[Federal Register Volume 64, Number 203 (Thursday, October 21, 1999)]
[Rules and Regulations]
[Pages 56882-56888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27445]
[[Page 56881]]
_______________________________________________________________________
Part IV
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 982
Renewal of Expiring Annual Contributions Contracts in the Tenant-Based
Section 8 Program; Formula for Allocation of Housing Assistance; Final
Rule
Federal Register / Vol. 64, No. 203 / Thursday, October 21, 1999 /
Rules and Regulations
[[Page 56882]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 982
[Docket No. FR-4459-F-03]
RIN 2577-AB96
Renewal of Expiring Annual Contributions Contracts in the Tenant-
Based Section 8 Program; Formula for Allocation of Housing Assistance
AGENCY: Office of Public and Indian Housing, HUD.
ACTION: Final rule.
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SUMMARY: This rule specifies the method HUD will use in allocating
housing assistance available to renew expiring contracts with public
housing agencies (PHAs) for Section 8 tenant-based housing assistance.
As required by statute, this rule is the product of a negotiated
rulemaking, following implementation, as further required by statute,
of a HUD notice on this subject.
EFFECTIVE DATE: November 22, 1999.
FOR FURTHER INFORMATION CONTACT: Robert Dalzell, Office of Public and
Indian Housing, Department of Housing and Urban Development, 451
Seventh Street, SW, Room 4204, Washington, DC 20410; telephone (202)
708-1380. (This is not a toll-free number.) Persons with hearing or
speech impairments may access that number via TTY by calling the
Federal Information Relay Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
The statutory provision that provides the foundation for this rule
is section 8(dd) of the United States Housing Act of 1937 (the 1937
Housing Act)(42 U.S.C. 1437(dd)), as added by section 556(a) of the
Quality Housing and Work Responsibility Act of 1998 (Pub. L. 105-276,
112 Stat. 2461, approved October 21, 1998) (``Public Housing Reform
Act''). The new section 8(dd) directs HUD to establish an allocation
baseline amount of assistance (budget authority) to cover the renewals,
and to apply an inflation factor (based on local or regional factors)
to the baseline. The new provision states as follows:
(dd) Tenant-Based Contract Renewals.--Subject to amounts
provided in appropriation Acts, starting in fiscal year 1999, the
Secretary shall renew all expiring tenant-based annual contribution
contracts under this section by applying an inflation factor based
on local or regional factors to an allocation baseline. The
allocation baseline shall be calculated by including, at a minimum,
amounts sufficient to ensure continued assistance for the actual
number of families assisted as of October 1, 1997, with appropriate
upward adjustments for incremental assistance and additional
families authorized subsequent to that date.
Section 556(b) of the Public Housing Reform Act required the
Department to implement section 8(dd) of the 1937 Housing Act through
notice not later than December 31, 1998, and to issue final regulations
on the allocation of tenant-based Section 8 annual contributions
contract renewal funding that are developed through the negotiated
rulemaking process no later than October 21, 1999.
On December 30, 1998, the Department issued HUD Notice 98-65 to
implement the provision, satisfying the requirement of section 556(b)
to implement the new provision through Notice not later than December
31, 1998. The Department published a notice in the Federal Register on
February 18, 1999, advising the public of the provisions of HUD Notice
98-65. The Department has developed this final rule implementing the
requirements of section 8(dd) of the 1937 Housing Act through a
negotiated rulemaking process, in accordance with the statutory
requirements of section 556.
II. Negotiated Rulemaking
HUD convened a negotiated rulemaking advisory committee to assist
in developing this final rule--the Section 8 Housing Certificate Fund
Negotiated Rulemaking Committee. (See publication of notice of
establishment of the Committee on April 26, 1999, 64 FR 20232.) The
charter for the Committee stated: ``The purpose of the Committee is to
discuss and negotiate a rule that would change the current method of
distributing funds to public housing agencies (PHAs) for purposes of
renewing assistance contracts in the tenant-based Section 8 program.
The committee will consist of persons representing stakeholder
interests in the outcome of the rule.'' Records of the advisory
committee's deliberations can be found at http://www.hud.gov/pih/
pih.html.
