.  982.641  Homeownership option: Applicability of other 
requirements.

* * * * *
    (d) * * *
    (3) Section 982.405 (PHA unit inspection); and
    (4) Section 982.406 (Use of alternative inspections).
* * * * *
    (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
85. The authority for part 983 continues to read as follows:

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

Subpart A--General

0
86. Amend Sec.  983.2 by revising and republishing paragraph (c) to 
read as follows:


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

* * * * *
    (c) Specific 24 CFR part 982 provisions that do not apply to PBV 
assistance. The following specific provisions in 24 CFR part 982 do not 
apply to PBV assistance under part 983:
    (1) In subpart D of part 982: paragraph (e)(2) of 24 CFR 982.158;
    (2) In subpart E of part 982: paragraph (e) of 24 CFR 982.201, 
paragraph (b)(2) of 24 CFR 982.202, and paragraph (d) of 24 CFR 
982.204;
    (3) Subpart G of part 982 does not apply, with the following 
exceptions:
    (i) Section 982.310 (owner termination of tenancy) applies to the 
PBV program, but to the extent that those provisions differ from Sec.  
983.257, the provisions of Sec.  983.257 govern; and

[[Page 38305]]

    (ii) Section 982.312 (absence from unit) applies to the PBV 
Program, but to the extent that those provisions differ from Sec.  
983.256(g), the provisions of Sec.  983.256(g) govern; and
    (iii) Section 982.316 (live-in aide) applies to the PBV Program;
    (4) Subpart H of part 982;
    (5) In subpart I of part 982: 24 CFR 982.401; paragraphs (a)(3), 
(c), and (d) of 24 CFR 982.402; 24 CFR 982.403; 24 CFR 982.404; 
paragraphs (a), (b), (d), (i), and (j) of 24 CFR 982.405; paragraphs 
(a), (e), and (f) of 24 CFR 982.406; and 24 CFR 982.407;
    (6) In subpart J of part 982: paragraphs (a), (b)(3), (b)(4), and 
(c) of Sec.  982.451; and Sec.  982.455;
    (7) Subpart K of part 982: subpart K does not apply, except that 
the following provisions apply to the PBV Program:
    (i) In 24 CFR 982.503, paragraphs (a)(1) and (d)(1)-(4) do apply;
    (ii) Section 982.516 (family income and composition; regular and 
interim examinations);
    (iii) Section 982.517 of this title (utility allowance schedule), 
except that 24 CFR 982.517(d) does not apply.
    (8) In subpart M of part 982:
    (i) Sections 982.603, 982.607, 982.611, 982.613(c)(2), 982.619(a), 
(b)(1), (b)(4), (c); and
    (ii) Provisions concerning shared housing (Sec.  982.615 through 
Sec.  982.618), manufactured home space rental (Sec.  982.622 through 
Sec.  982.624), and the homeownership option (Sec.  982.625 through 
Sec.  982.641).

0
87. Revise and republish 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 identified in this section. In limited cases, 
where there is a slight difference with the part 982 term, an 
annotation is made in this section.
    (b) Definitions. The following definitions apply to this part:
    Abatement. See 24 CFR 982.4.
    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 census tract with a poverty rate of 20 percent or less, as 
determined by HUD;
    (ii) A ZIP code area where the rental vacancy rate is less than 4 
percent, as determined by HUD; or
    (iii) A ZIP code area where 90 percent of the Small Area FMR is 
more than 110 percent of the metropolitan area or county 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 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.
    Building. See 24 CFR 982.4.
    Comparable tenant-based rental assistance. A tenant-based subsidy 
to enable a family to obtain decent, safe, and sanitary housing in the 
PHA jurisdiction, which meets the following minimum requirements:
    (i) The family's monthly payment is not more than 40 percent of the 
family's adjusted monthly gross income;
    (ii) The rental assistance contains no limitation as to the length 
of time the family may receive the assistance;
    (iii) The family is not required to be employed, to seek 
employment, or to participate in supportive services in order to 
receive the rental assistance; and
    (iv) The family is able to use the rental assistance in one or more 
other PHAs' jurisdictions.
    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. See 24 CFR 982.4.
    Cooperative member. See 24 CFR 982.4.
    Covered housing provider. For the 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. New construction or rehabilitation work done 
after the proposal or project selection date in order for a newly 
constructed or rehabilitated housing project to be covered by a PBV HAP 
contract, including work done pursuant to a rider to the HAP contract 
in accordance with Sec.  983.157.
    Excepted units. Units in a project not counted toward the project 
cap because they exclusively serve or are made available to certain 
families. See Sec.  983.54(c)(2).
    Excluded units. Units in a project not counted toward the program 
cap or project cap because they meet certain criteria. See Sec.  
983.59.
    Existing housing. A project that meets the following criteria:
    (i) All the proposed contract units in the project either fully 
comply or substantially comply with HQS on the proposal or project 
selection date, as determined per Sec.  983.103(a). (The units must 
fully comply with HQS at the time

[[Page 38306]]

required by Sec.  983.103(c)). The units substantially comply with HQS 
if:
    (A) The units only require repairs to current components or 
replacement of equipment and/or materials by items of substantially the 
same kind to correct deficiencies; and
    (B) The PHA determines all deficiencies can reasonably be corrected 
within a 30-day period, taking into consideration the totality of the 
deficiencies in the project.
    (ii) The PHA determines the project is not reasonably expected to 
require substantial improvement and the owner certifies it has no plans 
to undertake substantial improvement from the proposal submission date 
(for projects subject to competitive selection) or the project 
selection date (for projects excepted from competitive selection) 
through the first two years of the HAP contract.
    Family. See 24 CFR 982.4.
    Family self-sufficiency program. See 24 CFR 982.4.
    Gross rent. See 24 CFR 982.4.
    Group home. See 24 CFR 982.4.
    HAP contract. See 24 CFR 982.4.
    Household. See 24 CFR 5.100.
    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). The minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for the PBV program, 
including any variations approved by HUD for the PHA under 24 CFR 
5.705(a)(3).
    Independent entity. See 24 CFR 982.4, except that the independent 
entity is subject to the requirements in Sec.  983.57 (instead of 24 
CFR 982.352(b) and 24 CFR 982.628(d)) for the PBV program.
    Initial rent to owner. See 24 CFR 982.4.
    In-place family. A family residing in a proposed contract unit on 
the proposal or project selection date.
    Jurisdiction. See 24 CFR 982.4.
    Lease. See 24 CFR 982.4.
    Manufactured home. See 24 CFR 982.4.
    Multifamily building. A building with five or more dwelling units 
(assisted or unassisted).
    Newly constructed housing. A project containing housing units that 
do not exist on the proposal or project 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 Plan. See 24 CFR 982.4.
    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.
    Program receipts. See 24 CFR 982.4.
    Project. A project can be 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. A PHA may, in its Administrative 
Plan, establish the circumstances under which it will define a project 
as only one of the following: a single building, multiple contiguous 
buildings, or multiple buildings on contiguous parcels of land.
    Proposal or project selection date. See Sec.  983.51(g).
    Public housing agency (PHA). See 24 CFR 982.4.
    Reasonable rent. See 24 CFR 982.4.
    Rehabilitated housing. A project which is developed for use under 
the PBV program, in which all proposed contract units exist on the 
proposal or project selection date, but which does not qualify as 
existing housing.
    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.
    Substantial improvement. One of the following activities undertaken 
at a time beginning from the proposal submission date (for projects 
subject to competitive selection) or from the project selection date 
(for projects excepted from competitive selection), or undertaken 
during the term of the PBV HAP contract:
    (i) Remodeling that alters the nature or type of housing units in a 
project;
    (ii) Reconstruction; or
    (iii) A substantial improvement in the quality or kind of equipment 
and materials. 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 substantial 
improvement.
    Tenant. See 24 CFR 982.4.
    Tenant rent. The amount payable monthly by the family as rent to 
the unit owner, as described in Sec.  983.353(b). (See also 24 CFR 
5.520(c)(1)).
    Tenant-paid utilities. See 24 CFR 982.4.
    Total tenant payment. See 24 CFR 5.628.
    Utility allowance. See 24 CFR 5.603.
    Utility reimbursement. See 24 CFR 5.603.
    Waiting list admission. An admission from the PHA- or owner-
maintained 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.


Sec.  983.4  [Amended]

0
88. Amend Sec.  983.4 by removing the provision for ``Definitions.''.

[[Page 38307]]


0
89. Revise and republish 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 the 
consolidated annual contributions contract (ACC) in 24 CFR 982.151. 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 owner 
may develop the housing pursuant to an Agreement (Sec.  983.154) 
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:
    (i) The owner may develop the housing without an Agreement, before 
execution of a HAP contract, in accordance with Sec.  983.154(f); or
    (ii) In the case of rehabilitation, the owner may develop the 
housing or complete development activity after execution of the HAP 
contract, in accordance with Sec.  983.157.
    (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 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 
and when the PHA executes, amends, or extends a HAP contract. The PHA 
must also state in its Administrative Plan that it will engage in 
project-basing and must amend its Administrative Plan to include all 
PBV-related matters over which the PHA is exercising its policymaking 
discretion, including the subjects listed in Sec.  983.10, as 
applicable.

0
90. Revise and republish Sec.  983.6 to read as follows:


Sec.  983.6  Maximum number of PBV units (percentage limitation).

    (a) In general. Except as provided in paragraphs (d) and (e) of 
this section, a PHA may commit project-based assistance to no more than 
20 percent of its authorized voucher units, as adjusted as provided in 
paragraph (e) of this section, at the time of commitment. An analysis 
of impact must be conducted in accordance with Sec.  983.58, if a PHA 
is project-basing 50 percent or more of the PHA's authorized voucher 
units.
    (1) A PHA is not required to reduce the number of units to which it 
has committed PBV assistance under an Agreement or HAP contract 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 April 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 April 18, 2017, as applicable), unless such units 
meet the conditions described in paragraph (d) or (e) of this section.
    (b) Units subject to percentage limitation. All PBV units which the 
PHA has selected (from the time of the proposal or project selection 
date) or which are under an Agreement or HAP contract for PBV 
assistance count toward the 20 percent maximum or increased cap, as 
applicable, except as provided in paragraph (e).
    (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 at the time of commitment, as adjusted 
as provided in paragraph (e) of this section, provided the additional 
units meet the conditions in paragraphs (d)(1) or (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 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 comprised of or include a veteran. For purposes of the 
increased cap, a veteran means a person who served in the active 
military, naval, air, or space service, and who was discharged or 
released therefrom.
    (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. The PHA's Administrative Plan 
must describe the type and availability of supportive services the PHA 
will consider as qualifying for the 10 percent increased cap.
    (iv) The units are located in an area where vouchers are difficult 
to use as defined in Sec.  983.3.
    (v) The units replace, on a different site, the units listed in 
Sec.  983.59(b)(1) and (2) for which the PHA had authority under Sec.  
983.59 to commit PBV assistance on the original site without the units 
counting toward the program cap or project cap. The units are eligible 
under this category only if the PHA has not committed and will not 
commit PBV assistance to the original site pursuant to the normally 
applicable exclusions of those units under Sec.  983.59. If the PHA 
subsequently plans to commit PBV assistance to units on the original 
site, those proposed units count toward and must comply with the 20 
percent maximum or increased cap of this section, as applicable, and 
the project cap requirements of Sec.  983.54.
    (2) The units are part of a HAP contract executed on or after 
December 27, 2020, or are added on or after that date to any current 
HAP contract, including a contract entered into prior to December 27, 
2020, and meet the following requirements:

[[Page 38308]]

    (i) The units are exclusively made available to eligible youth as 
described in Section 8(x)(2)(B) of the U.S. Housing Act; and
    (ii) If the units exclusively made available to eligible youth use 
Family Unification Program (FUP) assistance that is normally available 
for eligible families and youth described in Section 8(x)(2) of the 
U.S. Housing Act, the PHA determines and documents that the limitation 
of the units to youth is consistent with the local housing needs of 
both eligible FUP populations (families and youth) and amends its 
Administrative Plan to specify that FUP PBV assistance is solely for 
eligible youth.
    (3) The PBV HAP contract must specify, and the owner must set 
aside, the number of units meeting the conditions of paragraphs 
(d)(1)(i), (ii), (iii) and (d)(2) of this section. To qualify for the 
increased program cap for units meeting the conditions of paragraphs 
(d)(1)(i), (ii), (iii) and (d)(2) of this section, the unit must be 
occupied by the type of family specified in the applicable paragraph 
consistent with the requirements of Sec.  983.262.
    (e) Units previously subject to federally required rent 
restrictions or that received long-term rental assistance from HUD. 
Units that meet the requirements of Sec.  983.59 do not count toward 
the program cap. Such units are removed from the number of authorized 
voucher units for purposes of calculating the percentages under 
paragraphs (a) and (d) of this section.

0
91. Revise Sec.  983.10 to read as follows:


Sec.  983.10  PBV provisions in the Administrative Plan.

    (a) PHA policymaking discretion. If a PHA exercises its discretion 
to operate a PBV program, the PHA's Administrative Plan as required by 
24 CFR 982.54 of this title must include all the PHA's local policies 
on PBV-related matters over which the PHA is exercising its 
policymaking discretion.
    (b) PHA policies. The PHA Administrative Plan must cover, at a 
minimum, the following PHA policies, as applicable:
    (1) The definition of ``project'' as consistent with this part 
(Sec.  983.3(b));
    (2) The program cap:
    (i) A description of the types and availability of services that 
will qualify units under the supportive services authority under the 
program cap (Sec.  983.6(d)(1)(iii)); and
    (ii) The PHA's policy limiting Family Unification Program 
assistance normally available for eligible families and youth described 
in Section 8(x)(2) of the U.S. Housing Act to youth (Sec.  
983.6(d)(2)(ii));
    (3) A description of the circumstances under which the PHA will use 
the competitive and noncompetitive selection methods and the procedures 
for submission and selection of PBV proposals (Sec.  983.51(a));
    (3) A description of the circumstances under which the PHA will use 
the competitive and noncompetitive selection methods and the procedures 
for submission and selection of PBV proposals (Sec.  983.51(a));
    (4) The project cap:
    (i) The PHA's policy limiting Family Unification Program assistance 
normally available for eligible families and youth described in Section 
8(x)(2) of the U.S. Housing Act to youth (Sec.  983.54(c)(2)(ii)); and
    (ii) A description of the types and availability of services that 
will qualify units under the supportive services exception from the 
project cap (Sec.  983.54(c)(2)(iii));
    (5) The site selection standards:
    (i) The PHA's standard for deconcentrating poverty and expanding 
housing and economic opportunities (Sec.  983.55(b)(1)); and
    (ii) The PHA's site selection policy (Sec.  983.55(c));
    (6) PHA inspection policies:
    (i) The timing of an initial inspection of existing housing (Sec.  
983.103(c)(1));
    (ii) Whether the PHA adopts for initial inspection of PBV existing 
housing the non-life-threatening deficiencies option, the alternative 
inspection option, or both, and whether the PHA adopts for periodic 
inspection of PBV housing the alternative inspection option. If so, 
state all policies as required by 24 CFR 982.54(d)(21)(ii) and (iii), 
as they relate to the PHA's PBV program (Sec.  983.103(c)(2) through 
(4) and (e)(3));
    (iii) The frequency of periodic inspections (Sec.  983.103(e) and 
(i)); and
    (iv) Any verification methods other than on-site inspection for 
different inspection types or for different HQS deficiencies (Sec.  
983.103(h)).
    (7) A description of the circumstances (if any) under which the PHA 
will establish additional requirements for quality, architecture, or 
design of PBV housing at the time of initial rehabilitation or new 
construction (Sec. Sec.  983.154(e)(11), 983.157(e)(4));
    (8) A description of the circumstances (if any) under which the PHA 
will enter a PBV HAP contract for newly constructed and rehabilitated 
housing without first entering into an Agreement or execute an 
Agreement after construction or rehabilitation that complied with 
applicable requirements of Sec.  983.153 has commenced (Sec.  
983.154(f)(1));
    (9) The PHA's policy on the form and manner in which the owner must 
submit evidence and certify that work has been completed (Sec.  
983.155);
    (10) Rehabilitated housing developed after HAP contract execution:
    (i) A description of the circumstances (if any) under which the PHA 
will enter a PBV HAP contract for rehabilitated housing that allows for 
development activity to occur after HAP contract execution (Sec.  
983.157(a)(2));
    (ii) The timing of the initial inspection (Sec.  983.157(c)(4));
    (iii) The form and manner of owner notifications of changes in the 
status of contract units (Sec.  983.157(e)(5)); and
    (iv) The period for compliance (if any) for development activity 
that has not been completed by the deadline (Sec.  983.157(h)(1));
    (11) The PHA's policy on amending PBV HAP contracts to substitute 
or add contract units (Sec.  983.207(f));
    (12) PHA housing quality policies;
    (i) A description of the circumstances (if any) under which the PHA 
will establish additional requirements for continued compliance with 
quality, architecture, or design of PBV housing during the term of the 
HAP contract (Sec.  983.208(a)(3));
    (ii) The PHA's policy on the conditions under which it will 
withhold HAP and the conditions under which it will abate HAP or 
terminate the contract for units other than the unit with HQS 
deficiencies (Sec.  983.208(d)); and
    (iii) The PHA's policy on assisting families with relocating and 
finding a new unit (Sec.  983.208(d)(6)(iii));
    (13) A description of the PHA's waiting list policies for admission 
to PBV units, including any information on the owner waiting list 
policy (Sec.  983.251(c) and (e));
    (14) A description of the PHA's policy on whether to conduct tenant 
screening and offer information to an owner (Sec.  983.255(a)(2) and 
(c)(4));
    (15) 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));
    (16) The PHA's policy on a family's right to move:
    (i) The form of tenant-based rental assistance that the PHA will 
offer families (Sec.  983.261(b)); and
    (ii) The procedures for tenants to request tenant-based rental 
assistance to move (Sec.  983.261(c));
    (17) The PHA's policy regarding which options it will take if a 
unit is no longer qualified for excepted status or the increased 
program cap (Sec.  983.262(b)(4));
    (18) The PHA's policy regarding continued occupancy of a unit under

[[Page 38309]]

the increased program cap for supportive housing for persons with 
disabilities or elderly persons and units excepted based on elderly or 
disabled family status after a change in family composition removing 
the elderly family member or family member with a disability (Sec.  
983.262(c)(3)(ii), (d)(1), and (d)(2));
    (19) The PHA's policy regarding the PHA-determined amount it will 
use to calculate rent to owner (Sec.  983.301(b)(1) and (c)(2)(i));
    (20) The PHA's policy on the required timing and form of owner 
requests for a rent increase (Sec.  983.302(a)(1));
    (21) The PHA's policy on providing vacancy payments, including the 
required form and manner of requests for vacancy payments (Sec.  
983.352(b)(1) and (4));
    (22) The PHA's policy on utility reimbursements (Sec.  
983.353(d)(2)); and
    (23) The PHA's policy on applying SAFMRs to its PBV program per 24 
CFR 888.113(h).

