[Federal Register Volume 63, Number 167 (Friday, August 28, 1998)]
[Rules and Regulations]
[Pages 46104-46108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23144]
[[Page 46103]]
_______________________________________________________________________
Part II
Housing and Urban Development
_______________________________________________________________________
24 CFR Part 968
Modernization Funding Replacement Housing Factor; Final Rule
Federal Register / Vol. 63, No. 167 / Friday, August 28, 1998 / Rules
and Regulations
[[Page 46104]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 968
[Docket No. FR-4125-F-02]
RIN 2577-AB71
Replacement Housing Factor in Modernization Funding
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Final rule.
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SUMMARY: This rule revises the regulations that govern the formula
allocation of modernization funding under the Comprehensive Grant
Program (CGP) to add to the formula a replacement housing factor that
would maintain, for five years, a portion of funding that otherwise
would be lost by a CGP housing agency when the number of its public
housing units are reduced as a result of demolition, disposition, or
conversion. The preserved funding must be used for accelerated
renovation and reoccupancy of vacant, viable units, or for construction
or acquisition of replacement housing units--to the extent that the
funds are authorized for such use. The rule takes effect in Federal
Fiscal Year (FY) 1998, based on demolition, disposition and conversion
of units between October 1, 1996 and September 30, 1997.
This rule is needed to encourage public housing agencies (PHAs) to
demolish, dispose of, or convert units that are not providing decent,
safe, and sanitary housing and either develop replacement units or
accelerate renovation of the existing units.
DATES: Effective date. September 28, 1998.
FOR FURTHER INFORMATION CONTACT: William Flood, Director, Office of
Capital Improvements, Office of Public Housing Investments, Room 4134,
Department of Housing and Urban Development, 451 Seventh Street, SW,
Washington, DC 20410, telephone number (202) 708-1640, extension 4185.
(This telephone number is not toll-free.) For hearing-and speech-
impaired persons, this number may be accessed via text telephone by
dialing the Federal Information Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Changes From Proposed Rule
The proposed rule in this proceeding was published on September 10,
1997 (62 FR 47740). This final rule includes several changes from the
proposed rule. Most are being made in response to public comments, as
discussed in greater detail below. Changes made in response to comments
are to clarify that a PHA must request application of the replacement
housing factor in order for it to be applied; to clarify that
replacement housing must be produced in accordance with the
Department's development regulations (24 CFR part 941); and to specify
additional procedures applicable to PHAs that are troubled or mod-
troubled that want to have this factor applied--either to rehabilitate
vacant but viable units or to develop new replacement units. In
addition, the rule clarifies that replacement housing may be undertaken
with funding from fiscal years in which it is an authorized use of
modernization funds. Also, the rule provides that use of replacement
reserve is not required for emergencies if the amount that otherwise
would be used from that reserve is an accumulation from application of
the replacement housing factor that is necessary so that replacement
housing can be provided efficiently and effectively.
II. Discussion of Public Comments
There were seven public comments received on the proposed rule.
Three of the comments were from organizations representing PHAs and
four were from PHAs. Two of the three organizations were opposed to the
rule, while all four PHAs were supportive.
A. Need for the Rule
1. Comments on Who Benefits
Some commenters believed the rule is very much needed to help PHAs
cope with the sudden losses in funding they would otherwise experience
when demolishing large numbers of units. One organization stated that
it is ``an important first step in addressing the lack of resources
available for much-needed replacement housing.'' However, a few
commenters stated that the change is not justified and that the rule
does not promote equity and fairness in the CGP distribution but favors
large city PHAs, including those who have already benefited from
special funding under HOPE VI and MROP. One organization also
challenged HUD's statement that ``replacement vouchers do not meet some
local needs as well as hard replacement units do.'' It argued that HUD
has touted the relative value of tenant-based over project-based
assistance.
According to one PHA, the replacement housing factor will
disproportionately benefit a relatively few, large housing authorities,
which already have received yearly CGP allocations based on large
numbers of units that have not been housing anyone. An organization
stated that the Department has not demonstrated that ``central cities
have tight housing markets.'' It contended that the National Housing
Survey ``consistently demonstrates that the highest vacancy rates and
lowest rents are in the central cities.'' It stated that the rule will
result in less funding for housing in areas outside the central cities,
and stated that this is not justified.
