[Federal Register Volume 60, Number 6 (Tuesday, January 10, 1995)]
[Rules and Regulations]
[Pages 2658-2669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-552]
[[Page 2657]]
_______________________________________________________________________
Part VII
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner
_______________________________________________________________________
24 CFR Parts 813 and 885
Management Rules for Existing Projects for the Elderly; Final Rule
Federal Register / Vol. 60, No. 6 / Tuesday, January 10, 1995 / Rules
and Regulations
[[Page 2658]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner
24 CFR Parts 813 and 885
[Docket No. R-94-1364; FR-1761-F-02]
RIN: 2502-AC03
Management Rules for Existing Projects for the Elderly
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule amends the provisions of 24 CFR part 885 which
govern projects that received direct loans under section 202 of the
Housing Act of 1959 and housing assistance under section 8 of the
United States Housing Act of 1937. The rule adds regulatory provisions
to govern the housing assistance payments contract, project operations
and project management.
EFFECTIVE DATE: February 9, 1995.
FOR FURTHER INFORMATION CONTACT: With respect to Section 202 issues
contact: Margaret Milner, Acting Director, Office of Elderly and
Assisted Housing, Department of Housing and Urban Development, 451
Seventh Street SW., Room 6130, Washington, DC 20410; telephone (202)
708-4542. With respect to Section 8 issues contact: Barbara Hunter,
Acting Director, Planning and Procedures Division, Office of
Multifamily Housing Management, Room 6182, Department of Housing and
Urban Development, 451 Seventh Street, S.W., Washington, D.C. 20410;
telephone (202) 426-3970. Hearing or speech impaired individuals may
call HUD's TDD number (202) 708-4594. (These are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
I. Paperwork Burden
The information collection requirements contained in this rule have
been approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520), and assigned OMB
control number 2502-0371.
II. Background
HUD's regulations at 24 CFR part 885, subpart B govern projects
that received direct loans under section 202 of the Housing Act of 1959
and housing assistance payments under section 8 of the United States
Housing Act of 1937 (section 202/8 program). This subpart contains
provisions governing the development of section 202/8 projects
including the loan fund allocation process, application procedures, and
loan financing procedures. There are no regulatory provisions governing
the housing assistance payments contract (HAP contract) (except
Sec. 885.425 on HAP contract execution) or governing the management and
operation of section 202/8 projects (except for preference rules
published on July 18, 1994 at 59 FR 36616). On December 9, 1987 (52 FR
46614), HUD published a proposed rule adding such provisions. In
response to the proposed rule, HUD received six comments. The comments
and HUD's responses are discussed below.
On June 20, 1989 (54 FR 25960), HUD published a final rule adding a
new subpart C to part 885. That subpart, which implemented amendments
to the section 202 program contained in section 162 of the Housing and
Community Development Act of 1987, governs section 202 housing for
nonelderly handicapped families and individuals. Such housing does not
receive assistance under section 8, but receives a new type of project
assistance. On June 12, 1991, HUD published two interim rules (56 FR
27104, 56 FR 27070) providing for the continued applicability of part
885 to projects for which section 202 loan reservations were made in FY
1990 and prior years. These interim rules also added new parts 889 and
890 to establish the Supportive Housing for the Elderly Program and
Supportive Housing for Persons with Disabilities Program and to enable
FY 1991 funding of projects under those programs. Requirements relating
to capital advances and project rental assistance contracts (these new
projects do not receive section 8 rental assistance) were published
August 12, 1992 at 57 FR 36338 and 57 FR 36330, and management rules
for these new programs will be published shortly.
Public Comments
Part 813. A commenter requested that HUD provide further
information regarding the relationship between part 813 and part 885.
The commenter also requested clarification concerning which part will
govern if there are inconsistencies between the parts.
Section 813.1, which was not proposed for amendment in the proposed
rule, currently provides the definitions, policies, and procedures
related to income limits, and the determination of eligibility, income
and rent for applicants and tenants in housing assisted under section 8
including section 8 projects for which loans are made under section 202
of the Housing Act of 1959. HUD is unaware of any inconsistencies
between part 813 and part 885, other than differences between the
definitions of elderly and handicapped families. These differences
reflect statutory definitions applicable to the section 8 and section
202 programs (see the definition of ``families'' and ``elderly family''
in section 3(b)(3) of the United States Housing Act of 1937, and the
definition of ``elderly or handicapped families'' in section
202(d)(4)). To the extent of these or any other inconsistencies, the
part that more specifically addresses the program (i.e., part 885) will
govern. References have been added for part 889 (Supportive Housing for
the Elderly) and part 890 (Supportive Housing for Persons with
Disabilities).
