[Federal Register Volume 60, Number 41 (Thursday, March 2, 1995)]
[Rules and Regulations]
[Pages 11844-11860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5093]
[[Page 11843]]
_______________________________________________________________________
Part VII
Department of Housing and Urban Development
_______________________________________________________________________
Office of Assistant Secretary for Housing--Federal Housing Commissioner
_______________________________________________________________________
24 CFR Parts 290 and 886
Disposition of Multifamily Projects and HUD-Held Multifamily Mortgages;
Interim Rule
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules
and Regulations
[[Page 11844]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Assistant Secretary for Housing--Federal Housing Commissioner
24 CFR Parts 290 and 886
[Docket No. R-95-1753; FR-3715-I-01]
RIN 2502-AG30
Disposition of Multifamily Projects and HUD-Held Multifamily
Mortgages
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Interim rule.
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SUMMARY: This interim rule amends the Department's multifamily property
disposition regulations to incorporate statutory amendments affecting
the management and disposition of HUD-owned properties and properties
with delinquent HUD-held mortgages, and the sale of HUD-held
multifamily mortgages.
DATES: Effective date: March 2, 1995.
Comments due date: May 1, 1995.
ADDRESSES: Interested persons are invited to submit comments regarding
this interim rule to the Rules Docket Clerk, Office of General Counsel,
Room 10278, Department of Housing and Urban Development, 451 Seventh
Street SW., Washington, DC 20410. Communications should refer to the
above docket number and title. A copy of each communication submitted
will be available for public inspection and copying between 7:30 a.m.
and 5:30 p.m. weekdays at the above address. Faxed comments will not be
accepted.
FOR FURTHER INFORMATION CONTACT: Frank Malone, Director, Office of
Multifamily Housing Preservation and Property Disposition, Department
of Housing and Urban Development, Room 6164, 451 7th Street SW,
Washington, DC 20410. Telephone (202) 708-3555; TDD (202) 708-4594.
(These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act Statement
The information collection requirements contained in this interim
rule were approved by the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1980 and were assigned OMB control
number 2502-0204 (expiration date: 9/30/96).
I. Introduction
On August 17, 1993 (58 FR 43708), the Department published a final
rule amending its requirements for the management and disposition of
HUD-owned multifamily housing projects. The regulation, at 24 CFR part
290, implemented HUD's statutory authority, contained in section 207(k)
and (l) of the National Housing Act and in section 203 of the Housing
and Community Development Amendments of 1978, to handle and dispose of
such real property.
Section 203 was amended by section 181 of the Housing and Community
Development Act of 1987 (1987 Act), section 1010 of the Stewart B.
McKinney Homeless Assistance Amendments Act of 1988 (1988 Act), and
section 579 of the National Affordable Housing Act of 1990 (NAHA). The
final rule published on August 17, 1993 implemented the NAHA
amendments.
Generally, the statutory amendments specified the type of
assistance to be provided when the Department determines to preserve
units as affordable low- and very low-income housing, and included
certain projects with HUD-held mortgages within the scope of section
203. The Department has been carrying out its multifamily property
disposition program and its servicing of delinquent HUD-held
multifamily mortgages on a project-by-project basis in conformity with
the requirements of section 203, as amended.
In the Multifamily Housing Property Disposition Reform Act of 1994
(MHPDRA) (Pub. L. 102-233, approved April 11, 1994), section 203 was
completely revised. This interim rule, in turn, completely revises 24
CFR part 290 to reflect the new statutory amendments.
Before turning to a discussion of specific details of the
implementation of the revised section 203 in this interim rule, a
general comment on the overall format of this interim rule is in order.
HUD is attempting to implement this complex legislation in a manner
that is more accessible and ``user friendly'' than the typical
government regulation, with the goal of providing clear guidance within
a legally binding context. The structure of the statute has been
reorganized in the regulation to correspond more with the flow of the
disposition process as it actually happens, from general, guiding
principles, through notification requirements, plan development, and
the various actions the Department will take to facilitate the
disposition process. The section headings in this interim rule are
posed in the form of questions, to invite a broader spectrum of users
for the interim rule and to permit all of its users to scan it and
identify more quickly their areas of concern. Certain portions of the
interim rule, which present an extended series of requirements or
alternatives, have been summarized with the use of tables that appear
within the permanent text of the interim rule itself. These tables,
covering the subjects of rents, notification requirements, methods of
disposition, and actions to facilitate disposition, provide a shorthand
overview of major portions of the interim rule that will permit users
to comprehend the interim rule and the disposition process more easily.
The tables are cross referenced to the sections of interim rule text
that provide a fuller explication of the requirements. HUD specifically
invites comments on whether the public finds such innovations to be
helpful, and welcomes suggestions for additional innovations.
A discussion of the revisions to the multifamily property
disposition program, organized section-by-section according to the
amended section 203, follows.
II. Implementation of Amended Section 203
Section 203(a)--Goals
The goals of the interim rule, which provide the general guidelines
within which HUD makes its determinations for the management or
disposition of multifamily housing projects, are listed in section
203(a). They closely resemble the goals previously listed at 24 CFR
290.5, but include three new factors. Protecting the financial
interests of the Federal Government, adhering to fair housing
requirements, and disposing of projects in a manner consistent with
local housing market conditions are now explicitly listed among the
goals which are set forth in Sec. 290.3 of this regulation.
Section 203(b)--Definitions
Several of the nine definitions included in this section are
combined and otherwise modified in the interim rule at Sec. 290.5. The
Department believes that its modifications provide additional precision
and simplify the structure of the interim rule. For example, the
interim rule defines the term multifamily housing project as a subset,
with references to specific statutory authorities, of multifamily
project, which is defined in very broad terms to cover most non-single
family projects insured or subject to a loan under one of HUD's
statutory authorities, including such properties as hospitals,
intermediate care facilities, and nursing homes. The actions the
Department may take to facilitate disposition (i.e., the
[[Page 11845]] assistance to be provided or the restrictions to be
imposed) depend upon the type of multifamily housing project involved,
and the statute provides definitions of subsidized project, formerly
subsidized project, and unsubsidized project, for this purpose. The
interim rule cuts back on the number of cross references necessary to
determine what actions may be taken by combining the definitions for
subsidized and formerly subsidized into a single definition of
subsidized project. Subsidized project includes projects both before
foreclosure and after HUD assumes ownership of the project, when the
mortgage which governs the project has been extinguished. Subsidized
projects and unsubsidized projects are the subsets within the category
of multifamily housing projects.
Although section 203(b)(8) lists market area among the definitions,
its meaning is left to the determination of the Department. The
Department has determined that this is a term best defined on a case-
by-case basis at the local level, particularly when the new goal of
disposing of projects in a manner consistent with local housing market
conditions is taken into consideration. The interim rule provides for
the market area for a project to be defined by the local HUD Office,
which would have the best grasp of local conditions, in terms of the
area from which a multifamily housing project may reasonably be
expected to draw a substantial number of its tenants.
The statute also permits HUD to define the term useful life, used
to determine how long certain requirements will apply to a project. The
Department has determined to define useful life as 20 years, the period
adopted in the August 17, 1993 final rule for maintaining a project as
rental or cooperative housing, but it may be more or less, as
determined by the Department.
Section 203(c)--Disposition of Property
Section 203(c)(1) lists ``negotiated, competitive bid, or other
basis'' as methods of disposition. The interim rule at Sec. 290.30
lists the basic methods of disposition as: (1) Foreclosure sales, (2)
sale of HUD-owned projects, and (3) transfer for use under other HUD
programs.
Method (3) is taken from section 203(f), entitled ``Discretionary
Assistance,'' where ``transfer for use under other HUD programs'' is
listed as an action the Department may take to facilitate disposition.
However, in the Department's analysis, a transfer is actually a method
of disposition, rather than a form of assistance or restriction such as
the other actions given in section 203(f).
The transfer option permits the Department, ``notwithstanding the
provisions of subsection (e)'' (which lists the basic actions and the
alternatives to the basic actions to facilitate disposition), to
transfer a multifamily housing project for use as public housing or
supportive housing, subject to any terms, conditions, and limitations
determined to be appropriate by the Department. The disposition is
complete upon the transfer.
Section 203(c) also lists the qualities of an eligible purchaser
(incorporated in the interim rule at Sec. 290.32); and requirements for
an initial disposition plan and initial sales price (Sec. 290.34 of the
interim rule). Section 203(c)(2)(D) requires the Department to obtain
timely and appropriate input into disposition plans from the community
and tenants. This requirement is stated in Sec. 290.34, and is also
laid out in more detail at Sec. 290.26 in subpart C of the interim rule
where the notification requirements are gathered. HUD views the
requirement for community and tenant input into the disposition plan as
a process similar to providing public notice and an opportunity for
comment in rulemaking. Just as a proposed rule is published for
comment, followed by consideration of the comments before a final rule
is issued, HUD will make an initial disposition plan available to the
community and tenants, consider the comments it receives, and then
issue its final disposition plan.
A requirement for a pre-foreclosure notification is included in
section 203(c)(3), which appears in subpart C of the interim rule as
Sec. 290.22.
Section 203(d)--Management and Maintenance of Properties
This subsection of the statute is the only one that explicitly
addresses management and maintenance of HUD-owned projects, or projects
where HUD is the mortgagee in possession (MIP). These provisions, which
provide management standards and permit HUD to contract or require an
owner to contract for management services, are basically identical to
those in Sec. 290.51 of the August 17, 1993 final rule, and are
incorporated in this interim rule at Secs. 290.10 (standards) and
290.12 (contracting), under subpart B, titled, ``Management
Provisions.'' Also included in subpart B are provisions for determining
occupancy (Sec. 290.14) and rental rates (Sec. 290.16) while a project
is managed by HUD. These provisions are based largely on the August 17,
1993 final rule and, in general, provide that the requirements of the
project's mortgage insurance program before HUD assumed management will
continue to apply.
Actions to Facilitate Disposition
Section 203(e)--Required Assistance; Section 203(f)--Discretionary
Assistance; Section 203(g)--Protection for Very Low-Income Tenants;
Section 203(j)--Displacement of Tenants and Relocation Assistance
Sections 203 (e), (f), (g), and (j) are discussed together because
of their close interrelationship. The actions the Department may take
to facilitate disposition are the common subject matter of these
sections. The regulation organizes the statutorily permitted actions
into four categories: ``required,'' ``basic,'' ``alternatives to
basic,'' and ``additional.'' The table which immediately precedes
subpart E provides an overview of these assistance and restrictions
provisions.
Section 203(e) is divided into three sections, each delineating
actions that the statute requires HUD to take separately, or in
combination with each other or with actions under section 203(f). These
actions are the assistance that may be provided or the restrictions
(mainly to preserve affordability) that may be imposed. The basic
actions are established by section 203(e)(1), which identifies the
units in subsidized projects and unsubsidized projects that are to
receive project-based Section 8 assistance or that are to be subject to
use or rent restrictions. The alternatives to these basic actions
appear in: (1) Section 203(e)(1)(C), which permits project-based
Section 8 assistance and/or use and rent restrictions in unsubsidized
projects to be substituted for the ``basic'' project-based Section 8
assistance in subsidized projects; (2) section 203(e)(2), which permits
tenant-based Section 8 assistance to be provided to tenants instead of
the project-based Section 8 assistance required under (e)(1); and (3)
section 203(e)(3), which provides that the additional actions listed in
section 203(f) may be used as long as, first, affordability use and
rent restrictions are imposed on units that otherwise would have
received the basic project-based Section 8 assistance under (e)(1), and
second, very low-income tenants in units that otherwise would have
received project-based Section 8 assistance under (e)(1) receive
tenant-based Section 8 assistance.