The members of the advisory committee were as follows:
Housing Agencies
Massachusetts Department of Housing and Community Development,
Boston, MA
New Jersey Department of Community Affairs, Trenton, NJ
Southeastern Minnesota Multi-County Housing and Redevelopment
Authority, Wabasha, MN
Oklahoma Housing Finance Agency, Oklahoma City, OK
Fort Worth Housing Authority, Fort Worth TX
Minneapolis Metropolitan Council Housing and Redevelopment Agency,
Saint Paul, MN
Santa Cruz County Housing Authority, Santa Cruz, CA
Burlington Housing Authority, Burlington, VT
Michigan State Housing Development Authority, Lansing, MI
New York City Housing Authority, NY, NY
Atlanta Housing Authority, Atlanta, GA
Cincinnati Metropolitan Housing Authority, Cincinnati, OH
Housing Authority of the City of Los Angeles, Los Angeles, CA
Stillwater Housing Authority, Stillwater, OK
Spokane Housing Authority, Spokane, WA
Jacksonville Housing Authority, Jacksonville, FL
Panama City Housing Authority, Bay County, FL
Alameda County Housing Authority, Hayward, CA
Housing Authority of New Orleans, New Orleans, LA
Stustman County Housing Authority, Stustman County, ND
Public Interest Groups
Center on Budget and Policy Priorities, Washington, DC
New Community Corporation, Newark, NJ
Disability Rights Action Coalition for Housing
Section 8 Resident Council of New Orleans, Inc., New Orleans, LA
Independent Accounting and Consulting Firms
Fenton, Ewald & Associates, PC
IMRglobal--Orion Consulting, Inc.
National/Regional PHA Associations
National Leased Housing Association (NLHA)
National Association of Housing and Redevelopment Officials (NAHRO)
Council of Large Public Housing Authorities (CLPHA)
Public Housing Authority Directors Association (PHADA)
(Note that 1. Fenton, Ewald & Associates, PC was made an alternate
due to its representative's time constraints and that the Southeast
Regional Section Eight Housing Association (SERSHA) was added as a
member of the Committee)
Federal Government
U.S. Department of Housing and Urban Development
The Committee met in Washington, DC, on April 27 and 28, 1999, on
June 2 and 3, 1999, on June 21 and 22, 1999, on July 19 and 20, 1999,
on August 19 and 20, 1999 and on September 28 and 29th, 1999. (See
notices of meetings: 64 FR 26923, May 18, 1999 and 64 FR 30450, June 8,
1999.) These Committee meetings were led by Larry Susskind and David
Fairman of the Consensus Building Institute (``CBI''), as facilitators/
mediators. Tom Fee and Michael Lewis, also of CBI, assisted in the
facilitation/mediation. Kelly
[[Page 56883]]
Davenport of CBI provided further assistance, taking minutes of the
meetings.
HUD appreciates the active participation in this negotiated
rulemaking process by such knowledgeable groups. The participants spent
many days reviewing materials, working with others in small groups to
prepare draft position papers, attended meetings of the Committee, and
participated in teleconferences. Ultimately, the members reached
consensus on the content of this rule. During the course of their
deliberations, they provided valuable advice to the Department on
broader issues, not reflected in this rule.
III. Discussion of Comments
A. General
This section provides a brief overview of the most important issues
discussed in the meetings of the Committee over the course of its
deliberations. This overview of the issues is not a detailed recitation
of the more than 12 days of meetings or the multiple additional work
group meetings/conference calls that took place during the term of the
Committee's charter but rather highlights the significant issues
considered by the Committee. In addition to providing HUD with
recommendations related to this regulation on the methodology for
allocating Section 8 renewal funding, the Committee also provided
recommendations on related issues (including policy on ACC reserves)
that HUD intends to implement through a Federal Register Notice. This
overview of the discussion of the Committee focuses only on the issues
related to the regulation itself and not on the issues discussed in
conjunction with developing separate Notice(s).
B. Establishing the Baseline
To initiate discussion of housing assistance allocation methods,
HUD staff provided background information to the Committee regarding
the various methods used over time to calculate renewals. An
explanation of the current renewal funding Notice, PIH 98-65 (HA),
including the process for setting the baseline and awarding renewal
funding for Fiscal Year 1998, was reviewed by HUD staff.
Issue. The Committee discussed specific details regarding
accounting rules and anomalies of the current method of calculating the
allocation of renewal funding. Several members expressed concern that
there was the possibility of discrepancies between historical
documented unit counts and the unit counts in HUD's data systems.
Members questioned whether a crosscheck of the data in the HUDCAPS
system against their own data was possible. Some members felt that the
October 1, 1997 baseline data were somewhat arbitrary and could
adversely impact agencies. Members suggested alternative ways to
setting the baseline units, such as choosing dates other that October
1, 1997. Concerns about using October 1, 1997 included that this date
``freezes'' many inequities among PHAs (e.g., rewarding those who
continued leasing during the 90-day freeze period declared by HUD). A
suggestion was made to use October 1, 1998 as the baseline date,
because at this time all PHAs would have had time to adjust to HUD
interim rules and guidelines on baseline accounting and renewal
funding.
Response. HUD noted that it had confidence that data discrepancies
in HUDCAPS are minor, and that most of the discrepancies between
HUDCAPS and PHA data would be attributable to data entry problems, or
differences in interpretations of unit or project classifications. HUD
representatives stated that they would check the kinds of information
that could be shared and how this information could be shared. HUD
representatives stated that they had revised the baseline determination
method to ensure that each PHA would receive the higher of the number
contracted or the number leased on October 1, 1997. HUD indicated that
the statute required a focus on the state of housing authorities as of
October 1, 1997 and that using other dates would not satisfy the
statutory mandate.