This same organization also criticized the rule as continuing to
``reward failure'' by giving additional funding to agencies regardless
of their capacity to use the funds well. It claimed that of the 40
agencies that would benefit from the factor, the majority are either
troubled or mod-troubled and that the rule provides no measures to
assure adequate performance. The recommendation made was that HUD
should consider adding a replacement factor only for those agencies
that are neither troubled nor mod-troubled.
2. HUD Response
With respect to the creation of ``hard replacement units'' as
opposed to tenant based assistance, the Department believes both
approaches should be used to replace demolished public housing. The
approach taken in this rule provides funding for replacement of about
20 percent of the units. The Department also is asking for additional
funding for the HOPE VI program, which will provide more hard units,
and for new Section 8 certificates and vouchers to support tenant-based
assistance for many families.
The reference to ``tight housing markets'' in the proposed rule was
found only in the introductory summary at the beginning of the rule.
The Department does not place primary reliance on the existence of a
tight housing market in any particular city for this factor to be
applicable. A primary purpose of the rule is to provide an incentive to
PHAs that have units in extremely poor condition to demolish or dispose
of or convert the units, supporting revitalization activity in the
areas where such housing is now a blight. In fact, to the extent that
the rule increases demolition, there may be an overall decrease in
units in a particular market, since there is insufficient funding for
100 percent replacement of the reduced number of public housing units.
In view of the large proportion of eligible low income households not
living in affordable housing, virtually all communities can use either
vacancy renovation funds or the relatively small amount of replacement
housing made
[[Page 46105]]
possible by this rule to provide more housing opportunities.
It is true that this rule benefits primarily large cities, although
all city housing agencies with at least 250 units that are demolishing
or disposing of public housing are eligible. That result is
appropriate, because that is where there is the largest number of units
to be demolished and replaced. This rule does not affect the
modernization rule that governs small PHAs--those with fewer than 250
units--generally in smaller localities, which are subject to the
Comprehensive Improvement Assistance Program instead of the CGP. Some
of the PHAs that will benefit from this rule have received HOPE VI and
MROP funding, but not all of them. In any case, such funds are offset
before this rule is applied, so that there is no double benefit.
With respect to receipt of funds by a troubled or mod-troubled PHA
that is not already under the direction of HUD or a court-appointed
receiver, the Department is requiring (in Secs. 968.103 (e)(3)(ii)(D)
and (f)(4)(ii)(D)) that such a PHA use an Alternative Management Entity
(as described in 24 CFR 901.5) for oversight of replacement housing
development. In addition, in all efforts to carry out activities funded
by the replacement housing factor, including accelerated renovation of
vacant and viable units, a troubled or mod-troubled PHA is required to
comply with the Memorandum of Agreement (MOA) that was executed with
HUD in connection with the finding that it is troubled, under the
Public Housing Management Assessment Program (24 CFR 901.135), and any
corrective actions required by HUD in accordance with this part's
performance review section (Sec. 968.335).
3. Comment on How to Calculate the Benefit
One PHA stated an example of how it thought the changes to the
formula to account for additional backlog need and accrual need would
apply to its circumstances, based on the example given in the preamble
of the proposed rule, and asked whether its estimate was accurate.
4. HUD Response
The estimate was not accurate, but when the rule is implemented,
HUD will provide each authority with a description of the method and
its application to the data of that housing authority. In the meantime,
a PHA may develop its own estimate by starting with the number of units
subject to the replacement factor formula in a year, and multiplying
that number by the average funding received per comprehensive grant
unit in the most current year. (To obtain this average, divide total
funding for the Comprehensive Grant program by the total units funded
under the program.) In the first year, one-third of the product will be
the replacement factor funding. In the second year, two-thirds of the
product will be the replacement factor funding. In years three through
five, the entire product will be the replacement factor funding.
Thereafter, the units will have no replacement factor funding. Of
course, the process is a rolling one, so that additional units may be
demolished, converted, or disposed of in more than one year of a five-
year period, adding to the backlog and accrual needs in later years.
B. Adequacy and Timing of Funding
1. Comments on Timing
Among those who supported the idea of providing a replacement
housing factor, a recommendation was made that HUD permit one of three
options to facilitate financing of replacement housing: (a) permit the
PHA to ``bank'' the funds until all replacement housing factor funds
are received; (b) advance the five years of funding in the first year;
or (c) allow the PHA to use other resources in the early years and
repay itself for its contribution as the replacement housing factor
funds are received. These options would respond to a concern about the
difficulty of funding replacement construction with funding that would
not be fully available for five years.