Section 203(f) then lists the additional actions that may be used
in subsidized and unsubsidized projects. Included by this interim rule
in the category of additional actions are provisions taken from the
August 17, 1993 final rule. [[Page 11846]] These provisions, entitled
``determination not to preserve,'' are included to provide criteria
under which the Department will take the action of a determination not
to preserve a project, or a part of a project, as affordable rental or
cooperative housing, resulting primarily in demolition.
In addition to these basic, alternative, and additional categories
of actions is the category of required actions. Section 203(g) provides
for required assistance for very-low income tenants, and 203(j)
provides for required displacement assistance. The displacement
assistance requirements in this interim rule are based upon the
requirements of the August 17, 1993 final rule. An action from the
August 17, 1993 final rule is also included as required, the
nondiscrimination against Section 8 certificate holders and voucher
holders provisions of section 183(c) of the Housing and Community
Development Act of 1987.
The interim rule organizes this complex system of actions to
facilitate a disposition according to the type of project involved in a
disposition--separate subparts address which actions are applicable to
all multifamily housing projects, or to subsidized projects, or to
unsubsidized projects, as follows. Subpart E contains the required
actions applicable to all multifamily housing projects under sections
203 (g) and (j), as well as the nondiscrimination requirements of
section 183(c) of the Housing and Community Development Act of 1987.
Subpart F contains the basic and alternative actions applicable to
subsidized projects under section 203(e), with a reference to the
additional section 203(f) actions listed in subpart H. Subpart G
contains the same information for unsubsidized projects as subpart F
does for subsidized projects. Subpart H lists the additional actions
under 203(f) that are applicable to all multifamily housing projects.
All of the actions to facilitate disposition are set out in abbreviated
form in a table that precedes subpart E, to permit users of this
interim rule to follow more easily the options for assistance and
restrictions that would apply to a particular project.
Section 203(h)--Contract Requirements
This section states the contract requirements applicable to
project-based Section 8 assistance provided in accordance with a
disposition. These requirements are implemented by revising the
appropriate Section 8 regulations at 24 CFR 886.310 and 886.311.
Section 203(i)--Right of First Refusal for Local and State Government
Agencies
This right of first refusal provision is included among the
notification requirements in subpart C as Sec. 290.24.
III. Sale of HUD-Held Multifamily Mortgages
On September 22, 1994 (59 FR 48726), the Department published a
final rule that amended 24 CFR part 290 to set forth the basic policies
and procedures that govern the disposition of HUD-held multifamily
project mortgages. This final rule implemented a proposed rule
published on April 13, 1994 (59 FR 17500) and also incorporated
amendments made by the MHPDRA. The provisions of the mortgage sale
final rule are included in this interim rule as subpart I, with only
slight modifications to conform to the new format of this interim rule.
IV. Other Amendments in This Interim Rule
Section 101(d) of the MHPDRA amended the definition of owner under
the United States Housing Act of 1937 to include ``an Agency of the
Federal Government.'' The purpose and effect of this amendment is to
permit HUD to collect Section 8 rental payments when it owns or manages
a project. The conforming change to the definition of owner is made in
24 CFR 886.302.
The definition of eligible project or project in 24 CFR 886.302 is
also amended to include a multifamily housing project under 24 CFR part
290.
Section 886.319 is amended to conform to Sec. 886.120 and state
explicitly that HUD may contract for the administration of its Section
8 contract functions.
V. Other Matters
Any assistance made available to a purchaser under this interim
rule, whether rental or other financial assistance, will be subject to
scrutiny under section 102(d) of the HUD Reform Act, insofar as that
statutory provision has been implemented by guidelines issued by the
Office of Housing under 24 CFR part 12, subpart D (see, e.g., a Federal
Register Notice published April 9, 1991 (56 FR 14436) entitled
``Administrative Guidelines; Limitations on Combining Other Government
Assistance with HUD Housing Assistance'').
Environmental Impact
A Finding of No Significant Impact 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. The Finding is available for public inspection between
7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules Docket
Clerk, Office of the General Counsel, Department of Housing and Urban
Development, Room 10276, 451 Seventh Street SW., Washington, DC 20410.
Executive Order 12866
This interim rule has been reviewed and approved by the Office of
Management and Budget in accordance with Executive Order 12866, issued
by the President on September 30, 1993 (58 FR 51735, October 4, 1993).
Any changes to the interim rule resulting from this review are
available for public inspection between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk.
Regulatory Flexibility Act
The Secretary, in accordance with provisions of the Regulatory
Flexibility Act (5 U.S.C. 605(b)), has reviewed this interim rule
before publication and by approving it certifies that it will not have
a significant economic impact on a substantial number of small
entities. These revisions to the policies governing the management and
disposition of HUD-owned multifamily housing projects should not affect
the ability of small entities, relative to larger entities, to bid for
and acquire projects that HUD determines to sell.
Executive Order 12612, Federalism
HUD has determined, in accordance with Executive Order 12612,
Federalism, that this interim rule will not have a substantial, direct
effect on the States or on the relationship between the Federal
government and the States, or on the distribution of power or
responsibilities among the various levels of government. While the
interim rule would impose terms and conditions on States that acquire
projects under this interim rule, that is clearly the intent of the
authorizing legislation, and therefore no further review is necessary
or appropriate.
Executive Order 12606, the Family
HUD has determined that this interim rule will not have a
significant impact on family formation, maintenance, and general well-
being within the meaning of Executive Order 12606, The Family, because
it does not affect the eligibility of families for admission into
multifamily housing projects that are subject to this
rulemaking. [[Page 11847]]
Justification for Interim Rulemaking
This publication of this interim rule for effect upon issuance is
required by MHPDRA section 101(f).
Regulatory Agenda
This interim rule was listed as item number 1802 in the
Department's Semiannual Agenda of Regulations published on November 14,
1994 (59 FR 57632, 57657) under Executive Order 12866 and the
Regulatory Flexibility Act.
The Catalog of Federal Domestic Assistance Program number and title
is 14.156, Lower Income Housing Assistance Program (Section 8).
List of Subjects
24 CFR Part 290
Low and moderate-income housing, Mortgage insurance.
24 CFR Part 886
Grant programs--housing and community development, Lead poisoning,
Rent subsidies, Reporting and recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, part 290 of
chapter II and part 886 of chapter VIII of title 24 of the Code of
Federal Regulations, are amended as follows:
1. Part 290 is revised to read as follows:
PART 290--DISPOSITION OF MULTIFAMILY PROJECTS AND SALE OF HUD-HELD
MULTIFAMILY MORTGAGES
Subpart A--General Provisions
Sec.
290.1 What subjects does this regulation cover?
290.3 What are the goals of this regulation?
290.5 What definitions apply in this regulation?
290.7 May any of the provisions of this regulation be waived?
Subpart B--Management and Maintenance Provisions
290.10 What maintenance and management standards apply to
multifamily housing projects?
290.12 How may HUD contract for management services, or require the
owner of a multifamily project to contract for management services?
290.14 What occupancy requirements apply under this regulation?
290.16 How will rental rates be set when HUD is mortgagee-in-
possession (MIP) or owner of a multifamily housing project?
Subpart C--Notification Requirements
290.20 How will HUD provide the notifications that are required
under this regulation?
290.22 What notification must be given before foreclosure?
290.24 Who has a right of first refusal for properties that HUD is
selling, and what kind of notice must HUD provide?
290.26 What kind of notice must HUD provide to tenants and the
community when HUD is selling a project?
Subpart D--Disposition Procedures
290.30 What are the different methods that may be used for the
disposition of a multifamily housing project?
290.32 What qualities does HUD look for in a purchaser?
290.34 What kind of disposition plan will HUD prepare before
selling a project?
Subpart E--All Multifamily Housing Projects--Required Actions
290.40 Are there any required actions that must be taken in the
disposition of all multifamily housing projects?
290.42 What actions must be taken concerning tenants who are
displaced by the disposition of a multifamily housing project?
290.44 What actions must be taken concerning very low-income
tenants in the disposition of a multifamily housing project?
290.46 What restrictions concerning nondiscrimination against
Section 8 certificate holders and voucher holders apply in the
disposition of a multifamily housing project?
Subpart F--Subsidized Projects--Basic and Alternative Actions to
Facilitate Disposition
290.54 What are the basic actions that may be taken in the
disposition of a subsidized project?
290.56 What alternatives to the basic actions are available in the
disposition of subsidized projects?
Subpart G--Unsubsidized Projects--Basic and Alternative Actions to
Facilitate Disposition
290.64 What are the basic actions that may be taken in the
disposition of an unsubsidized project?
290.66 What alternatives to the basic actions are available in the
disposition of an unsubsidized projects?
Subpart H--All Multifamily Housing Projects--Additional Actions to
Facilitate Disposition
290.70 What guidelines will HUD apply in determining which
additional actions to take in the disposition of a multifamily
housing project?
290.72 May HUD reduce the sales price for a project?
290.74 May HUD require additional use and rent restrictions?
290.76 May HUD provide short-term loans to facilitate the sale of a
project?
290.78 Under what conditions may HUD provide up-front grants?
290.80 What additional tenant-based assistance may HUD offer?
290.82 How may HUD provide for alternative uses of units in the
disposition of a multifamily housing project?
290.84 What disposition assistance may be available to rebuild a
multifamily housing project?
290.86 What emergency assistance funds may be provided to tenants?
290.88 Under what circumstances may HUD make a determination not to
preserve a project or a part of a project?
Subpart I--Sale of HUD-Held Multifamily Mortgages
290.100 What is the purpose of this subpart?
290.102 What affect does this subpart have on the applicability of
Civil Rights requirements?
290.104 What tenant protections will apply in the sale of HUD-held
subsidized mortgages?
290.106 How will HUD sell current subsidized mortgages?
290.108 How will HUD sell delinquent subsidized mortgages?
290.110 What is HUD's policy for selling HUD-held unsubsidized
mortgages?
Authority: 12 U.S.C. 1701z-11, 1701z-12, 1713, 1715b, 1715z-1b;
42 U.S.C. 3535(d).
Subpart A--General Provisions
Sec. 290.1 What subjects does this regulation cover?
(a) Except as provided in paragraph (b) of this section, this part
applies to the sale of multifamily projects which are or were, before
being acquired by the Department, assisted or had a mortgage insured
under the National Housing Act, or which were subject to a loan or a
capital advance under Section 202 of the Housing Act of 1959. Subpart I
of this part applies to the sale of HUD-held multifamily mortgages.
(b) This part does not apply to multifamily projects being
foreclosed by HUD for which the decision to foreclose has been made
before the effective date of this part, nor to HUD-owned projects where
the initial disposition program has been approved before the effective
date of this part. For such projects, the procedures in the regulations
at 24 CFR part 290 in effect immediately prior to the effective date of
this regulation apply, unless HUD determines, on a case-by-case basis,
to apply the new regulations.