Conclusion: The Committee reached consensus that the baseline
number of units should be the higher of the number of units leased as
of October 1, 1997 or the number of units reserved by HUD as of October
1, 1997. The Department has added approximately 19,000 units to its
previously reserved number of units as a result of the comparison. This
increase in the number of units as well as transactions that have taken
place since October 1, 1997 will be reflected in the baseline
established as of December 31, 1999, in accordance with the rule. In
response to the Committee's recommendation, HUD will establish a
mechanism for PHAs to request an adjustment of the baseline unit number
assigned to them if they can demonstrate that the number in HUD's
system is inaccurate.
C. Unit-Based vs. Dollar Based Funding Allocation
Issue. The Committee discussed moving from the current ``unit-
based'' funding system (using units multiplied by an adjusted per unit
cost as the basis for determining annual funding amounts) to a
``dollar-based'' system: A dollar-based system would fund PHAs by
adjusting their previous year's dollar grant amount to account for
changes in local rental costs, without considering how many units were
rented through the program in the previous year. Initially there
appeared to be a preference for a dollar-based system, for reasons of
administrative simplicity and ability to serve more households if costs
are contained. Some Committee members raised concerns regarding
switching to a dollar-based system, because it might lead to
significant swings in the number of families assisted year-to-year.
The Committee extensively explored possible adjustment factors that
would be applied to PHA's previous year grant amount in a dollar-based
system. The Committee reviewed data analysis from Andersen Consulting
Corporation that compared the accuracy of different adjustment factors
against the actual experience of approximately 400 housing authorities
over the course of 3 years (1995-1997) for which reliable historical
data was available. The most reliable predictor of future costs proved
to be changes in a housing authority's most recent year's actual costs
in HUDCAPS. The analysis uncovered significant problems in using MTCS
data for the purpose of calculating renewals at this time.
Response. HUD indicated that it is cognizant of its obligation to
protect existing assisted families from losing their assistance due to
a shortfall in funding. In addition a number of the reasons why per
unit costs might vary would not be related to the PHA's discretionary
actions (e.g., the need to meet new income targeting requirements).
Conclusion: After much discussion, the Committee and HUD reached
consensus that the Department should have authority to use the current
unit-based method for the next several years. Given the limitations of
current data systems and adjustment factors, the unit-based system has
the best potential to predict fluctuations in per unit costs and to
ensure reasonably adequate funding to support the reserved number of
units in a housing authority's inventory.
Issue. Some members of the Committee, including HUD, expressed
concern that the current method creates a disincentive for PHAs to
contain per-unit costs, because the higher a PHA's per-unit costs, the
higher its funding for the next year. Additionally, the current
[[Page 56884]]
system creates a disincentive for PHAs to lease more than their
contracted number of units, because their funding allocations are
determined based on the number of reserved units, not the leased number
of units.
Other members of the Committee asserted that costs are largely
outside of the control of a PHA. Rents are set by the local market and
the size of the family. The PHA does not control the local rental
market and has little control over the family size, because it has to
follow the waiting list. Tenant contributions are affected for the most
part by tenant incomes. Again, this factor is largely controlled by
residents themselves, as well as the local job market. However, in some
important instances, a PHA can influence the per-unit cost. These
instances include, but are not limited to, rent reasonableness, subsidy
standards, and payment standards. (For this purpose, ``subsidy
standards'' refer to a PHA's policy for determining the appropriate
unit size for a particular household.)
Committee members also made the point that PHAs themselves do not
benefit from an increase in the grant amount for renewals, because
their administrative fee is not tied to the grant amount used to
subsidize families. The administrative fee formula actually provides an
incentive for cost containment, because a PHA would benefit from being
able to lease more units--which could only be accomplished by lower
per-unit costs.
Members of the Committee also emphasized how difficult it would be
to isolate how much of a change in per-unit costs was attributable to
actions taken by a PHA as opposed to market/demographic changes totally
outside the control of the PHA.
Response. HUD is concerned that the regulation's methodology not
create an incentive or bias toward higher per-unit costs as a result of
PHA policies that can affect per-unit costs. Such a bias can result
both from the current rule's characteristic of adapting to higher costs
over time without penalty and from its subtraction of funding to
support additional units that a PHA is able to put under lease because
of cost saving measures. HUD acknowledged that there are very
significant difficulties administratively in isolating the effects of
PHA policies on cost per unit. HUD proposed that the rule give it
flexibility to put in place checks and balances that would offset the
impact of PHA policies on per-unit costs and ultimately the allocation
amount.