The length of time over which the replacement housing factor would
apply also was an issue. Some commenters felt the period was too short,
while others felt that it was too long. One commenter stated that
because the phase-out is most drastic after the fifth year, there would
be an outcry for slower decreases after that year, extending the factor
even longer. Another PHA stated that the period should be longer, so
that the effect felt would be more gradual.
2. HUD Response
Large PHAs may be able to phase construction in such a way as to
have adequate funding available in any given year. Of the three options
specified by one commenter and outlined above, the first and third are
acceptable, under appropriate circumstances.
If a PHA wants to build up reserves in a particular year to spend
in a following year for replacement housing, it could establish a
reserve under the current Sec. 968.112(f)(1)(ii) for such a purpose if
its annual replacement housing funding would be inadequate to cover its
replacement housing needs in an efficient and effective manner. The
rule is being modified to assure that this policy can be carried out.
Ordinarily, under Sec. 968.112(f)(4), the PHA would be required to
use the funds in the replacement reserve to cover emergency
modernization needs--to the extent that adequate funds otherwise were
not available--if the PHA had an emergency need during the period when
it is building up the replacement reserve. (The CGP is flexible enough
to permit a PHA to reorder its priorities when it encounters an
emergency modernization need, so that the PHA could then use funds
otherwise earmarked for a particular modernization use for the
emergency and fund the original priority in a later year.) The
availability of the replacement reserve for replacement housing is
central to the purposes of this rule: to encourage demolition,
disposition, and conversion of units that are not viable and to provide
an additional resource for replacement housing and for the accelerated
renovation of units that can be renovated and reoccupied. Therefore, to
assure that an emergency modernization would not undermine these
purposes, this rule adds a sentence to Sec. 968.112(f) to provide that
use of the replacement reserve is not required for emergencies if the
amount that otherwise would be used from that reserve is an
accumulation from application of the replacement housing factor.
With respect to a loan repayment option, HUD has no authority to
advance the five years of funding made available under the application
of this factor in the first year.
When considering what year's funding to use for various purposes,
PHAs must be conscious of permissible uses under the appropriation act
for the various years. For example, FY 1997 and FY 1996 Comp Grant
funds may be used for replacement housing purposes. Fiscal Year 1998
funds are not yet authorized for such use, although they may be used
for accelerated renovation and reoccupancy of vacant, viable units. A
reference to this variation in authority for different years' funds is
added to Secs. 968.103(e)(3)(ii)(B) and (f)(4)(ii)(B).
HUD will not consider changing the period over which this
replacement housing factor is used. Five years was chosen because it is
a short enough time so that PHAs that are not significantly decreasing
their number of units would see increases in their allocations within a
reasonable period, but PHAs that are significantly decreasing their
number of units would see enough of an impact from the factor to be
motivated to
[[Page 46106]]
pursue the much-needed demolition and replacement of those units and
would have a significant additional resource for this purpose.
3. Comments on Other Funding for Replacement Housing
An organization stated that section 202 of the Omnibus Consolidated
Rescissions and Appropriations Act of 1996 required PHAs to identify
certain distressed public housing developments to be removed from the
public housing inventory within five years, after relocation of the
tenants with tenant-based or project-based assistance. The rule
provides that the replacement housing factor applies only if ``the
reduced units are not otherwise receiving funding for replacement
housing or vacancy renovation.'' The organization asked whether
``funding for replacement housing'' includes existing vouchers, new
vouchers, or relocation to other public housing.
4. HUD Response
PHAs that have received tenant-based assistance or have relocated
households to other public housing are eligible for application of the
replacement housing factor. If a PHA already has received vouchers, it
remains eligible for this factor. If a PHA has not received vouchers
and it applies for application of this factor first, then it will not
be eligible for vouchers to replace the units involved. Relocation of
tenants to other public housing does not disqualify a PHA from
application of this factor to replace those hard units. The units
renovated or replaced with funds received under the replacement housing
factor may not have received funding, however, under the public housing
development program, Major Reconstruction of Obsolete Public Housing
(MROP), or HOPE VI program for the purpose of replacement housing or
accelerated renovation. They may not receive future HOPE VI funds for
this purpose, either.