0
92. Add Sec.  983.11 to subpart A to read as follows:


Sec.  983.11  Prohibition of excess public assistance.

    (a) PBV assistance for newly constructed and rehabilitated housing. 
The PHA may provide PBV assistance for newly constructed and 
rehabilitated housing only in accordance with HUD subsidy layering 
regulations (24 CFR 4.13) and other requirements.
    (b) PBV assistance for existing housing. The subsidy layering 
requirements are not applicable to existing housing.
    (c) Development activity before HAP contract. 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) Additional assistance after HAP contract. (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. 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) If the additional related assistance in paragraph (d)(1) of 
this section meets certain threshold and other requirements established 
by HUD through publication in the Federal Register, a subsidy layering 
review may be required to determine if it 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
93. Add Sec.  983.12 to subpart A to read as follows:


Sec.  983.12  Project record retention.

    (a) Records retained according to the contract term. For each PBV 
project, the PHA must maintain the following records throughout the HAP 
contract term and for three years thereafter:
    (1) Records to document the basis for PHA selection of the 
proposal, if selection is competitive, or project, if selection is 
noncompetitive, including records of the PHA's site selection 
determination (see Sec.  983.55) and records to document the completion 
of the review of the selection process in the case of PHA-owned units 
and copies of the written notice of proposal selection and response of 
the appropriate party;
    (2) The analysis of impact (see Sec.  983.58(b)), if applicable;
    (3) The subsidy layering determination, if applicable;
    (4) The environmental review record, if applicable;
    (5) The Agreement to enter into HAP contract, if applicable;
    (6) Evidence of completion (see Sec.  983.155), if applicable;
    (7) The HAP contract and any rider and/or amendments, including 
amendments to extend the term of the contract;
    (8) Records to document the basis for PHA determination and 
redetermination of rent to owner;
    (9) Records to document HUD approval of the independent entity or 
entities, in the case of PHA-owned units;
    (10) Records of the accessibility features of the project and each 
contract unit; and
    (11) Other records as HUD may require.
    (b) [RESERVED]

0
94. Revise subpart B to read as follows:

Subpart B--Selection of PBV Proposals and Projects

Sec.
983.51 Proposal and project 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.

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


Sec.  983.51  Proposal and project selection procedures.

    (a) General procedures for submission and selection. The PHA 
Administrative Plan must describe the procedures for submission and 
selection of PBV proposals under the methods of competitive selection 
in paragraph (b) of this section and selection of projects under an 
exception to competitive selection under paragraph (c) of this section. 
The description must include under what circumstances the PHA will use 
the selection methods described in paragraphs (b) and (c) of this 
section. The PHA may allow for entities that have site control to 
submit proposals provided the entity will be the owner prior to 
entering into the Agreement or HAP contract. Before selecting a PBV 
proposal or project, the PHA must determine that the PBV proposal or 
project 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). An owner may submit, and a PHA may select, a 
single proposal covering multiple projects where each project consists 
of a single-family building, provided all projects are the same housing 
type (existing, rehabilitated, or newly constructed).
    (b) Methods of competitive 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. A PHA may establish selection procedures in the 
Administrative Plan that combine or are

[[Page 38310]]

in conjunction with other Federal, State, or local government housing 
assistance, community development, or supportive services competitive 
selection processes. If the PHA selection process is combined and 
administered in conjunction with another RFP process, the PHA remains 
responsible for complying with Sec.  983.51. See Sec.  983.157(a)(2) 
for additional requirements for an RFP for rehabilitated housing.
    (2) The PHA may select, without issuing an RFP, a proposal for 
housing assisted under a Federal, State, or local government housing 
assistance, community development, or supportive services program that 
required competitive selection of proposals, where the proposal has 
been selected in accordance with such program's competitive selection 
requirements within three years of the PBV proposal selection date. The 
PHA may not select a housing assistance proposal using this method if 
the competition involved any consideration that the project would 
receive PBV assistance.
    (c) Exceptions to competitive selection. Prior to selection under 
this paragraph (c), the PHA must notify the public of its intent to 
noncompetitively select one or more projects for PBV assistance through 
its 5-Year Plan.
    (1) A PHA engaged in an initiative to improve, develop, or replace 
a public housing property or site may select for PBV assistance an 
existing, newly constructed, or rehabilitated project in which the PHA 
has an ownership interest or over which the PHA has control without 
following a competitive process.
    (i) With respect to replacement housing, the PHA does not have to 
replace the housing on the same site as the original public housing, 
but the number of contract units in the replacement project may not 
exceed the number of units in the original public housing project by 
more than a de minimis amount for this exception to apply.
    (ii) The public housing properties or sites may be in the public 
housing inventory at the time of project selection or they may have 
been removed from the public housing inventory through any available 
legal removal tool within five years of the project selection date.
    (2) A PHA may select for future PBV assistance a project currently 
under the public housing program, or a project that is replacing the 
public housing project, in which a PHA has no ownership interest, or 
which a PHA has no control over, without following a competitive 
process, 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 five years of the 
project selection date;
    (ii) The PHA that owned or owns the public housing project does not 
administer the HCV program;
    (iii) The project selected for 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; and
    (iv) With respect to replacement housing, the PHA does not have to 
replace the housing on the same site as the original public housing, 
but the number of contract units in the replacement project may not 
exceed the number of units in the original public housing project by 
more than a de minimis amount for this exception to apply.
    (3) A PHA may select for PBV assistance a project consisting of 
PHA-owned units as defined at 24 CFR 982.4 without following a 
competitive process.
    (i) The project units must continue to meet the definition of PHA-
owned for the initial two years of the HAP contract unless there is a 
transfer of ownership approved by HUD.
    (ii) The PHA must meet any conditions with respect to selection for 
PBV assistance of a project consisting of PHA-owned units without 
following a competitive process as may be established by HUD through 
publication in the Federal Register notice after providing opportunity 
for public comment.
    (4) A PHA may select for PBV assistance a project that underwent an 
eligibility event within five years of the project selection date, in 
which a family (or families) qualifies for enhanced voucher assistance 
under Section 8(t) of the Act and provides informed consent to 
relinquish its enhanced voucher for PBV assistance, without following a 
competitive process.
    (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 or project selection. 
(1) The PHA must examine the proposed site before the proposal or 
project selection date to determine whether the site complies with the 
site selection standards in accordance with Sec.  983.55.
    (2) The PHA may execute a HAP contract for existing housing if:
    (i) All proposed contract units in the project fully or 
substantially comply with the HQS on the proposal or project selection 
date, which the PHA must determine via inspection;
    (iii) The project meets the initial inspection requirements in 
accordance with Sec.  983.103(c).
    (iii) The project meets the initial inspection requirements in 
accordance with Sec.  983.103(c).
    (f) PHA written notice of proposal or project selection. (1) For 
selection of proposals through competitive methods under paragraph (b) 
of this section, the PHA must give prompt written notice of proposal 
selection to the party that submitted a selected proposal 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. The written notice of 
proposal selection must require the owner or party that submitted the 
selected proposal to provide a written response to the PHA accepting 
the terms and requirements stated in the notice.
    (2) For selection of projects through exceptions to competition 
under paragraph (c) of this section, the PHA must give prompt written 
notice of project selection to the owner following the PHA board's 
resolution approving the project-basing of assistance at the specific 
project. The written notice of project selection must require the owner 
of the project selected to provide a written response to the PHA 
accepting the terms and requirements stated in the notice.
    (3) Regardless of the method of selection, if the project contains 
PHA-owned units that are not owned by a separate legal entity from the 
PHA, the PHA must provide the written notice of proposal or project 
selection to the

[[Page 38311]]

responsible PHA official, and that official must certify in writing 
that the PHA accepts the terms and requirements stated in the notice.
    (4) When an environmental review is required, if such a review has 
not been conducted prior to the project or proposal selection date, the 
PHA's written notice of project or proposal selection must state that 
the selection is subject to completion of a favorable environmental 
review and that the project or proposal may be rejected based on the 
results of the environmental review in accordance with 983.56(c).
    (5) See Sec.  983.153(c)(3) for additional notice requirements for 
newly constructed housing and rehabilitated housing.
    (g) Proposal or project 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 
project selection date 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 project selection process the PHA undertook and determines that the 
project was appropriately selected based on the selection procedures 
specified in the PHA Administrative Plan. Under no circumstance may a 
HAP contract be effective for any of the subsidized housing types set 
forth in Sec.  983.53(a). With the exception of projects 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. A HAP contract must not be effective and no 
PBV assistance may be provided for any of the following:
    (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 execute a HAP contract and provide 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 are ineligible only if the manufactured home 
is not permanently affixed to a permanent foundation or the owner does 
not own fee title to the real property (land) on which the manufactured 
home is located; and
    (6) Transitional Housing.
    (b) Prohibition against assistance for owner-occupied unit. A HAP 
contract must not be effective and no PBV assistance may be provided 
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 a PHA places a specific unit under a HAP contract, the 
PHA must determine whether the unit is occupied and, if occupied, 
whether the unit's occupants are eligible for assistance in accordance 
with Sec.  982.201 of this title. Additionally, for a family to be 
eligible for assistance in the specific unit, the unit must be 
appropriate for the size of the family under the PHA's subsidy 
standards and the total tenant payment for the family must be less than 
the gross rent for the unit, such that the unit will be eligible for a 
monthly HAP. The PHA must not enter into a 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 in violation of program 
requirements. Unless a PHA has exercised the discretion at Sec.  
983.154(f), to undertake development activity without an Agreement or 
to execute an Agreement after construction or rehabilitation that 
complied with applicable requirements of Sec.  983.153 has commenced, 
or at Sec.  983.157, to undertake development activity after execution 
of the HAP contract, the PHA may not execute a HAP contract for units 
on which construction or rehabilitation 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) and prior to the effective date of an Agreement. At HUD's 
sole discretion, HUD may approve a PHA's request for an exception to 
this prohibition. In determining whether to approve the PHA request, 
HUD will consider appropriate factors, including the nature and extent 
of the construction or rehabilitation that has commenced.
    (1) Units for which rehabilitation or new construction began after 
proposal submission or the date of board resolution but prior to the 
effective date of an Agreement (if applicable), as described in this 
paragraph (d), do not subsequently qualify as existing housing.
    (2) Units that were newly constructed or rehabilitated in violation 
of program requirements do not qualify as existing housing.


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

    (a) Types of subsidized housing prohibited from receiving PBV 
assistance. A HAP contract must not be effective and no PBV assistance 
may be provided for any of the following:
    (1) A public housing dwelling unit;
    (2) A unit subsidized with any other form of Section 8 assistance 
(tenant-based or project-based);
    (3) A unit subsidized with any governmental rent subsidy (a subsidy 
that pays all or any part of the rent);
    (4) A unit subsidized with any governmental subsidy that covers all 
or any part of the operating costs of the housing;
    (5) 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

[[Page 38312]]

Program). However, the PHA may attach assistance for a unit subsidized 
with Section 515 interest reduction payments (42 U.S.C. 1485);
    (6) 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);
    (7) Section 811 project-based supportive housing for persons with 
disabilities (42 U.S.C. 8013);
    (8) Section 202 supportive housing for the elderly (12 U.S.C. 
1701q);
    (9) 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.); or
    (10) 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).
    (b) [RESERVED]


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

    (a) Project cap. Except as provided in paragraph (b) or (c) of this 
section, a PHA may not select a proposal to provide PBV assistance or 
enter into an Agreement or HAP contract if the number of assisted units 
in a project is more than the greater of 25 percent of the number of 
dwelling units (assisted and unassisted, as adjusted as provided in 
paragraph (c)(3)) 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 and unassisted, as adjusted as provided in paragraph (c)(3) 
of this section) in the project if 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) A project is not limited to 
a single exception category but may include excepted units from any of 
the exception categories under paragraph (2) and excluded units under 
paragraph (3) below.
    (2) PBV units are not counted toward the project cap in the 
following cases:
    (i) Units exclusively serving elderly families, as defined in 24 
CFR 5.403;
    (ii) Units exclusively made available to eligible youth described 
in Section 8(x)(2)(B) of the U.S. Housing Act. If the units exclusively 
made available to eligible youth use Family Unification Program (FUP) 
assistance that is normally available for eligible families and youth, 
the PHA must determine that the limitation of the units to youth is 
consistent with the local housing needs of both eligible FUP 
populations (families and youth), maintain documentation to support 
this determination, and amend its Administrative Plan to include the 
limitation of these FUP PBV units to eligible youth; or
    (iii) Units exclusively made available to households eligible for 
supportive services available to the residents of the project assisted 
with PBV 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 supportive services 
must be made available to the family within a reasonable time as 
defined by the PHA, but not to exceed 120 calendar days from the 
family's request. 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), and the 
reasonable time by which such services must be made available to the 
family, not to exceed 120 calendar days. A PHA that manages an FSS 
program may offer FSS to meet the exception. The PHA may also make the 
supportive services used in connection with the FSS program available 
to non-FSS PBV families at the project.
    (3) Units that are excluded under Sec.  983.59 do not count toward 
the project cap. Such units are removed from the number of dwelling 
units for purposes of calculating the percentages under paragraphs (a) 
and (b) of this section.
    (4)(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) HAP contracts already in effect. (1) In general, HAP contracts 
in effect prior to April 18, 2017, when the exception at paragraph 
(c)(2)(iii) of this section came into effect and a prior exception for 
disabled families was removed, or prior to December 27, 2020, when the 
exception at paragraph (c)(2)(ii) of this section came into effect, are 
governed by those HAP contracts' terms concerning 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 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 Notice, subject to public comment.


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 site 
and neighborhood standards. The PHA may not select a project or 
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

[[Page 38313]]

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 must 
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 (42 U.S.C. 
12131-12134) and implementing regulations (28 CFR part 35), 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 and neighborhood is reasonably free from disturbing 
noises and reverberations and other dangers to the health, safety, and 
general welfare of the occupants. The site and neighborhood may not be 
subject to serious adverse environmental conditions, natural or 
manmade, that could affect the health or safety of the project 
occupants, such as dangerous walks or steps; contamination; 
instability; flooding, poor drainage, septic tank back-ups or sewage 
hazards; mudslides; abnormal air pollution, smoke or dust; excessive 
noise, vibration or vehicular traffic; excessive accumulations of 
trash; vermin or rodent infestation; or fire hazards.
    (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.
    (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

[[Page 38314]]

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 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) HUD environmental regulations. (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) For projects or proposals that were selected in accordance with 
the site selection standards at Sec.  983.55 in effect on or after June 
6, 2024, no environmental review is required to be undertaken before 
entering into a HAP contract for existing housing, except to the extent 
a Federal environmental review is required by law or regulation 
relating to funding other than PBV housing assistance payments.
    (b) Who performs the environmental review? Under 24 CFR part 58, 
the unit of general local government within which the project is 
located that exercises land use responsibility, the county, or the 
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.
    (c) Notice of applicability. When an environmental review is 
required, if such a review has not been conducted prior to the proposal 
or project selection date, then the PHA's written notice of proposal or 
project selection must state that the selection is subject to 
completion of a favorable environmental review and that the project may 
be rejected based on the results of the environmental review.
    (d) Environmental review limitations. When an environmental review 
is required, a PHA may not execute an Agreement or HAP contract with an 
owner, 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 activities to be 
undertaken are exempt under 24 CFR 58.34(a) or 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). HUD 
approves the Request for Release of Funds and Certification by issuing 
a Letter to Proceed or form HUD-7015.16, thereby authorizing the PHA to 
execute an Agreement or HAP contract, as applicable; or
    (3) HUD has performed an environmental review under 24 CFR part 50 
and has notified the PHA in writing of environmental clearance.
    (e) Environmental review restrictions. HUD will not issue a Letter 
to Proceed or form HUD-7015.16 to the PHA or provide environmental 
clearance if the PHA, the owner, or its contractors have undertaken any 
of the activities described in paragraph (d) of this section.
    (f) Mitigating measures. The PHA must document any mitigating 
measures or other conditions as provided in 24 CFR part 50 or 58, as 
applicable, and must complete or require the owner to carry out such 
measures and conditions.
    (g) PHA duty to supply information. The PHA must supply all 
available, relevant information necessary for the RE (or HUD, if 
applicable) to perform the required environmental review.