Conclusion: HUD's proposed mechanism for addressing cost
containment is embodied in paragraph (g) of the rule. Paragraph (g)(1)
permits HUD to put in place mechanisms to step in to prevent a PHA from
becoming overextended and exceeding its allocated funding. Paragraph
(g)(2) gives HUD the ability to act on either a case-by-case or a
systemic basis. If the Department's analysis of the program costs and
related factors determines that systemic adjustments, including cost
containment and other cost adjustments, to the program are necessary
because of threats to the future availability of funding, HUD has
agreed that it would consult with PHA representatives and other
relevant stakeholders before putting such a policy in place. HUD
further indicated that any such cost adjustment would be consistent
with the legitimate program goals. These goals are:
(1) Deconcentration of poverty and expanding housing opportunities;
(2) Not imposing unreasonable rent burdens on residents;
(3) Compliance with the income targeting requirements of the Public
Housing Reform Act;
(4) Consistency with applicable consolidated plan(s);
(5) Assuring rent reasonableness;
(6) Maintaining program efficiency and economy;
(7) Providing service to additional households within budgetary
limitations; and
(8) Providing service to the adjusted baseline number of families.
Paragraph (g)(3) gives HUD the flexibility to keep PHAs with
declining per unit costs from losing funding under the regulation and
to allow additional households to be served if costs are contained.
Many factors are intersecting to influence per unit costs at this time
(including the merger of the certificate and voucher program, the
requirement for income targeting, the requirement that payment
standards not impose unreasonable rent burdens, the flexibility of
housing authorities to set payment standards between 90% and 110% of
FMR on their own as well as the continued implementation of this rule's
methodology that indexes funding closely to per unit costs). HUD will
gain program experience as it monitors program costs and analyzes the
reasons for fluctuations in costs.
D. Inflation Factors
Issue: The Committee considered other more up-to-date measurement
of rents, or weighting the Annual Adjustment Factor so that the most
recent inflation data count for more than older data. Additionally, the
Committee recommended that inflation factors be more closely attuned to
individual PHAs' housing markets: examples included local rents, and
the use of local government or real estate agency data on rents.
Response: Based on its program experience, HUD staff advised that
some of these options could work, but that the smaller the sample area,
the higher the cost to obtain statistically valid data on costs.
Sometimes the more accurate the Annual Adjustment Factors (AAFs) could
produce lower rather than higher inflation factors for some PHAs. A
review and comparison of the Annual Adjustment Factor and the National
Inflation Factor were presented.
Conclusion: The Committee agreed to keep the AAF as it exists in
the rule for the time being. HUD will examine whether it can get better
data and more predictable information in the future. At the Committee's
request, HUD added a provision that will allow it to consider requests
from PHAs on a case-by-case basis in instances where because of special
circumstances the AAF is not accurately predicting per unit cost.
IV. Renewal Funding Level Consideration
The renewal formula included in this regulation assumes
continuation of the current system, in which the Department allocates
sufficient funds to renew 100 percent of the units reserved for a PHA,
even though many PHAs do not use all of the allocated funds. The
Department subsequently recaptures funds that PHAs do not use after the
end of their fiscal years. This system of initially overfunding on a
national basis and then recapturing, has the advantage of assuring that
each PHA will have the necessary renewal funds, but it also has created
some confusion in Congress and elsewhere.
At the end of the fiscal year 2000 appropriations process, the
Senate Appropriations Committee raised substantial concerns about the
tenant-based assistance program that appear to be partly related to
this system. The Administration is exploring the feasibility and
desirability of an approach that would minimize overfunding and
subsequent recapture, while still meeting the basic requirement that
each PHA have the necessary funding for timely renewals. The evaluation
and any Administration proposals will be mindful of the consensus
reached by the negotiated rulemaking committee.
V. Explanation of Rule Text
Renewal Units
This rule revises part 982, governing tenant-based assistance. It
adds a new
[[Page 56885]]
defined term, ``renewal units'' to the definitions found at Sec. 982.4.
This rule also adds a new Sec. 982.102 to outline a multi-step process
for calculating the number of units that constitute ``renewal units.''
The total number of renewal units will be assigned to one or more (if
applicable) of a housing agency's funding increments. Ultimately, the
Department will multiply the number of renewal units times the adjusted
per unit cost to calculate the amount of funding a housing agency will
receive to renew a given funding increment.
Applicability
This rule will apply to the renewal of funding increments that
expire in calendar year 2000 and thereafter (the initial increments
covered by the regulation would be those that expire on January 31,
2000). The Department adjusted to a calendar year basis for allocating
renewal funding in the first quarter of 1999. The Department adjusted
to a calendar year basis to ensure that it would have adequate time to
process renewal funding in advance of expirations even if
appropriations are not finalized until late in a given fiscal year or
early in a subsequent fiscal year. The regulation also makes it clear
that it applies to units that a housing agency project bases pursuant
to regulatory flexibility to project base up to 15% of the tenant-based
units that are reserved for it.
Renewal Methodology
The new Sec. 982.102 outlines the method for calculating renewal
funding. The Department does have the ability to adjust the amounts
allocated if the Department's appropriation is not sufficient to fully
fund all housing agencies pursuant to the regulation.
Determining the Amount of Budget Authority Allocated for Renewal of an
Expiring Funding Increment
The basic calculation the Department performs to determine the
renewal funding for an expiring increment is multiplication of the
number of renewal units assigned to the increment by the adjusted per
unit cost.
