[Federal Register Volume 89, Number 137 (Wednesday, July 17, 2024)]
[Proposed Rules]
[Pages 58092-58095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15269]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 883

[Docket No. FR-6378-P-01]
RIN 2502-AJ68


Updated Terminology for State Housing Agency Housing Assistance 
Payments Contracts

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, Department of Housing and Urban Development (HUD).

ACTION: Proposed rule.

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

SUMMARY: The U.S. Department of Housing and Urban Development is 
proposing to revise HUD's regulations for Housing Assistance Payments 
contracts that were initially issued and administered by a State 
Housing Finance Agency. The proposed rule would clarify the meaning of 
the terms ``HFA (Housing Finance Agency)'' and ``State Agency 
(Agency)'' when HUD either assumes contract administration 
responsibilities or assigns the contract administration 
responsibilities to a Performance-Based Contract Administrator. The 
proposed rule would also clarify how reserve accounts may be 
transferred following assumption of contract administration duties by a 
new party. These regulatory changes would conform with longstanding HUD 
policy and practice.

DATES: Comments are due by September 16, 2024.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule. There are two methods for submitting public 
comments. All submissions must refer to the above docket number and 
title.
    1. Electronic Submission of Comments. Comments may be submitted 
electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make comments immediately available 
to the public. Comments submitted electronically through the 
www.regulations.gov website can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that website to submit comments 
electronically.
    2. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW, Room 10276, 
Washington, DC 20410-0500.

    Note:  To receive consideration as public comments, comments 
must be submitted through one of the two methods specified above.

    Public Inspection of Public Comments. HUD will make all properly 
submitted comments and communications available for public inspection 
and copying during regular business hours at the above address. Due to 
security measures at the HUD Headquarters building, you must schedule 
an appointment in advance to review the public comments by calling the 
Regulations Division at 202-708-3055 (this is not a toll-free number). 
HUD welcomes and is prepared to receive calls from individuals who are 
deaf or hard of hearing, as well as 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. Copies of all comments 
submitted are available for inspection and downloading at 
www.regulations.gov.
    In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed 
rule may be found at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Jennifer Larson, Director, Office of 
Asset Management Portfolio Oversight, U.S. Department of Housing and 
Urban Development, 451 7th Street SW, Washington, DC 20410, telephone 
number 202-402-3823 (this is not a toll-free number). HUD welcomes and 
is prepared to receive calls from individuals who are deaf or hard of 
hearing, as well as 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: 

[[Page 58093]]

I. Background

A. Section 8 Project-Based Rental Assistance Program

    The Section 8 Project-Based Rental Assistance (Section 8 PBRA) 
program was enacted as part of the Housing and Community Development 
Act of 1974,\1\ which amended the United States Housing Act of 1937.\2\ 
Under the Section 8 PBRA program, either HUD or a public housing agency 
(PHA) acting pursuant to an annual contributions contract (ACC) with 
HUD provides rental assistance payments via a Housing Assistance 
Payments (HAP) Contract to project owners who, in turn, rent units 
covered by the HAP Contract to families who meet program eligibility 
rules. Either HUD or a PHA acting pursuant to an ACC serves as the 
contract administrator, which is responsible for performing multiple 
functions, from maintaining a reserve for replacement account and a 
residual receipts account to processing annual rent adjustments and 
periodic contract renewals. Pursuant to the United States Housing Act 
of 1937 and HUD regulations, a Housing Finance Agency (HFA) meets the 
definition of a PHA and, as such, may serve as a Performance-Based 
Contract Administrator (PBCA).
---------------------------------------------------------------------------

    \1\ Public Law 93-383, 88 Stat. 633 (1974).
    \2\ 42 U.S.C. 1437f.
---------------------------------------------------------------------------

B. Regulatory and Operational History of the 24 CFR Part 883 Section 8 
PBRA Program

    On April 15, 1975, HUD published 24 CFR part 883, establishing 
policies and procedures under which HFAs could select proposals for 
funding under the Section 8 New Construction and Substantial 
Rehabilitation Programs.\3\ Pursuant to 24 CFR part 883, HFAs provided 
permanent financing and assumed the risk of default and foreclosure on 
selected project proposals. In selecting a project for permanent 
financing, HFAs and project owners could enter into HAP Contracts with 
initial mortgage terms of up to 40 years,\4\ with the HFA serving as 
the HAP Contract administrator. Significantly for purposes of this 
rulemaking, in January of 1980, HUD issued a new regulation under 24 
CFR part 883 that introduced a limit on annual distributions of project 
surplus cash for some project owners, a requirement for such owners to 
establish a residual receipts account, and a requirement to maintain a 
reserve for replacement account to address physical condition 
issues.\5\ As HAP Contract administrators, the HFAs controlled the 
residual receipts and reserve for replacement accounts required by 24 
CFR part 883.
---------------------------------------------------------------------------