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(h).
    (b) Independent entity functions. In connection with PHA-owned 
units:
    (1) The independent entity must determine rent to owner, including 
rent reasonableness and calculating any rent

[[Page 38315]]

adjustments by an OCAF (where applicable), in accordance with 
Sec. Sec.  983.301 through 983.305.
    (2) The independent entity must perform unit inspections in 
accordance with Sec.  983.103(g).
    (3) When the owner carries out development activity under Sec.  
983.152 or substantial improvement under Sec. Sec.  983.207(d) or 
983.212, the independent entity must review the evidence and work 
completion certification submitted by the owner in accordance with 
Sec.  983.155(b) and determine if the units are complete in accordance 
with Sec.  983.156.
    (4) The independent entity must determine whether to approve 
substantial improvement to units under a HAP contract in accordance 
with Sec.  983.212.
    (c) Payment to independent entity. 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.


Sec.  983.58  PHA determination prior to selection.

    (a) Analysis of units and budget. A PHA must calculate the number 
of authorized voucher units that it is permitted to project-base in 
accordance with Sec.  983.6 and determine the amount of budget 
authority that it has available for project-basing in accordance with 
Sec.  983.5(b), before it 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 
noncompetitively selects a project in accordance with Sec.  983.51(c).
    (b) Analysis of impact. Prior to selecting a project for PBV 
assistance, a PHA must perform an analysis of the impact if project-
basing 50 percent or more of the PHA's authorized voucher units. The 
analysis should consider the ability of the PHA to meet the needs of 
the community across its tenant-based and project-based voucher 
portfolio, including the impact on, among others: families on the 
waiting list and eligible PBV families that wish to move under Sec.  
983.261. The analysis performed by the PHA must be available as part of 
the public record.


Sec.  983.59  Units excluded 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 paragraph (b) of this section. Such 
units do not count toward 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. 
Excluded units must, in the five years prior to the request for 
proposals (RFP) or the proposal or project selection date in the case 
of selection without RFP, fall into one of the following categories 
provided that the units are removed from all categories prior to the 
effective date of the HAP contract:
    (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) Rental Assistance Program (RAP) (Section 236(f)(2) of the 
National Housing Act); or
    (vi) 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); or
    (iii) The following HUD programs:
    (A) Section 236;
    (B) Section 221(d)(3) Below Market Interest Rate;
    (C) Housing For the Elderly (Section 202 of the Housing Act of 
1959);
    (D) Housing for Persons with Disabilities (Section 811 of the 
Cranston-Gonzalez National Affordable Housing Act);
    (E) Flexible Subsidy Program (Section 201 of the Housing and 
Community Development Amendments Act of 1978); or
    (iv) Any other program identified by HUD through Federal Register 
notice subject to public comment.
    (c) 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 the newly constructed project is acceptable as long as a 
majority of the replacement units are built back on the site of the 
original project 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 newly constructed project when it is ready 
for occupancy.
    (2) Prior to the demolition of the original project, the PBV newly 
constructed project must have been identified as replacement housing 
for that original project as part of a documented plan for the 
redevelopment of the site.
    (d) Unit size configuration and number of units for newly 
constructed and rehabilitated projects. The unit size configuration of 
the PBV newly constructed or rehabilitated 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 excluded from the 
program cap and the project cap. Units that exceed the total number of 
covered units in the original project are subject to the program cap 
and the project cap.
    (e) Inapplicability of other program and project cap exceptions. 
The 10 percent exception under Sec.  983.6 and the project cap 
exception under Sec.  983.54(c)(2) are inapplicable to excluded units 
under this section.

Subpart C--Dwelling Units

0
95. Amend Sec.  983.101 by revising paragraphs (a) and (e) to read as 
follows:

[[Page 38316]]

Sec.  983.101  Housing quality standards.

    (a) HQS applicability. As defined in Sec.  983.3, HQS refers to the 
minimum quality standards developed by HUD in accordance with 24 CFR 
5.703 of this title for housing assisted under the PBV program, 
including any variations approved by HUD for the PHA under 24 CFR 
5.705(a)(3).
* * * * *
    (e) Additional PHA quality and design requirements. This section 
establishes the minimum federal housing quality standards for PBV 
housing. However, the PHA may elect to establish additional 
requirements for quality, architecture, or design of PBV housing.

0
96. Revise Sec.  983.103 to read as follows:


Sec.  983.103  Inspecting units.

    (a) Pre-selection inspection. If the units to be assisted already 
exist, the PHA must inspect all units before the proposal or project 
selection date and must determine if the project meets the definition 
of existing housing. If the project is 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) Initial inspection of newly constructed and rehabilitated 
projects and units that underwent substantial improvement to be added 
to a HAP contract. Following completion of work pursuant to Sec.  
983.155, the PHA must complete the following inspection(s), as 
applicable in accordance with Sec.  983.156:
    (1) For rehabilitated housing that is developed prior to the HAP 
contract term or newly constructed housing, the PHA must inspect each 
proposed newly constructed and rehabilitated PBV unit before execution 
of the HAP contract. Each proposed PBV unit must fully comply with HQS 
prior to HAP contract execution.
    (2) For rehabilitated housing that will undergo development 
activity after HAP contract execution per Sec.  983.157, the PHA must 
conduct unit inspections in accordance with the requirements of Sec.  
983.157.
    (3) Inspect each unit that underwent substantial improvement 
pursuant to Sec. Sec.  983.207(d) or 983.212. Each PBV unit that 
underwent substantial improvement must fully comply with HQS prior to 
the PHA adding the unit to the HAP contract, returning the unit 
temporarily removed to the HAP contract, allowing re-occupancy of the 
unit, and resuming housing assistance payments, as applicable.
    (c) Initial inspection requirements for existing housing--(1) In 
general. In accordance with this paragraph, the PHA may adopt in its 
Administrative Plan the non-life-threatening deficiencies option or the 
alternative inspection option, or both, for initial inspections of 
existing housing. 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 HQS before 
entering the HAP contract. The PHA must establish in its Administrative 
Plan the amount of time that may elapse between the initial inspection 
of existing housing and execution of a HAP contract for that unit.
    (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 units have life-threatening deficiencies and if the owner 
agrees to the NLT option. If the PHA has established and the unit is 
covered by both the NLT option and the alternative inspections option 
under paragraph (c)(3) of this section for the initial HQS inspection, 
see paragraph (c)(4) of this section.
    (ii) After completing the inspections and determining there are no 
life-threatening deficiencies, for any unit with non-life-threatening 
deficiencies, the PHA must provide 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) a list of the non-life-
threatening deficiencies identified by the initial HQS inspection and 
an explanation of the maximum amount of time the PHA will withhold HAP 
before abating assistance if the owner does not complete the repairs 
within 30 days. 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. If the PHA's Administrative Plan 
provides that the PHA will terminate the PBV HAP contract if the owner 
fails to correct deficiencies in any unit in the project within the 
cure period, the PHA must also provide the notice described above to 
families referred to units without any deficiencies. 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 must use the withheld housing assistance payments to 
make payments for the period that payments were withheld.
    (v) 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 the 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. If the PHA 
terminates the PBV HAP contract or removes the unit from the HAP 
contract as a result of the owner's failure to correct the 
deficiencies, the PHA must provide any affected family tenant-based 
assistance as provided in Sec.  983.206(b).
    (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 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, subject to the procedures and requirements specified 
in 24 CFR 982.406(b), (c), (d), and (g).
    (i) After the PHA determines the project meets the definition of 
existing housing in accordance with paragraph (a) of this section, the 
PHA may execute the HAP contract for the project if the project has 
been inspected in the

[[Page 38317]]

previous 24 months using an alternative inspection that meets the 
requirements of 24 CFR 982.406, as opposed to re-inspecting the project 
to make sure all units fully comply with HQS 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 
inspection 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 a contract unit) that will occupy a contract 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 as part of this notification. A family on the waiting list 
may decline to accept an offered 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 
proposal or 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 paragraph (f) of this section or 
within 30 days of the effective date of the HAP contract, whichever 
time period ends first.
    (iv) The PHA may not commence housing assistance payments to the 
owner until the PHA has inspected all the units under the HAP contract 
and determined they meet HQS.
    (v) If the PHA inspection finds that any contract unit contains HQS 
deficiencies, the PHA may not make housing assistance payments to the 
owner until all the deficiencies have been corrected in all contract 
units. If a deficiency is life-threatening, the owner must correct the 
deficiency within 24 hours of notification from the PHA. For other 
deficiencies, the owner must correct the deficiency within 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 or the PBV lease effective dates, 
whichever is later.
    (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. If the PHA terminates the PBV HAP 
contract or removes the unit from the HAP contract as a result of the 
owner's failure to correct the deficiencies, the PHA must provide any 
affected family tenant-based assistance as provided in Sec.  983.206(b) 
of this title.
    (vii) If the owner fails to make the repairs within the applicable 
time 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 or the unit removal or contract 
termination occurs. If the deficiencies are corrected, the PHA must use 
the withheld housing assistance payments to make payments for the 
period that payments were withheld.
    (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 tenant-based assistance. If 
the PHA terminates the PBV HAP contract or removes the unit from the 
HAP contract as a result of the owner's failure to correct the 
deficiencies, the PHA must provide any affected family tenant-based 
assistance as provided in Sec.  983.206(b) of this title.
    (4) Initial inspection--use of both the NLT and alternative 
options. The PHA may adopt both the NLT option and the alternative 
inspection option for initial inspections of existing housing, subject 
to the procedures and requirements specified in 24 CFR 982.406(b), (c), 
(d), and (g).
    (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. 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. Following inspection (see 
paragraph (c)(4)(ii) of this section), the PHA must provide any family 
referred from the PBV waiting list that will occupy a unit with non-
life-threatening deficiencies a list of the non-life-threatening 
deficiencies identified by the initial HQS inspection and an 
explanation of the maximum amount of time the PHA will withhold HAP 
before abating assistance if the owner does not complete the repairs 
within 30 days. 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 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 proposal or project selection date. 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 
paragraph (f) of this section or within 30 days of the proposal or 
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 or the PBV lease effective dates, 
whichever is later, 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 must 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 for any 
units until all the HQS deficiencies (life-threatening and non-life-
threatening) have been corrected. The PHA must not refer families from 
the PBV waiting list

[[Page 38318]]

to occupy units with life-threatening deficiencies. The owner must 
correct all life-threatening deficiencies within no more than 24 hours. 
For other deficiencies, the owner must correct the deficiency within no 
more than 30 calendar days (or any PHA-approved extension). If the 
owner corrects all of the deficiencies within the required cure period, 
the PHA must make the housing assistance payments retroactive to the 
effective date of the HAP contract or the PBV lease effective dates, 
whichever is later. If the owner fails to make the repairs within the 
applicable time 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 or the unit removal or 
contract termination occurs. If the deficiencies are corrected, the PHA 
must use the withheld housing assistance payments to make payments for 
the period that payments were withheld.
    (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 tenant-based 
assistance. If the PHA terminates the PBV HAP contract or removes the 
unit from the HAP contract as a result of the owner's failure to 
correct the deficiencies, the PHA must provide any affected family with 
tenant-based assistance as provided in Sec.  983.206(b) of this title. 
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 or remove the unit from 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) Periodic 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 (d) of 
this section are not counted toward meeting this inspection 
requirement. Instead of biennially, a small rural PHA, as defined in 
Sec.  902.101 of this title, must inspect the random sample of units in 
accordance with this paragraph at least once every three years. The PHA 
must establish in its Administrative Plan the frequency of periodic 
inspections. This requirement applies in the case of a HAP contract 
that is undergoing development activity after HAP contract execution 
per Sec.  983.157; however, if the periodic inspection occurs during 
the period of development activity covered by the rider and fewer than 
20 percent of contract units in each building are designated in the 
rider as available for occupancy, the PHA is only required to inspect 
the units in that building that are designated as available for 
occupancy.
    (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 alternative inspections to meet the 
requirements for periodic inspections in this paragraph (e), subject to 
the procedures and requirements specified in 24 CFR 982.406(b), (c), 
(d), and (g).
    (f) Other inspections. (1) Interim inspections: When a participant 
family or government official notifies the PHA of a potential 
deficiency, the following conditions apply:
    (i) Life-threatening. If the reported deficiency is life-
threatening, 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.
    (ii) Non-life-threatening. If the reported deficiency 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 the notification from the PHA or 
within any PHA-approved extension.
    (iii) Extraordinary circumstances. In the event of extraordinary 
circumstances, such as if a unit is within a presidentially declared 
disaster area, HUD may approve an exception of the 24-hour or the 15-
day inspection requirement until such time as an inspection is 
feasible.
    (2) Follow-up inspections: The PHA must conduct follow-up 
inspections needed to determine if the owner (or, if applicable, the 
family) has corrected an HQS violation, except where the PHA is using a 
verification method as described in paragraph (h) of this section, 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) Supervisory quality control inspections: 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, which must be detailed in its Administrative Plan. 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 deficiency has been corrected.
    (i) Projects with government financing. In the case of a PBV 
project financed under a Federal, State, or local housing program that 
is subject to an alternative inspection, the PHA may rely upon 
inspections conducted at least triennially to demonstrate compliance 
with the alternative inspection option under paragraph (c) of this 
section or the periodic inspection requirement of paragraph (e) of this 
section, in accordance with its policy established in the PHA 
Administrative Plan.

0
97. In subpart D, revise Sec.  983.151 through Sec.  983.156 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.

[[Page 38319]]

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 newly constructed or rehabilitated project under a 
HAP contract; or
    (2) For a rehabilitated project that will undergo development 
activity after HAP contract execution, completing the requirements of 
the rider in accordance with Sec.  983.157.
    (b) Development requirements. Development activity must comply with 
the requirements of Sec. Sec.  983.153 through 983.157.


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 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 attaches assistance to a project. Specifically, the PHA 
may not execute 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) 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 owner must disclose to the PHA any change to the 
information provided for purposes of the subsidy layering review, 
including the amount of assistance or number of units to be developed, 
that occurs after the subsidy layering review has been conducted and 
before all contract units are placed under the HAP contract, in 
accordance with HUD requirements. A subsidy layering review may be 
required to determine if such a change would result in excess public 
assistance to the project, as required by HUD through notification in 
the Federal Register.
    (5) 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, unless the owner discloses additional assistance 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.  983.11(d).
    (6) Existing housing is exempt from subsidy layering requirements.
    (c) Labor standards. (1) Labor standards as described in paragraphs 
(c)(2) of this section apply to development activity. When the PHA 
exercises its discretion at Sec. Sec.  983.154(f) or 983.157(a) to 
allow the owner to conduct some or all development activity while the 
proposed PBV units are not under an Agreement or HAP contract, the 
applicable parties must comply with the labor standards in paragraph 
(c)(2) of this section 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).
    (2) In the case of development involving nine or more contract 
units (whether or not completed in stages):
    (i) The owner and the owner's contractors and subcontractors must 
pay Davis-Bacon wages to laborers and mechanics employed in development 
of the housing; and
    (ii) 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.
    (3) For any project to which labor standards apply, the PHA's 
written notice to the party that submitted the selected proposal or 
board resolution approving project-basing of assistance at the specific 
project, as applicable per Sec.  983.51(f), must state that any 
construction contracts must incorporate a Davis-Bacon contract clause 
and the current applicable prevailing wage determination.
    (d) Equal employment opportunity. Development activity 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).
    (e) 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 part 8, including 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. A description of any 
required work item resulting from these requirements must be included 
in the Agreement (if applicable), as specified in Sec.  983.154(e)(6) 
or HAP contract (if applicable), as specified in Sec.  983.157(e)(1).
    (f) Broadband infrastructure. (1) Any development activity that 
constitutes substantial rehabilitation as defined by 24 CFR 5.100 of a 
building with more than four rental units and where the proposal or 
project selection date 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

[[Page 38320]]

applicable), as specified in Sec.  983.154(e)(7) or HAP contract (if 
applicable), as specified in Sec.  983.157(e)(2).
    (g) 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 
non-procurement programs, or who is debarred, suspended subject to a 
limited denial of participation, or otherwise excluded under 2 CFR part 
2424, 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 and are not 
debarred, suspended subject to a limited denial of participation, or 
otherwise excluded under 2 CFR part 2424.
    (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, in accordance with Sec.  982.161 of this 
title.


Sec.  983.154  Development agreement.