Definitions (Sec. 885.5). A new definition of handicapped person or
individual was added to part 885 in the final rule published June 20,
1989 implementing section 162 of the Housing and Community Development
Act of 1987. In that rule, HUD proposed the same definition of
handicapped person or individual that was contained in the proposed
rule for the section 202/8 program. (Both proposed rules included a
revised definition of handicapped person or individual that contained
specific definitions of developmentally disabled and chronically
mentally ill. Alcoholism and drug addiction were specifically excluded
from the definition of chronically mentally ill unless the individual
has a disabling condition required for eligibility.)
Commenters to both proposed rules made substantially the same
comments on the proposed definition. Some commenters argued that the
exclusion of alcoholism and drug addiction was contrary to section 504
of the Rehabilitation Act of 1973 which specifically extends coverage
to alcoholics and drug addicts. Other commenters supported the
exclusion of such persons.
In the June 20, 1989 final rule, HUD responded to these objections
and substituted new language that provided that a person whose sole
impairment is alcoholism or drug addiction (i.e., who does not have a
developmental disability, chronic mental illness or physical disability
which is the disabling condition required for eligibility in a
particular project) will not be considered to be handicapped for the
purposes of the section 202 program. The discussion of these changes
can be found at that rule at 54 FR 25962, and is adopted without change
for the [[Page 2659]] purposes of this rule. Because the definitions
section of part 885 governs both the section 202 handicapped housing
program and the section 202/8 program, the text of the final rule
adopted today does not include a definition.
Term of HAP contract (Sec. 885.505). The proposed rule at
Sec. 885.505 provided that the term of the HAP contract for assisted
units in section 202/8 projects is 20 years. If the project is
completed in stages, the term of the HAP contract for all assisted
units in all stages of a project may not exceed 22 years. One commenter
recommended that HUD should provide short extensions of the HAP
contract if the facility or the tenants would suffer an undue hardship
without the extension. Section 885.535 already provides that HUD and
the Borrower may agree to extend the term of the HAP contract or to
renew the HAP contract upon the expiration of the term of the contract.
This section has been clarified to state that any extension or renewal
is subject to the availability of funding.
Fair Market rents. One commenter recommended that the Department
develop additional language in part 885 specifying how fair market
rents (FMRs) will be calculated for section 202/8 facilities. This
commenter claimed that the Department's method of calculating FMRs was
not economically feasible for many section 202 facilities. Under the
section 202/8 program, the applicable published FMRs were used in
development processing to determine the amount reserved for the section
8 funding and served as a limit on the amount of the section 202 loan
that could be made. They served as the initial contract rents (although
they could be adjusted based on the amount of the loan). Thereafter,
the contract rents are adjusted based on the project's approved budget
or by the annual (and special) adjustment factor as specified in the
contract. HUD believes that the regulations are sufficiently specific.
No additional provisions have been included in this rule, particularly
since no new reservations are subject to section 8 FMRs.
Leasing to eligible families (Sec. 885.515). Proposed Sec. 885.515
implemented section 325(1) of the Housing and Community Development Act
of 1981 which requires that HAP contracts for new construction and
substantial rehabilitation must provide that during the term of the HAP
contract, the owner shall make available for occupancy by eligible
families the number of units for which assistance is committed under
the HAP contract. Under the proposed rule making units available for
occupancy by eligible families required the Borrower: (1) to conduct
marketing in accordance with Sec. 885.600(a) (i.e., the Borrower must
commence and continue diligent marketing activities not later than 90
days before the anticipated date of availability for occupancy of the
first unit and marketing must be performed in accordance with a HUD-
approved affirmative marketing plan and all fair housing and equal
opportunity requirements); (2) lease or make good faith efforts to
lease the units to eligible and otherwise acceptable families,
including taking all feasible actions to fill vacancies by renting to
such families; and (3) not reject any such applicant family except for
reasons acceptable to HUD. The proposed rule stated that if the
Borrower is temporarily unable to lease all assisted units to families
that are eligible to occupy them, one or more units may, with the prior
approval of HUD, be leased to ``ineligible families'' (i.e., families
that meet the section 202 handicapped or elderly eligibility
requirements, but cannot meet the income eligibility requirements).
A commenter argued that the proposed rules do not adequately ensure
that effective outreach techniques will be used. The commenter argued
that once the Borrower complies with HUD's general fair housing and
equal opportunity requirements and continues this outreach strategy for
90 days, its marketing obligations would be fulfilled and the Borrower
would be free to rent to ineligible tenants. The commenter argued that
the final rule should require Borrowers to specifically target the
elderly and handicapped populations in their outreach strategies.
Further, the commenter suggested that HUD provide for the use of a
centralized computer system for matching Borrowers and tenant
applicants.
HUD believes that the regulations are adequate to ensure that the
Borrower will market to eligible handicapped and elderly families. HUD
notes that, in addition to the marketing requirements cited by the
commenter, making units available to eligible families requires the
Borrower to demonstrate that it has leased or is making good faith
efforts to lease units to eligible and otherwise acceptable families.