(c) This part applies to the sale of multifamily projects which are
or were, before being acquired by the Department, assisted or insured
under the National Housing Act, or which were subject to a loan under
section 202 of the Housing Act of 1959. It also applies to the sale of
certain loans and mortgages, and to the management of certain
multifamily properties.
Sec. 290.3 What are the goals of this regulation?
(a) The goals of this part are to provide for the management and
[[Page 11848]] disposition of HUD-owned multifamily projects, and
multifamily projects subject to HUD-held mortgages, in a manner that:
(1) Is consistent with the National Housing Act, section 203 of the
Housing and Community Development Amendments of 1978, and other
relevant statutes;
(2) Will protect the financial interests of the Federal Government;
and
(3) Will, in the least costly fashion among reasonable available
alternatives, address the goals of:
(i) Preserving certain housing so that it can remain available to
and affordable by low-income persons;
(ii) Preserving and revitalizing residential neighborhoods;
(iii) Maintaining the existing housing stock in a decent, safe, and
sanitary condition;
(iv) Minimizing the involuntary displacement of tenants;
(v) Maintaining housing for the purpose of providing rental
housing, cooperative housing, and homeownership opportunities for low-
income persons;
(vi) Minimizing the need to demolish multifamily housing projects;
(vii) Adhering to fair housing requirements; and
(viii) Disposing of such projects in a manner consistent with local
housing market conditions.
(b) The goals of this part, with respect to HUD-held mortgages, are
to sell such mortgages in a manner that:
(1) Reduces losses to the FHA fund;
(2) Decreases HUD's inventory of project mortgages;
(3) Improves the servicing of these mortgages; and
(4) Improves the rental services provided by properties securing
HUD-insured and HUD-held mortgages.
(c) Competing goals. In determining the manner in which a project
is to be managed and disposed of, HUD may balance competing goals
relating to individual projects in a manner that will further the
purposes of this part.
Sec. 290.5 What definitions apply in this regulation?
The following definitions apply to this part:
Affordable means, with respect to a unit of a multifamily housing
project:
(1) For a unit occupied by a very-low income family, the unit rent
does not exceed 30 percent of 50 percent of the area median income (not
the income of the family), as determined by the Department, with
adjustments for smaller and larger families; or
(2) For a unit occupied by a low-income family other than a very
low-income family, the unit rent does not exceed 30 percent of 80
percent of the area median income (not the income of the family), as
determined by the Department, with adjustments for smaller and larger
families; or
(3) The unit, or the family residing in the unit, is receiving
assistance under Section 8 of the United States Housing Act of 1937.
Cooperative means a nonprofit, limited equity, or consumer
cooperative as defined under 24 CFR part 213. It may include mutual
housing associations.
Department means the United States Department of Housing and Urban
Development, or HUD.
HUD-owned project means a multifamily project that has been
acquired by HUD.
Low-income family means a low-income family as defined at 24 CFR
part 813.
Market area means the area from which a multifamily housing project
may reasonably be expected to draw a substantial number of its tenants,
as determined by HUD, taking into consideration the knowledge of the
HUD office with jurisdiction over the project of the local real estate
market and HUD's project underwriting experience. Submarkets may be
used in large, complex metropolitan areas.
Multifamily housing project means a multifamily project that is or
was insured under sections 207, 213, 220, 221(d)(3) 221(d)(4), 223(f),
231, 236, or 608 of the National Housing Act (12 U.S.C. 1701 et seq.);
or is or was subject to a loan under section 202 of the Housing Act of
1959 (12 U.S.C. 1701q); or was a Real Estate Owned (REO) multifamily
project transferred by the Government National Mortgage Association to
the Department. Multifamily housing project does not include projects
consisting of one to eleven units insured under section 220(d)(3)(A) of
the National Housing Act (12 U.S.C. 1715k); or mobile home parks under
section 207(m) of that Act (12 U.S.C. 1713); or vacant land; or
property covered by a homeownership program approved under the
Homeownership and Opportunity for People Everywhere (``HOPE'') program.
Multifamily project means a project consisting of five or more
units that has or had a mortgage (even if subordinate to other
mortgages) insured under the National Housing Act or is or was subject
to a loan under section 202 of the Housing Act of 1959, or a hospital,
intermediate care facility, nursing home, group practice facility, or
board and care facility that has or had a mortgage insured, or is or
was subject to a loan under, these authorities. Multifamily project
does not include projects consisting of one to eleven units insured
under section 220(d)(3)(A) of the National Housing Act, which are
classified as single family homes.
Nonprofit organization means a corporation or association organized
for purposes other than making a profit or gain for itself.
Stockholders or trustees do not share in profits or losses. Profits are
used to accomplish the charitable, humanitarian, or educational
purposes of the corporation.
Preexisting tenant means a family that resides in a unit in a
multifamily housing project immediately before the project is acquired
under this part by a purchaser other than the Department.
Project-based assistance means assistance that is attached to a
structure.
Subsidized mortgage means a mortgage, including a purchase money
mortgage, on a subsidized project.
Subsidized project means a multifamily housing project that is
receiving, or immediately before its mortgage was foreclosed by HUD or
the project was acquired by HUD, pursuant to this regulation, was
receiving any of the following types of assistance:
(1) Below market interest rate mortgage insurance under the proviso
of section 221(d)(5) of the National Housing Act (12 U.S.C. 1715l)
(hereinafter, a BMIR project);
(2) Interest reduction payments made in connection with mortgages
insured under section 236 of the National Housing Act (hereinafter, a
236 project);
(3) Direct loans made under section 202 of the Housing Act of 1959
(hereinafter, a 202 project);
(4) Assistance, to more than 50 percent of the units in the
project, in the form of:
(i) Rent supplement payments under section 101 of the Housing and
Urban Development Act of 1965 (12 U.S.C. 1701s) (hereinafter, Rent
Supp);
(ii) Additional assistance payments under section 236(f)(2) of the
National Housing Act (hereinafter, RAP);
(iii) Housing assistance payments under section 23 of the United
States Housing Act of 1937 (as in effect before January 1, 1975)
(hereinafter, Sec. 23); or
(iv) Housing assistance payments under Section 8 of the United
States Housing Act of 1937 (42 U.S.C. 1437f note) (excluding payments
of tenant-based Section 8 assistance) (hereinafter, project-based
Section 8 assistance).
Sufficient habitable, affordable, rental housing is available means
that the HUD office with jurisdiction determines that there is an
adequate supply of habitable, affordable housing for low-
[[Page 11849]] and very low-income families available in the market
area. Submarkets, consisting of portions of units of general local
government, may be used in large, complex metropolitan areas. Local
housing markets having an adequate supply of standard-quality rental
housing would include housing markets in which the supply of rental
housing available and in production is adequate to meet the anticipated
demand (e.g., the housing market is balanced), as well as those in
which there is an excess supply of rental housing (e.g., the housing
market is soft). Rental markets that do not have an adequate supply
(e.g., tight markets) are characterized by low rental vacancy rates,
low levels of production and turnover of rental housing, and, usually,
by high levels of rent inflation. HUD will make the determination of
whether sufficient habitable, affordable, rental housing is available
using established market analysis techniques, and will consider
information that demonstrates:
(1) The rental housing vacancy rate is at a low level relative to
the rate required for a balanced market, typically a four percent
vacancy rate; except that a rate lower than four percent may be
considered in unusual circumstances if it can be demonstrated that
there is an adequate supply of affordable housing for low-income
families;
(2) The number of rental housing units being produced on an annual
basis is not large enough to satisfy demand arising from the increase
in households, or, in markets where there is little or no growth,
evidence that the number of additional rental units being supplied is
not sufficient to meet the demand arising from net losses to the
available inventory and the inadequate supply of rental housing has
inhibited growth;
(3) The shortage of housing is resulting in rent increases that
exceed normal increases commensurate with the costs of operating rental
housing;
(4) A significant number, or proportion, of the households holding
Section 8 certificates or rental vouchers are unable to find adequate
housing because of the shortage of rental housing, including PHA data
showing a lower than average percentage of units under lease and a
longer than average time required to find units.
Tenant-based assistance means rental assistance that is not
attached to a structure.
Unit of general local government means a city, town, township,
county, parish, village, or other general purpose political subdivision
of a State.
Unsubsidized mortgage means any HUD-held multifamily mortgage that
is not a subsidized mortgage.
Unsubsidized project means a multifamily housing project that is
not a subsidized project.
URA means the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (42 U.S.C. 4601-4655).
Useful life means, generally, twenty years, but it may be more or
less, as determined by the Department.
Very low-income family means a very low-income family as defined at
24 CFR part 813.
Sec. 290.7 May any of the provisions of this regulation be waived?
The Assistant Secretary for Housing may waive any provision of this
part, subject only to statutory limitations. Each waiver must be in
writing, and must be supported by documentation of the facts and
reasons which formed the basis for the waiver. HUD will publish a
Federal Register notice informing the public of all waivers granted
under this section in accordance with the HUD Reform Act of 1989 and
HUD policies regarding publication of waivers.
Subpart B--Management and Maintenance Provisions
Sec. 290.10 What maintenance and management standards apply to
multifamily housing projects?
(a) Scope. The provisions of this section apply to any multifamily
housing project:
(1) That is HUD-owned;
(2) For which HUD is mortgagee-in-possession; or
(3) That is subject to a mortgage held by HUD.
(b) Maintenance and management standards. With respect to projects
within the scope of this section, HUD or the owner, as appropriate,
shall:
(1) To the greatest extent possible, maintain all occupied projects
in a decent, safe, and sanitary condition, and in compliance with any
standards established by the Department and under applicable State or
local laws, rules, ordinances, or regulations relating to the
accessibility and physical condition of the housing;
(2) Maintain full occupancy;
(3) Maintain projects for purposes of providing rental or
cooperative housing; and
(4) Manage projects in accordance with the requirements of the Fair
Housing Act (42 U.S.C. 3601-19) and implementing regulations at 24 CFR
parts 100 et al, which prohibit discrimination in the sale or rental of
housing and in related transactions on the basis of race, color,
religion, sex, national origin, handicap, or familial status; section
504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing
regulations at 24 CFR part 8 that prohibit discrimination against
disabled individuals in Federally-assisted activities, and 24 CFR part
9, which prohibit discrimination against disabled individuals in
Federally-conducted activities; Title VI of the Civil Rights Act of
1964 and implementing regulations at 24 CFR part 1, which prohibit
discrimination based on race, color, or national origin in programs
receiving Federal financial assistance; the Age Discrimination Act of
1975 and implementing regulations at 24 CFR part 146, which prohibit
discrimination based on age in programs receiving Federal financial
assistance; and Executive Order 11063, as amended by Executive Order
12259 (Equal Opportunity in Housing) and implementing regulations at 24
CFR part 107.
Sec. 290.12 How may HUD contract for management services, or require
the owner of a multifamily project to contract for management services?
(a) Scope. The provisions of this section apply to any multifamily
housing project:
(1) That is HUD-owned;
(2) For which HUD is mortgagee-in-possession; or
(3) That is subject to a mortgage held by HUD.