For example, the Department calculated the adjusted baseline number
of units for the Main Street Housing Authority to be 115 for the year
2000. It then multiplied the adjusted baseline number of units (115) by
the final per unit cost ($4979) to calculate the gross amount of
renewal funding for the housing authority, $572,585.
Determining the Number of Renewal Units
The Department will determine the number of renewal units for each
calendar year as of the last day of the previous calendar year through
a 3-step process.
Step 1--The Department will calculate the initial baseline. It will
be set at the reserved number of units (the number of units awarded to
the housing agency during the history of the program) as of December
31, 1999. The statute requires that the Department ensure, at a
minimum, sufficient funding for the number of families assisted as of
October 1, 1997. The Department has already compared the number of
reserved units as of October 1, 1997 with the number of program
families assisted as of that date. In instances in which the number of
program families exceeded the reserved units as of October 1, 1997, the
Department reserved additional units to account for the difference.
These additional units were awarded to housing agencies in or before
September of 1999. Because of the actions the Department has taken to
account for the October 1, 1997 statutory minimum, it believes the
number of reserved units will already have taken into account the
statutory October 1, 1997 requirement when it sets the initial baseline
as of December 31, 1999. In the event the Department has made an error
in its analysis to ensure adherence to the statutory minimum, the
Department has the ability to correct for such an error in
982.102(d)(3).
For example, on December 31, 1999, the Department's records
indicated that it had reserved 110 units for the housing authority. The
Department would set the initial baseline at 110 units.
Step 2--Each calendar year, the Department will review all of the
transactions that have altered the number of reserved units since it
set the initial baseline. The Department will make adjustments to add
to the initial baseline any additional units awarded to the housing
authority by the Department supported from additional funding reserved
since setting of the initial baseline. Adjustments to the baseline
number of units will include units supported by incremental funding as
well as other funding such as that awarded to provide continued
assistance to assisted families pursuant to the conversion of project
based assistance to tenant-based assistance. The Department also will
include adjustments for budget authority reallocated from one housing
authority to others. In this case, the adjusted baseline of the PHA
whose budget authority is being reallocated would decrease, reflecting
the decrease in budget authority, and the adjusted baseline of PHAs to
which the budget authority is being reallocated would increase.
For example, in calendar year 2000, the Main Street Housing
Authority received 10 incremental units in the Family Unification
Program. In 2000, the authority also had 10 units added to its
inventory as a result of the conversion of a property from project
based to tenant-based assistance. All 20 of these additional units
would be added to the initial baseline to calculate the adjusted
baseline number of units, 130 for the year 2001.
Step 3--In its final step in determining the number of renewal
units that will be used to calculate renewal funding, the Department
will further adjust the baseline number by subtracting the number of
units supported by contracts that are not scheduled to expire until
after the end of the calendar year. The baseline number of units
includes such non-expiring units; however, the Department has
previously allocated sufficient budget authority to support such units
beyond the time period for which it is allocating renewal funding.
For example, the Department's records indicate that the Main Street
Housing Authority has 15 units in its Initial Baseline number of units
that are not scheduled to expire until 2002. The Department would then
subtract 15 units from the Main Street Housing Authority's 130 units to
revise the Adjusted Baseline Number of Units to 115. Similarly, in the
event that the Department awarded budget authority for 50 incremental
units for Welfare to Work in 2000 that would not expire until 2001, the
Department would subtract the 50 units from the baseline in 2000
because they would not expire during that year.
Determining the Adjusted per Unit Cost
The Department will derive an annual actual per unit cost using a 3
step process.
Step 1--The Department will extract the total expenditures for all
of the housing authority's Section 8 tenant-based assistance programs
and the unit months leased information from the most recent approved
year end statement (Form HUD-52681) that each housing authority has
filed with the Department. The Department will divide the total
expenditures for all of the housing authority's Section 8 tenant-based
assistance programs by the unit
[[Page 56886]]
months leased to derive an average monthly per unit cost.
Step 2--The Department will multiply the monthly per unit cost by
12 (months) to obtain an annual per unit cost.
Step 3--The Department will then multiply the result of step 2
above by the Section 8 Housing Assistance Payments Program Contract
Rent Annual Adjustment Factors (table 1 amount with the highest cost
utility included) for the applicable intervening Federal Fiscal Years
between the time of the last year end statement and the time of the
renewal to generate an adjusted annual per unit cost.
For example, the Main Street Housing Authority's 1998 Year End
Statement (the most recent one approved) indicated that it expended
$120,000 in its tenant-based Section 8 assistance programs and that it
achieved 300 unit months leased. The Department would take the total
expenditure ($120,000) and divide it by the unit months leased (300) to
calculate the monthly per unit cost ($400) and then multiply the result
by 12 months to obtain an actual annual per unit cost ($4,800).