    (a) Agreement to enter into HAP contract (Agreement). Except as 
specified in paragraphs (f) and (g) of this section, the PHA and owner 
must enter into an Agreement that will govern development activity. 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. The Agreement must cover a single project, except one 
Agreement may cover multiple projects that each consist of a single-
family building.
    (b) Timing of Agreement. The effective date of the Agreement must 
be on or after the date the Agreement is executed. The Agreement must 
be executed and effective prior to the commencement of development 
activity as described in paragraph (d) of this section, except as 
provided in paragraphs (f) and (g) of this section, and must be in the 
form required by HUD (see 24 CFR 982.162(b)).
    (c) Agreement amendment. The PHA and owner may agree to amend the 
contents of the Agreement described in paragraph (e) of this section by 
executing an addendum to the Agreement, so long as such amendments are 
consistent with all requirements of this part 983. The PHA and owner 
may only execute an addendum affecting a unit prior to the PHA 
accepting the completed unit.
    (d) Commencement of development activity. Development activity must 
not commence 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) and before the effective date of 
the Agreement, except as provided in paragraphs (f) and (g) of this 
section.
    (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.
    (e) 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 and development activity to be 
performed:
    (1) The site;
    (2) The location of contract units on site;
    (3) The number of contract units by area (square footage) and 
number of bedrooms and bathrooms;
    (4) The services, maintenance, or equipment to be supplied by the 
owner without charges in addition to the rent to owner;
    (5) The 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) A description of any required work item necessary to comply 
with the accessibility requirements of Sec.  983.153(e);
    (7) A description of any required work item if the requirement at 
Sec.  983.153(f) to install broadband infrastructure applies;
    (8) Estimated initial rents to owner for the contract units;
    (9) A description of the work to be performed under the Agreement:
    (i) For rehabilitation, the work description must include the 
rehabilitation work write-up and, where determined necessary by the 
PHA, specifications and plans (see paragraph (g) of this section for 
additional requirements that apply under the option for development 
activity after HAP contract at 983.157); and
    (ii) For new construction, the work description must include the 
working drawings and specifications;
    (10) The deadline for completion of the work to be performed under 
the Agreement; and
    (11) Any requirements the PHA elects to establish in addition to 
HQS for design, architecture, or quality. The PHA must specify the 
conditions under which it will require additional housing quality 
requirements in the Administrative Plan.
    (f) PHA discretion. With respect to development activity, the PHA 
may decide not to use an Agreement or may choose to execute an 
Agreement after construction or rehabilitation that complied with 
applicable requirements of Sec.  983.153 has commenced.
    (1) In its Administrative Plan, the PHA must explain the 
circumstances (if any) under which the PHA will enter a PBV HAP 
contract for newly constructed or rehabilitated housing without first 
entering into an Agreement and under which the PHA will enter into an 
Agreement after construction or rehabilitation that complied with 
applicable requirements of Sec.  983.153 has commenced.
    (2) The following conditions apply:
    (i) The owner of the project must be able to document its 
compliance with all applicable 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) For housing subject to competitive selection, the PHA must 
confirm prior to the proposal selection date that the owner has 
complied with all applicable requirements of Sec.  983.153 from the 
date of proposal submission. For housing excepted from competitive 
selection, the PHA must confirm prior to executing the Agreement (if 
applicable) or HAP contract that the owner has complied with all 
applicable requirements of Sec.  983.153 from the date of the PHA's 
board resolution approving the project-basing of assistance at the 
project; and
    (iii) The PHA must comply with the notice requirement of Sec.  
983.153(c)(3).


Sec.  983.155  Completion of work.

    (a) General requirement. The owner must submit evidence and certify 
to the PHA, in the form and manner required by the PHA's Administrative 
Plan, that development activity under Sec.  983.152 or substantial 
improvement under Sec. Sec.  983.207(d) or 983.212 has been completed, 
and that all such work was completed in accordance with the

[[Page 38321]]

applicable requirements. The PHA must review the evidence to determine 
whether the development activity or substantial improvement was 
completed in accordance with the applicable requirements.
    (b) PHA-owned units. In the case of PHA-owned units, the owner must 
submit evidence and certify to the independent entity (see Sec.  
983.57(b)(3)), in the form and manner required by the PHA's 
Administrative Plan, that development activity under Sec.  983.152 or 
substantial improvement under Sec. Sec.  983.207(d) or 983.212 has been 
completed, and that all such work was completed in accordance with the 
applicable requirements. The independent entity must review the 
evidence to determine whether the development activity or substantial 
improvement 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 completed units to determine whether they comply with HUD's 
HQS (see Sec.  983.103(b)) and any additional design, architecture, or 
quality requirements specified by the PHA.
    (b) Execution or amendment of the HAP contract. If the PHA 
determines that the development activity or substantial improvement was 
completed in accordance with the applicable requirements at Sec.  
983.155 and the completed units meet HUD's HQS and any additional 
design, architecture, or quality requirements specified by the PHA per 
paragraph (a) of this section, then the PHA must:
    (1) For units developed pursuant to Sec.  983.152(a)(1) which will 
not undergo development activity after HAP contract execution per Sec.  
983.157, submit the HAP contract for execution by the owner and execute 
the HAP contract;
    (2) For rehabilitated housing projects for which development 
activity has commenced prior to HAP contract execution, but which will 
undergo development activity after HAP contract execution under Sec.  
983.157(b), submit the HAP contract for execution by the owner and 
execute the HAP contract;
    (3) For development activity conducted after HAP contract 
execution, amend the HAP contract rider to designate the completed 
units as available for occupancy (Sec.  983.157(f)(1)(ii)) or, if the 
owner has completed all development activity as provided in the rider, 
amend the HAP contract to terminate the rider (Sec.  983.157(d)); or
    (4) For units that underwent substantial improvement in order to be 
added to the HAP contract, amend the HAP contract to add the units to 
the HAP contract (Sec.  983.207(d)).
    (c) Staged completion of contract units. Contract units developed 
pursuant to Sec.  983.152(a)(1) which will not undergo development 
activity after HAP contract execution per Sec.  983.157 may be placed 
under the HAP contract in stages commencing on different dates. In such 
a case, the PHA must determine separately for each stage whether the 
development activity was completed in accordance with the applicable 
requirements per Sec.  983.155 and that the units meet HUD's HQS and 
any additional design, architecture, or quality requirements specified 
by the PHA per paragraph (a) of this section. If the first stage is 
determined compliant, then the PHA must submit the HAP contract for 
execution by the owner and must execute the HAP contract for PBV 
rehabilitated housing and newly constructed housing projects. As each 
subsequent stage is determined compliant, the PHA and owner must amend 
the HAP contract to add the units to the HAP contract (see Sec.  
983.207(g)).
    (d) PHA-owned units. The independent entity must perform the 
inspection required in paragraph (a) of this section and make the 
determination(s) required in paragraphs (b) and (c) of this section in 
the case of PHA-owned units (see Sec.  983.57(b)(3)).

0
98. Delayed indefinitely, amend Sec.  983.154 by adding paragraphs (g) 
and (h) to read as follows:


Sec.  983.154  Development agreement.

* * * * *
    (g) Rehabilitated housing option: development activity during HAP 
contract term. The PHA may permit some or all development activity to 
occur during the term of the HAP contract under the rehabilitated 
housing option in Sec.  983.157. Under this option, the PHA may choose 
to execute an Agreement for any development activity undertaken before 
the HAP contract is effect. If the PHA will execute an Agreement for 
development activity undertaken before the HAP contract is effective, 
the work description required per paragraph (e)(9)(i) of this section 
must specify the work activities that will be performed during the term 
of the Agreement.
    (h) PHA-owned units. For PBV projects containing PHA-owned units 
that are 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 
following options if it does not exercise its discretion at paragraphs 
(f) or (g) of this section not to use an Agreement:
    (1) Prior to execution of the Agreement, the PHA must establish a 
separate legal entity to serve as the owner. That separate legal entity 
must execute the Agreement with the PHA. The separate legal entity must 
have the legal capacity to lease units and must be one of the 
following:
    (i) A non-profit affiliate or instrumentality of the PHA;
    (ii) A limited liability corporation;
    (iii) A limited partnership;
    (iv) A corporation; or
    (v) Any other legally acceptable entity recognized under State law.
    (2) The PHA signs the HUD-prescribed PHA-owned agreement 
certification covering a PHA-owned unit, instead of executing the 
Agreement for the PHA-owned unit. By signing the PHA-owned agreement 
certification, the PHA certifies that it will fulfill all the required 
program responsibilities of the private owner under the Agreement, and 
that it will also fulfill all of the program responsibilities required 
of the PHA for the PHA-owned unit.
    (i) The PHA-owned agreement certification serves as the equivalent 
of the Agreement, and subjects the PHA, as owner, to all of the 
requirements of the Agreement contained in parts 982 and 983. Where the 
PHA has elected to use the PHA-owned agreement certification, all 
references to the Agreement throughout parts 982 and 983 must be 
interpreted to be references to the PHA-owned agreement certification.
    (ii) The PHA may not use the PHA-owned agreement 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
99. Delayed indefinitely, add Sec.  983.157 to read as follows:


Sec.  983.157  Rehabilitated housing: option for development activity 
after HAP contract execution.

    (a) PHA discretion. (1) The PHA may allow an owner of a 
rehabilitated housing project to conduct some or all of the development 
activity during the term of the HAP contract, as provided in this 
section. Under this option, the PHA and owner place all proposed PBV 
units under the HAP contract at the time

[[Page 38322]]

provided in paragraph (c) of this section and before the owner 
completes development activity. During the period of development 
activity, the PHA makes assistance payments to the owner for the 
contract units that are occupied and meet HQS.
    (2) In its Administrative Plan, the PHA must explain the 
circumstances (if any) under which the PHA will enter a PBV HAP 
contract for rehabilitated housing that allows for development activity 
on contract units. The Administrative Plan may provide for execution of 
HAP contracts in accordance with this section prior to commencement of 
development activity, following commencement of development activity, 
or both. When the PHA uses the competitive selection method at Sec.  
983.51(b)(1), the PHA's policy must be disclosed in the request for 
proposals.
    (b) Projects that have commenced rehabilitation. If the PHA allows 
for execution of a HAP contract following commencement of development 
activity, the following requirements apply to the development activity 
that occurs before HAP contract execution:
    (1) For rehabilitation undertaken under an Agreement, the 
development activity must have complied with the Agreement executed 
pursuant to Sec.  983.154, including completion of any work items and 
completion and acceptance of any units which were to be completed under 
the Agreement under Sec. Sec.  983.155 and 983.156; or
    (2) For rehabilitation undertaken without an Agreement pursuant to 
Sec.  983.154(f):
    (i) The owner of the project must be able to document its 
compliance with all applicable 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); and
    (ii) For housing subject to competitive selection, the PHA must 
confirm prior to the proposal selection date that the owner has 
complied with all applicable requirements of Sec.  983.153 from the 
date of proposal submission. For housing excepted from competitive 
selection, the PHA must confirm prior to executing the HAP contract 
that the owner has complied with all applicable requirements of Sec.  
983.153 from the date of the PHA's board resolution approving the 
project-basing of assistance at the project.
    (c) Timing of HAP contract execution. The PHA may execute the HAP 
contract for a project covered by this section after all of the 
following have occurred:
    (1) The applicable requirement of Sec.  983.56(d) (environmental 
review) has been met;
    (2) If applicable, the subsidy layering review has been completed, 
in accordance with Sec.  983.153(b)(2);
    (3) If applicable, the PHA has determined that development activity 
that has commenced met the requirements of paragraph (b) of this 
section;
    (4) The PHA has conducted an inspection (see Sec.  983.103(b)(2)) 
of all units that the owner proposes to make available for occupancy by 
an assisted family at the beginning of the HAP contract term and the 
PHA has determined that at least one of those proposed contract units, 
including items and components within the primary and secondary means 
of egress, common features, and systems equipment as described by 24 
CFR 5.703(a)(2), fully complies with HQS. The PHA may make the 
determination of compliance with HQS regardless of whether the HQS-
compliant unit is expected to undergo rehabilitation. The owner may 
make repairs to correct HQS deficiencies identified during the PHA 
inspection as part of the development activity that occurs prior to HAP 
contract execution (see paragraph (b) of this section) to make the unit 
available for occupancy at the beginning of the HAP contract term. The 
PHA must establish in its Administrative Plan the amount of time that 
may elapse between the inspection and the execution of the HAP 
contract; and
    (5) Occupants (if any) of proposed PBV units that were not 
inspected pursuant to paragraph (c)(4) of this section or that do not 
fully comply with HQS have moved and such units are vacant. These units 
must be identified as unavailable for occupancy in accordance with 
paragraph (e)(5)(ii) of this section. Any inspected unit that does not 
fully comply with HQS must undergo development activity, followed by 
inspection under Sec.  983.156(a), prior to being designated for 
occupancy under paragraph (f)(1)(ii) of this section.
    (6) Occupants (if any) who do not accept PBV assistance have moved 
and such units are vacant.
    (7) The PHA may decline to place proposed PBV units that do not 
meet the criteria in paragraphs (c)(5) or (6) of this section on the 
HAP contract in order to execute the HAP contract before the units have 
been vacated. The PHA may add the units to the HAP contract once the 
units are vacant in accordance with Sec.  983.207, except that the 
inspection requirement of Sec.  983.207 does not apply if the unit will 
initially be categorized as unavailable for occupancy as provided in 
paragraph (e)(5)(ii) of this section.
    (d) HAP contract requirements. The PHA and owner must execute the 
HAP contract (see Sec.  983.204(c)) with a rider to the HAP contract 
that will govern development activity occurring during the term of the 
HAP contract. The contents of the HAP contract apply and are 
supplemented by the additional terms and conditions provided in the 
rider during the period the rider is in effect. When executing the HAP 
contract and rider, the PHA and owner complete the information in the 
HAP contract as provided in Sec.  983.203 in addition to the 
information in the rider as provided in paragraph (e) of this section. 
The rider must be in the form required by HUD (see 24 CFR 982.162(b)). 
In the rider, 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 rider, the 
rider will terminate and the HAP contract will remain in effect. The 
PHA determination that development activity has been completed and the 
rider may be terminated is made when all work has been completed in 
accordance with the applicable requirements at Sec.  983.155 and all 
contract units fully comply with HQS, as provided in Sec.  
983.156(b)(3).
    (e) Contents of HAP contract rider. At a minimum, the rider must 
describe the following features of the housing to be rehabilitated and 
assisted under the PBV program and development activity to be 
performed:
    (1) A description of any required work item necessary to comply 
with the accessibility requirements of Sec.  983.153(e);
    (2) A description of any required work item if the requirement at 
Sec.  983.153(f) to install broadband infrastructure applies;
    (3) A description of the work to be performed under the rider, 
including the rehabilitation work write-up and, where determined 
necessary by the PHA, specifications and plans;
    (4) Any requirements the PHA elects to establish in addition to HQS 
for design, architecture, or quality. The PHA must specify the 
conditions under which it will require additional housing quality 
requirements in the Administrative Plan.
    (5) The development status of each specific contract unit. 
Specifically:
    (i) The rider must list each unit that is available for occupancy 
by an assisted family at the time the unit is placed on the HAP 
contract. Each contract unit that fully complies with HQS in accordance 
with the PHA determination

[[Page 38323]]

under paragraph (c)(4) of this section and that the owner will make 
available for occupancy by an assisted family must be initially 
categorized as available for occupancy. For each unit that is available 
for occupancy, the rider must specify whether the owner will undertake 
development activity in the unit after it is occupied by an assisted 
family. The owner may initiate the development activity in the unit 
while it is occupied, subject to paragraph (g)(6) of this section, or 
when it becomes vacant, which may change the status of the unit for 
purposes of this paragraph. The owner must promptly notify the PHA of 
any change in the status of each unit throughout the period of 
development activity, in the form and manner required by the PHA's 
Administrative Plan;
    (ii) The rider must list each unit that is unavailable for 
occupancy at the time the unit is placed on the HAP contract. Each 
contract unit that has not been inspected in accordance with paragraph 
(c)(4) of this section or that has been inspected and did not fully 
comply with HQS must be initially categorized as unavailable for 
occupancy. The owner must promptly notify the PHA of any change in the 
status of each unit throughout the period of development activity, in 
the form and manner required by the PHA's Administrative Plan; and
    (6) The deadline for completion of the work to be performed under 
the rider, which must be no more than five years from the date the HAP 
contract is effective (the five-year maximum includes any extensions 
granted by the PHA).
    (f) Contract and rider amendment. In general, the PHA and owner may 
agree to amend the contents of the rider described in paragraph (e) of 
this section by executing an addendum to the rider, so long as such 
amendments are consistent with all requirements of this part 983. 
However, the following requirements apply:
    (1) In the case of additions or substitutions of units, the 
provisions of Sec.  983.207 apply, except:
    (i) The PHA and owner must also amend the rider to update the 
information described in paragraph (e)(5) of this section;
    (ii) The units to be added must not undergo repairs or renovation 
prior to amending the PBV HAP contract to add the unit; and
    (iii) Addition of a unit is prohibited while the rider is in effect 
if such addition will increase the number of contract units from eight 
or fewer units to nine or more units.
    (2) The PHA and owner may only execute an addendum amending the 
items in paragraphs (e)(1)-(4) of this section affecting a unit prior 
to the PHA accepting the completed unit.
    (g) Occupancy of units during rehabilitation period. The following 
requirements apply with respect to contract units that are available 
for occupancy at the time that the HAP contract is executed and during 
the period of development activity covered by the rider in accordance 
with paragraph (d) of this section:
    (1) The PHA must select families as provided in Sec.  983.251 for 
PBV assistance in a contract unit that is available for occupancy. Upon 
PHA acceptance of a completed unit (see Sec.  983.156(b)(3)) that is 
vacant, the PHA may either select a family from the waiting list for 
PBV assistance in the newly completed unit or offer to transfer a 
family assisted in a different contract unit to the newly completed 
unit as described in paragraph (g)(6)(iii) of this section.
    (2) The PHA may refer a family for occupancy of a contract unit 
only if the unit fully complies with HQS as determined by the PHA 
inspection.
    (3) The PHA must provide a notice to the family upon selection 
explaining:
    (i) The expected nature and duration of the development activity at 
the project;
    (ii) That if the family accepts the unit and the owner fails to 
complete the development activity in accordance with applicable 
requirements, the PHA may terminate the HAP contract, in which case the 
family will be issued a tenant-based voucher and may be able to remain 
in the project with tenant-based assistance (see Sec.  983.206(b));
    (iii) If development activity is expected to occur in the family's 
unit per paragraph (e)(5) of this section, that the family may be 
required to vacate the unit temporarily or with continued voucher 
assistance;
    (iv) That the family may choose to decline the unit and remain on 
the waiting list; and
    (v) If applicable, in the case of an eligible in-place family, that 
the family may choose not to accept PBV assistance in the unit.
    (4) The PHA must conduct periodic and other inspections on occupied 
contract units in accordance with the requirements of Sec.  983.103(e) 
and (f) and must vigorously enforce the owner's obligation to maintain 
contract units occupied by an assisted family in accordance with the 
requirements of Sec.  983.208.
    (5) The PHA makes payments to the owner for occupied units as 
provided in Sec.  983.351.
    (6) When an owner will undertake development activity in a unit 
currently occupied by an assisted family as provided in paragraph 
(e)(5) of this section, the requirements of this paragraph (g)(6) 
govern where the family will live during the rehabilitation. For 
purposes of this paragraph, all references to the HQS applicable to the 
unit include items and components within the primary and secondary 
means of egress, common features, and systems equipment as described by 
24 CFR 5.703(a)(2).
    (i) The owner must complete the development activity without the 
family vacating the unit if the PHA reasonably expects that the owner 
can complete the development activity in a manner that:
    (A) Does not result in life-threatening deficiencies;
    (B) Does not result in any other deficiencies under the HQS that 
are not corrected within 30 days; and
    (C) Is mutually agreeable to the owner and the family;
    (ii) If the conditions for in-place development activity in 
paragraph (g)(6)(i) of this section cannot be achieved, the owner must 
temporarily relocate the family to complete the development activity 
if:
    (A) The PHA reasonably expects that the owner can complete the 
relocation and development activity within a single calendar month 
(beginning no sooner than the first day of a month and ending no later 
than the last day of the same month); and
    (B) The family can be relocated to a location and in a manner 
mutually agreeable to the owner and the family; and
    (iii) If the conditions for in-place development activity in 
paragraph (g)(6)(i) of this section and temporary relocation in 
paragraph (g)(6)(ii) of this section cannot be achieved, the following 
protocol for lease termination and relocation applies:
    (A) If there are contract units within the project that are 
designated as available for occupancy and that are vacant or expected 
to become vacant at the time of the planned lease termination, the PHA 
must refer the family to the owner for occupancy of an appropriate-size 
contract unit. If the family accepts the offered unit, the owner must 
provide the family with a reasonable time to move to the offered unit, 
must pay the family's reasonable moving expenses, must execute a lease 
with the family for the offered unit to be effective at the time of the 
family's move, and must terminate the lease for