(b) Contracting for management services. (1) With respect to
projects within the scope of this section, HUD may, or may require the
owner to, contract for management services for the project with for-
profit and nonprofit entities and public agencies, including public
housing agencies, on a negotiated, competitive bid, or other basis, at
a price determined by HUD to be reasonable, with a manager determined
by HUD to be capable of:
(i) Implementing a sound financial and physical management program
that is designed to enable the project to meet anticipated operating
and maintenance expenses to ensure that the project will remain in a
decent, safe, and sanitary condition, and in compliance with any
standards under applicable State or local laws, rules, ordinances, or
regulations relating to the accessibility and physical condition of the
housing, and any such standards established by HUD;
(ii) Responding to the needs of tenants and working cooperatively
with tenant organizations;
(iii) Providing adequate organizational, staff, and financial
resources to the project; and
(iv) Meeting such other requirements as HUD may determine to be
necessary or appropriate. [[Page 11850]]
(2) HUD will conduct outreach efforts to minority-owned and female-
owned businesses to become managers of the HUD-owned projects covered
by this section, in accordance with Executive Order 11625, as amended
by Executive Order 12007 (Minority Business Enterprises), Executive
Order 12432 (Minority Business Enterprise Development), and Executive
Order 12138 (National Women's Business Enterprise Policy).
Sec. 290.14 What occupancy requirements apply under this regulation?
(a) Multifamily housing project that is HUD-owned or for which HUD
is mortgagee-in-possession. Occupancy in a multifamily housing project
that is HUD-owned or for which HUD is mortgagee-in-possession shall be
available on a basis that is comparable to the occupancy requirements
that applied to the project immediately before HUD acquired the project
or became mortgagee-in-possession, except that preference shall be
given to tenants of other HUD-owned multifamily housing projects who
are eligible for assistance in accordance with the displacement and
relocation provisions at Sec. 290.42.
(b) Evictions. Eviction from a HUD-owned multifamily housing
project is governed by 24 CFR part 247, subpart B.
(c) Threat to health and safety. Whenever HUD determines that there
is an immediate threat to the health and safety of the tenants, HUD may
require the tenants to vacate the premises and shall provide temporary
relocation benefits as provided in Sec. 290.42 to tenants required to
vacate the premises.
Project Rents While HUD is MIP or Owner
Unit rents....................... Unit rents set in accordance with the
rent setting requirements of the
project's mortgage insurance or
direct loan program while HUD is
mortgagee-in-possession (MIP), or in
accordance with the rent setting
requirements of the project's
mortgage insurance or direct loan
program in effect immediately before
HUD became the owner of the project
(Sec. 290.16(a)).
Rents payable by tenants......... 1. Tenant rent. Rent the tenant pays
will be based on the income
certification and the rent payment
requirements of the project's
mortgage insurance or direct loan
program in effect while HUD is MIP
or immediately before HUD became the
owner of the project (Sec.
290.16(b)(1)).
2. Rent when tenant does not certify
income. If a tenant does not certify
income, the tenant must pay the unit
rent (Sec. 290.16(b)(1)).
3. Utility allowance. For a tenant
whose rent is based on a percentage
of adjusted income, HUD will use a
utility allowance to reduce the rent
(Sec. 290.16(b)(2)).
4. Project viability. HUD may adjust
the rent to promote project
viability (Sec. 290.16(b)(3)).
5. Tenants with rental vouchers or
certificates. Tenant pays rent in
accordance with policies and
procedures governing such assistance
(Sec. 290.16(b)(4)).
Sec. 290.16 How will rental rates be set when HUD is mortgagee-in-
possession (MIP) or owner of a multifamily housing project?
Because of the subsidies involved in making multifamily housing
projects affordable, the setting of rents involves two steps: first,
establishing the rent on a unit that will be paid to the owner, and
second, determining the rent that the tenant pays (with the difference
made up by a subsidy), using a number of procedures to obtain income
verification and notify tenants of changes in rent. These procedures
are explained below.
(a) Setting unit rents. Except as modified by this section, for a
property where HUD is mortgagee-in-possession (MIP), HUD will set unit
rents in accordance with the rent setting requirements of the project's
mortgage insurance or direct loan program; or for a property owned by
HUD, rents will be set in accordance with the rent setting requirements
of the project's mortgage insurance or direct loan program in effect
immediately before HUD became the owner of the project.
(b) Setting rents payable by tenants--(1) Tenant rent. The rent the
tenant pays will be based on the income certification and the rent
payment requirements of the project's mortgage insurance or direct loan
program in effect while HUD is MIP or immediately before HUD became the
owner of the project, as affected by any of the factors in paragraphs
(b)(2) through (b)(4) of this section. However, if a tenant does not
certify income as required by this section, the tenant must pay the
unit rent as determined under the rent setting requirements in
paragraph (a) of this section.
(2) Utility allowance. For a tenant whose rent is based on a
percentage of adjusted income (except for rental voucher or rental
certificate holders), if the cost of utilities (except telephone) and
other housing services for the unit is the responsibility of the tenant
to pay directly to the provider of the utility or service, HUD will
deduct from the rent to be paid by the tenant to HUD a utility
allowance, which is an amount equal to HUD's estimate of the monthly
costs of a reasonable consumption of the utilities and other services
for the unit for an energy-conservative household of modest
circumstances consistent with the requirement of a safe, sanitary, and
healthful living environment. If the utility allowance exceeds the
percentage of the tenant's adjusted income payable as rent, HUD will
pay the difference between the amount payable as rent and the utility
allowance to the tenant or, with the consent of the tenant and the
utility company, either jointly to the tenant and the utility company
or directly to the utility company.
(3) Rent adjustments for project viability. For a HUD-owned
project, HUD may adjust the rent provided for in paragraphs (b)(1) or
(b)(2) of this section if necessary or desirable to maintain the
existing economic mix in the project, prevent undesirable turnover, or
increase occupancy.
(4) Tenants who are rental voucher or rental certificate holders.
Tenants assisted with rental vouchers or certificates certify their
income to the public housing agency (PHA) administering the assistance,
and pay rent pursuant to the policies and procedures governing such
assistance.
(c) Income verification and rent notification procedures.
(1) Income certification by tenants--(i) In subsidized projects.
(A) For families residing in subsidized projects, when HUD becomes MIP
or owner, HUD will request an income certification from each family as
soon as practicable after HUD initially assumes management, unless the
family's income has been examined by the owner or by HUD not more than
four months before HUD's assumption of management.
(B) For each family applying for admission to subsidized projects,
HUD will request an income certification to determine the family's
eligibility for a subsidized rent, and (if the rent is based on a
percentage of adjusted income) the [[Page 11851]] family's subsidized
rent, in accordance with part 813 of this title.
(ii) In unsubsidized projects. (A) For tenants in occupancy when
HUD becomes mortgagee-in-possession or owner of an unsubsidized
project, HUD may request an income certification from families who are
not paying a subsidized rent.
(B) For families applying for admission to such projects, HUD will
request sufficient information for income verification to determine the
family's ability to pay the unit rent.
(2) Notice of increases in the amount of rent payable. Whenever HUD
proposes an increase in rents in a HUD-owned multifamily project or a
project where HUD is mortgagee-in-possession, HUD will provide tenants
30 days notice of the proposed changes and an opportunity to review and
comment on the new rent and supporting documentation. After HUD
considers the tenants' comments and has made a decision with respect to
its proposed rent change, HUD shall notify the tenants of its decision,
with the reasons for the decision. A tenant in occupancy before the
effective date of any revised rental rate must be given 30 days notice
of the revised rate, and any change in the tenant's rent is subject to
the terms of an existing lease. Notices to each tenant must be
personally delivered or sent by first class mail. General notices to
all tenants must be posted in the project office and in appropriate
conspicuous and accessible locations around the project.
(3) Disclosure and verification of Social Security numbers. Any
certifications or reexaminations of the income of tenants or
prospective tenants in connection with tenancy under this section are
subject to the requirements for the disclosure and verification of
Social Security Numbers, as provided by part 200, subpart T, of this
title.
(4) Signing of consent forms for income verification. Any
certifications or reexaminations of the income of tenants or
prospective tenants in connection with tenancy under this section are
subject to the requirements for the signing and submitting of consent
forms for the obtaining of wage and claim information from State Wage
Information Collection Agencies, as provided by part 200, subpart V, of
this title. (Approved by Office of Management and Budget under control
number 2502-0204.)
Pre-Disposition Notification Requirements
Pre-foreclosure (Sec. 290.22).... 1. Timing. Not later than 60 days
before foreclosure on any mortgage.
2. Recipients.
(i) Tenants of the project, and
(ii) The unit of general local
government in which the project is
located.
3. Contents.
(i) General terms and conditions
concerning the sale, future use, and
operation of the project that HUD
proposes to impose; and,
(ii) Whether temporary or permanent
relocation is anticipated, and, if
so, available displacement and
relocation assistance.
Right of first refusal (Sec. 1. Timing. Not later than 30 days
290.24). after HUD acquires title to a
multifamily housing project.
2. Recipients.
(i) The appropriate unit of general
local government;
(ii) Public housing agencies in the
project's market area;
(iii) The State agency or agencies
designated to receive such notice by
the chief executive officer of the
State in which the project is
located.
3. Contents.
(i) Description of the project;
(ii) Invitation to recipients to make
bona fide offers to purchase the
project;
(iii) Offer of right of first refusal
for period of up to 90 days;
(iv) Method by which the recipient
may respond to HUD.
Notice to tenants and the 1. Timing. Not later than 60 days
community (Sec. 290.26). after HUD acquires title to a
multifamily housing project.
2. Recipients.
(i) To the tenants of the project;
(ii) To the unit of general local
government in which the project is
located; and
(iii) To the community in which the
project is located.
3. Contents.
(i) Description of the project;
(ii) Proposed general terms and
conditions concerning the sale,
future use, and operation of the
project;
(iii) Invitation for tenants and
their organizations, units of
general local government, and other
public or nonprofit entities to
submit comments on the disposition
plan, and/or proposals for
disposition which will be considered
by HUD in making its property
disposition determination.
Subpart C--Notification Requirements
Sec. 290.20 How will HUD provide the notifications that are required
under this regulation?
(a) In general. HUD may combine two or more of the notifications
required by this subpart, as appropriate, to simplify the disposition
process.
(b) Methods of notification-- (1) To tenants. The notices required
to be made to tenants under this subpart will be delivered to each unit
in the project, or sent to each unit by first class mail. Where HUD is
mortgagee-in-possession or owner of a project, the notice will also be
posted in the project office and in appropriate conspicuous and
accessible locations around the project.
(2) To the unit of general local government. The notice required to
be made to a unit of general local government under this section will
be sent to the chief executive officer of the unit of general local
government by first class mail. For purposes of receiving or sending
any notices or information under this subpart, the unit of general
local government is its chief executive officer, or the person
designated by the chief executive officer to receive or send the notice
or information.
(3) To the community or any other party. HUD will consult with
tenants and their organizations, officials of units of general local
government, and other entities as HUD determines to be appropriate, to
identify community recipients of any notification required by this
subpart. Any notice required to be made to any party other than a
tenant [[Page 11852]] or a unit of general local government will be
sent by first class mail.
Sec. 290.22 What notification must be given before foreclosure?
(a) Timing and recipients of notice. Not later than 60 days before
foreclosing on any mortgage held by the Department on any multifamily
housing project, HUD will provide notice of the proposed foreclosure
sale to the tenants of the project and to the unit of general local
government in which the project is located.