Without such a showing, HUD will not approve a Borrower's request for
permission to lease to ineligible families. Moreover, the Affirmative
Fair Housing Marketing Plan is in effect for the duration of the
Federal financial assistance. While affirmative marketing efforts must
commence at least 90 days prior to the initial rent-up, they also must
continue throughout the life of the Federal financial assistance. In
light of the expense involved in the establishment of a centralized
computer system and questions concerning the necessity of a system, HUD
has rejected the commenter suggestion regarding the provision of a
computerized system for matching Borrowers and tenant-applicants.
One commenter argued that the provision permitting the Borrower to
lease to ineligible families is unnecessary since sufficient numbers of
income-eligible families can be located if Borrowers make an effort.
The commenter feared that this exception would lead to other practices
or exceptions that would undermine efforts to serve the poor and the
homeless.
The proposed provision has been retained in the final rule. The
failure to achieve necessary occupancy could impair project operations
to the detriment of tenants and would ultimately create a danger of a
default on the section 202 loan. Such a default and foreclosure could
result in the project being entirely disassociated from its original
purpose, if purchased by an outside bidder. Accordingly, HUD has
concluded that the proposed provision may be essential in order to
preserve certain projects for the benefit of present and future
eligible tenants. HUD believes that the requirement for prior approval
will ensure adequate supervision of the project and will prevent the
abuses predicted by the commenter.
A commenter suggested that the final rule should be revised to
permit Borrowers, without prior HUD authorization, to rent up to five
percent of the units to low-income families where very low-income
families are not available to fill a vacancy. Section 16 of the United
States Housing Act of 1937 establishes limitations on the admission to
the Section 8 and public housing programs of low-income families, but
not very low income. HUD has implemented this national limitation by
prohibiting the admission of families in this category, unless the
owner has received prior HUD approval (see Secs. 813.105 and 913.105).
Section 103 of the Housing and Community Development Act of 1987 and
section 1001 of the Stewart B. McKinney Homeless Assistance Amendments
Act of 1988 amended the United States Housing Act of 1937 to state that
HUD may not totally prohibit admission of lower income families other
than very low-income families, shall establish an appropriate specific
percentage of lower income families other than very low-
[[Page 2660]] income families that may be assisted in each assisted
housing program, and shall prohibit project owners from selecting
families for residence in an order different from the order on the
waiting list for the purpose of selecting relatively higher income
families for residence. A final rule implementing the 1987 amendment
was published on September 6, 1988 (53 FR 34412).
Section 16(b) of the United States Housing Act of 1937 was amended
by the Cranston-Gonzalez National Affordable Housing Act (CGNAHA) by
striking 5% and inserting 15% and adding the following new paragraph:
``Not more than 25 percent of the dwelling units in any project of any
agency shall be available for occupancy by low-income families other
than very low-income families. The limitation shall not apply in the
case of any project in which, before the enactment of the CGNAHA, such
low-income families occupy more than 25 percent of the dwelling
units.'' The Department is pursuing rulemaking to implement these
changes.
Notice upon HAP contract expiration (Sec. 885.530). Proposed
Sec. 885.530 implements section 8(c)(8) of the United States Housing
Act of 1937 which governs the Borrower's notification of tenants upon
the expiration of the HAP contract. A commenter recommended that the
final rule also include a requirement that HUD notify the Borrower one
year before the expiration of the contract term. Section 262 of the
Housing and Community Development Act of 1987 added a new section
8(c)(9) to the United States Housing Act of 1937. This new provision
imposed a requirement on the owner to give one year's notice prior to
the termination. This new provision was self-implementing and HUD
issued instructions on this provision to all Section 8 owners
(including section 202/8 owners) in a memorandum dated July 6, 1988.
Responsibilities of Borrower (Sec. 885.600). Paragraph (d)(1) of
Sec. 885.600 (responsibilities of Borrower) provided that financial
statements must be provided to HUD 60 days after the end of each fiscal
year of operations. A commenter suggested that Borrowers be given an
option in the HAP contract (with provisions for adjustment) to
determine the dates to be used for the fiscal year. The HAP contract
permits fiscal years ending on March 31, June 30, September 30, or
December 31. While Borrowers may request a fiscal year ending on any of
these dates, such requests are subject to approval by HUD.
Under Sec. 885.600(d)(2), the Borrower must provide such other
statements regarding project operation, financial condition, and
occupancy as HUD may require to administer the HAP contract and to
monitor project operations. A commenter requested HUD to explain or
provide examples of such ``other statements''. Other statements will
include: monthly accounting statements; tenant assistance payments
requests and special claims requests (claims for unpaid rent, tenant
damages and other charges and claims for vacancy loss); and quarterly
and annual occupancy reports.