5. Comments on Amount of Funding
One PHA expressed reservations about the adequacy of the funding
resulting from the replacement housing factor as described to support
replacement of twenty percent of the units demolished, disposed of, or
converted. It proposed an alternative for determining the amount of
funding to be preserved: not using the amount that a particular PHA
would have received if it had not reduced its number of units, but on
the aggregate amount of funding that is subject to reduction as a
result of demolition, disposition, or conversion--allocated among only
the PHAs that do propose replacement housing. This PHA also stated that
it is unclear whether the funds resulting from the current three-year
phase-out will continue to be received in addition to the replacement
housing factor funds, or whether the current phase-out funds become the
replacement housing factor funds (at least in part).
Concerned about adequate funding levels for construction of
replacement housing, one organization suggested that HUD continue to
seek other sources of funding, as well. A PHA recommended that HUD
consider funding for a higher percentage of replacement units for PHAs
with a high demand for housing that are located in cities with tight
affordable housing markets.
6. HUD Response
It is not the intent of this rule to provide an increase above the
amount of modernization funding to which the PHA would have been
entitled if there had been no demolition, disposition, or conversion.
If a community does not need the funds that would be restored by the
replacement housing factor, they should remain available for general
distribution under the formula. With respect to the adequacy of
funding, that issue is discussed above in section A2.
The funding now available under the three-year phase-out will not
become a portion of the replacement housing factor funds but instead
will continue to be available for all modernization needs.
C. Procedures
1. Comments on Universal Applicability
In the preamble to the proposed rule, it was stated that a PHA must
request use of the replacement housing factor when updating its annual
formula characteristics report. The rule text, at Sec. 968.103(e)(3)
and (f)(4), did not repeat the requirement that a PHA request use of
the factor. Commenters differed on the preferred resolution of this
difference. One PHA preferred that the replacement housing factor only
be applied to those PHAs that specifically request it, while an
organization recommended that the factor be applied automatically to
every PHA that would be eligible.
This element is particularly important to the first year of its
applicability, since some PHAs may already have returned the
information for the period ending on September 30, 1997, and therefore
may not have requested use of the factor for which they will be
eligible under a final rule.
2. HUD Response
The rule text has been revised to correspond to what was described
in the preamble of the proposed rule (see Secs. 968.103(e)(3)(ii)(C)
and (f)(4)(ii)(C)). Since the time has already passed for PHAs to
indicate whether they wanted this factor applied for the demolitions,
dispositions, and conversions that took place between October 1, 1996
and September 30, 1997, the Department has asked all qualified PHAs
whether they want to have the factor applied in the letter transmitting
the annual formula amount which is already calculated using the formula
characteristics for the same period of time. For the purpose of funding
such requests, the Department has held back a very limited amount of
funds during the current funding cycle. In future years, such a request
may be handled in a different fashion.
3. Comments on Determination of Units Covered
PHAs asked what procedures are to be used when disclosing the units
that are the subject of demolition, disposition, or conversion. They
also asked which happens first--approval of a demolition, disposition,
or conversion application, or identification in the Formula
Characteristics Report of units to be demolished, disposed of, or
converted.
4. HUD Response
The approval process is that HUD approves an application for
demolition, disposition, or conversion in order for the housing
authority to be eligible for the replacement housing factor. In the
case of developments that are the subject of mandatory conversion
(under Section 202 of the Omnibus Consolidated Rescissions and
Appropriations Act of 1996), HUD approves a conversion plan before the
PHA is eligible.
In the annual letter transmitting to PHAs the annual formula amount
for the period from October 1, 1996 through September 30, 1997, the
Department has already asked PHAs that had demolitions, dispositions,
and conversions during that period whether they want to have the factor
applied. The data used to determine the applicability of the factor to
a particular PHA is found in HUD's own systems, including information
garnered from plans for demolition, disposition, and conversion
approved by HUD and validated by the PHA.
D. Additional constraints
1. Comments
Improvements suggested to the proposed rule were to require a
feasible, reasonably specific replacement plan that includes milestones
to be met to avoid recapture of the funds, and to
[[Page 46107]]
limit the funds made available under the factor so that the primary
purpose of modernization funds can still be realized.
2. HUD Response
As clarified in this final rule (Secs. 968.103(e)(3)(ii)(E) and
(f)(4)(ii)(E)), the replacement units must be constructed in accordance
with the Public Housing Development regulations, 24 CFR 941 (including
the sanctions under Sec. 941.501), which require submission of a
project development schedule. The appropriateness of the amount of
funds subject to this rule has been discussed above.
E. Additional flexibility
1. Comments
If a PHA is state-wide, it may prefer the flexibility of being able
to provide replacement units in a different community within its
jurisdiction than the one in which units are being demolished, disposed
of, or converted. Suggesting that this be permitted, the PHA asked what
area's Total Development Cost (TDC) limit would be used to establish
the replacement housing factor funding level.