[[Page 38324]]

the family's original unit at the time of the family's move. The owner 
must terminate the family's lease if the family rejects the offered 
unit; however, the PHA must first offer the family a different unit or 
tenant-based assistance under paragraph (g)(6)(iii)(B) of this section 
if needed as a reasonable accommodation under Section 504, the Fair 
Housing Act, or the Americans with Disabilities Act (ADA), for a 
household member who is a person with disabilities. The PHA must 
consider other family requests for a different unit or tenant-based 
assistance under paragraph (g)(6)(iii)(B) of this section;
    (B) If no other contract unit within the project is available for 
the family to lease during the period of development activity, the PHA 
must issue the family a tenant-based voucher. However, the PHA is not 
required to issue the family a voucher if the PHA has offered the 
family an alternative housing option (e.g., an assisted unit in another 
PBV project), and the family chooses to accept the alternative housing 
option instead of the voucher. The PHA may also issue the family a 
tenant-based voucher to accommodate the family's need or request as 
provided in paragraph (g)(6)(iii)(A) of this section. The PHA must 
issue the voucher no fewer than 90 calendar days prior to the planned 
lease termination. If the family is eligible and willing to request a 
voucher to move in accordance with Sec.  983.261, the PHA must issue 
the family the voucher to move under that section. If the family is not 
eligible or is unwilling to request a voucher to move under Sec.  
983.261, the PHA must remove the family's unit from the PBV HAP 
contract and issue the family its voucher to move with tenant-based 
assistance and subsequently add a unit back to the PBV HAP contract at 
the earlier of the time that the PHA has an authorized voucher unit 
available or the time that the unit is ready for occupancy. The PHA 
must extend the voucher term until the family either leases a unit with 
the tenant-based voucher or accepts a contract unit, whichever occurs 
first;
    (C) If the family moves from the project in order for the owner to 
undertake development activity in the family's unit, the PHA must offer 
the family the option to return to the project with PBV assistance, if 
the family is eligible for PBV assistance, following completion of 
development activity at the project. The PHA, or owner in the case of 
an owner-maintained waiting list, must place the family on the PBV 
waiting list with an absolute selection preference for occupancy in the 
project; and
    (D) If the family moves from the project in order for the owner to 
undertake development activity in the family's unit, the PHA must not 
refer any family for occupancy of the unit until after rehabilitation 
of the unit and PHA acceptance of the completed unit (see Sec.  
983.156(b)(3)).
    (h) Owner breach. The owner's failure to complete the development 
activity as provided in the rider is a breach of the HAP contract and 
may result in the termination of the HAP contract, in accordance with 
the following requirements:
    (1) If the owner has not completed the development activity by the 
deadline specified in the rider, which includes any extensions granted 
by the PHA, (see paragraph (e)(6) of this section), the PHA may grant 
an additional period for compliance to allow the owner more time to 
complete the development activity. The granting of any such period must 
be consistent with the PHA's Administrative Plan and must not exceed 
180 days. If the owner has not completed the development activity 
following the period for compliance, the PHA must terminate the 
contract. In addition to termination, the PHA may exercise any of its 
other rights or remedies under the HAP contract. At HUD's sole 
discretion, HUD may approve a PHA's request for an extension of the 
period for compliance beyond 180 days. In determining whether to 
approve the PHA request, HUD will consider appropriate factors, 
including any extenuating circumstances that contributed to the delay.
    (2) The owner's failure to comply with the development requirements 
of Sec.  983.153 constitutes a breach of the HAP contract (see Sec.  
983.206(c)(2)). In the event that the owner's failure constituted only 
a de minimis error in the owner's compliance with the development 
requirements of Sec.  983.153, the PHA may decide to take an action 
other than termination of the HAP contract. In all other cases, the PHA 
must terminate the HAP contract, in addition to any other rights and 
remedies the PHA chooses to exercise under the HAP contract.
    (i) PHA-owned units. For PHA-owned units, the independent entity 
must perform the inspections required under paragraphs (b)(1) and (g) 
of this section and make the determinations in paragraphs (g)(6)(i) and 
(g)(6)(ii)(A) when the owner will undertake development activity in a 
unit currently occupied by an assisted family, as applicable.

Subpart E--Housing Assistance Payments Contract

0
100. Amend Sec.  983.202 by revising paragraph (a) to read as follows:


Sec.  983.202  Purpose of HAP contract.

    (a) Requirement. The PHA must enter into a HAP contract with the 
owner. Except as provided in this paragraph, a HAP contract shall cover 
a single project. If multiple projects exist, each project shall be 
covered by a separate HAP contract. However, a PHA and owner may agree 
to place multiple projects, each consisting of a single-family 
building, under one HAP contract. The HAP contract must be in such form 
as may be prescribed by HUD.
* * * * *

0
101. Amend Sec.  983.203 by:
0
a. Revising paragraphs (f) and (h);
0
b. In paragraph (i), removing the period and adding, in its place, 
adding ``; and''; and
0
b. Adding paragraph (j).
    The revisions and addition 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;
* * * * *
    (h) The number of contract units under the increased program cap 
(as described in Sec.  983.6(d)) or excepted from the project cap (as 
described in Sec.  983.54(c)) which will be set aside for occupancy by 
families who qualify for such a unit;
* * * * *
    (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
102. Revise Sec.  983.204 to read as follows:


Sec.  983.204  Execution of HAP Contract or PHA-owned Certification.

    (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) or (c) 
as applicable. The PHA may not execute the HAP contract for any 
contract unit that does not meet the pre-HAP contract HQS requirements, 
except as provided in paragraph (c).
    (b) Existing housing. For existing housing, the HAP contract must 
be

[[Page 38325]]

executed and effective 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. For newly 
constructed or rehabilitated housing developed pursuant to Sec.  
983.152(a)(1) which will not undergo development activity after HAP 
contract execution per Sec.  983.157, the HAP contract must be executed 
and effective promptly after the PHA determines that the housing was 
completed in accordance with the applicable requirements, HUD's HQS, 
and any additional design, architecture, or quality requirements 
specified by the PHA, in accordance with Sec.  983.156(b)(1) or (c). 
For rehabilitated housing that will undergo development activity after 
HAP contract execution per Sec.  983.157, the HAP contract must be 
executed and effective promptly after the requirements of Sec.  
983.157(c) are met (all proposed PBV units are added to the contract at 
this time, including units that do not comply with HQS or that will 
undergo development activity).
    (d) Effective date of the PBV HAP contract. The effective date of 
the HAP contract must be on or after the date the HAP contract is 
executed. The HAP contract must be effective before the effective date 
of the first lease covering a contract unit occupied by an assisted 
family, and the PHA may not pay any housing assistance payment to the 
owner until the HAP contract is effective.

0
103. Delayed indefinitely, amend Sec.  983.204 by adding paragraph (e) 
to read as follows:


Sec.  983.204  Execution of HAP Contract or PHA-owned Certification.

* * * * *
    (e) PHA-owned units. For PBV projects containing PHA-owned units 
that are 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 
following options:
    (1) Prior to execution of the HAP contract, the PHA must establish 
a separate legal entity to serve as the owner. That separate legal 
entity must execute the HAP contract with the PHA. The separate legal 
entity must have the legal capacity to lease units and must be one of 
the following:
    (i) A non-profit affiliate or instrumentality of the PHA;
    (ii) A limited liability corporation;
    (iii) A limited partnership;
    (iv) A corporation; or
    (v) Any other legally acceptable entity recognized under State law.
    (2) The PHA signs the HUD-prescribed PHA-owned certification 
covering a PHA-owned unit instead of executing the HAP contract for the 
PHA-owned unit. By signing the PHA-owned 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 unit.
    (i) The PHA-owned certification serves as the equivalent of the HAP 
contract, and subjects the PHA, as owner, to all of the requirements of 
the HAP contract contained in parts 982 and 983. Where the PHA has 
elected to use the PHA-owned certification, all references to the HAP 
contract throughout parts 982 and 983 must be interpreted to be 
references to the PHA-owned certification.
    (ii) The PHA must obtain the services of an independent entity to 
perform the required PHA functions identified in Sec.  983.57(b) before 
signing the PHA-owned certification.
    (iii) 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
104. 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. The PHA and owner may agree at any time 
before expiration of the HAP contract to execute one or more extensions 
of the HAP contract term. The following conditions apply:
    (1) Each extension executed must have a term that does not exceed 
20 years;
    (2) At no time may the total remaining term of the HAP contract, 
with extensions, exceed 40 years;
    (3) Before agreeing to an extension, the PHA must determine that 
the extension is appropriate to continue providing affordable housing 
for low-income families or to expand housing opportunities; and
    (4) Each extension must be on the form and subject to the 
conditions prescribed by HUD at the time of the extension.

0
105. 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 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, termination of 
the HAP contract by agreement of PHA and owner per paragraph (e) of 
this section, 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. Unless a termination or expiration without 
extension occurs due to a determination of insufficient funding 
pursuant to paragraph (c)(1) of this section or other extraordinary 
circumstances determined by HUD, the PHA shall issue each family 
occupying a contract unit a tenant-based voucher based on the 
termination or expiration of the contract no fewer than 60 calendar 
days prior to the planned termination or expiration of the PBV HAP 
contract. However, the PHA is not required to issue the family a 
voucher if the PHA has offered the family an alternative housing option 
(e.g., an assisted unit in another PBV project), and the family chooses 
to accept the alternative housing option instead of the voucher. Such a 
family is not a new admission to the tenant-based program and shall not 
count toward the PHA's income-targeting requirements at 24 CFR 
982.201(b)(2)(i). The voucher issued to the family is the voucher 
attached to its unit under the expiring or terminating PBV contract. 
Consequently, if the family vacates the

[[Page 38326]]

contract unit following the issuance of the tenant-based voucher and 
prior to the contract termination or expiration date, the PHA must 
remove the unit from the PBV HAP contract at the time the family 
vacates the unit. The PBV HAP contract must provide that, if the units 
continue to be used for rental housing upon termination or expiration 
without extension of a PBV HAP contract, each assisted family may elect 
to use its tenant-based assistance to remain in the same project, 
subject to the following:
    (1) The unit must comply with HUD's HQS;
    (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 24 CFR 982.508 regarding maximum family share at 
initial occupancy shall not apply); and
    (4) The owner may not refuse to initially lease a unit in the 
project to a family that elects to use their tenant-based assistance to 
remain in the same project, except where the owner will use the unit 
for a purpose other than a residential rental unit. The owner may not 
later terminate the tenancy of such a family, except for the following 
grounds:
    (i) The grounds in 24 CFR 982.310 of this title, except paragraphs 
24 CFR 982.310(d)(1)(iii) and (iv);
    (ii) The owner's desire to use the unit for a purpose other than a 
residential rental unit; and
    (iii) The owner's desire to renovate the unit, subject to the 
following:
    (A) The owner must consider whether a reasonable alternative to 
terminating the lease exists. If a reasonable alternative exists, the 
owner must not terminate the lease. The owner must consider the 
following alternatives:
    (1) Completing renovations without the family vacating the unit, if 
the renovations can be completed in a manner that does not result in 
life-threatening conditions, does not result in deficiencies under HQS 
that are not corrected within 30 days, and is mutually agreeable to the 
owner and the family; and
    (2) Temporarily relocating the family to complete the renovations, 
if the relocation and renovations can be completed within a single 
calendar month (beginning no sooner than the first day of a month and 
ending no later than the last day of the same month) and the family can 
be relocated to a location and in a manner mutually agreeable to the 
owner and the family;
    (B) If the owner terminates the lease for renovation, the owner 
must make every reasonable effort to make available and lease the 
family another unit within the project that meets the tenant-based 
voucher program requirements; and
    (C) If no other unit within the project is available for the family 
to lease during the renovation period or the family chooses to move 
from the project during the renovation period, the owner must make 
every reasonable effort to make available and lease the family a unit 
within the project upon completion of renovations.
    (c) Termination by PHA. (1) The HAP contract must provide that the 
PHA may terminate the contract for insufficient funding, subject to HUD 
requirements.
    (i) Consistent with the policies in the PHA's Administrative Plan, 
the PHA has the option of terminating a PBV HAP contract based on 
``insufficient funding'' only if:
    (A) The PHA determines in accordance with HUD requirements that it 
lacks sufficient HAP funding (including HAP reserves) to continue to 
make housing assistance payments for all voucher units currently under 
a HAP contract;
    (B) The PHA has taken cost-saving measures specified by HUD;
    (C) The PHA notifies HUD of its determination and provides the 
information required by HUD; and
    (D) HUD determines that the PHA lacks sufficient funding and 
notifies the PHA it may terminate HAP contracts as a result.
    (2) If the PHA determines that the owner has breached the HAP 
contract, the PHA may exercise any of its rights or remedies under the 
HAP contract, including but not limited to contract termination. The 
provisions of Sec.  983.208 apply for HAP contract breaches involving 
failure to comply with HQS. For any other contract termination due to 
breach, paragraph (b) of this section on provision of tenant-based 
assistance applies.
    (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 no fewer than 90 calendar days prior to the planned 
termination, 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.
    (e) Termination by agreement of PHA and owner. The PHA and owner 
may agree to terminate the HAP contract prior to the end of the term. 
The owner's notice in paragraph (a) of this section is required prior 
to termination, and the families must be provided tenant-based 
assistance and may elect to remain in the project in accordance with 
paragraph (b) of this section.

0
106. 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, the PHA and owner may execute an amendment to the HAP contract 
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 (the 
unit must comply with HQS to be substituted) and must determine the 
reasonable rent for such unit (the rent to owner must be reasonable for 
the unit to be substituted). The proposed substituted unit may be 
vacant or, subject to the requirements of paragraph (c) of this 
section, it may be occupied. The proposed substituted unit may undergo 
repairs or renovation prior to amending the PBV HAP contract to 
substitute the unit, as provided in paragraph (d) of this section. The 
proposed substituted unit must have existed at the time described in 
paragraph (e) of this section.
    (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, the PHA and owner may execute an amendment to the HAP 
contract to add PBV units in the same project to the contract, without 
a new proposal selection. Prior to such addition, the PHA must inspect 
the proposed added unit (the unit must comply with HQS to be added) and 
must determine the reasonable rent for such unit (the rent to owner 
must be reasonable for the unit to be added).
    (1) Added units that qualify for an exclusion from the program cap 
(as described in Sec.  983.59) or an exception to or exclusion from the 
project cap (as described in Sec.  983.54(c) and Sec.  983.59, 
respectively) will not count toward such cap(s).