    \3\ 40 FR 16934.
    \4\ The terms ``HFA'' and ``State Agency'' appear in both part 
883 and corresponding HAP Contracts.
    \5\ 45 FR 6889 (Jan. 30, 1980).
---------------------------------------------------------------------------

    In the 1990s, HAP Contracts between HFAs and project owners began 
to reach the end of the contracted term and expire. Where a HAP 
Contract expires and is not renewed, families eligible for Section 8 
PBRA are at risk of displacement from their housing because there is no 
longer an agreement in place that allows project owners to receive 
Section 8 PBRA rental assistance for the applicable units. To authorize 
the renewal of expiring HAP Contracts, including HAP Contracts issued 
pursuant to 24 CFR part 883 (Part 883 HAP Contracts), Congress enacted 
the Multifamily Assisted Housing Reform and Affordability Act of 1997 
(MAHRA).\6\ As implemented by HUD, MAHRA allows the issuance of HAP 
Contracts that incorporate and renew nearly all provisions of an 
expired, original HAP Contract. Relevant to the purposes of this 
proposed rule, the provisions incorporated into renewed Part 883 HAP 
Contracts include references to the terms ``HFA'' and ``State Agency.''
---------------------------------------------------------------------------

    \6\ 42 U.S.C. 1437f.
---------------------------------------------------------------------------

    Beginning in May of 1999, HUD began using PBCAs to streamline the 
renewal and administration of expiring HAP Contracts, including Part 
883 HAP Contracts, by assigning administration and servicing tasks to 
PBCAs, which qualify as PHAs under the United States Housing Act of 
1937 and act in accordance with an ACC that sets forth requirements and 
performance-based incentive standards. As Part 883 HAP Contracts 
expired, HUD began terminating ACCs with the HFAs of the expiring Part 
883 HAP Contracts, with HUD then either taking over administration of 
the Part 883 HAP Contracts itself or assigning administration of the 
contracts to PBCAs. Relevant to the purpose of this proposed rule, 
references to the terms ``HFA'' and ``State Agency'' remained in both 
24 CFR part 883 and the renewed Part 883 HAP Contracts that were now 
administered by either HUD or a PBCA.
    As of the second quarter of 2023, there were approximately 2,690 
Part 883 HAP Contracts in effect throughout the country. Of these 
contracts, the vast majority are now administered either by a PBCA or 
HUD, with only sixty-five (65) Part 883 HAP Contracts still being 
administered by an HFA. For the Part 883 HAP Contracts that were 
previously administered by an HFA but that are now administered by a 
PBCA or HUD, the terms ``HFA'' and ``State Agency'' still appear in the 
Part 883 HAP Contracts, along with references to the same terms in 24 
CFR part 883. The references to these terms in the contracts and part 
883 create confusion because HUD or a PBCA now administers these Part 
883 HAP Contracts rather than an HFA or State Agency. This confusion is 
especially problematic with regard to the administration of project 
owners' restricted financial accounts (i.e., the residual receipts and 
reserve for replacement accounts) because of unclear expectations 
regarding which entity must issue approvals to withdraw funds. HUD 
issues this proposed rule to eliminate this confusion.

C. Residual Receipts and Reserve for Replacement Project Accounts

    Both the residual receipts account and the reserve for replacement 
account are project accounts. The project owner must make deposits to 
the residual receipts account and the reserve for replacement accounts, 
consistent with HUD requirements, and must receive prior approval 
before withdrawing funds from either account. When a HAP Contract 
associated with the project is administered by an HFA, the project 
owner requests fund withdrawal approval from the HFA. Once an ACC 
between the HFA and HUD expires, HUD must review such fund withdrawal 
requests; therefore, the HFA must release the funds in the accounts 
upon the request of the project owner. The project owner, in turn, must 
ensure that the residual receipts and reserve for replacement accounts 
funds are placed in accounts that meet HUD requirements, after which 
time any fund withdrawals will be made only with HUD approval.