(b) Contents of notice. The notice will describe the general terms
and conditions concerning the sale, future use, and operation of the
project that HUD proposes to impose on a purchaser other than HUD
through the foreclosure. The notice will also state whether temporary
or permanent relocation is anticipated as a result of repairs or the
proposed disposition, including any anticipated conversion of use, and,
if so, the levels of displacement and relocation assistance available
under Sec. 290.42.
Sec. 290.24 Who has a right of first refusal for properties that HUD
is selling, and what kind of notice must HUD provide?
(a) Timing and recipients of notice. Not later than 30 days after
HUD acquires title to a multifamily housing project, HUD will provide
notice of the right of first refusal to the appropriate unit of general
local government, as well as public housing agencies in the project's
market area, and the State agency or agencies designated to receive
such notice by the chief executive officer of the State in which the
project is located.
(b) Content of notice. The notice will describe the project
acquired by HUD, and contain an invitation to recipients to make bona
fide offers to purchase the project. The notice will state:
(1) That for a period specified in the notice, not to exceed 90
days from the time the notification is made, HUD will not sell or offer
to sell the project other than to a recipient of the notice, unless the
recipients notify HUD sooner that they will not make an offer to
purchase the project;
(2) That if a recipient expresses interest within the specified
period in acquiring the project, HUD will consult with the interested
parties in the preparation of the disposition plan and the terms and
conditions of the sale of the project. HUD will accept a bona fide
offer to purchase the project if the offer complies with the terms and
conditions of the disposition plan for the project, or is otherwise
acceptable to HUD;
(3) The method by which the recipient may respond to HUD with an
expression of interest or a bona fide offer, or by which the recipient
may notify HUD that an offer will not be made.
Sec. 290.26 What kind of notice must HUD provide to tenants and the
community when HUD is selling a project?
(a) Timing and recipients of notice. Not later than 30 days after
HUD acquires title to a multifamily housing project, HUD will provide
notice of HUD's acquisition and proposed disposition of the project to
the tenants of the project, to the unit of general local government,
and to the community in which the project is located.
(b) Content of notice. The notice will describe the project
acquired by HUD, and the general terms and conditions concerning the
sale, future use, and operation of the project as proposed by HUD. The
notice will, as appropriate, state:
(1) HUD has acquired the project.
(2) During HUD's ownership, HUD will, to the extent feasible,
assure that the project is maintained in a decent, safe, and sanitary
condition.
(3) HUD is developing a final disposition plan for the project.
(4) HUD normally seeks to sell HUD-owned projects as rapidly as
possible.
(5) HUD's interest in learning of tenant, community, and local
government plans and capacity for the acquisition of the project for
use as rental or cooperative housing.
(6) HUD's final determination of the terms and conditions to be
imposed on the disposition of the project will not be made until after
HUD considers the comments received from tenants, the community, and
the unit of general local government within the specified comment
period.
(7) A brief description of a proposed manner of disposition of the
project.
(8) A description of the pending notice of the right of first
refusal to purchase the project made under Sec. 290.24.
(9) That alternative uses of units in the project may be part of
the project's disposition, and that:
(i) Some of the units in the project may be made available for uses
other than rental or cooperative uses, including low-income
homeownership opportunities, or community space, office space for
tenant or housing-related service providers or security programs, or
small business uses, if such uses benefit the tenants of the project;
(ii) Some of the units in the project may be used in any manner, if
the Department and the unit of general local government or area-wide
governing body determine that such use will further fair housing,
community development, or neighborhood revitalization goals;
(iii) Such alternative uses of units may only take place if:
(A) Tenant-based Section 8 rental assistance is made available to
each eligible family residing in the project that is displaced as a
result of such actions; and
(B) The Department determines that sufficient habitable, affordable
rental housing is available in the market area in which the project is
located to ensure use of such assistance.
(10) That any very low-income family who is a preexisting tenant of
the project who upon disposition of the project would be required to
pay rent in an amount in excess of 30 percent of the adjusted income of
the family:
(i) For a period of 2 years beginning upon the date of the
acquisition of the project under the disposition, the rent for the unit
occupied by the family may not be increased above the rent charged
immediately before the acquisition; and
(ii) The family shall be considered displaced for purposes of the
preferences for assistance under sections 6(c)(4)(A)(i), 8(d)(1)(A)(i),
and 8(o)(3)(B) of the United States Housing Act of 1937.
(11) Whether temporary or permanent relocation is anticipated as a
result of repairs or the proposed disposition, including any
anticipated conversion of use, and, if so, the levels of relocation
assistance available under Sec. 290.42.
(12) That tenants and their organizations, units of general local
government, and other public or nonprofit entities are invited to
submit comments on the disposition plan, and/or proposals (e.g.,
expressions of interest to convert the project to a cooperative or
other form of resident-controlled ownership, or other resident
initiative), which will be considered by HUD in making its property
disposition determination.
(13) That comments must be submitted to HUD within 30 days of
receipt of the notice.
(14) That the full disposition recommendation and analysis and
other supporting information will be available for inspection and
copying at the HUD field office.
[[Page 11853]]
Methods of Disposition
Foreclosure sales. (Sec. HUD may dispose of a project at a
290.30(a)). foreclosure sale:
1. In accordance with the Multifamily
Mortgage Foreclosure Act, or
2. In accordance with other Federal
or State foreclosure law.
Sale of HUD-owned projects. (Sec. HUD may sell a HUD-owned project
290.30(b)). using any of the following
procedures:
1. Competitive bid;
2. Auction;
3. Request for proposals;
4. Negotiated sale, as permitted
under Sec. 290.30(b)(1) and (2); or
5. Any other method, on such terms as
HUD considers appropriate.
Transfer for use under other HUD HUD, under an agreement, may transfer
programs. (Sec. 290.30(c)). a multifamily housing project:
1. To a public housing agency (PHA)
for use of the project as public
housing; or
2. To an entity eligible to own or
operate 202 or 811 supportive
housing.
Subpart D--Disposition Procedures
Sec. 290.30 What are the different methods that may be used for the
disposition of a multifamily housing project?
HUD may use any of the following methods, as appropriate, for the
disposition of a multifamily housing project:
(a) Foreclosure sales. Foreclosure sales will be conducted, at
HUD's discretion, in accordance with the Multifamily Mortgage
Foreclosure Act, or other Federal or State foreclosure law, on such
terms as HUD considers appropriate to further the purpose stated in
Sec. 290.3.
(b) Sale of HUD-owned projects. HUD may dispose of a HUD-owned
multifamily project by competitive bid, auction, request for proposals,
or other method, on such terms as HUD considers appropriate to further
the purpose stated in Sec. 290.3. When HUD conducts a negotiated sale
involving the disposition of a project to a person or entity without a
public offering, the following provisions apply:
(1) HUD may negotiate the sale of any project to an agency of the
Federal, State, or local government.
(2) When HUD determines that a purchaser can demonstrate the
capacity to own and operate a project in accordance with standards set
by HUD, and/or a competitive offering will not generate offers of equal
merit from qualified purchasers, HUD may approve a negotiated sale of a
subsidized project to:
(i) A resident organization wishing to convert the project to a
nonprofit or limited equity cooperative;
(ii) A cooperative (e.g., nonprofit limited equity, consumer
cooperative, mutual housing organization) with demonstrated experience
in the operation of nonprofit (and preferably low- to moderate-income)
housing;
(iii) A nonprofit entity that will continue to operate the project
as low- to moderate-income rental housing and whose governing board is
composed of project residents;
(iv) A State or local governmental entity with the demonstrated
capacity to acquire, manage, and maintain the project as rental or
cooperative housing available to and affordable by low- and moderate-
income residents;
(v) A State or local governmental or nonprofit entity with the
demonstrated capacity to acquire, manage, and maintain the project as a
shelter for the homeless or other public purpose, generally when the
project is vacant or has minimal occupancy and is not needed in the
area for continued use as rental housing for the elderly or families;
or
(vi) Other nonprofit organizations.
(c) Transfer for use under other HUD programs.--(1) In general.
Subject only to the requirements of an agreement under paragraph (c)(2)
of this section, HUD may transfer a multifamily housing project:
(i) To a public housing agency (PHA) for use of the project as
public housing; or
(ii) To an entity eligible to own or operate housing assisted under
section 202 of the Housing Act of 1959 or under section 811 of the
Cranston-Gonzalez National Affordable Housing Act for use as supportive
housing under either of those sections.
(2) Transfer agreement. An agreement providing for the transfer of
a project as described in paragraph (c)(1) of this section must:
(i) Contain such terms, conditions, and limitations as HUD
determines to be appropriate, including requirements to ensure use of
the project as public housing, supportive housing under section 202 of
the Housing Act of 1959, or supportive housing under section 811 of the
Cranston-Gonzalez National Affordable Housing Act, as applicable; and
(ii) Ensure that no tenant of the project will be displaced as a
result of the transfer.
Sec. 290.32 What qualities does HUD look for in a purchaser?
(a) Foreclosure sales. HUD will dispose of a multifamily housing
project through a foreclosure sale only to a purchaser that the
Department determines is capable of implementing a sound financial and
physical management program that is designed to enable the project to
meet anticipated operating and repair expenses to ensure that the
project will remain in decent, safe, and sanitary condition and in
compliance with any standards under applicable State or local laws,
rules, ordinances, or regulations relating to the physical condition of
the housing and any such standards established by the Department.
(b) HUD-owned multifamily housing projects. Sales of HUD-owned
multifamily housing projects may be made only to a purchaser determined
by the Department to be capable of:
(1) Satisfying the conditions of the disposition plan developed
under Sec. 290.34 for the project;
(2) Implementing a sound financial and physical management program
that is designed to enable the project to meet anticipated operating
and repair expenses to ensure that the project will remain in decent,
safe, and sanitary condition and in compliance with any standards under
applicable State or local laws, rules, ordinances, or regulations
relating to the physical condition of the housing and any such
standards established by the Department;
(3) Responding to the needs of the tenants and working
cooperatively with tenant organizations;
(4) Providing adequate organizational, staff, and financial
resources to the project; and
(5) Meeting such other requirements as HUD may determine to be
appropriate for the particular project.
Sec. 290.34 What kind of disposition plan will HUD prepare before
selling a project?
(a) In general. Before disposing of a HUD-owned multifamily housing
[[Page 11854]] project, HUD will develop an initial and a final
disposition plan for the project that specifies the minimum terms and
conditions for the disposition of the project, the sales price that is
acceptable to HUD, and the assistance that HUD plans to make available
to a prospective purchaser.
(b) Market-wide plans. In developing the disposition plan under
this section for a HUD-owned multifamily housing project located in a
market area in which at least 1 other HUD-owned multifamily housing
project is located, HUD may coordinate the disposition of HUD-owned
multifamily housing projects located within the same market area to the
extent and in such a manner as the Department determines appropriate to
carry out the goals under Sec. 290.3.
(c) Sales price. The sales price in the disposition plan will be
reasonably related to the intended use of the project after the sale,
any rehabilitation requirements for the project, the rents for units in
the project that can be supported by the market, the amount of rental
assistance available for the project under Section 8 of the United
States Housing Act of 1937, the occupancy profile of the project
(including family size and income levels for tenant families), and any
other factors that HUD considers appropriate.