Proposed paragraph (e) required the maintenance of a project fund
account. All funds remaining in the project fund account following the
expiration of the project's fiscal year (i.e., the excess of project
income over project operating expenses, required principal and interest
payment and deposits to the replacement reserve) were required to be
deposited in the replacement reserve account following the expiration
of the fiscal year. The final rule has been revised to conform to the
practices currently applied in the section 8 program. These practices
provide that the remaining funds are deposited in a residual receipts
account. Amounts in this account may be used to reduce housing
assistance payments and for other project purposes with the approval of
HUD. Upon termination of the contract any excess funds must be remitted
to HUD.
Replacement reserve (Sec. 885.605). One commenter thought that
proposed Sec. 885.605, which governs the amount of the replacement
reserve, required a contribution of .6 percent for the first year and
.4 percent for the second year of operations. After the first two
years, the commenter recommended the use of a sliding scale (based on
the age of the building) to maintain an adequate reserve.
This commenter has misread the proposed rule. The proposed rule
provided that the annual amount of the deposit is .6 percent of the
cost of the total structure (for new construction projects) or .4
percent of the cost of the initial mortgage (for all other projects).
This amount would have been required for deposit and adjusted yearly by
the amount of the annual adjustment factor and may be reduced if HUD
determines that the reserve has reached a level sufficient to meet
project requirements (see Sec. 885.605(b) and (c)). To provide
flexibility, HUD has decided not to specify a percentage of cost amount
in the final rule, instead HUD will determine the amount whenever
appropriate.
Another commenter suggested that HUD permit Borrowers to use the
replacement reserve for preventive and maintenance efforts, and for
physical adjustments necessary to accommodate the needs of residents
aging in place. The proposed change has not been made. The purpose of
the replacement reserve is to ensure that sufficient funds will be
available to provide for extraordinary maintenance, and repair and
replacement of capital items (e.g., replacement of structural elements
and mechanical equipment in the project.) Operating expenses such as
day-to-day maintenance requirements and preventive maintenance expenses
are to be paid from operating revenues. Currently, Borrowers may
request HUD to approve the use of the replacement reserve for payments
for some items to accommodate aging residents. If such requests are
approved, however, HUD requires the Borrower to replenish the reserve.
Selection and admission of tenants (Sec. 885.610). Proposed
Sec. 885.610 stated that the Borrower is responsible for deciding
whether an applicant is eligible for admission to the project.
Applicants for admission must meet the eligibility requirements
applicable to them under the section 202/8 program concerning age or
handicap, and income. The preamble noted that in addition to these
admission requirements, Borrowers would be permitted to develop and
implement additional tenant selection criteria.
A commenter representing a disability group argued that the rule
would give Borrowers too much discretion in the selection of tenants
and would require Borrowers to make determinations beyond their areas
of expertise. The commenter objected to the example cited in the
preamble that stated that a Borrower could refuse to admit an otherwise
eligible applicant, if the applicant is unable to live independently in
the project without support services that he or she needs, but which
are not available. The commenter predicted that such Borrower
determinations could be arbitrary and constitute discrimination against
the handicapped. The commenter suggested that these determinations
should be left to the tenant-applicant.
Section 8 allows owners the discretion to establish which of the
eligible applicants they want to admit as tenants. This allows an owner
to establish ``suitability'' requirements, such as that tenants be able
to live independently, and, concomitantly, to make decisions on whether
a particular applicant meets those criteria. HUD, through this
regulation, is creating a procedure to appeal an owner's initial
[[Page 2661]] admission determination, if an applicant thinks it is
wrong. Therefore, an applicant will have an opportunity to correct an
owner's suitability decision to the extent it leads to an unlawful
admission determination (such as one in violation of the civil rights
laws, including section 504).
While the owner of section 202 ``elderly'' project may only
consider applicants ``suitable'' if they can live independently--an
applicant for a section 202 ``handicapped'' project must ``have an
impairment which * * * substantially impedes his ability to live
independently'' and that ``could be improved by more suitable housing
conditions.'' See section 202(d)(4).
The example in the preamble to the section 202 rule regarding
ability to live independently reflected the proposed rule implementing
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794). The
proposed section 504 rule defined qualified handicapped person, in
part, with regard to the person's capacity for independent living. In
the final section 504 rule published June 2, 1988 (53 FR 20216), HUD
dropped references to the ability to live independently from the
definition of qualified individual with handicaps. Instead, the
definition was revised to focus on the handicapped individual's
capacity to comply with all obligations of occupancy whether without
supportive services or with supportive services provided by persons
other than the recipient. Thus, Borrowers must make a determination
whether an applicant can fulfill all obligations of occupancy. In a
project that does not provide supportive services, it is irrelevant
whether the obligations of tenancy are met by the individual alone or
with assistance that the individual with handicaps arranges. Further,
in making eligibility determinations, a presumption in favor of the
individual's own assessment of his or her capabilities is warranted in
absence of evidence to the contrary.
Under the proposed rule, a tenant-applicant may request a review of
the Borrower's determination of ineligibility. The review would be made
by a member of the Borrower's staff who did not make the initial
decision to reject. A commenter noted that many projects would be
unable to comply with this requirement because their staffs are too
small. As an alternative, the commenter suggested that HUD permit such
Borrowers to convene a panel to review determinations.