II. Proposed Rule

    Through this proposed rule, HUD proposes to amend the definitions 
of two terms defined in 24 CFR 883.302: ``HFA (Housing Finance 
Agency)'' and ``State Agency (Agency).'' HUD proposes that the 
definitions currently found in 24 CFR 883.302 for these terms will 
continue to apply while an ACC between HUD and an HFA is in effect. 
When an ACC between HUD and the HFA expires and is not renewed, HUD 
proposes that the definitions of the terms ``HFA (Housing Finance 
Agency)'' and ``State Agency (Agency)'' as currently provided in 24 CFR 
883.302 would then be defined the same as ``Contract Administrator'' is 
defined at 24 CFR 880.201. This proposed change would eliminate the 
confusion that

[[Page 58094]]

results when a renewed Part 883 HAP Contract is administered by HUD or 
a PBCA, rather than the former HFA. In addition to the proposed 
definition changes to 24 CFR 883.302, the proposed rule would make a 
conforming change to 24 CFR 883.701. The conforming change to Sec.  
883.701 would make clear that, for the purposes of 24 CFR part 883, 
subpart G, all references to ``contract administrator'' in 24 CFR part 
880, subpart F, shall be construed to refer to ``Agency'' only while 
the ACC between the State Agency and HUD is in effect.
    HUD also proposes to amend 24 CFR 883.306 and add a new Sec.  
883.702 to make clear that project owners are required to request the 
withdrawal of funds from residual receipts and reserve for replacement 
accounts administered by HFAs when the ACC between HUD and the HFA is 
terminated or expires.
    As described, these proposed changes would clarify that when HUD 
assumes or assigns HAP Contract administration duties following the 
expiration of the HFA ACC, the new contract administrator, either HUD 
or a PBCA, is responsible for the administration duties under the HAP 
Contract. These HAP Contract administration duties include overseeing 
restricted project accounts and allowing disbursements from restricted 
project accounts in accordance with HAP Contract requirements. For 
example, if a project owner has made deposits into a reserve for 
replacement account and the HAP Contract requires that the HFA must 
authorize disbursements from that account, these proposed changes would 
provide clarity to the project owner that the HAP Contract 
administrator must authorize such disbursements.

III. Findings and Certifications

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

    Pursuant to 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 13563 (Improving Regulations and Regulatory Review) 
emphasizes the importance of quantifying both costs and benefits, 
reducing costs, harmonizing rules, and promoting flexibility. The order 
also directs executive agencies to analyze regulations that are 
``outmoded, ineffective, insufficient, or excessively burdensome, and 
to modify, streamline, expand, or repeal them in accordance with what 
has been learned.'' Executive Order 13563 further directs that, where 
relevant, feasible, and consistent with regulatory objectives, and to 
the extent permitted by law, agencies are to identify and consider 
regulatory approaches that reduce burdens and maintain flexibility and 
freedom of choice for the public. Executive Order 14094 (Modernizing 
Regulatory Review) amends section 3(f) of Executive Order 12866, among 
other things.
    This proposed rule would clarify that HUD or a PBCA may assume the 
HAP Contract administrator responsibilities when the ACC between HUD 
and an HFA expires. The rulemaking would also clarify how residual 
receipts and reserve for replacement accounts may be transferred 
following assumption of contract administration duties by a new party. 
These regulatory changes would conform with longstanding HUD policy and 
practice. This rulemaking was determined not to be a ``significant 
regulatory action'' as defined in section 3(f) of Executive Order 12866 
as amended by Executive Order 14094 and is not an economically 
significant regulatory action and therefore was not subject to OMB 
review.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on State, local, and 
Tribal governments, and on the private sector. This proposed rule would 
not impose any Federal mandates on any State, local, or Tribal 
government, or on the private sector, within the meaning of the UMRA.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is 
available through the Federal eRulemaking Portal at http://www.regulations.gov. The FONSI is also available for public inspection 
during regular business hours in the Regulations Division, Office of 
General Counsel, Department of Housing and Urban Development, 451 7th 
Street SW, Room 10276, Washington, DC 20410-0500. Due to security 
measures at the HUD Headquarters building, you must schedule an 
appointment in advance to review the FONSI by calling the Regulations 
Division at 202-708-3055 (this is not a toll-free number). HUD welcomes 
and is prepared to receive calls from individuals who are deaf or hard 
of hearing, as well as 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.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
As discussed above, the changes proposed in this rule are limited to 
clarifying that HUD or a PBCA may assume the HAP Contract administrator 
responsibilities when the ACC between HUD or an HFA expires. The 
rulemaking would also clarify how residual receipts and reserve for 
replacement accounts may be transferred following assumption of 
contract administration duties by a new party. These regulatory changes 
would conform with longstanding HUD policy and practice.
    Accordingly, the undersigned certifies that the proposed rule will 
not have a significant economic impact on a substantial number of small 
entities. Notwithstanding HUD's determination that this rulemaking will 
not have a significant impact on a substantial number of small 
entities, HUD specifically invites comments regarding any less 
burdensome alternatives to this rule that will meet HUD's objectives as 
described in the preamble to this proposed rule.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either: (1) imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (2) the rule 
preempts State law, unless the agency meets the consultation and 
funding requirements of section 6 of the Executive order. This proposed 
rule would not have federalism implications and would not impose 
substantial direct compliance costs on State and local governments or 
preempt State law within the meaning of the Executive order.