To continue the example, the Annual Adjustment Factors for the Main
Street Housing Authority were 1.5% in 1999 and 2.2% for 2000. The
Department would take the original annual per unit cost ($4,800) and
adjust it by 1.5% ($4,872) and then again by 2.2% to obtain the
resulting adjusted per unit cost ($4,979).
Many housing agencies have jurisdictions that cover multiple rental
markets with separate AAFs. In such instances, the Department will use
the highest AAF that applies to a portion of the housing agency's units
and use it as the adjustment factor.
For example, the Main Street Housing Authority is a regional agency
that covers a metropolitan area with an AAF for 1999 set at 2.1% and
for 2000 set at 1.9%. The housing authority's jurisdiction also covers
several non-metropolitan counties outside of the metropolitan area
assigned an AAF for 1999 of 1.5% and for 2000 set at 2.0%. In this
instance, the Department will use the higher metropolitan area AAF for
1999 (2.1%) and the higher non-metropolitan area AAF for 2000 (2.0%).
CACC Amendment To Add Renewal Funding
The Department intends to process renewal funding if possible at
least a month before a given funding increment is due to expire. A
normal renewal will extend the expiration date for one year.
Modification of Allocation of Budget Authority
The regulation permits HUD to address the issue of cost containment
through this provision. Paragraph (g)(1) permits HUD to put in place
mechanisms to step in to prevent a PHA from becoming overextended and
exceeding its allocated funding. Paragraph (g)(2) gives HUD the ability
to act on either a case-by-case or a systemic basis. If the
Department's analysis of the program costs and related factors
determines that systemic adjustments to the program, including cost
containment and other cost adjustments, are necessary because of
threats to the future availability of funding, HUD has agreed that it
would consult with PHA representatives and other relevant stakeholders
before putting such a policy in place. Paragraph (g)(3) gives HUD the
flexibility to keep PHAs with declining per unit costs from losing
funding under the regulation and to allow additional households to be
served if costs are contained.
Ability To Prorate and Synchronize Contract Funding Increments
Notwithstanding the formula amount that HUD derives pursuant to the
regulation, the Department is permitted to prorate the renewal of units
that expire on different dates throughout the year in order to have
their expiration date match the expiration of other units within the
housing authority's inventory and/or a given point in time in relation
to the housing authority's fiscal year. The Department will consider
using this flexibility in order to merge the multiple sets of units for
the purpose of allocating renewal funding in the future. The Department
desires to consolidate increments as much as possible in order to
reduce the tracking required for thousands of separate increments. The
Department will endeavor to synchronize and/or merge all increments so
as to expire 6 months after the housing agency's fiscal year. Such a
schedule would permit the Department to use a year end statement that
is less than a year old to calculate current per unit costs at the time
of the renewal.
For example, the Main Street Housing Authority has 115 units that
require renewal on April 1, 2000 and also has 20 units that were
awarded to it on August 1, 1999 that would require renewal on August 1,
2000. If the Department decided to merge the two sets of units for
future renewals, it would have the ability to prorate the renewal of
the 20 units so that they would expire on April 1, 2001, simultaneously
with the expiration of the other 115 units. The Department would be
able to merge the two sets of units into one set of 135 units for the
purpose of calculating future renewal funding.
Reallocation of Renewal Units
This provision gives HUD the ability by Federal Register notice to
permanently de-reserve units and their associated budget authority from
a PHA with performances deficiencies (particularly underleasing) and to
reallocate the budget authority to other PHAs. The reallocation would
not preclude a PHA from being awarded new units in the future.
VI. Findings and Certifications
Impact on Small Entities
The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that an
agency analyze the impact of a rule on small entities whenever it
determines that the rule is likely to have a significant impact on a
substantial number of small entities. Most small PHAs do not qualify as
``small governmental entities'' under the Act. However, this rule,
developed in consultation with a negotiated rulemaking committee
including representatives of small PHAs, will not be likely to have a
significant impact on a substantial number of small PHAs or on the few
of them that qualify as ``small governmental entities.'' Therefore, no
further analysis is required under the Act.
Environmental Impact
This final rule does not direct, provide for assistance or loan and
mortgage insurance for, or otherwise govern or regulate, real property
acquisition, disposition, leasing (other than tenant-based rental
assistance), rehabilitation, alteration, demolition, or new
construction. This rule also does not establish, revise or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under HUD regulations (24 CFR
50.19(c)(1)), this rule is categorically excluded from the requirements
of the National Environmental Policy Act of 1969 (42 U.S.C. 4321) and
is not subject to environmental review under related laws and
authorities (24 CFR 50.4).
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 will not have substantial direct effects on
states or their political
[[Page 56887]]
subdivisions, or the relationship between the federal government and
the states, 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.
Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532)
establishes requirements for Federal agencies to assess the effects of
their regulatory actions on State, local, and tribal governments and
the private sector. This proposed rule does not impose a Federal
mandate that will result in the expenditure by State, local, or tribal
governments in the aggregate, or by the private sector, of $100 million
or more in any one year.