(d) Community and tenant input. In developing the initial and final
disposition plans, HUD will consider any timely input from officials of
the unit of general local government affected, the community in which
the project is situated, and the tenants of the project, including the
comments received in response to the notice required by Sec. 290.26. To
obtain this input, HUD may provide technical assistance, directly or
indirectly, and may use amounts available for technical assistance
under the Emergency Low Income Housing Preservation Act of 1987,
subtitle C of the Low-Income Housing Preservation and Resident
Homeownership Act of 1990, subtitle B of title IV of the Cranston-
Gonzalez National Affordable Housing Act, or this part, for the
provision of such technical assistance. Recipients of technical
assistance funding under the provisions referred to in this
subparagraph may provide technical assistance to the extent of such
funding, notwithstanding the source of the funding.
(e) Environmental requirements. HUD will perform, and include in
the final disposition plan, the environmental reviews required by 24
CFR part 50.
Table of Actions to Facilitate Disposition
All Multifamily Housing Projects Required Actions
[Subpart E]. 1. Displacement requirements (Sec.
290.42).
2. Very-low income preexisting
tenant--2 year rent freeze if rent
after disposition more than 30
percent of adjusted income (Sec.
290.44).
3. Nondiscrimination against Section
8 certificate holders and voucher
holders (Sec. 290.46).
Subsidized Projects [Subpart F].. Basic Actions
1. Provide project-based Section 8
assistance to at least all units
that, before acquisition or
foreclosure, received: Rent Supp,
RAP, Sec. 23, project-based Section
8 (Sec. 290.54(a)).
2. Vacancy in any assisted unit must
be filled by a family that is
eligible for the assistance (Sec.
290.54(b)).
3. Rent and use restrictions on BMIR,
236, or 202 subsidized project units
that were not covered before
acquisition or foreclosure by Rent
Supp, RAP, Sec. 23, or project-based
Section 8 (Sec. 290.54(c)).
Alternatives to Basic Actions
1. Assistance to, or restrictions on,
units in unsubsidized projects
instead of assistance to units in
subsidized projects (Sec.
290.56(a)).
2. Substitution of tenant-based
Section 8 assistance to low-income
families instead of Project-based
assistance to units (Sec.
290.56(b)).
3. Use of the additional assistance
and restrictions permitted in
subpart H (Sec. 290.56(c)).
Unsubsidized Projects [Subpart G]
Basic Actions
1. Provide project-based Section 8
assistance for all units that,
before acquisition or foreclosure,
received assistance under:
(i) The new construction and
substantial rehabilitation program
under section 8(b)(2) of the United
States Housing Act of 1937 (as in
effect before October 1, 1983);
(ii) The property disposition program
under section 8(b) of such Act;
(iii) The project-based certificate
program under section 8 of such Act;
(iv) The moderate rehabilitation
program under section 8(e)(2) of
such Act;
(v) Section 23 of such Act (as in
effect before January 1, 1975);
(vi) The rent supplement program
under section 101 of the Housing and
Urban Development Act of 1965; or
(vii) Section 8 of the United States
Housing Act of 1937, following
conversion from assistance under
section 101 of the Housing and Urban
Development Act of 1965 (Sec.
290.64(a)).
2. Provide tenant-based Section 8
assistance to preexisting tenants of
LMSA-assisted units (Sec.
290.64(b)).
Alternatives to Basic Actions
1. Substitution of tenant-based
Section 8 assistance to low-income
families instead of project-based
assistance to units (Sec.
290.66(a)).
2. Use of the additional assistance
and restrictions permitted in
subpart H (Sec. 290.66(b)).
All Multifamily Housing Projects Additional Actions
[Subpart H]. 1. Discounted sales price (Sec.
290.72).
2. Additional use and rent
restrictions (Sec. 290.74).
3. Short-term loans (Sec. 290.76).
4. Up-front grants (Sec. 290.78).
5. Additional tenant-based assistance
(Sec. 290.80).
6. Alternative uses (Sec. 290.82)
6. Rebuilding (Sec. 290.84).
7. Emergency assistance funds (Sec.
290.86).
8. Determination not to preserve
(Sec. 290.88).
[[Page 11855]]
Subpart E--All Multifamily Housing Projects--Required Actions
Sec. 290.40 Are there any required actions that must be taken in the
disposition of all multifamily housing projects?
Yes, the requirements regarding tenants who are displaced
(explained in Sec. 290.42), unassisted very low-income tenants
(explained in Sec. 290.44), and nondiscrimination against Section 8
certificate holders and voucher holders (explained in Sec. 290.46),
apply in the disposition of all multifamily housing projects.
Sec. 290.42 What actions must be taken concerning tenants who are
displaced by the disposition of a multifamily housing project?
(a) Scope of section. This section applies to all HUD-owned
multifamily housing projects and all multifamily housing projects
subject to HUD-held mortgages. When HUD is not the mortgagee-in-
possession or owner, the owner of the project shall comply with this
section, if HUD has authorized the demolition of, repairs to, or
conversion of the use of the multifamily housing project.
(b) Minimizing displacement. Consistent with the other goals and
objectives of this part, all reasonable steps shall be taken to
minimize the displacement of persons (families, individuals,
businesses, and nonprofit organizations) from a project covered by this
part. If displacement or temporary relocation will occur in connection
with the disposition of a project, HUD may require the purchaser of the
project to provide assistance in accordance with this section.
(c) Relocation assistance at non-URA levels. Whenever the
displacement of a residential tenant (family or individual) occurs in
connection with the management or disposition of a multifamily project,
but is not subject to paragraph (d) of this section (e.g., occurs as a
direct result of HUD repair or demolition of all or a part of a HUD-
owned multifamily project or as a direct result of the foreclosure of a
HUD-held mortgage on a multifamily housing project or sale of a HUD-
owned project without federal financial assistance), the displaced
tenant shall be eligible for the following relocation assistance:
(1) Advance written notice of the expected displacement. The notice
shall be provided at least 60 days before displacement, describe the
assistance and the procedures for obtaining the assistance, and contain
the name, address and phone number of an official responsible for
providing the assistance;
(2) Other advisory services, as appropriate, including counseling,
referrals to suitable (and where appropriate, accessible), decent,
safe, and sanitary replacement housing, and fair housing-related
advisory services;
(3) Payment for actual reasonable moving expenses, as determined by
HUD;
(4) For displaced eligible families and individuals--
(i) The opportunity to relocate to a suitable (and where
appropriate, accessible), decent, safe, and sanitary dwelling unit in a
HUD-owned multifamily project, in a public housing project, or in
another HUD subsidized multifamily housing project; or
(ii) Assistance under the Section 8 Certificate program (see
Sec. 882.209(a)(4)(ii)(B) of this title) or the Housing Voucher program
(see Sec. 887.155(c) of this title), if the assistance is available;
and
(5) Such other federal, State or local assistance as may be
available.
(d) Relocation assistance at URA levels--(1) General. Whenever
assistance under 24 CFR part 886, subpart C (or other federal financial
assistance, as defined in 49 CFR 24.2(j)) is provided in connection
with the purchase, demolition, or rehabilitation of a multifamily
property by a third party, any resulting displacement is subject to
paragraph (d) of this section. A displaced person (defined in paragraph
(d)(3) of this section) must be provided relocation assistance at the
levels described in, and in accordance with the requirements of, the
URA, implementing regulations at 49 CFR part 24, and this section.
(2) Definition of ``initiation of negotiations''. Under the URA,
for purposes of determining the method for computing the replacement
housing assistance to be provided to a residential tenant displaced as
a direct result of privately undertaken rehabilitation, demolition, or
acquisition of the real property, the term ``initiation of
negotiations'' means the transfer of title to the purchaser.
(3) Definition of displaced person. (i) The term ``displaced
person'' means any person (family, individual, business, or nonprofit
organization) that moves from the real property, or moves personal
property from the real property, permanently, as a direct result of
acquisition, rehabilitation or demolition for a federally assisted
project. This includes, but is not limited to:
(A) A person that moves permanently from the real property after
receiving notice requiring such move, if the move occurs on or after
the date of the transfer of title to the purchaser.
(B) Any person that HUD determines was displaced as a direct result
of acquisition, rehabilitation or demolition for an assisted project.
(C) A tenant-occupant of a dwelling unit who moves from the
building/complex, permanently, after the transfer of title to the
purchaser, if the move occurs before the tenant is provided notice
offering him or her the opportunity to lease and occupy a suitable,
decent, safe, sanitary, and where appropriate, accessible dwelling in
the same building/complex, under reasonable terms and conditions, upon
completion of the project. Such reasonable terms and conditions shall
include a monthly rent, including estimated average monthly utility
costs, that does not exceed the greater of the tenant's monthly rent
before transfer of title to the purchaser and estimated average monthly
utility costs, or that is affordable, as defined in this part.
(D) A tenant-occupant of a dwelling unit who is required to
relocate temporarily for the project, but does not return to the
building/complex, if either the tenant is not offered payment for all
reasonable out-of-pocket expenses incurred in connection with the
temporary relocation, or other conditions of the temporary relocation
are not reasonable.
(E) A tenant-occupant who moves from the building/complex
permanently after he or she has been required to move to another unit
in the same building/complex for the project, if either the tenant is
not offered reimbursement for all reasonable out-of-pocket expenses
incurred in connection with the move, or other conditions of the move
are not reasonable.
(ii) Notwithstanding the provisions of paragraph (d)(3)(i) of this
section, a person does not qualify as a ``displaced person'' if:
(A) The person is excluded under 49 CFR 24.2(g)(2).
(B) The person has been evicted for a serious or repeated violation
of the terms and conditions of the lease or occupancy agreement,
violation of applicable Federal, State, or local law, or other good
cause, and HUD determines that the eviction was not undertaken for the
purpose of evading the obligation to provide relocation assistance.
(C) The person moves into the property after transfer of title to
the purchaser.
(D) HUD determines that the person was not displaced as a direct
result of acquisition, rehabilitation, or demolition for an assisted
project.
(e) Temporary relocation (URA and non-URA relocation assistance).
Residential tenants, who will not be required to move permanently, but
who [[Page 11856]] must relocate temporarily (e.g., to permit property
repairs), shall be provided:
(1) Reimbursement for all reasonable out-of-pocket expenses
incurred in connection with the temporary relocation, including the
cost of moving to and from the temporary housing and any increase in
monthly rent or utility costs. The party responsible for this
requirement may, at its option, perform the services involved in
temporarily relocating the tenants or pay for such services directly;
and
(2) Appropriate advisory services, including reasonable advance
written notice of the date and approximate duration of the temporary
relocation; the suitable (and where appropriate, accessible), decent,
safe, and sanitary housing to be made available for the temporary
period; the terms and conditions under which the tenant may lease and
occupy a suitable, decent, safe, and sanitary dwelling in the building/
complex following completion of the repairs; and the right to financial
assistance provided under paragraph (e)(1) of this section.
(f) Appeals. If a person disagrees with the purchaser's
determination concerning the person's eligibility for relocation
assistance or the amount of the assistance for which the person is
eligible, the person may file a written appeal of that determination
with the owner or purchaser. A person who is dissatisfied with the
purchaser's determination on his or her appeal may submit a written
request for review of that decision to the HUD Field Office responsible
for administering the URA in the area.