The final rule has been revised to permit the Borrower (with prior
HUD approval) to appoint a panel of individuals to review eligibility
determinations, if the size of the Borrower's staff will not permit a
review by a member of the staff that did not make the original
decision. Under these circumstances, HUD will approve the panel if the
Borrower demonstrates that the members of the panel are qualified to
make eligibility determinations (e.g., members of the staff of a
comparable section 8 project in the area).
Based on the broad discretion provided to Borrowers in the
development and implementation of tenant selection procedures, one
commenter suggested that HUD should provide a review of Borrower's
selections through the provision of administrative hearings to
applicants that are rejected for tenancy. HUD is mindful of its duty to
assure that the policies implemented by Borrowers are enforced in a
non-arbitrary and non-discriminatory manner. However, rather than
establishing a burdensome administrative review process, HUD believes
that its role should be limited to the provision of tenant selection
guidance by regulations and through other issuances, and to the review
of the Borrower's tenant selection plan and procedures during the
management review of the project. HUD has limited authority in this
area, i.e., to reject an owner's criteria for selecting among
statutorily eligible applicants only when the criteria the owner uses
to determine whether applicants would be suitable tenants would violate
the civil rights laws, such as section 504 of the Rehabilitation Act.
(In addition to the regulatory guidance found in the final rule, HUD
notes that Occupancy Requirements of Subsidized Multifamily Housing
Programs (HUD handbook-4350.3 Chg-1, 2-15, 2-16 and 2-17) require
Borrowers to develop a written tenant selection plan covering such
matters as procedures for accepting applications and screening tenants,
fair housing and equal opportunity requirements, preferences and
priorities required by HUD or established by the Borrower, etc., and
provide additional administrative guidance on permitted and prohibited
screening criteria.)
Federal selection preferences. A final rule revising tenant
selection preferences including preferences requirements for this
program was published on July 18, 1994 at 59 FR 36616. Section 885.427
was revised to incorporate the preference provisions of Secs. 880.613-
880.617.
Overcrowded and underoccupied units (Sec. 885.620). Proposed
Sec. 885.620 governs unit transfers where the Borrower has determined
that an assisted unit is overcrowded or underoccupied. A commenter was
concerned that the proposed regulations would permit a Borrower to
force a tenant to change apartments in order to comply with the unit
size requirements. The commenter argued that this requirement may
conflict with State and local laws that prohibit a landlord from moving
an unwilling tenant. The commenter recommended that the final rule
permit flexibility in complying with HUD requirements.
The Department is charged with the responsibility for assuring that
housing assistance payments are used efficiently, including the
appropriate assignment and reassignment of families to units of a
proper size. Accordingly, the final rule provides that the Borrower
will, as promptly as possible, offer the family an appropriate
alternate unit. Contrary to the commenter's fears, the rule would not
permit the Borrower to force an unwilling tenant to move. The existing
HUD procedures permit the tenant to remain in the unit and pay the
market rent, or move within 30 days of the notification that a unit of
the required size is available within the project.
Lease requirements (Sec. 885.625). Under Sec. 885.625, the lease
must contain all required provisions and none of the prohibited
provisions specified by HUD. One commenter argued that HUD should
prepare a new model lease for section 202/8 projects. This commenter
attached a copy of a proposed lease and encouraged HUD to adopt it in
the Section 202 handbook. HUD has prepared a new model lease and it is
available from HUD Field Offices and is contained in the 4350.3
Handbook Chg. 22, Appendix 19C, dated June 1992.
Security Deposits (Sec. 885.635). Under proposed Sec. 885.635, the
Borrower must require each family occupying an assisted unit to pay a
security deposit in an amount equal to one month's total tenant payment
or $50, whichever is greater. A commenter argued that the minimum
security deposit should be increased to $100. The commenter argued that
this amount represents a reasonable minimum tenant contribution, would
safeguard the Borrower, and would reduce the cost of unpaid charge
claims and tenant damage reimbursement requests.
The $50 limit is the minimum deposit that is currently required
under the section 202/8 and related section 8 programs. It balances the
ability of the targeted tenant population (i.e., low and very low
income persons) to pay a security deposit with the Borrower's need for
an adequate resource to offset damages caused to the unit. (HUD notes
that the family's security deposit [[Page 2662]] balance is not the
only resource available to a Borrower to recover sums owed. Under the
final rule (Sec. 885.635(c)), if the family's security deposit is
insufficient to reimburse the Borrower for any unpaid rent, or other
amount which the family owes under the lease for an assisted unit, the
Borrower may claim reimbursement from HUD in an amount not to exceed
the lesser of the amount owed to the Borrower or one month's contract
rent, minus the amount of the family's security deposit.) The $50
minimum has been retained in the final rule.