[[Page 38327]]

    (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) The added unit may be vacant or, subject to the requirements of 
paragraph (c) of this section, it may be occupied.
    (4) The unit may undergo repairs or renovation prior to amending 
the PBV HAP contract to add the unit, as provided in paragraph (d) of 
this section.
    (5) The added unit must have existed at the time described in 
paragraph (e) of this section.
    (c) Substituting or adding occupied units. The PHA may place 
occupied units on the HAP contract under paragraphs (a) or (b) of this 
section, subject to the following:
    (1) The family occupying the unit must be eligible for assistance 
per Sec. Sec.  983.53(a)(3) and 983.251(a);
    (2) The unit must be appropriate for the size of the family 
occupying the unit under the PHA's subsidy standards;
    (3) The family must be selected from the waiting list in accordance 
with the applicable selection policies; and
    (4) The unit may be occupied by a family who was assisted with a 
tenant-based voucher immediately prior to the unit being placed on the 
PBV HAP contract. The tenant-based HAP contract for the unit must 
terminate before the unit may be placed under the PBV HAP contract. The 
family occupying the unit is not a new admission to the voucher 
program. The option described in this paragraph (c)(4) is subject to 
the following conditions:
    (i) If the family is in the initial term of the tenant-based lease, 
the family agreed to mutually terminate the tenant-based lease with the 
owner and enter into a PBV lease.
    (ii) If the initial term of the tenant-based lease has passed or 
the end of that term coincides with the time at which the unit will be 
placed on the PBV HAP contract, upon the owner's decision not to renew 
the tenant-based lease or to terminate the tenant-based lease in 
accordance with 24 CFR 982.308 or 982.310, respectively, the family 
agreed to relinquish the tenant-based voucher and enter into a PBV 
lease.
    (d) Substituting or adding units that underwent repairs or 
renovation. 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 or substitute 
the unit, except in the case of a contract subject to a rider under the 
rehabilitated housing option for development activity after HAP 
contract execution in accordance with Sec.  983.157. If such repairs or 
renovation constitute substantial improvement as defined in Sec.  
983.3, then:
    (1) The substantial improvement must not proceed prior to the first 
two years of the effective date of the HAP contract, except in 
extraordinary circumstances (e.g., the units were damaged by fire, 
natural disaster, etc.).
    (2) The substantial improvement 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).
    (3) 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 part 8, 
including 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 
substantial improvement.
    (4) Any substantial improvement that constitutes substantial 
rehabilitation as defined by 24 CFR 5.100 of a building with more than 
four rental units and where the proposal or project selection date or 
the start of the substantial improvement 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 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.
    (5) An owner or project principal who is on the U.S. General 
Services Administration list of parties excluded from Federal 
procurement and non-procurement programs, or who is debarred, suspended 
subject to a limited denial of participation, or otherwise excluded 
under 2 CFR part 2424, may not participate in substantial improvement. 
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 and are not 
debarred, suspended subject to a limited denial of participation, or 
otherwise excluded under 2 CFR part 2424.
    (6) An owner must disclose any possible conflict of interest that 
would be a violation of the HAP contract or HUD regulations, in 
accordance with Sec.  982.161 of this title.
    (7) The requirements for additional assistance after HAP contract 
at Sec.  983.11(d) apply.
    (8) Section 983.155, Completion of work, applies.
    (9) Paragraphs (a), (b)(4), and (d) of Sec.  983.156, PHA 
acceptance of completed units, apply.
    (e) Restriction on substituting or adding newly built units. Units 
may only be added to the HAP contract or substituted for a previously 
covered contract unit if one of the following conditions applies:
    (1) The units to be added or substituted existed at the time of HAP 
contract execution;
    (2) In the case of a project completed in stages, the units to be 
added or substituted existed at the time of PHA acceptance of the last 
completed unit(s) per Sec.  983.156(c); or
    (3) A unit, office space, or common area within the interior of a 
building containing contract units existed at the time described in 
paragraph (e)(1) or (2) of this section, as applicable, and is 
reconfigured without impacting the building envelope, subject to 
paragraph (d) of this section, into one or more units to be added or 
substituted.
    (f) Administrative Plan requirement. The PHA must describe in the 
Administrative Plan the circumstances under which it will add or 
substitute contract units, and how those circumstances support the 
goals of the PBV program.
    (g) 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.
    (h) Amendment to merge or bifurcate HAP contracts. HUD may 
establish a

[[Page 38328]]

process allowing the PHA and owner to agree to merge two or more HAP 
contracts for PBV assistance on the same project, or to bifurcate a HAP 
contract, by Federal Register notice subject to public comment.

0
107. Revise and republish 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 the HQS, 
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 contract term with 
additional housing quality requirements specified by the PHA (in 
addition to, but not in place of, compliance with HUD's HQS). 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)). The PHA must specify the conditions under which 
it will require additional housing quality requirements in the 
Administrative Plan.
    (b) Enforcement of HQS. (1) The PHA must vigorously enforce the 
owner's obligation to maintain contract units in accordance with HUD's 
HQS. If the owner fails to maintain the dwelling unit in accordance 
with HQS, the PHA must take enforcement action in accordance with this 
section.
    (2) The unit is in noncompliance with HQS if:
    (i) The PHA or other inspector authorized by the State or local 
government determines the unit has HQS deficiencies based upon an 
inspection;
    (ii) The agency or inspector notifies the owner in writing of the 
unit HQS deficiencies; and
    (iii) The unit HQS deficiencies are not remedied within the 
following timeframes:
    (A) For life-threatening deficiencies, the owner must correct the 
deficiency within 24 hours of notification.
    (B) For other deficiencies, the owner must correct the deficiency 
within 30 calendar days of notification (or any reasonable PHA-approved 
extension).
    (3) In the case of an HQS deficiency that the PHA determines is 
caused by the tenant, any member of the household, or any guest or 
other person under the tenant's control, other than any damage 
resulting from ordinary use, the PHA may waive the owner's 
responsibility to remedy the violation. Housing assistance payments to 
the owner may not be withheld or abated if the owner responsibility has 
been waived. However, the PHA may terminate assistance to a family 
because of an HQS breach beyond damage resulting from ordinary use 
caused by any member of the household or any guest or other person 
under the tenant's control, which may result in removing the unit from 
the HAP contract.
    (4) In the case of an HQS deficiency that is caused by fire, 
natural disaster, or similar extraordinary circumstances, the PHA may 
permit the owner to undertake substantial improvement in accordance 
with Sec.  983.212. However, so long as the contract unit with 
deficiencies is occupied, the PHA must withhold or abate housing 
assistance payments and remove units from or terminate the HAP contract 
as described in this section.
    (5) In the case of a project that is undergoing development 
activity after HAP contract execution per Sec.  983.157, the remedies 
of paragraph (d) of this section do not apply to units designated as 
unavailable for occupancy during the period of development activity in 
accordance with the rider. However, in the case of any contract unit 
with deficiencies that is occupied, the PHA must withhold or abate 
housing assistance payments and remove units from or terminate the HAP 
contract as described in this section.
    (c) Family obligation. (1) The family may be held responsible for a 
breach of the HQS that is caused by any of the following:
    (i) The family fails to pay for any utilities that the owner is not 
required to pay for, but which are to be paid by the tenant;
    (ii) The family fails to provide and maintain any appliances that 
the owner is not required to provide, but which are to be provided by 
the tenant; or
    (iii) Any member of the household or guest damages the dwelling 
unit or premises (damages beyond ordinary wear and tear).
    (2) If the PHA has waived the owner's responsibility to remedy the 
violation in accordance with paragraph (b)(3) of this section, the 
following applies:
    (i) If the HQS breach caused by the family is life-threatening, the 
family must take all steps permissible under the lease and State and 
local law to ensure the deficiency is corrected within 24 hours of 
notification.
    (ii) For other family-caused deficiencies, the family must take all 
steps permissible under the lease and State and local law to ensure the 
deficiency is corrected within 30 calendar days of notification (or any 
PHA-approved extension).
    (3) If the family has caused a breach of the HQS, the PHA must take 
prompt and vigorous action to enforce the family obligations. The PHA 
may terminate assistance for the family in accordance with 24 CFR 
982.552.
    (d) PHA remedies. These remedies apply when HQS deficiencies are 
identified as the result of an inspection other than a pre-selection, 
initial, or turnover inspection. (See Sec.  983.103 generally, and see 
Sec.  983.103(c) in particular for PHA enforcement actions related to 
the initial HQS inspection for existing housing). The PHA must identify 
in its Administrative Plan the conditions under which it will withhold 
HAP and the conditions under which it will abate HAP or terminate the 
HAP contract for units other than the unit with HQS deficiencies.
    (1) A PHA may withhold HAP for an individual unit that has HQS 
deficiencies once the PHA has notified the owner in writing of the 
deficiencies. If the unit is brought into compliance during the 
applicable cure period (within 24 hours from notification for life-
threatening deficiencies and within 30 days from notification (or other 
reasonable period established by the PHA for non-life-threatening 
deficiencies), the PHA:
    (i) Must resume assistance payments; and
    (ii) Must provide assistance payments to cover the time period for 
which the assistance payments were withheld.
    (2)(i) The PHA must abate the HAP, including amounts that had been 
withheld, for the PBV unit with deficiencies if the owner fails to make 
the repairs within the applicable cure period (within 24 hours from 
notification for life-threatening deficiencies and within 30 days from 
notification (or other reasonable period established by the PHA) for 
non-life-threatening deficiencies).
    (ii) The PHA may choose to abate payments for all units covered by 
the HAP contract due to a contract unit's noncompliance with the HQS, 
even if some of the contract units continue to meet HQS.
    (iii) If a PHA abates the HAP for a unit, the PHA must notify the 
family and the owner that it is abating payments and that if the unit 
with deficiencies 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

[[Page 38329]]

contract or remove the unit with deficiencies from the HAP contract, 
and any family residing in a unit that does not comply with HQS will 
have to move if the family wishes to receive continued 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. The PHA must promptly issue the family a tenant-based 
voucher to move.
    (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 if the unit is still occupied by an assisted family. 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. The PHA must issue the 
family whose unit will be removed or all families residing in contract 
units, if the PHA is terminating the HAP contract, a tenant-based 
voucher to move at least 30 days prior to the removal of the unit from 
the HAP contract or termination of the HAP contract. A family may elect 
to remain in the project in accordance with Sec.  983.206(b) if the 
project contains a unit that meets the requirements of that section, 
with priority given to families who will remain in the same unit if 
there are insufficient units available to accommodate all families that 
wish to remain.
    (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 (d) 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 
or removal of the unit from the HAP contract to lease a unit with 
tenant-based assistance.
    (ii) If the family is unable to lease a new unit within the period 
provided by the PHA under paragraph (d)(6)(i) of this section and the 
PHA owns or operates public housing, the PHA must offer, and, if 
accepted, provide the family a selection preference for an appropriate-
size public housing unit that first becomes available for occupancy 
after the time period expires.
    (iii) PHAs may assist families relocating under this paragraph (d) 
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, temporary 
housing costs, or other reasonable moving costs as determined by the 
PHA based on their locality. PHAs must assist families with 
disabilities in locating available accessible units in accordance with 
24 CFR 8.28(a)(3). If the PHA uses the withheld and abated assistance 
payments to assist with the family's relocation costs, the PHA must 
provide security deposit assistance to the family as necessary. 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.
    (e) 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.
    (f) Applicability. This section is applicable to HAP contracts 
executed on or after or extended on or after June 6, 2024. For purposes 
of this paragraph, a HAP contract is extended the earlier of the 
effective date of the next extension period or the date the PHA and 
owner agree to the next extension. For all other HAP contracts, Sec.  
983.208 as in effect on June 5, 2024 remains applicable. However, the 
PHA and owner may agree to apply this section to a HAP contract 
executed before June 6, 2024 prior to extension.

0
108. Amend Sec.  983.210 by revising paragraphs (a), (c), (d) and (e), 
and removing paragraph (j), to read as follows:


Sec.  983.210  Owner certification.

* * * * *
    (a) The owner is maintaining the premises and all contract units in 
accordance with HUD's HQS under the requirements of this part 983.
* * * * *
    (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.
    (d) To the best of the owner's knowledge, the members of the family 
reside in each contract unit for which the owner is receiving housing 
assistance payments, and the unit is the family's only residence, 
except as provided in Sec. Sec.  983.157(g)(6)(ii) and 
983.212(a)(3)(ii).
    (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 Americans with Disabilities Act (ADA), for a 
household member who is a person with disabilities.
* * * * *

0
109. Revise Sec.  983.211 to read as follows:


Sec.  983.211  Removal of unit from HAP contract based on a family's 
increased income.

    (a) Removal of a unit based on a family's increased income. Units 
occupied by families whose income has increased during their tenancy 
resulting in the total tenant payment equaling the gross rent shall be 
removed from the HAP contract 180 days following the last housing 
assistance payment on behalf of the family.
    (b) Reinstatement or substitution of HAP contracts. If the project 
is fully assisted, a PHA may reinstate the unit removed under paragraph 
(a) of this section to the HAP contract after the ineligible family 
vacates the property. If the project is partially assisted, a PHA may 
substitute a different unit for the unit removed under paragraph (a) of 
this section to the HAP contract when the first eligible substitute 
becomes available. A reinstatement or substitution of units under the 
HAP contract, in accordance with this paragraph, must be permissible 
under Sec.  983.207(b) or (a), respectively.
    (c) Additional requirements. The anniversary and expirations dates 
of the reinstated or substituted unit must be the same as all other 
units under the HAP contract (i.e., the annual anniversary and 
expiration dates for the first contract units placed under the HAP 
contract). Families must be selected in accordance with program 
requirements under Sec.  983.251 of this part.

0
110. Add Sec.  983.212 to subpart E to read as follows:

[[Page 38330]]

Sec.  983.212  Substantial improvement to units under a HAP contract.

    (a) Substantial improvement to units under a HAP contract. The 
owner may undertake substantial improvement on a unit currently under a 
HAP contract, except a contract subject to a rider under the 
rehabilitated housing option for development activity after HAP 
contract execution in accordance with Sec.  983.157, if approved to do 
so by the PHA. The owner may request PHA approval no earlier than the 
effective date of the HAP contract. The following conditions apply:
    (1) The PHA may approve the substantial improvement only if one of 
the following conditions apply:
    (i) The unit has been damaged by fire or natural disaster, or other 
extraordinary circumstances exist which require a unit previously 
compliant with HQS to urgently undergo substantial improvement. For 
this purpose, ``extraordinary circumstances'' are unforeseen events 
that are not the fault of the owner. The PHA may provide approval for 
substantial improvement resulting from the damage or extraordinary 
circumstances described in this paragraph (a)(1)(i) after the owner 
submits the request.
    (ii) The owner requests to engage in substantial improvement that 
will commence following the first two years of the effective date of 
the HAP contract. The PHA may provide approval for substantial 
improvement occurring as described in this paragraph (a)(1)(ii) after 
the owner submits the request, but no earlier than twenty-one months 
after the effective date of the HAP contract.
    (2) The owner's request must include a description of the 
substantial improvement proposed to be undertaken and the length of 
time, if any, the owner anticipates that the unit, including items and 
components within the primary and secondary means of egress, common 
features, and systems equipment as described by 24 CFR 5.703(a)(2), 
will not meet HQS. The PHA must not approve as substantial improvement, 
under this section, an owner's request to demolish a building 
containing contract units and newly construct replacement units (see 
requirements for contract termination at Sec.  983.206 and requirements 
for newly constructed housing in this part 983).
    (3) If the unit is occupied and will not meet HQS during any part 
of the period of the substantial improvement, the owner's request must 
include a description of the owner's plan to house the family during 
the period the unit will not meet HQS. The PHA must not approve the 
substantial improvement unless the owner's plan complies with one of 
the following requirements:
    (i) The owner must complete the substantial improvement without the 
family vacating the unit if the PHA reasonably expects that the owner 
can complete the substantial improvement in a manner that:
    (A) Does not result in life-threatening deficiencies;
    (B) Does not result in any other deficiencies under the HQS that 
are not corrected within 30 days; and
    (C) Is mutually agreeable to the owner and the family;
    (ii) If the conditions for in-place substantial improvement in 
paragraph (a)(3)(i) of this section cannot be achieved, the owner must 
temporarily relocate the family to complete the substantial improvement 
if:
    (A) The PHA reasonably expects that the owner can complete the 
relocation and substantial improvement within a single calendar month 
(beginning no sooner than the first day of a month and ending no later 
than the last day of the same month); and
    (B) The family can be relocated to a location and in a manner 
mutually agreeable to the owner and the family; and
    (iii) If the conditions for in-place substantial improvement in 
paragraph (a)(3)(i) of this section and temporary relocation in 
paragraph (a)(3)(ii) of this section cannot be achieved, the following 
protocol for lease termination and relocation applies:
    (A) If there are contract units within the project will meet HQS 
during the period of substantial improvement and that are vacant or 
expected to become vacant at the time of the planned lease termination, 
the PHA must refer the family to the owner for occupancy of an 
appropriate-size contract unit. If the family accepts the offered unit, 
the owner must provide the family with a reasonable time to move to the 
offered unit, must pay the family's reasonable moving expenses, must 
execute a lease with the family for the offered unit to be effective at 
the time of the family's move, and must terminate the lease for the 
family's original unit at the time of the family's move. The owner must 
terminate the family's lease if the family rejects the offered unit; 
however, the PHA must first offer the family a different unit or 
tenant-based assistance under paragraph (a)(3)(iii)(B) of this section 
if needed as a reasonable accommodation under Section 504, the Fair 
Housing Act, or the Americans with Disabilities Act (ADA), for a 
household member who is a person with disabilities. The PHA must 
consider other family requests for a different unit or tenant-based 
assistance under paragraph (a)(3)(iii)(B) of this section;
    (B) If no other contract unit within the project is available for 
the family to lease during the period of substantial improvement, the 
PHA must issue the family a tenant-based voucher. However, the PHA is 
not required to issue the family a voucher if the PHA has offered the 
family an alternative housing option (e.g., an assisted unit in another 
PBV project), and the family chooses to accept the alternative housing 
option instead of the voucher. The PHA may also issue the family a 
tenant-based voucher to accommodate the family's need or request as 
provided in paragraph (a)(3)(iii)(A) of this section. The PHA must 
issue the voucher no fewer than 90 calendar days prior to the planned 
lease termination in the case of substantial improvement pursuant to 
paragraph (a)(1)(ii) of this section. The PHA must issue the voucher as 
soon as practicable in the case of substantial improvement pursuant to 
paragraph (a)(1)(i) of this section. If the family is eligible and 
willing to request a voucher to move in accordance with Sec.  983.261, 
the PHA must issue the family the voucher to move under that section. 
If the family is not eligible or is unwilling to request a voucher to 
move under Sec.  983.261, the PHA must remove the family's unit from 
the PBV HAP contract and issue the family its voucher to move with 
tenant-based assistance and subsequently add a unit back to the PBV HAP 
contract at such time that the unit is ready for occupancy. The PHA 
must extend the voucher term until the family either leases a unit with 
the tenant-based voucher or accepts a contract unit, whichever occurs 
first; and
    (C) If the family moves from the project during the period of 
substantial improvement, the PHA must offer the family the option to 
return to the project with PBV assistance, if the family is eligible 
for PBV assistance, following completion of substantial improvement at 
the project. The PHA, or owner in the case of an absolute selection 
preference for occupancy in the project.
    (4) The PHA must abate housing assistance payments for a unit 
beginning at the time the unit has any deficiency under HUD's HQS 
during the period of substantial improvement. The timing for the PHA to 
begin withholding and abatement specified in Sec.  983.208(d) does not 
apply to deficiencies occurring during the period of substantial 
improvement. When all deficiencies in the unit are corrected, the PHA 
must recommence payments to the owner if the unit is still occupied by 
an assisted family, subject to paragraphs (a)(5) and