Regulatory Review
The Office of Management and Budget (OMB) has reviewed this
proposed rule under Executive Order 12866, Regulatory Planning and
Review, issued by the President on September 30, 1993. Any changes made
in this proposed rule after its submission to OMB are identified in the
docket file, which is available for public inspection during regular
business hours in the Regulations Division, Office of General Counsel,
Room 10276, U.S. Department of Housing and Urban Development, 451
Seventh Street, SW, Washington, DC 20410.
Catalog
The Catalog of Federal Domestic Assistance numbers for these
programs are 14.855 and 14.857.
List of Subjects in 24 CFR Part 982
Grant programs--housing and community development, Housing, Rent
subsidies.
Accordingly, HUD amends part 982 of title 24 of the Code of Federal
Regulations as follows:
PART 982--SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER
PROGRAM
1. The authority citation for part 982 continues to read as
follows:
Authority: 42 U.S.C. 1437f and 3535(d).
2. Amend Sec. 982.4(b) by adding the definition of Renewal units,
in alphabetical order, to read as follows:
Sec. 982.4 Definitions.
* * * * *
(b) * * *
Renewal units. The number of units, as determined by HUD, for which
funding is reserved on HUD books for a PHA's program. This number is
used is calculating renewal budget authority in accordance with
Sec. 982.102.
* * * * *
Secs. 982.102 and 982.103 [Redesignated as Secs. 982.103 and 982.104]
3. Redesignate Secs. 982.102 and 982.103 as Secs. 982.103 and
982.104, respectively.
4. Add a new Sec. 982.102 to read as follows:
Sec. 982.102 Allocation of budget authority for renewal of expiring
CACC funding increments.
(a) Applicability. This section applies to the renewal of CACC
funding increments in the program (as described in Sec. 982.151(a)(2))
that expire after December 31, 1999 (including any assistance that the
PHA has attached to units for project based assistance under part 983
of this title). This section implements section 8(dd) of the 1937 Act
(42 U.S.C. 1437f(dd)),
(b) Renewal Methodology. HUD will use the following methodology to
determine the amount of budget authority to be allocated to a PHA for
the renewal of expiring CACC funding increments in the program, subject
to the availability of appropriated funds. If the amount of
appropriated funds is not sufficient to provide the full amount of
renewal funding for PHAs, as calculated in accordance with this
section, HUD may establish a procedure to adjust allocations for the
shortfall in funding.
(c) Determining the amount of budget authority allocated for
renewal of an expiring funding increment. Subject to availability of
appropriated funds, as determined by HUD, the amount of budget
authority allocated by HUD to a PHA for renewal of each program funding
increment that expires during a calendar year will be equal to:
(1) Number of renewal units. The number of renewal units assigned
to the funding increment (as determined by HUD pursuant to paragraph
(d) of this section); multiplied by
(2) Adjusted annual per unit cost. The adjusted annual per unit
cost (as determined by HUD pursuant to paragraph (e) of this section).
(d) Determining the number of renewal units.--(1) Number of renewal
units. HUD will determine the total number of renewal units for a PHA's
program as of the last day of the calendar year previous to the
calendar year for which renewal funding is calculated. The number of
renewal units for a PHA's program will be determined as follows:
(i) Step 1: Establishing the initial baseline. HUD will establish a
baseline number of units (``baseline'') for each PHA program. The
initial baseline equals the number of units reserved by HUD for the PHA
program as of December 31, 1999.
(ii) Step 2: Establishing the adjusted baseline. The adjusted
baseline equals the initial baseline with the following adjustments
from the initial baseline as of the last day of the calendar year
previous to the calendar year for which renewal funding is calculated:
(A) Additional units. HUD will add to the initial baseline any
additional units reserved for the PHA after December 31, 1999.
(B) Units removed. HUD will subtract from the initial baseline any
units de-reserved by HUD from the PHA program after December 31, 1999.
(iii) Step 3: Determining the number of renewal units. The number
of renewal units equals the adjusted baseline minus the number of units
supported by contract funding increments that expire after the end of
the calendar year.
(2) Funding increments. HUD will assign all units reserved for a
PHA program to one or more funding increment(s).
(3) Correction of errors. HUD may adjust the number of renewal
units to correct errors.
(e) Determining the adjusted per unit cost. HUD will determine the
PHA's adjusted per unit cost when HUD processes the allocation of
renewal funding for an expiring contract funding increment. The
adjusted per unit cost calculated will be determined as follows:
(1) Step 1: Determining monthly program expenditure.--(i) Use of
most recent HUD-approved year end statement. HUD will determine the
PHA's monthly per unit program expenditure for the PHA certificate and
voucher programs (including project-based assistance under such
programs) under the CACC with HUD using data from the PHA's most recent
HUD-approved year end statement.
(ii) Monthly program expenditure. The monthly program expenditure
equals:
(A) Total program expenditure. The PHA's total program expenditure
(the total of housing assistance payments and administrative costs) for
the PHA fiscal year covered by the approved year end statement; divided
by
(B) Total unit months leased. The total of unit months leased for
the PHA fiscal year covered by the approved year end statement.