Adjustment of Rents (Sec. 885.640). Section 885.640 governs the
adjustment of contract rents. Adjustments are made by one of two
methods. Generally, HAP contracts that were entered into prior to 1981
provide for adjustments using an automatic annual adjustment factor and
special additional adjustments. Contracts executed or amended after
1981 provided for adjustment based on a HUD-approved budget.
One commenter encouraged HUD to allow, within the rent adjustment,
an annual adjustment for utility costs based on the projected costs
established by utility companies, rather than the past years' actual
expenditures. Contrary to the commenter's assumption, rent adjustments
based on the HUD-approved budget may not necessarily be performed as
frequently as annually. However, when such adjustments are performed
HUD does consider the actual utility rates that are in effect and
approved utility rate increases that will be implemented during the
year. HUD does not believe it is necessary to revise the rule to
accommodate the commenter's suggestion.
Where the HAP contract provides that rent adjustments will be based
on the application of an annual adjustment factor the procedures are
different. The Department considers the average annual cost of
utilities for the prior year in determining the section 8 annual
adjustment factor. If the annual adjustment factor is insufficient to
cover the cost of an approved increase, the Borrower may request HUD to
approve a special adjustment under Sec. 885.640(a)(2)(ii).
Other Matters
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations in 24 CFR Part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969, 42 U.S.C. 4332. The Finding of No Significant Impact is
available for public inspection during regular business hours in the
Office of the General Counsel, Rules Docket Clerk, Room 10276, 451
Seventh Street, S.W., Washington, D.C. 20410-0500.
Under 5 U.S.C. 605(b) (the Regulatory Flexibility Act), the
Undersigned certifies that this rule does not have a significant
economic impact on a substantial number of small entities. The contract
and management provisions incorporated in this rulemaking generally
reflect existing HUD policies already guiding operators of section 202/
8 projects. This proceeding does not change the goals toward which
program activities are directed. The rule's effect both on small and
large entities should be minor.
The General Counsel, as the Designated Official under section 6(a)
of Executive Order No. 12611--Federalism, has determined that the final
rule does not involve the preemption of State law by Federal statute or
regulation and does not have Federalism implications. The rule reflects
existing HUD policies guiding non-profit organizations operating
section 202/8 projects. The rule, to the maximum extent possible,
defers to State and local policies (see e.g., Secs. 885.635(b)(1), (3)
and (5)).
This rule was listed as sequence number 1805 in the Department's
Semiannual Agenda of Regulations published November 14, 1994 (59 FR
57632, 57657) under Executive Order 12866 and the Regulatory
Flexibility Act.
List of Subjects
24 CFR Part 813
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements, Utilities.
24 CFR Part 885
Aged, Individuals with disabilities, Loan programs--housing and
community development, Low and moderate income housing, Reporting and
recordkeeping requirements.
Accordingly, in title 24 of the Code of Federal Regulations, parts
813 and 885, are amended as follows:
PART 813--DEFINITION OF INCOME, INCOME LIMITS, RENT AND
REEXAMINATION OF FAMILY INCOME FOR THE SECTION 8 HOUSING ASSISTANCE
PAYMENTS PROGRAMS AND RELATED PROGRAMS
1. The authority citation for 24 CFR part 813 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 1437n and 3535(d).
2. In Sec. 813.109, the section heading and paragraph (a), is
revised to read as follows:
Sec. 813.109 Initial determination, verification, and reexamination of
Family income and composition.
(a) Responsibility for initial determination and reexamination. The
Owner or PHA shall be responsible for determination of eligibility for
admission, for determination of Annual Income, Adjusted Income and
Total Tenant Payment, and for reexamination of Family income and
composition at least annually, as provided in pertinent program
regulations and handbooks (see, e.g., 24 CFR part 880, subpart F; 24
CFR part 881, subpart F; 24 CFR part 882, subparts B and E; 24 CFR part
883, subpart G; 24 CFR part 884, subpart B; 24 CFR part 885, subparts B
and C; 24 CFR part 886, subparts A and C; 24 CFR part 887, subpart H;
and 24 CFR parts 889 and 890.). As used in this part, the ``effective
date'' of an examination or reexamination refers to:
(1) In the case of an examination for admission, the effective date
of initial occupancy; and
(2) In the case of a reexamination of an existing tenant, the
effective date of the redetermined housing assistance payment with
respect to the Housing Voucher program (part 887 of this chapter) and
the effective date of the redetermined Total Tenant Payment in all
other cases.
* * * * *
PART 885--LOANS FOR HOUSING FOR THE ELDERLY OR HANDICAPPED
3. The authority citation for 24 CFR part 885 continues to read as
follows:
Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f and 3535(d).
4. In Sec. 885.5, the definition of ``Section 8 Program'', is
revised to read as follows:
Sec. 885.5 Definitions.