Sec. 290.44 What actions must be taken concerning very low-income
tenants in the disposition of a multifamily housing project?
HUD will require that for a period of 2 years, beginning upon the
date of disposition of a multifamily housing project, the rent for any
unit occupied by a very low-income family, that is a preexisting tenant
and that would be required to pay a rent that is more than 30 percent
of the adjusted income (as defined in part 813) of the family, may not
be increased above the rent charged immediately before the acquisition.
Such a family will also be considered displaced for purposes of the
preferences for assistance under sections 6(c)(4)(A)(i), 8(d)(1)(A)(i),
and 8(o)(3)(B) of the United States Housing Act of 1937.
Sec. 290.46 What restrictions concerning nondiscrimination against
Section 8 certificate holders and voucher holders apply in the
disposition of a multifamily housing project?
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 Certificate of Family Participation or a Voucher under
Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f),
or any successor legislation. This provision is limited in its
application, for tenants or applicants with Section 8 Certificates or
their equivalent (other than Vouchers), to those units which rent for
an amount not greater than the Section 8 Fair Market Rent, as
determined by HUD. 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.
Subpart F--Subsidized Projects--Basic and Alternative Actions to
Facilitate Disposition
Sec. 290.54 What are the basic actions that may be taken in the
disposition of a subsidized project?
The basic assistance that HUD will provide and the basic
restrictions HUD will require in the disposition of a subsidized
project depend upon the profile of the project's units and tenants, as
follows:
(a) Assisted units--provision of project-based Section 8
assistance. Except as noted in Sec. 290.56, and to the extent budget
authority is available, HUD will provide project-based Section 8
assistance to assist at least all of a subsidized project's units that
were covered, before acquisition or foreclosure, by the rent subsidies
(Rent Supp, RAP, Sec. 23, project-based Section 8) included in the
definition of a subsidized project.
(b) Assisted units--tenant eligibility restrictions. The contract
for project-based Section 8 assistance in accordance with paragraph (a)
of this section, will provide that when a vacancy occurs in any unit
that requires such assistance, but which was occupied by a family
ineligible for such assistance, the owner will lease the available unit
to a family that is eligible for the assistance.
(c) Unassisted units--use and rent restrictions. HUD will require
use or rent restrictions on BMIR, 236, or 202 subsidized projects to
ensure that units that were not covered before acquisition or
foreclosure by Rent Supp, RAP, Sec. 23, or project-based Section 8 rent
subsidies remain available and affordable for the remaining useful life
of the project.
Sec. 290.56 What alternatives to the basic actions are available in
the disposition of subsidized projects?
In the disposition of a subsidized project, HUD may take the
following alternative actions instead of the basic actions listed in
Sec. 290.54:
(a) Unit substitution: Assistance to, or restrictions on, units in
unsubsidized projects instead of assistance to units in subsidized
projects. Instead of providing project-based Section 8 assistance as
required by Sec. 290.54(a), HUD may, in unsubsidized projects located
in the same market area, provide project-based Section 8 assistance to
units to be occupied by very low-income persons, or impose use and rent
restrictions to assure that units remain available to and affordable by
very low-income families for the remaining useful life of the project.
When this unit substitution procedure is used, the total number of
unsubsidized project units provided with assistance and/or placed under
use and rent restrictions must be at least equal to the number of
subsidized projects units that would have received project-based
Section 8 in the absence of unit substitution. In addition, HUD will
make tenant-based Section 8 assistance available to low-income families
residing in the subsidized project's units that would have received
project-based Section 8 assistance if this unit substitution
alternative had not been used.
(b) Substitution of tenant-based Section 8 assistance to low-income
families instead of project-based assistance to units. Instead of
providing project-based Section 8 assistance as required under
Sec. 290.54(a), HUD may enter into annual contribution contracts with
public housing agencies to provide tenant-based Section 8 assistance to
all low-income families who reside, on the date that the project is
acquired by a purchaser other than HUD, in units that would have been
eligible for the project-based Section 8 assistance under Sec. 290.54.
Tenant-based Section 8 assistance may be used in this way as a
substitute for project-based Section 8 assistance in not more than 10
percent of the aggregate number of subsidized project units disposed of
by HUD in any fiscal year, and only if HUD determines that there is
available in the market area in which the project is located an
adequate supply of habitable, affordable [[Page 11857]] housing for
very low-income families and other low-income families using tenant-
based assistance. The number of units eligible for this form of
substitution within the 10 percent limit will be estimated at the
beginning of each fiscal year, taking into consideration the aggregate
number of subsidized project units disposed of by HUD in the
immediately preceding fiscal year and the disposition activity planned
for the current fiscal year.
(c) Additional actions under subpart H. Instead of, or in addition
to, providing project-based Section 8 assistance in the disposition of
a subsidized project as required under Sec. 290.54(a), HUD may make use
of the additional actions to facilitate the disposition of multifamily
housing projects permitted in subpart H of this part.
Subpart G--Unsubsidized Projects--Basic and Alternative Actions to
Facilitate Disposition
Sec. 290.64 What are the basic actions that may be taken in the
disposition of an unsubsidized project?
The basic assistance that HUD will provide and the basic
restrictions HUD will require in the disposition of an unsubsidized
project depend upon the profile of the project's units and tenants, as
follows:
(a) Assisted units--provision of project-based Section 8
assistance. Except as noted in Sec. 290.66, and to the extent budget
authority is available, HUD will provide project-based Section 8
assistance for all of an unsubsidized project's units that were
covered, before acquisition or foreclosure, by an assistance contract
under:
(1) The new construction and substantial rehabilitation program
under section 8(b)(2) of the United States Housing Act of 1937 (the
1937 Act) (as in effect before October 1, 1983);
(2) The property disposition program under section 8(b) of the 1937
Act;
(3) The project-based certificate program under section 8 of the
1937 Act;
(4) The moderate rehabilitation program under section 8(e)(2) of
the 1937 Act;
(5) Section 23 of the 1937 Act (as in effect before January 1,
1975);
(6) The rent supplement program under section 101 of the Housing
and Urban Development Act of 1965; or
(7) Section 8 of the 1937 Act, following conversion from assistance
under section 101 of the Housing and Urban Development Act of 1965.
(b) LMSA-assisted units--provision of tenant-based section 8
assistance. HUD will provide tenant-based Section 8 assistance for
families that are preexisting tenants of unsubsidized projects in units
that, immediately before foreclosure or acquisition of the project by
HUD, were covered by an assistance contract under the loan management
set-aside program under section 8(b) of the United States Housing Act
of 1937.
Sec. 290.66 What alternatives to the basic actions are available in
the disposition of unsubsidized projects?
In disposing of an unsubsidized project, HUD may take the following
alternative actions instead of the basic actions listed in Sec. 290.64:
(a) Substitution of tenant-based Section 8 assistance to low-income
families instead of project-based assistance to units. Instead of
providing project-based Section 8 assistance as required under
Sec. 290.64, HUD may enter into annual contribution contracts with
public housing agencies to provide tenant-based Section 8 assistance to
all low-income families who reside, on the date that the project is
acquired by a purchaser other than HUD, in units eligible for the
project-based Section 8 assistance under Sec. 290.64. Tenant-based
Section 8 assistance may be used in this way as a substitute for
project-based Section 8 assistance only if HUD determines that there is
available in the market area in which the project is located an
adequate supply of habitable, affordable housing for very low-income
families and other low-income families using tenant-based assistance.
(b) Additional actions under subpart H. Instead of, or in addition
to, providing project-based Section 8 assistance in the disposition of
an unsubsidized project as required under Sec. 290.64, HUD may make use
of the additional assistance and restrictions for the disposition of
multifamily housing projects permitted in subpart H of this part.
Subpart H--All Multifamily Housing Projects--Additional Actions to
Facilitate Disposition
Sec. 290.70 What guidelines will HUD apply in determining which
additional actions to take in the disposition of a multifamily housing
project?
The additional actions to facilitate disposition available under
this subpart are intended to replace, supplement or make more cost
effective the Section 8 assistance that would otherwise be required,
and are to be provided in a manner consistent with the goals of
Sec. 290.3 and unless otherwise noted:
(a) On terms that will ensure that at least the units in the
project otherwise required to receive project-based Section 8
assistance in accordance with Sec. 290.54(a) (for a subsidized project)
and Sec. 290.64(a) (for an unsubsidized project) are available to and
affordable by low-income persons for the remaining useful life of the
project, with use or rent restrictions as HUD may prescribe; and
(b) With tenant-based Section 8 assistance to any very low-income
families who would have received project-based assistance under Section
8 in accordance with Sec. 290.54(a) (for a subsidized project) and
Sec. 290.64(a) (for an unsubsidized project), but because of action
taken under subpart H of this part, did not receive such assistance,
and are left residing in units of the project with rents that exceed
the amount payable as rent under section 3(a) of the United States
Housing Act of 1937 for very low-income families.
Sec. 290.72 May HUD reduce the sales price for a project?
HUD may reduce the selling price of a project. The sales price for
a project will be reasonably related to the intended use of the
property as affordable housing for very low-income tenants after sale,
any rehabilitation requirements for the project, the rents for units in
the project that can be supported by the market, the amount of project-
based Section 8 assistance being made available by HUD in the
disposition of the project, the occupancy profile of the project
(including family size and income levels for tenant families), and any
other factors that the Department considers appropriate.
Sec. 290.74 May HUD require additional use and rent restrictions?
Consistent with the guidelines in Sec. 290.70, HUD may require
units in a project to be subject to use or rent restrictions to provide
that the units will be available to and affordable by low- and very
low-income persons for the remaining useful life of the project.
Sec. 290.76 May HUD provide short-term loans to facilitate the sale of
a project?
HUD may provide short-term loans to facilitate the sale of a HUD-
owned multifamily housing project if:
(a) Authority for such loans is provided in advance in an
appropriation Act;
(b) The loan has a term of not more than 5 years;
(c) HUD determines, based upon documentation provided by the
purchaser, that the purchaser has obtained a commitment of permanent
financing to replace the short-term loan from a lender who meets
standards established by the Department; and [[Page 11858]]
(d) The terms of the loan are consistent with prevailing practices
in the marketplace or the provision of the loan results in no cost to
the Government, as defined in section 502 of the Congressional Budget
Act of 1974.
Sec. 290.78 Under what conditions may HUD provide up-front grants?
For a HUD-owned multifamily housing project, HUD may utilize the
budget authority provided for contracts issued under this part for
project-based Section 8 assistance to (in addition to providing
project-based Section 8 rental assistance) provide up-front grants for
the necessary cost of rehabilitation and other HUD-approved related
development costs to reduce the level of Section 8 contract rents if
HUD determines that action under this section is more cost-effective
than providing project-based Section 8 assistance in accordance with
Sec. 290.54(a) (for a subsidized project) and Sec. 290.64(a) (for an
unsubsidized project).
Sec. 290.80 What additional tenant-based assistance may HUD offer?
To facilitate the sale of a multifamily housing project, HUD may
make tenant-based Section 8 assistance available to families eligible
to receive such assistance residing in a multifamily housing project
that do not otherwise qualify for project-based assistance.
Sec. 290.82 How may HUD provide for alternative uses of units in the
disposition of a multifamily housing project?