[[Page 38331]]

(b)(1) of this section. Additionally, the PHA must not pay vacancy 
payments during the period of substantial improvement.
    (5) The terms of the PHA approval must be recorded in an addendum 
to the HAP contract. The PHA may choose to temporarily remove vacant 
units from the PBV HAP contract during the time the units will not meet 
HQS during the substantial improvement. If the PHA temporarily removes 
a unit, the PHA reinstates the unit in accordance with Sec.  
983.207(b). Owner failure to complete the substantial improvement as 
approved shall be a breach of the HAP contract and the PHA may exercise 
any of its rights or remedies under the HAP contract, including but not 
limited to contract termination pursuant to Sec.  983.206(c)(2).
    (b) Applicable requirements. (1) Substantial improvement undertaken 
on units that are currently under a HAP contract 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).
    (2) 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 part 8, 
including 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 
substantial improvement undertaken on units that are currently under a 
HAP contract.
    (3) Any substantial improvement undertaken on units that are 
currently under a HAP contract that constitutes substantial 
rehabilitation as defined by 24 CFR 5.100 of a building with more than 
four rental units and where the proposal or project selection date or 
the start of the substantial improvement 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 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.
    (4) An owner or project principal who is on the U.S. General 
Services Administration list of parties excluded from Federal 
procurement and non-procurement programs, or who is debarred, suspended 
subject to a limited denial of participation, or otherwise excluded 
under 2 CFR part 2424, may not participate in substantial improvement 
undertaken on units subject to a HAP contract. 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 and are not debarred, suspended subject 
to a limited denial of participation, or otherwise excluded under 2 CFR 
part 2424.
    (5) An owner must disclose any possible conflict of interest that 
would be a violation of the HAP contract or HUD regulations, in 
accordance with Sec.  982.161 of this title.
    (6) The requirements for additional assistance after HAP contract 
at Sec.  983.11(d) apply to substantial improvement undertaken on units 
that are currently under a HAP contract.
    (7) Section 983.155, Completion of work, applies to substantial 
improvement undertaken on units that are currently under a HAP 
contract.
    (8) Section 983.156(a), Inspection of units, and (d), PHA-owned 
units, apply to substantial improvement undertaken on units that are 
currently under a HAP contract.
    (c) PHA-owned units. For PHA-owned units, the independent entity 
must determine whether to approve the PHA proposal to undertake 
substantial improvement as provided in paragraph (a) of this section, 
including making the determinations in paragraphs (a)(3)(i) and 
(a)(3)(ii)(A) when the owner will undertake substantial improvement in 
a unit currently occupied by an assisted family, as applicable (see 
Sec.  983.57(b)(4)). The independent entity must approve the proposal 
if:
    (1) The proposed substantial improvement meets one of the 
conditions of paragraph (a)(1) of this section;
    (2) The description of the substantial improvement does not include 
plans to demolish a building containing contract units and newly 
construct replacement units; and
    (3) The plan to house each family during the period that family's 
unit will not meet HQS complies with the requirements of paragraph 
(a)(3).

Subpart F--Occupancy

0
111. Revise and republish 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 voucher participants (determined eligible at 
original admission to the voucher program), the PHA may only select 
families determined eligible for admission at commencement of PBV 
assistance, using information received and verified by the PHA within a 
period of 60 days before commencement of PBV assistance. For all 
families, the PHA must determine the total tenant payment for the 
family is less than the gross rent, such that the unit will be eligible 
for a monthly HAP.
    (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 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 Americans with Disabilities Act (ADA), for a household member who 
is a person with disabilities.
    (b) Protection of in-place families. (1) To minimize displacement 
of in-place families, if an in-place family is determined to be 
eligible prior to placement of the family's unit on the HAP contract, 
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 the PHA's waiting list for PBV assistance is not a 
project-specific waiting list, the PHA must refer the family to the 
applicable project owner for an appropriate-size PBV unit in the 
specific project.
    (2) If the in-place family is a tenant-based voucher participant, 
program eligibility is not re-determined. However, the PHA must 
determine that the total tenant payment for the family is less than the 
gross rent for the unit, such that the unit will be eligible for a

[[Page 38332]]

monthly HAP, and 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 lease under the tenant-based 
tenancy, an in-place tenant-based voucher family may agree, but is not 
required, to mutually terminate the lease with the owner and enter into 
a lease and tenancy under the PBV program. If the family chooses to 
continue the tenant-based assisted tenancy, 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 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) If, after the initial term, the owner chooses not to renew the 
lease or terminates the lease for other good cause (as defined in 24 
CFR 982.310(d)) to end the tenant-based assisted tenancy, the family 
would be required to move with continued tenant-based assistance or 
relinquish the tenant-based voucher and enter into a new lease to 
receive PBV assistance in order to remain in the unit.
    (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 must identify in the Administrative Plan which of the 
following options it will use 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 the option in paragraph 
(c)(2)(i) or (ii) of this section. The PHA must specify the name of the 
PBV project in the Administrative Plan. The PHA may permit the owner to 
maintain such waiting lists (see paragraph (c)(7) of this section for 
more information).
    (3) For any of the options under paragraph (c)(2) of this section, 
the PHA may establish in its Administrative Plan any preferences for 
occupancy of particular units including the name of the project(s) and 
the specific preferences that are to be used by project. Criteria for 
occupancy of units (e.g., elderly families) may also be established; 
however, selection of families must be done through an admissions 
preference.
    (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 
establish in their Administrative Plan that owners will maintain such 
waiting lists. PHAs may choose to use owner-maintained PBV waiting 
lists for specific owners or projects. 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. PHAs 
must identify in their Administrative Plans 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 waiting list 
policy (including any preferences). Where a PHA allows for owner-
maintained waiting lists, all the following apply:
    (i) The owner must develop and submit a written owner waiting list 
policy to the PHA for approval. The owner waiting list policy 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 owner waiting 
list policy in accordance with the process established in the PHA's 
Administrative Plan. The owner's waiting list policy 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 waiting 
list policy. Each project may have a different set of preferences. 
Preferences must be consistent with the PHA Plan and listed in the 
owner's waiting list policy.
    (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 24 CFR 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 24 CFR 982.206 and the owner waiting list policy.
    (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. In such a case, the owner is responsible 
to provide the notice at 24 CFR 982.554(a) of this title. 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.

[[Page 38333]]

    (ix) All HCV waiting list administration requirements that apply to 
the PBV program (24 CFR part 982, subpart E, other than 24 CFR 
982.201(e), 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 but not limited to 
nondiscrimination and equal opportunity requirements under the 
authorities cited at 24 CFR 5.105(a). The owner is responsible for 
maintaining complete and accurate records as described in 24 CFR 
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 24 CFR 982.158(c). HUD may undertake 
investigation to determine whether the PHA or owner is in violation of 
authorities and, if unable to reach a voluntary resolution to correct 
the violation, take an 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, 8.27, and 100.202). 
Also see Sec.  983.260. 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) 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 24 CFR 982.207(b)(3) continues to apply.
    (2) Families must not be required to accept the particular services 
offered at the project nor shall families be required to provide their 
own equivalent services if they decline the project's services.
    (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 without good 
cause 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 without good cause or the owner's 
rejection of the family. The family's position on any other project-
specific PBV waiting list is not affected.
    (iii) The PHA must define ``good cause'' for purposes of paragraphs 
(e)(2)(i) and (ii) of this section in its Administrative Plan. The 
PHA's definition of good cause must include, at minimum, that:
    (A) The family determines the unit is not accessible to a household 
member with a disability or otherwise does not meet the member's 
disability-related needs;
    (B) The unit has HQS deficiencies;
    (C) The family is unable to accept the offer due to circumstances 
beyond the family's control (such as hospitalization, temporary 
economic hardship, or natural disaster); and
    (D) The family determines the unit presents a health or safety risk 
to a household member who is or has been a victim of domestic violence, 
dating violence, sexual assault, or stalking, as provided in part 5, 
subpart L of this title.
    (3) None of the following actions may be taken against an applicant 
solely because the applicant 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
112. Revise and republish 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.
    (1) The briefing must include information on the following 
subjects:
    (i) A description of how the program works;
    (ii) Family and owner responsibilities; and
    (iii) Family right to move.
    (2) The PHA must take appropriate steps to ensure effective 
communication in accordance with 24 CFR 8.6 and 28 CFR part 35, subpart 
E, and must provide information on the reasonable accommodation 
process.
    (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; and
    (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 a reasonable accommodation or modification under Section 504, 
the Fair Housing Act, and the Americans with Disabilities Act;
    (4) PHA subsidy standards, including when the PHA will consider 
granting exceptions to the standards as allowed by 24 CFR 
982.402(b)(8), and when exceptions are required as a reasonable 
accommodation for a person with disabilities under Section 504, the 
Fair Housing Act, or the Americans with Disabilities Act; and
    (5) Family right to move.

[[Page 38334]]

    (c) Statement of family responsibility. The PHA and family must 
sign the statement of family responsibility.
    (d) Providing information for persons with limited English 
proficiency. The PHA must take reasonable steps to ensure meaningful 
access by persons with limited English proficiency in accordance with 
obligations and procedures contained in Title VI of the Civil Rights 
Act of 1964, and HUD's implementing regulation at 24 CFR part 1., 
Executive Order 13166, and HUD's Final Guidance to Federal Financial 
Assistance Recipients Regarding Title VI Prohibition Against National 
Origin Discrimination Affecting Limited English Proficient Persons (72 
FR 2732) or successor authority.

0
113. Amend Sec.  983.253 by revising 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
114. 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 in a contract unit. However, contract units in a 
rehabilitated housing project undergoing development activity after HAP 
contract execution that are not available for occupancy in accordance 
with Sec.  983.157(e)(5) are not subject to this requirement.
    (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 make such final eligibility determination within 30 calendar 
days.
    (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 promptly refer a 
sufficient number of families for the owner to fill such vacancies 
within 30 calendar days.
    (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
115. Amend Sec.  983.255 by revising paragraphs (a)(2) and (c)(4) to 
read as follows:


Sec.  983.255  Tenant screening.

    (a) * * *
    (2) The PHA must conduct tenant screening of applicants in 
accordance with policies stated in the PHA Administrative Plan.
    (c) * * *
    (4) The PHA policy must be stated in the Administrative Plan and 
provide that the PHA will give the same types of information to all 
owners.
* * * * *

0
116. Revise Sec.  983.257 to read as follows:


Sec.  983.257  Owner termination of tenancy and eviction.

    24 CFR 982.310 of this title applies with the exception that 24 CFR 
982.310(d)(1)(iii) and (iv) does 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.) In addition, the owner may terminate the 
tenancy in accordance with the requirements related to lease 
terminations for development activity on units under a HAP contract as 
provided in Sec.  983.157(g)(6)(iii) and for substantial improvement to 
units under a HAP contract as provided in Sec.  983.212(a)(3)(iii). 24 
CFR 5.858 through 5.861 on eviction for drug and alcohol abuse and 24 
CFR part 5, subpart L (Protection for Victims of Domestic Violence, 
Dating Violence, Sexual Assault, or Stalking) apply to the PBV program.

0
117. Amend Sec.  983.259 by:
0
a. Adding a heading to paragraph (a);
0
b. Revising paragraph (b); and
0
c. Adding headings to paragraphs (c) through (e).
    The additions and revisions read as follows:


Sec.  983.259  Security deposit: Amounts owed by tenant.

    (a) Security deposit permitted. * * *
    (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. * * *
    (d) Security deposit reimbursement to owner. * * *
    (e) Insufficiency of security deposit. * * *

0
118. 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:
    (i) Within 30 days from the PHA's determination, notify the family 
and the owner of this determination; and
    (ii) Within 60 days from the PHA's determination, offer the family 
continued housing assistance, pursuant to paragraph (b) of this 
section.
    (b) PHA offer of continued assistance. (1) The PHA policy on 
continued housing assistance must be stated in the Administrative Plan 
and may be in the form of:
    (i) PBV assistance in an appropriate-size unit (in the same project 
or in another project);
    (ii) Other project-based housing assistance (e.g., by occupancy of 
a public housing unit);
    (iii) Tenant-based rental assistance under the voucher program; or
    (iv) Other comparable tenant-based rental assistance.
    (2) If no continued housing assistance as described in paragraph 
(b)(1) of this section is available, the PHA must remove the wrong-size 
or accessible unit from the HAP contract to make voucher assistance 
available to issue the family a tenant-based voucher. Section 
983.206(b) does not apply to families issued a tenant-based voucher 
under the

[[Page 38335]]

circumstance described in this paragraph (b)(2).
    (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 tenant-based rental assistance under the voucher 
program), in accordance with paragraph (b)(1) 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) In the case of an offer by the PHA of PBV assistance or other 
project-based housing assistance in an appropriate-size unit, 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. The family may request and the PHA may grant one extension not to 
exceed up to an additional 90 days to accommodate the family's efforts 
to locate affordable, safe, and geographically proximate replacement 
housing.
    (ii) In the case of an offer by the PHA of PBV assistance or other 
project-based housing assistance in an appropriate size unit, 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.
    (iii) In the case of an offer by the PHA of other comparable 
tenant-based rental assistance, the family either accepts or does not 
accept 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. The 
family may request and the PHA may grant one extension not to exceed up 
to an additional 90 days to accommodate the family's efforts to locate, 
affordable, safe, and geographically proximate replacement housing.
    (d) Reinstatement. The PHA may reinstate a unit removed under 
paragraph (b)(2), (c)(1)(ii), or (c)(2) of this section to the HAP 
contract after the family vacates the property, in accordance with 
Sec.  983.207(b).

0
119. Revise Sec.  983.261 to read as follows:


Sec.  983.261  Family right to move.

    (a) Termination of assisted lease after one year. The family may 
terminate the assisted lease at any time after one year of PBV 
assistance. The family must give the owner advance written notice of 
intent to vacate (with a copy to the PHA) in accordance with the lease.
    (b) Continued assistance. If the family has elected to terminate 
the lease in accordance with paragraph (a) of this section, the PHA 
must offer the family the opportunity for continued tenant-based rental 
assistance. The PHA must specify in the Administrative Plan whether it 
will offer families assistance under the voucher program or other 
comparable tenant-based rental assistance. If voucher assistance is 
offered to the family and the search term expires, the PHA must issue 
the voucher to the next eligible family.
    (c) Contacting the PHA. Before providing notice to terminate the 
lease under paragraph (a) of this section, a family must contact the 
PHA to request a voucher or comparable tenant-based rental assistance 
if the family wishes to move with continued assistance. If a voucher or 
other comparable tenant-based rental assistance is not immediately 
available to the family upon the family's request to the PHA, the PHA 
must give the family priority to receive the next available opportunity 
for continued tenant-based rental assistance. The PHA must describe in 
its Administrative Plan its policies and procedures for how the family 
must contact the PHA and how the PHA documents families waiting for 
continued tenant-based rental assistance.
    (d) Termination of assisted lease before one year. If the family 
terminates the assisted lease before one year of PBV assistance, the 
family relinquishes the opportunity for continued tenant-based 
assistance under this section.
    (e) Notice exclusion. When the family or a member of the family is 
or has been the victim of domestic violence, dating violence, sexual 
assault, or stalking, as provided in 24 CFR part 5, subpart L, and the 
move is needed to protect the health or safety of the family or family 
member, the family is not required to give the owner advance written 
notice or contact the PHA under paragraph (a) and (c), respectively, of 
this section before moving from the unit. Additionally, when any family 
member has been the victim of a sexual assault that occurred on the 
premises during the 90-calendar-day period preceding the family's 
request to move, the family is not required to give the owner advance 
written notice or contact the PHA under paragraph (a) and (c), 
respectively, of this section before moving from the unit. A PHA may 
not terminate the assistance of a family due to a move occurring under 
the circumstances in this paragraph (e) and must offer the family the 
opportunity for continued tenant-based assistance if the family had 
received at least one year of PBV assistance prior to moving.
    (f) Emergency Transfer Plans. In the case of a move due to domestic 
violence, dating violence, sexual assault, or stalking, as provided in 
24 CFR part 5, subpart L, PHAs must describe policies for facilitating 
emergency transfers for families with PBV assistance in their Emergency 
Transfer Plan, consistent with the requirements in 24 CFR 5.2005(e), 
including when the victim has received PBV assistance for less than one 
year and is not eligible for continued assistance under Sec.  
983.261(b).
    (g) Family break-up. If a family break-up results from an 
occurrence of domestic violence, dating violence, sexual assault, or 
stalking as provided in 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking), the PHA must ensure that the victim retains assistance in 
accordance with 24 CFR 982.315(a)(2).