List of Subjects in 24 CFR Part 883

    Accounting, Administrative practice and procedure, Government 
contracts, Grant programs--housing and

[[Page 58095]]

community development, Low and moderate income housing, Public 
assistance programs, Public housing, Rent subsidies, Reporting and 
recordkeeping requirements, State and local governments.

    For the reasons stated above, HUD proposes to amend 24 CFR part 883 
as follows:

PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE 
HOUSING AGENCIES

0
1. The authority citation for part 883 continues to read as follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.

0
2. In Sec.  883.302, revise the definitions of ``HFA (Housing Finance 
Agency)'' and ``State Agency (Agency)'' to read as follows:


Sec.  883.302  Definitions.

* * * * *
    HFA (Housing Finance Agency). While the Annual Contributions 
Contract between the State Agency and HUD is in effect, ``Housing 
Finance Agency'' and ``HFA'' means a State Agency that provided 
permanent financing for newly constructed or substantially 
rehabilitated housing processed under this part and financed without 
Federal mortgage insurance or a Federal guarantee except coinsurance 
under section 244 of the National Housing Act. When the Annual 
Contributions Contract between the State Agency and HUD is no longer in 
effect, ``Housing Finance Agency'' and ``HFA,'' as used in this part 
and in the Housing Assistance Payments Contract, means ``Contract 
Administrator,'' as defined in 24 CFR 880.201.
* * * * *
    State Agency (Agency). While the Annual Contributions Contract 
between the State Agency and HUD is in effect, ``State Agency'' and 
``Agency'' means an agency that has been notified by HUD that it is 
authorized to apply for a set-aside and/or to use the Fast Track 
Procedures of this part. When the Annual Contributions Contract between 
the State Agency and HUD is no longer in effect, ``State Agency'' and 
``Agency,'' as used in this part and in the Housing Assistance Payments 
Contract, mean ``Contract Administrator,'' as defined in 24 CFR 
880.201.
* * * * *
0
3. In Sec.  883.306, add a sentence to the end of paragraph (e) to read 
as follows:


Sec.  883.306  Limitation on distributions.

* * * * *
    (e) * * * Upon termination of the Annual Contributions Contract 
between HUD and the HFA, the Owner must request withdrawal of any funds 
that were placed in such an account at the direction of the HFA and 
immediately deposit such funds into an interest-bearing residual 
receipts account that complies with the requirements of 24 CFR 
880.601(e)(2)(i).
* * * * *
0
4. In Sec.  883.701, add text to the end of the second sentence to read 
as follows:


Sec.  883.701  Cross-reference.

    * * * while the Annual Contributions Contract between the State 
Agency and HUD is in effect.
0
5. Add Sec.  883.702 to read as follows:


Sec.  883.702  Replacement reserve.

    For projects that are required to maintain a replacement reserve 
account to fund capital repairs and building system replacements, while 
the Annual Contributions Contract (ACC) between the State Agency and 
HUD is in effect, funds in that replacement reserve account may be 
drawn and used only in accordance with State Agency guidelines and with 
the approval of, or as directed by, the State Agency. Upon termination 
of the ACC, the Owner must request withdrawal of any funds in the 
replacement reserve account and immediately deposit such funds into an 
interest-bearing replacement reserve account that complies with the 
requirements of 24 CFR 880.602(a)(1)(iv).

Julia R. Gordon,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2024-15269 Filed 7-16-24; 8:45 am]
BILLING CODE 4210-67-P