(2) Step 2: Determining annual per unit cost. HUD will determine
the PHA's annual per unit cost. The annual per unit cost equals the
monthly program expenditures (as determined
[[Page 56888]]
under paragraph (e)(1)(ii) of this section) multiplied by 12.
(3) Step 3: Determining adjusted annual per unit cost. (i) HUD will
determine the PHA's adjusted annual per unit cost. The adjusted annual
per unit cost equals the annual per unit cost (as determined under
paragraph (e)(2) of this section) multiplied cumulatively by the
applicable published Section 8 housing assistance payments program
annual adjustment factors in effect during the period from the end of
the PHA fiscal year covered by the approved year end statement to the
time when HUD processes the allocation of renewal funding.
(ii) Use of annual adjustment factor applicable to PHA
jurisdiction. For this purpose, HUD will use the annual adjustment
factor from the notice published annually in the Federal Register
pursuant to part 888 that is applicable to the jurisdiction of the PHA.
For a PHA whose jurisdiction spans multiple annual adjustment factor
areas, HUD will use the highest applicable annual adjustment factor.
(iii) Use of annual adjustment factors in effect subsequent to most
recent Year End Statement. HUD will use the Annual Adjustment Factors
in effect during the time period subsequent to the time covered by the
most recent HUD approved Year End Statement and the time of the
processing of the contract funding increment to be renewed.
(iii) Special circumstances. At its discretion, HUD may modify the
adjusted annual per unit cost based on receipt of a modification
request from a PHA. The modification request must demonstrate that
because of special circumstances application of the annual adjustment
factor will not provide an accurate adjusted annual per unit cost.
(4) Correction of errors. HUD may correct for errors in the
adjusted per unit cost.
(f) CACC amendment to add renewal funding. HUD will reserve
allocated renewal funding available to the PHA within a reasonable time
prior to the expiration of the funding increment to be renewed and
establish a new expiration date one-year from the date of such
expiration.
(g) Modification of allocation of budget authority.--(1) HUD
authority to conform PHA program costs with PHA program finances
through Federal Register notice. In the event that a PHA's costs
incurred threaten to exceed budget authority and allowable reserves,
HUD reserves the right, through Federal Register notice, to bring PHA
program costs and the number of families served, in line with PHA
program finances.
(2) HUD authority to limit increases of per unit cost through
Federal Register notice. HUD may, by Federal Register notice, limit the
amount or percentage of increases in the adjusted annual per unit cost
to be used in calculating the allocation of budget authority.
(3) HUD authority to limit decreases to per unit costs through
Federal Register notice. HUD may, by Federal Register notice, limit the
amount or percentage of decreases in the adjusted annual per unit cost
to be used in calculating the allocation of budget authority.
(4) Contents of Federal Register notice. If HUD publishes a Federal
Register notice pursuant to paragraphs (g)(1), (g)(2) or (g)(3) of this
section, it will describe the rationale, circumstances and procedures
under which such modifications are implemented. Such circumstances and
procedures shall, be consistent with the objective of enabling PHAs and
HUD to meet program goals and requirements including but not limited
to:
(i) Deconcentration of poverty and expanding housing opportunities;
(ii) Reasonable rent burden;
(iii) Income targeting;
(iv) Consistency with applicable consolidated plan(s);
(v) Rent reasonableness;
(vi) Program efficiency and economy;
(vii) Service to additional households within budgetary
limitations; and
(viii) Service to the adjusted baseline number of families.
(5) Public consultation before issuance of Federal Register notice.
HUD will design and undertake informal public consultation prior to
issuing Federal Register notices pursuant to paragraphs (g)(1) or
(g)(2) of this section.
(h) Ability to prorate and synchronize contract funding increments.
Notwithstanding paragraphs (c) through (g) of this section, HUD may
prorate the amount of budget authority allocated for the renewal of
funding increments that expire on different dates throughout the
calendar year. HUD may use such proration to synchronize the expiration
dates of funding increments under the PHA's CACC.
(i) Reallocation of budget authority. If a PHA has performance
deficiencies, such as a failure to adequately lease units, HUD may
reallocate some of its budget authority to other PHAs. If HUD
determines to reallocate budget authority, it will reduce the number of
units reserved by HUD for the PHA program of the PHA whose budget
authority is being reallocated and increase the number of units
reserved by HUD for the PHAs whose programs are receiving the benefit
of the reallocation, so that such PHAs can issue vouchers. HUD will
publish a notice in the Federal Register that will describe the
circumstances and procedures for reallocating budget authority pursuant
to this paragraph.
Dated: October 15, 1999.
Deborah Vincent,
General Deputy Assistant, Secretary for Public and Indian Housing.
[FR Doc. 99-27445 Filed 10-20-99; 8:45 am]
BILLING CODE 4210-33-P