* * * * *
Section 8 Program means the housing assistance payments program
which implements section 8 of the United States Housing Act of 1937 (42
U.S.C. 1437f note).
* * * * *
5. In subpart B, Sec. 885.200 is redesignated as Sec. 885.203, and
a new Sec. 885.200 is added, to read as follows:
Sec. 885.200 Definitions applicable to Subpart B.
As used in this subpart B:
Agreement to enter into housing assistance payments contract means
the agreement between the Borrower and [[Page 2663]] HUD which provides
that, upon satisfactory completion of the project in accordance with
the HUD-approved final proposal, HUD will enter into the HAP contract
with the Borrower.
Annual income is defined in part 813 of this chapter.
Assisted unit means a dwelling unit eligible for assistance under a
HAP contract.
Contract rent means the total amount of rent specified in the HAP
contract as payable by HUD and the tenant to the Borrower for an
assisted unit.
Family (eligible family) means an elderly or handicapped family (as
defined in this section) that meets the project occupancy requirements
approved by HUD and, if the family occupies an assisted unit, meets the
requirements described in part 813 of this chapter.
Gross rent is defined in part 813 of this chapter.
HAP contract (housing assistance payments contract) means the
contract entered into by the Borrower and HUD setting forth the rights
and duties of the parties with respect to the project and the payments
under the HAP contract.
Housing assistance payment means the payment made by HUD to the
Borrower for assisted units as provided in the HAP contract. The
payment is the difference between the contract rent and the tenant
rent. An additional payment is made to a family occupying an assisted
unit when the utility allowance is greater than the total tenant
payment. A housing assistance payment, known as a ``vacancy payment'',
may be made to the Borrower when an assisted unit is vacant, in
accordance with the terms of the HAP contract.
Project account means a specifically identified and segregated
account for each project which is established in accordance with
Sec. 885.510(b) out of the amounts by which the maximum annual
commitment exceeds the amount actually paid out under the HAP contract
each year.
Project occupancy requirements means eligible populations to be
served under the Section 202 program are qualified individuals or
families whose head of household or spouse is elderly, physically
handicapped, developmentally disabled or chronically mentally ill.
Projects are designed to meet the special needs of the particular
tenant population which the Borrower was selected to serve. Individuals
from one eligible group may not be accepted for occupancy in a project
designed for a different tenant group. However, a Sponsor can propose
to house eligible tenant groups other than the one it was selected to
serve, but must apply to the HUD Field Office for permission to do so,
based on a plan which demonstrates that it can adequately serve the
proposed tenant group. Upon review and recommendation by the Field
Office, HUD Headquarters will approve or disapprove the request.
Rent, in the case of a unit in a cooperative project, means the
carrying charges payable to the cooperative with respect to occupancy
of the unit.
Tenant rent means the monthly amount defined in, and determined in
accordance with part 813 of this chapter.
Total tenant payment means the monthly amount defined in, and
determined in accordance with part 813 of this chapter.
Utility allowance is defined in part 813 of this chapter and is
determined or approved by HUD.
Utility reimbursement is defined in part 813 of this chapter.
Vacancy payment means the housing assistance payment made to the
Borrower by HUD for a vacant assisted unit if certain conditions are
fulfilled, as provided in the HAP contract. The amount of the vacancy
payment varies with the length of the vacancy period and is less after
the first 60 days of any vacancy.
6. In Sec. 885.210, paragraph (b)(5) is revised, to read as
follows:
Sec. 885.210 Contents of applications.
* * * * *
(b) * * *
(5) A narrative description of the anticipated occupancy of the
project. The Borrower must propose project occupancy requirements that
limit occupancy to the elderly and/or handicapped.
* * * * *
7. In Sec. 885.425, the section heading is revised; paragraph (b)
is removed; paragraphs (c), (d), (e) and (f) are redesignated as
paragraphs (b), (c), (d) and (e), respectively; to read as follows:
Sec. 885.425 Completion of project, cost certification and HUD
approvals.
* * * * *
8. Sections 885.500 through 885.655 are added to subpart B, to read
as follows:
Sec. 885.500 HAP contract.
(a) HAP contract. The housing assistance payments contract sets
forth rights and duties of the Borrower and HUD with respect to the
project and the housing assistance payments.
(b) HAP contract execution. (1) Upon satisfactory completion of the
project, the Borrower and HUD shall execute the HAP contract on the
form prescribed by HUD.
(2) The effective date of the HAP contract may be earlier than the
date of execution, but no earlier than the date of HUD's issuance of
the permission to occupy.
(3) If the project is completed in stages, the procedures of
paragraph (b) of this section shall apply to each stage.
(c) Housing assistance payments to owners under the HAP contract.
The housing assistance payments made under the HAP contract are:
(1) Payments to the Borrower to assist eligible families leasing
assisted units. The amount of the housing assistance payment made to
the Borrower for an assisted unit leased to an eligible family is equal
to the difference between the contract rent for the unit and the tenant
rent payable by the family.