(a) In general. Notwithstanding any other provision of law, after
providing notice to and an opportunity for comment by preexisting
tenants, HUD may allow up to:
(1) 10 percent of the total number of rental housing units in
multifamily housing projects that are disposed of by the Department
during any fiscal year to be made available for uses other than rental
or cooperative uses, such as, low-income homeownership opportunities,
or in any particular project, community space, office space for tenant
or housing-related service providers or security programs, or small
business uses, if such uses benefit the tenants of the project; and
(2) 5 percent of the total number of rental housing units in
multifamily housing projects that are disposed of by the Department
during any fiscal year to be used in any manner, if HUD and the unit of
general local government or area-wide governing body determine that
such use will further fair housing, community development, or
neighborhood revitalization goals.
(b) Computation of number of eligible units. The number of units
eligible for alternate uses in any fiscal year will be determined at
the beginning of the fiscal year as the applicable percentages in
paragraph (a) (1) or (2) of this section (i.e., either 10 percent or 5
percent) of the estimated total number of units to be disposed of in
the fiscal year, taking into consideration the total number of units in
multifamily housing projects disposed of by the Department in the
immediately preceding fiscal year, and the extent of the disposition
activity planned in the current fiscal year.
(c) Displacement protection. HUD may take actions under paragraph
(a) of this section only if:
(1) Tenant-based Section 8 assistance is made available to each
family eligible for such assistance residing in the project that is
displaced as a result of such actions; and
(2) HUD determines that sufficient habitable, affordable rental
housing is available in the market area in which the project is located
to ensure use of such assistance.
Sec. 290.84 What disposition assistance may be available to rebuild a
multifamily housing project?
(a) Notwithstanding any provision of section 8 of the United States
Housing Act of 1937, HUD may provide project-based assistance up to the
levels required in Sec. 290.54(a) (for a subsidized project) and
Sec. 290.64(a) (for an unsubsidized project) to support the rebuilding
of a HUD-owned multifamily housing project rebuilt or to be rebuilt (in
whole or in part and on-site, off-site, or in a combination of both) in
connection with a disposition under this part, if HUD determines all of
the following:
(1) The project is not being maintained in a decent, safe, and
sanitary condition;
(2) The costs to HUD for rebuilding are such that the monthly debt
service needed to amortize the cost of relocating tenants, demolition,
site preparation, rebuilding, operating expenses, and a reasonable
return to the purchaser cannot be provided with rents that are within
120 percent of the most recently published Section 8 Fair Market Rents
for Existing Housing (24 CFR part 888, subpart A), and would be less
expensive than rehabilitation;
(3) The unit of general local government in which the project is
located approves the rebuilding and makes a financial contribution or
other commitment to the project determined by HUD to be satisfactory;
(4) The rebuilding is a part of a local neighborhood revitalization
plan approved by the unit of general local government.
(b) The provisions of Sec. 290.42 apply to any tenants of the
project who are displaced through an action taken under paragraph (a)
of this section.
Sec. 290.86 What emergency assistance funds may be provided to
tenants?
HUD may make arrangements with State agencies and units of general
local government of States receiving emergency assistance under part A
of title IV of the Social Security Act for the provision of assistance
under that Act on behalf of eligible families who would reside in any
multifamily housing projects.
Sec. 290.88 Under what circumstances may HUD make a determination not
to preserve a project or a part of a project?
HUD may determine to demolish, or otherwise dispose of, a HUD-owned
multifamily housing project, or any portion of such a project, or to
foreclose a HUD-held mortgage on a multifamily housing project, without
ensuring its continued availability as affordable rental or cooperative
housing for low- and very low-income families under appropriate
circumstances which may include one or more those listed in paragraphs
(a) through (g) of this section. If HUD decides not to preserve an
occupied multifamily housing project at a foreclosure sale or sale of a
HUD-owned project, tenants must be provided relocation assistance as
described in Sec. 290.42.
(a) The costs to HUD of rehabilitation are such that the monthly
debt service needed to amortize the cost of rehabilitation, operating
expenses, and a reasonable return to the purchaser cannot be provided
with rents that are, for subsidized and formerly subsidized projects,
within 120 percent of the most recently published Section 8 Fair Market
Rents for Existing Housing (24 CFR part 888, subpart A) or, for
unsubsidized and formerly unsubsidized projects, within rents
obtainable in the market.
(b) Construction is substantially incomplete.
(c) Preservation is not feasible because of environmental factors
that cannot be mitigated by HUD or the purchaser. For example, when the
project is located on a site that cannot be made to comply with the
Section 8 Site and Neighborhood standards in 24 CFR 886.307(k) because
of factors that adversely affect the health, safety and general welfare
of residents such as air pollution; smoke; mud slides; fire or
explosion hazards. Preservation may also be infeasible because of
[[Page 11859]] significantly deteriorated surrounding neighborhood
conditions with inadequate police or fire protection; high crime rates;
drug infestation; or lack of public community services needed to
support a safe and healthy living environment for residents.
(d) HUD determines the project is unfit for rehabilitation.
(e) Rehabilitation would cost more than constructing comparable new
housing.
(f) A reduction in the number of units in the project will enhance
long-term project viability, for example, demolition of a building to
provide space for a playground, open space, or combining one-bedroom
units to create larger units for families.
(g) Continued preservation of the project as rental or cooperative
housing is not compatible with State or local land use plans for the
area in which the project is located.
Subpart I--Sale of HUD-Held Multifamily Mortgages
Sec. 290.100 What is the purpose of this subpart?
The purpose of this subpart is to set out HUD's policy regarding
the sale of subsidized and unsubsidized HUD-held mortgages. Except as
otherwise provided in Sec. 290.106(a)(2), the Department will sell
these mortgages on a competitive basis. HUD retains full discretion to
offer any qualifying mortgage for sale and to withhold or withdraw any
offered mortgage from sale. However, when a qualifying mortgage is
offered for sale, the procedures set out in this part will govern the
sale.
Sec. 290.102 What effect does this subpart have on the applicability
of Civil Rights requirements?
Nothing in this subpart relieves HUD or housing that receives
federal financial assistance from federal civil rights requirements,
including section 504 of the Rehabilitation Act, Title VI of the Civil
Rights Act of 1964, Title VIII of the Civil Rights Act of 1968, the Age
Discrimination Act of 1975, Executive Order 11063, and related
regulations and requirements. This includes housing in which less than
50% of the units are receiving housing assistance payments under either
Section 23 or Section 8 of the United States Housing Act of 1937 and
housing in which the rent of any unit is paid by a Section 8
certificate or voucher.
Sec. 290.104 What tenant protections will apply in the sale of HUD-
held subsidized mortgages?
HUD will only sell subsidized mortgages if the sale is part of a
transaction that will ensure that the project subject to the mortgage
will continue to operate, at least until the maturity date of the
mortgage, in a manner that will provide rental housing on terms at
least as advantageous to existing and future tenants as the terms
required by the program under which the mortgage was insured prior to
its assignment.
Sec. 290.106 How will HUD sell current subsidized mortgages?
HUD will sell current mortgages, as follows:
(a) Current mortgages with FHA mortgage insurance will be sold
either:
(1) On a competitive basis to FHA-approved mortgagees; or
(2) On a negotiated basis, to State or local governments, or to a
group of investors that includes an agency of a State or local
government, if:
(i) The terms of the sale include an agreement by the State or
local government, or an agency of the State or local government, to:
(A) Act as mortgagee or owner of a beneficial interest in the
mortgage; and
(B) Ensure that the project will maintain occupancy by the tenant
group originally intended to be served by the subsidized housing
program; and
(ii) The sales price is the best price that HUD can obtain from an
agency of a State or local government while maintaining occupancy for
the tenant group originally intended to be served by the subsidized
housing program.
(b) Current mortgages without FHA mortgage insurance will be sold
if HUD can offer protections equivalent to those listed for an insured
sale in paragraph (a) of this section.
Sec. 290.108 How will HUD sell delinquent subsidized mortgages?
Delinquent mortgages will be sold only if, as part of the sales
transaction:
(a) The mortgages are restructured; and
(b) Either FHA mortgage insurance or equivalent protections are
provided.
Sec. 290.110 What is HUD's policy for selling HUD-held unsubsidized
mortgages?
HUD's policy for selling HUD-held unsubsidized mortgages is as
follows:
(a) Current mortgages may be sold with or without FHA mortgage
insurance.
(b) Delinquent mortgages may be sold without FHA mortgage
insurance. However, delinquent mortgages will not be sold if:
(1) HUD believes that foreclosure is unavoidable; and
(2) The project securing the mortgage is occupied by very low-
income tenants who are not receiving housing assistance and would be
likely to pay rent in excess of 30 percent of their adjusted monthly
income if HUD sold the mortgage.
PART 886--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--SPECIAL
ALLOCATIONS
2. The authority citation for 24 CFR part 886 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.
3. Section 886.302 is amended by revising the definitions of the
terms ``Eligible project or project'', and ``Owner'', to read as
follows:
Sec. 886.302 Definitions.
* * * * *
Eligible project or project. A multifamily housing project (see 24
CFR part 290):
(1) For which the disposition in accordance with the provisions of
24 CFR part 290 involves sale with Section 8 housing assistance to
enable the project to be used, in whole or in part, to provide housing
for lower income families; and
(2) The units of which are decent, safe, and sanitary.
* * * * *
Owner. The purchaser, including a cooperative entity or an agency
of the Federal Government, under this subpart, of a HUD-owned project;
or the purchaser, including a cooperative entity or an agency of the
Federal Government, through a foreclosure sale of a project that was
subject to a HUD-held mortgage.
* * * * *
4. Section 886.310 is revised to read as follows:
Sec. 886.310 Initial contract rents.
HUD will establish contract rents at levels that, together with
other resources available to the purchasers, provide sufficient amounts
for the necessary costs of rehabilitating and operating the multifamily
housing project and do not exceed 120 percent of the most recently
published Section 8 Fair Market Rents for Existing Housing (24 CFR part
888, subpart A).
5. Section 886.311 is revised to read as follows:
Sec. 886.311 Term of contract.
The contract term for any unit shall not exceed 15 years, except
that the term may be less than 15 years as [[Page 11860]] provided
under either paragraph (a) or (b) of this section.
(a) The contract term may be less than 15 years if HUD finds that,
based on the rental charges and financing for the multifamily housing
project to which the contract relates, the financial viability of the
project can be maintained under a contract having a term less than 15
years. Where a contract of less than 15 years is provided under this
paragraph, the amount of rent payable by tenants of the project for
units assisted under such a contract shall not exceed the amount
payable for rent under section 3(a) of the United States Housing Act of
1937 for a period of at least 15 years.
(b) The contract term may be less than 15 years if the assistance
is provided under a contract authorized under section 6 of the HUD
Demonstration Act of 1993, and pursuant to a disposition plan under
this part for a project that is determined by the HUD to be otherwise
in compliance with this part.
6. Section 886.319 is revised to read as follows:
Sec. 886.319 Responsibility for contract administration.
HUD is responsible for administration of the Contract. HUD may
contract with another entity for the performance of some or all of its
Contract administration functions.
Dated: October 13, 1995.
Jeanne K. Engel,
General Deputy Assistant Secretary for Housing--Federal Housing
Commissioner.
[FR Doc. 95-5093 Filed 3-1-95; 8:45 am]
BILLING CODE 4210-27-P