2. HUD Response
HUD agrees that a multi-jurisdictional PHA should be able to
replace housing where it is most needed within its territory, using the
TDC for the area where the replacement housing is being built.
III. Findings and Certifications
A. Public Reporting Burden
This final rule contains no new information collection requirements
that would require review by the Office of Management and Budget under
the Paperwork Reduction Act of 1995 (42 U.S.C. 3501-3520). An agency
may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless the collection displays a valid
control number.
B. Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this final rule, and in so
doing certifies that this rule will not have a significant economic
impact on a substantial number of small entities. This final rule only
affects PHAs with 250 or more units, eligible for formula funding under
the CGP and primarily affects larger PHAs, which have experienced the
greatest unit reduction.
C. Environmental Impact
A Finding of No Significant Impact with respect to the environment
was made in connection with development of a proposed rule on this
subject, in accordance with HUD regulations at 24 CFR part 50 that
implement section 102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4332). That Finding of No Significant Impact is
applicable to this final rule as well, and it is available for public
inspection and copying during regular business hours (7:30 a.m. to 5:30
p.m.) in the Regulations Division of the Office of General Counsel,
Room 10276, 451 Seventh Street, SW, Washington, DC 20410-0500.
D. Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule do not have significant impact on States or
their political subdivisions, or the relationship between the Federal
Government and State and local governments, or on the distribution of
power and responsibilities among the various levels of government. As a
result, the rule is not subject to review under the Order. The rule
merely preserves funding that otherwise would be lost to local housing
agencies that have experienced significant loss of units.
E. Unfunded Mandates Reform Act
The Secretary, in accordance with the Unfunded Mandates Reform Act
of 1995, 2 U.S.C. 1532, has reviewed this rule before publication and
by approving it certifies that this rule does not impose a Federal
mandate that will result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year.
F. Regulatory Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, Regulatory Planning and Review. OMB determined
that this rule is a ``significant regulatory action,'' as defined in
section 3(f) of the Order. Any changes made to this rule as a result of
that review are clearly identified in the docket file. The docket file
is available for public inspection between 7:30 a.m. and 5:30 p.m. in
the Regulations Division of the Office of General Counsel, Room 10276,
Department of Housing and Urban Development, 451 Seventh Street, SW,
Washington, DC 20410-0500.
G. Catalog
The Catalog of Federal Domestic Assistance number for the program
affected by this final rule is 14.850.
List of Subjects in 24 CFR 968
Grant programs--housing and community development, Indians, Loan
programs--housing and community development, Public housing, Reporting
and recordkeeping requirements.
Accordingly, part 968 of title 24 of the Code of Federal
Regulations is amended as follows:
PART 968--PUBLIC HOUSING MODERNIZATION
The authority citation for part 968 continues to read as follows:
Authority: 42 U.S.C. 1437d, 1437l, and 3535(d).
Section 968.103 is amended as follows:
a. Paragraphs (e)(3) and (e)(4) are redesignated as paragraphs
(e)(4) and (e)(5), respectively;
b. New paragraphs (e)(3) and (f)(4) are added, to read as follows:
Sec. 968.103 Allocation of funds under section 14.
* * * * *
(e) * * *
(3) Replacement factor to reflect backlog need for developments
with demolition, disposition, or conversion occurring on or after
October 1, 1996.
(i) PHAs that have a reduction in units attributable to demolition,
disposition, or conversion of units during the period (reflected in
data maintained by HUD) that lowers the formula unit count for the
Comprehensive Grant formula calculations qualify for application of a
replacement housing factor, subject to satisfaction of criteria stated
in paragraph (e)(3)(ii) of this section. The factor will be added,
where applicable, for the first five years after such reduction, and
consists of 50 percent of the published Total Development Cost for a
two-bedroom unit in a walkup type structure for the period April 3,
1996 through April 30, 1997, multiplied times the number of units to be
demolished, disposed of, or converted. The total relative backlog need
of the PHA resulting from application of this replacement factor cannot
exceed the share it would have had if the demolition, disposition, or
conversion had not taken place.