0
120. Revise Sec.  983.262 to read as follows:


Sec.  983.262  Occupancy of units under the increased program cap and 
project cap excepted units.

    (a) General. Pursuant to Sec.  983.6(a), a PHA may commit project-
based assistance to no more than 20 percent of its authorized voucher 
units at the time of commitment. There are certain units eligible for 
an increased program cap as described in Sec.  983.6(d). Pursuant to 
Sec.  983.54(a), the PHA may not select a proposal to provide PBV 
assistance or 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 both the excepted units from the 
project cap under Sec.  983.54(c)(2) and units under the increased 
program cap under Sec.  983.6(d).
    (b) Requirements applicable to both excepted units and units under 
an increased program cap. (1) The unit must be occupied by a family who 
meets the applicable exception.
    (2) The family must be selected from the waiting list for the PBV 
program

[[Page 38336]]

through an admissions preference (see Sec.  983.251).
    (3) Once the family vacates the unit, the unit must be made 
available to and occupied by a family that meets the applicable 
exception.
    (4) The PHA must specify in its Administrative Plan which of the 
options below the PHA will take if a unit is no longer qualified for 
its excepted status or the increased program cap:
    (i) Substitute the unit for another unit if it is possible to do so 
in accordance with Sec.  983.207(a), so that the overall number of 
excepted units or units under the increased program cap in the project 
is not reduced. A PHA may, in conjunction with such substitution, add 
the original unit to the HAP contract if it is possible to do so in 
accordance with Sec.  983.207(b), including that such addition does not 
cause the PHA to exceed the program cap or become non-compliant with 
the project cap.
    (ii) Remove the unit from the PBV HAP contract. In conjunction with 
the removal, the PHA may provide the family with tenant-based 
assistance, if the family is eligible for tenant-based assistance. The 
family and the owner may agree to use the tenant-based voucher in the 
unit; otherwise, the family must move from the unit with the tenant-
based voucher. If the family later vacates the unit, the PHA may add 
the unit to the PBV HAP contract in accordance with Sec.  983.207.
    (iii) Change the unit's status under the project cap or program 
cap, as applicable, provided that the change does not cause the PHA to 
exceed the program cap or become non-compliant with the project cap.
    (c) Requirements for units under the increased program cap--(1) 
Homeless family. A unit qualifies under the increased program cap at 
Sec.  983.6(d)(1)(i) if the family meets 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, at the time the family first 
occupies the unit.
    (2) Veteran family. A unit qualifies under the increased program 
cap at Sec.  983.6(d)(1)(ii) if the family is comprised of or includes 
a veteran (a person who served in the active military, naval, air, or 
space service, and who was discharged or released therefrom) at the 
time the family first occupies the unit.
    (3) Supportive housing for persons with disabilities or elderly 
persons. The following applies to the increased program cap category at 
Sec.  983.6(d)(1)(iii):
    (i) A disabled or elderly member of the family must be eligible for 
one or more of the supportive services at the time the family first 
occupies the unit. The member of the family may choose not to 
participate in the services.
    (ii) The PHA must state in its Administrative Plan whether it will 
allow a family that initially qualified for supportive housing for 
persons with disabilities or elderly persons 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 family member with a 
disability or long term or permanent hospitalization or nursing care), 
the elderly family member or family member with a disability no longer 
resides in the unit. In this case, the unit may continue to count under 
the increased program cap category 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 no longer counts under the increased program cap 
category 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 (b)(4) of this section.
    (4) Units for Family Unification Program (FUP) youth. See paragraph 
(e) of this section for requirements relating to the increased program 
cap category at Sec.  983.6(d)(2).
    (d) Requirements for project cap excepted units--(1) Elderly 
family. A unit under the project cap exception category at Sec.  
983.54(c)(2)(i) must be occupied by an elderly family, as defined in 24 
CFR 5.403. The PHA must state in its Administrative Plan whether it 
will 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 (b)(4) of this section.
    (2) Disabled family. The same provisions of paragraph (d)(1) of 
this section apply to units previously excepted based on disabled 
family status under a HAP contract in effect prior to April 18, 2017.
    (3) Supportive services. The following applies under the project 
cap exception category at Sec.  983.54(c)(2)(iii):
    (i) 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.
    (ii) 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, even if the members that continue to reside in the unit are 
ineligible during tenancy for all available supportive services.
    (iii) The unit loses its excepted status only if the entire family 
becomes ineligible during the tenancy for all supportive services 
available to the family. This provision does not apply where any member 
of the family has successfully completed the supportive services under 
paragraph (c)(2) of this section.
    (iv) A family cannot be terminated from the program or evicted from 
the unit because they become ineligible for all supportive services 
during the tenancy.
    (4) Units for FUP youth. See paragraph (e) of this section for 
requirements relating to the increased project cap exception category 
at Sec.  983.54(c)(2)(ii).
    (e) Requirements for units for FUP youth under the increased 
program cap and project cap exception. The following applies under the 
project cap exception category at Sec.  983.54(c)(2)(ii) and the 
increased program cap category at Sec.  983.6(d)(2):
    (1) A unit is excepted from the project cap or qualifies under the 
increased program cap, as applicable, if the unit is occupied by an 
eligible youth receiving FUP assistance.
    (2) The youth must vacate the unit once the FUP assistance has 
expired. The unit loses its excepted status or no longer qualifies 
under the increased program cap, as applicable, if the youth does not 
move from the unit upon the expiration of the FUP assistance.

Subpart G--Rent to Owner

0
121. Amend Sec.  983.301 by revising paragraphs (b)(1), (c)(2)(i), (f), 
and (g) to read as follows:


Sec.  983.301  Determining the rent to owner.

* * * * *
    (b) * * *

[[Page 38337]]

    (1) An amount determined by the PHA in accordance with the 
Administrative Plan not to exceed 110 percent of the applicable fair 
market rent (or the amount of any applicable exception payment 
standard) for the unit bedroom size minus any utility allowance;
    (c) * * *
    (2) * * *
    (i) An amount determined by the PHA in accordance with the 
Administrative Plan, not to exceed the tax credit rent minus any 
utility allowance;
* * * * *
    (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 PBV projects that are not located in a designated SAFMR 
area under 24 CFR 888.113(c)(1), or for PBV projects not located in a 
ZIP code where the PHA has opted in under 24 CFR 888.113(c)(3), any 
exception payment standard amount approved under 24 CFR 982.503(d)(2)-
(4) applies for purposes of paragraphs (b)(1) and (c)(1)(iv) of this 
section. HUD will not approve a different payment standard amount for 
use in the PBV program.
    (ii) For PBV projects that are located in a designated SAFMR area 
under 24 CFR 888.113(c)(1), or for PBV projects located in a ZIP code 
where the PHA has opted in under 24 CFR 888.113(c)(3), an exception 
payment standard amount approved under 24 CFR 982.503(d)(3)-(4) will 
apply for purposes of paragraphs (b)(1) and (c)(1)(iv) of this section 
only if the PHA has adopted a policy applying SAFMRs to its PBV program 
and met all other requirements in accordance with 24 CFR 888.113(h).
    (4) HUD may establish a process allowing PHAs to adopt project-
specific utility allowances by notification in the Federal Register 
subject to public comment. Absent the establishment of such a project-
specific utility allowance, the PHA's utility allowance schedule as 
determined under 24 CFR 982.517(b)(2)(i) or (ii) applies to both the 
tenant-based and PBV programs.
    (5) The PHA must continue to use the applicable utility allowance 
schedule for the purpose of determining the initial rent to owner and 
redetermining the rent to owner for contract units, as outlined in this 
24 CFR 983.301, regardless of whether the PHA approves a higher utility 
allowance as a reasonable accommodation for a person with disabilities 
living in a contract unit (see 24 CFR 982.517(e)).
    (g) PHA-owned units. For PHA-owned PBV units, the initial rent to 
owner and the annual redetermination of rent at the annual anniversary 
of the HAP contract must be determined by the independent entity 
approved by HUD in accordance with Sec.  983.57. The PHA must use the 
rent to owner established by the independent entity.

0
122. 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) When there is a 10 percent decrease in the published FMR;
    (2) Upon the owner's request consistent with requirements 
established in the PHA's Administrative Plan. The Administrative Plan 
must specify any advance notice the owner must give the PHA and the 
form the request must take; or
    (3) At the time of the automatic adjustment by an operating cost 
adjustment factor (OCAF) in accordance with paragraph (b)(3).
    (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) 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. A rent increase as the result of an owner 
request must be determined by the PHA pursuant to Sec.  983.301(b) or 
(c), as applicable. A rent increase through an adjustment by an OCAF is 
likewise subject to Sec.  983.301(b) or (c), as applicable, except 
there is no rent request by the owner to take into account since the 
PHA redetermines the rent automatically under that option.
    (3) 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 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 apply to a contract that 
provides for rent adjustments using an OCAF:
    (i) The contract may require an additional increase up to an amount 
determined by the PHA pursuant to Sec.  983.301(b) or (c), as 
applicable, if requested by the owner in writing, periodically during 
the term of the contract.
    (ii) The contract shall require an additional increase up to an 
amount determined by the PHA pursuant to Sec.  983.301(b) or (c), as 
applicable, at the point of contract extension, if requested by the 
owner in writing.
    (4) 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.
    (5) 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).
    (6) 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 
(except that HQS compliance is not required for purposes of this 
provision for units undergoing development activity that complies with 
Sec.  983.157 or substantial improvement that complies with Sec.  
983.212). The owner may not receive any retroactive increase of rent 
for any period of noncompliance.
    (c) Rent decrease. (1) If the HAP contract provides for rent 
adjustments by an OCAF and there is a decrease in the fair market rent, 
tax credit rent, or reasonable rent that requires a decrease to the 
rent to owner (see paragraph (b)(2)), the rent to owner must be 
decreased. If the HAP contract does not provide for adjustment by an 
OCAF and 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 owner requests a rent adjustment.

[[Page 38338]]

    (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. 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 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) The annual anniversary of the HAP contract for contract units 
completed in stages must follow Sec.  983.207(g).

0
123. Amend Sec.  983.303 by:
0
a. Removing from paragraph (a) the citation to ``Sec.  983.302(e)(2)'' 
and adding, in its place, a citation to ``Sec.  983.302(c)(2)'';
0
b. Revising paragraph (b)(3);
0
c. Redesignating paragraph (b)(4) as paragraph (b)(5) and adding a new 
paragraph (b)(4);
0
d. Adding paragraph (c)(3); and
0
e. Revising paragraph (f).
    The revisions and additions read as follows:


Sec.  983.303  Reasonable rent.

* * * * *
    (b) * * *
    (3) Whenever the HAP contract is amended to add a contract unit or 
substitute a different contract unit in the same building or project;
    (4) Whenever the PHA accepts a completed unit after development 
activity that is conducted after HAP contract execution (see Sec.  
983.156(b)(3)); and
* * * * *
    (c) * * *
    (3) The reasonable rent determination must be based on the 
condition of the assisted unit at the time of the determination and not 
on anticipated future unit conditions.
* * * * *
    (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.

Subpart H--Payment to Owner

0
124. Amend Sec.  983.352 by adding a sentence to the end of paragraph 
(b)(1) to read as follows:


Sec.  983.352  Vacancy payment.

* * * * *
    (b) * * *
    (1) * * * The PHA must include in its Administrative Plan the PHA's 
policy on the conditions under which it will allow vacancy payments in 
a HAP contract, the duration of the payments, amount of vacancy 
payments it will make to an owner, and the required form and manner of 
requests for vacancy payments, in accordance with paragraph (b)(4) of 
this section.
* * * * *

0
125. Amend Sec.  983.353 by revising paragraph (d)(2) to read as 
follows:


Sec.  983.353  Tenant rent; payment to owner.

* * * * *
    (d) * * *
    (2) The PHA must describe in its Administrative Plan its policies 
on paying the utility reimbursement directly to the family or directly 
to the utility supplier.
* * * * *

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

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

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


0
127. Amend Sec.  985.3 by:
0
a. Revising the second paragraph of the undesignated introductory text 
and the parenthetical at the end of paragraph (b)(1);
0
b. In paragraph (b)(3)(i)(B), removing the reference to ``Sec.  982.507 
of this chapter'' and adding, in its place, a reference to ``Sec. Sec.  
982.507 and 983.303 of this chapter, as applicable'';
0
c. Revising paragraph (c)(3)(i)(A);
0
d. In paragraph (e)(3)(i), removing the citation to ``Sec.  983.2'' and 
adding, in its place, a citation to ``Sec.  985.2''; and
0
e. Revising paragraphs (i)(1), (i)(3), (k)(1), (k)(2), and (l), the 
heading of paragraph (m), and paragraphs (m)(1), (m)(3), (p)(1), and 
(p)(3)(i)(B).
    The revisions read as follows:


Sec.  985.3  Indicators, HUD verification methods and ratings.

* * * * *
    A PHA that expends less than its Federal award expenditure 
threshold in 2 CFR Subpart F, and whose Section 8 programs are not 
audited by an independent auditor (IA), will not be rated under the 
SEMAP indicators in paragraphs (a) through (g) of this section for 
which the annual IA audit report is a HUD verification method.
* * * * *
    (b) * * *
    (1) * * * (24 CFR 982.4, 24 CFR 982.54(d)(15), 982.158(f)(7), 
982.507, and 983.303)
* * * * *
    (c) * * *
    (3) * * *
    (i) * * *
    (A) The PHA obtains third party verification, as appropriate, of 
reported family annual income, the value of assets, expenses related to 
deductions from annual income, and other factors that affect the 
determination of adjusted income, and uses the verified information in 
determining adjusted income, and/or documents tenant files to show why 
third party verification was not available;
* * * * *
    (i) * * *
    (1) This indicator shows whether the PHA has adopted payment 
standard schedule(s) in accordance with Sec.  982.503.
* * * * *
    (3) Rating:
    (i) The PHA's voucher program payment standard schedule contains 
payment standards set in accordance with 24 CFR 982.503. 5 points.
    (ii) The PHA's voucher program payment standard schedule contains 
payment standards that were not set in accordance with Sec.  982.503. 0 
points.
* * * * *
    (k) * * *
    (1) This indicator shows whether the PHA correctly calculates the 
family's

[[Page 38339]]

share of the rent to owner in the rental voucher program. (24 CFR part 
982, subpart K).
    (2) HUD verification method: MTCS report--Shows percent of tenant 
rent and family's share of the rent to owner calculations that are 
incorrect based on data sent to HUD by the PHA on Forms HUD-50058. The 
MTCS data used for verification cover only voucher program tenancies, 
and do not include rent calculation discrepancies for manufactured home 
owner rentals of manufactured home spaces for proration of assistance 
under the noncitizen rule.
* * * * *
    (l) Initial unit inspections. (1) This indicator shows whether 
newly leased units pass HQS inspection within the time period required. 
This includes both initial and turnover inspections for the PBV 
program. (24 CFR 982.305 and 983.103(b) through (d)).
    (2) HUD verification method: MTCS report--Shows percent of newly 
leased units where the beginning date of the assistance contract is 
before the date the unit passed the initial unit inspection or, if the 
PHA employed the PHA initial inspection option for non-life- 
threatening deficiencies or alternative inspections, the timing 
requirements for the applicable PHA initial inspection option.
    (3) Rating:
    (i) 98 to 100 percent of newly leased units passed HQS inspection 
within the time period required. 5 points.
    (ii) Fewer than 98 percent of newly leased units passed HQS 
inspection within the time period required. 0 points.
    (m) Periodic HQS inspections. (1) This indicator shows whether the 
PHA has met its periodic inspection requirement for its units under 
contract (24 CFR 982.405 and 983.103(e)).
* * * * *
    (3) Rating:
    (i) Fewer than 5 percent of periodic HQS inspections of units under 
contract are more than 2 months overdue. 10 points.
    (ii) 5 to 10 percent of all periodic HQS inspections of units under 
contract are more than 2 months overdue. 5 points.
    (iii) More than 10 percent of all periodic HQS inspections of units 
under contract are more than 2 months overdue. 0 points.
* * * * *
    (p) * * *
    (1) This indicator shows whether voucher holders were successful in 
leasing units with voucher assistance. This indicator applies only to 
PHAs that established success rate payment standard amounts in 
accordance with Sec.  982.503(f) prior to June 6, 2024.
* * * * *
    (3) * * *
    (i) * * *
    (B) The proportion of families issued rental vouchers that became 
participants in the program during the six month period utilized to 
determine eligibility for success rate payment standards under Sec.  
982.503(f) plus 5 percentage points; and
* * * * *

PART 1000--NATIVE AMERICAN HOUSING ACTIVITIES

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

    Authority: 25 U.S.C. 4101 et seq.; 42 U.S.C. 3535(d).


Sec.  1000.302  [AMENDED]

0
129. In Sec.  1000.302, amend the definition of ``Section 8 unit'' by 
removing the words ``certificates, vouchers,'' and adding, in their 
place, the word ``vouchers''.

Damon Smith,
General Counsel.
[FR Doc. 2024-08601 Filed 5-6-24; 8:45 am]
BILLING CODE 4210-67-P