(ii) A PHA is eligible for application of this factor only if the
PHA satisfies the following criteria:
(A) The PHA requests the application of the replacement factor;
[[Page 46108]]
(B) The restored funding that results from the use of the
replacement factor is used to provide replacement housing (in any year
in which replacement housing is an eligible activity) or accelerated
renovation of vacant but viable units, in accordance with the PHA's
five-year action plan, approved by HUD (see Sec. 968.315);
(C) The PHA does not receive funding under the public housing
development; Major Reconstruction of Obsolete Public Housing, or HOPE
VI programs for the units developed or modernized with funds received
under this replacement housing factor;
(D) A PHA that has been determined by HUD to be troubled or mod-
troubled that is not already under the direction of HUD or a court-
appointed receiver, in accordance with part 901 of this chapter, must
use an Alternative Management Entity as defined in Sec. 901.5 of this
chapter for development of replacement housing and must comply with any
applicable provisions of its Memorandum of Agreement executed with HUD
under that part; and
(E) Any development of replacement housing by any PHA must be done
in accordance with part 941 of this chapter.
(iii) If the PHA does not use the restored funding that results
from the use of the replacement factor to provide replacement housing
or renovate vacant units in a timely fashion, in accordance with
Sec. 968.125 and Sec. 941.501 of this chapter, and make reasonable
progress on such use of the funding, in accordance with
Sec. 968.335(a)(3) and Sec. 941.501, HUD may require appropriate
corrective action under Sec. 968.335 and Sec. 941.501; may recapture
and reallocate the funds; or may use other remedies available to HUD.
* * * * *
(f) * * *
(4) Replacement factor to reflect accrual need for developments
with demolition, disposition, or conversion occurring on or after
October 1, 1996. (i) PHAs that have a reduction in units attributable
to demolition, disposition, or conversion of units during the period
(reflected in data maintained by HUD) that lowers the formula unit
count for the Comprehensive Grant formula calculations qualify for
application of a replacement housing factor, subject to satisfaction of
criteria stated in paragraph (f)(4)(ii) of this section. The factor
will be added, where applicable, for the first five years after such
reduction, and consists of two percent of the published Total
Development Cost for a two-bedroom unit in a walkup type structure for
the period April 3, 1996 through April 30, 1997, multiplied times the
number of units to be demolished, disposed of, or converted. The total
relative accrual need of the PHA resulting from application of this
replacement factor cannot exceed the share it would have had if the
demolition, disposition, or conversion had not taken place.
(ii) A PHA is eligible for application of this factor only if the
PHA satisfies the following criteria:
(A) The PHA requests the application of the replacement factor;
(B) The restored funding that results from the use of the
replacement factor is used to provide replacement housing (in any year
in which replacement housing is an eligible activity) or accelerated
renovation of vacant but viable units, in accordance with the PHA's
five-year action plan, approved by HUD (see Sec. 968.315);
(C) The PHA does not receive funding under the public housing
development, Major Reconstruction of Obsolete Public Housing, or HOPE
VI programs for the units developed or modernized with funding received
under this replacement housing factor;
(D) A PHA that has been determined by HUD to be troubled or mod-
troubled, in accordance with part 901 of this chapter that is not
already under the direction of HUD or a court-appointed receiver, must
use an Alternative Management Entity as defined in Sec. 901.5 of this
chapter for development of replacement housing and must comply with any
applicable provisions of its Memorandum of Agreement executed with HUD
under that part; and
(E) Any development of replacement housing by any PHA must be done
in accordance with part 941 of this chapter.
(iii) If the PHA does not use the restored funding that results
from the use of the replacement factor to provide replacement housing
or renovate vacant units in a timely fashion, in accordance with
Sec. 968.125 and Sec. 941.501 of this chapter, and make reasonable
progress on such use of the funding, in accordance with
Sec. 968.335(a)(3) and Sec. 941.501, HUD may require appropriate
corrective action under Sec. 968.335 and Sec. 941.501; may recapture
and reallocate the funds; or may use other remedies available to HUD.
* * * * *
3. Section 968.112 is amended by adding a new sentence to the end
of paragraph (f)(4), to read as follows:
Sec. 968.112 Eligible costs.
* * * * *
(f) * * *
(4) * * * Use of the replacement reserve is not required for
emergencies if the amount that otherwise would be used from that
reserve is an accumulation from application of the replacement housing
factor (Sec. 968.103(e) (3) and (f)(4)) that is necessary so that
replacement housing can be provided efficiently and effectively.
* * * * *
Dated: August 25, 1998.
Deborah Vincent,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 98-23144 Filed 8-27-98; 8:45 am]
BILLING CODE 4210-33-P