(2) Payments to the Borrower for vacant assisted units (``vacancy
payments''). The amount of and conditions for vacancy payments are
described in Sec. 885.650. The housing assistance payments are made
monthly by HUD upon proper requisition by the Borrower, except payments
for vacancies of more than 60 days, which are made semiannually by HUD
upon requisition by the Borrower.
(d) Payment of utility reimbursement. Where applicable, a utility
reimbursement will be paid to a family occupying an assisted unit as an
additional housing assistance payment. The HAP contract will provide
that the Borrower will make this payment on behalf of HUD. Funds will
be paid to the Borrower in trust solely for the purpose of making the
additional payment. The Borrower may pay the utility reimbursement
jointly to the family and the utility company, or, if the family and
utility company consent, directly to the utility company.
Sec. 885.505 Term of HAP contract.
The term of the HAP contract for assisted units shall be 20 years.
If the project is completed in stages, the term of the HAP contract for
assisted units in each stage shall be 20 years. The term of the HAP
contract for all assisted units in all stages of a project shall not
exceed 22 years.
Sec. 885.510 Maximum annual commitment and project account.
(a) Maximum annual commitment. The maximum annual amount that may
be committed under the HAP contract is the total of the contract rents
and utility allowances for all assisted units in the project.
(b) Project account. (1) HUD will establish and maintain a
specifically identified and segregated project account for each
project. The project [[Page 2664]] account will be established out of
the amounts by which the maximum annual commitment exceeds the amount
actually paid out under the HAP contract each year. HUD will make
payments from this account for housing assistance payments as needed to
cover increases in contract rents or decreases in tenant income and
other payments for costs specifically approved by the Secretary.
(2) If the HUD-approved estimate of required annual payments under
the HAP contract for a fiscal year exceeds the maximum annual
commitment for that fiscal year plus the current balance in the project
account, HUD will, within a reasonable time, take such steps authorized
by section 8(c)(6) of the United States Housing Act of 1937 (42 U.S.C.
1437f note), as may be necessary, to assure that payments under the HAP
contract will be adequate to cover increases in contract rents and
decreases in tenant income.
Sec. 885.515 Leasing to eligible families.
(a) Availability of assisted units for occupancy by eligible
families. (1) During the term of the HAP contract, a Borrower shall
make available for occupancy by eligible families the total number of
units for which assistance is committed under the HAP contract. For
purposes of this section, making units available for occupancy by
eligible families means that the Borrower:
(i) Is conducting marketing in accordance with Sec. 885.600(a);
(ii) Has leased or is making good faith efforts to lease the units
to eligible and otherwise acceptable families, including taking all
feasible actions to fill vacancies by renting to such families;
(iii) Has not rejected any such applicant family except for reasons
acceptable to HUD.
(2) If the Borrower is temporarily unable to lease all units for
which assistance is committed under the HAP contract to eligible
families, one or more units may, with the prior approval of HUD, be
leased to otherwise eligible families that do not meet the income
eligibility requirements of part 813. Failure on the part of the
Borrower to comply with these requirements is a violation of the HAP
contract and grounds for all available legal remedies, including an
action for specific performance of the HAP contract, suspension or
debarment from HUD programs, and reduction of the number of units under
the HAP contract as set forth in paragraph (b) of this section.
(b) Reduction of number of units covered by the HAP contract. HUD
may reduce the number of units covered by the HAP contract to the
number of units available for occupancy by eligible families if:
(1) The Borrower fails to comply with the requirements of paragraph
(a) of this section; or
(2) Notwithstanding any prior approval by HUD, HUD determines that
the inability to lease units to eligible families is not a temporary
problem.
(c) Restoration. HUD will agree to an amendment of the HAP contract
to provide for subsequent restoration of any reduction made under
paragraph (b) of this section if:
(1) HUD determines that the restoration is justified by demand;
(2) The Borrower otherwise has a record of compliance with the
Borrower's obligations under the HAP contract; and
(3) Contract and budget authority is available.
(d) Applicability. In accordance with section 555 of the Cranston-
Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and
(b) of this section apply to all contracts. An owner who had leased an
assisted unit to an ineligible family consistent with the regulations
in effect at the time will continue to lease the unit to that family.
However, the owner must make the unit available for occupancy by an
eligible family when the ineligible family vacates the unit.
(e) Occupancy by families that are not elderly or handicapped. HUD
may permit units in the project to be leased to other than elderly or
handicapped families if:
(1) The Borrower has made reasonable efforts to lease assisted and
unassisted units to eligible families;
(2) The Borrower has been granted HUD approval under paragraph (a)
of this section; and
(3) The Borrower is temporarily unable to achieve or maintain a
level of occupancy sufficient to prevent financial default and
foreclosure under the section 202 loan documents. HUD approval under
paragraph (e)(3) of this section will be of limited duration. HUD may
impose terms and conditions to this approval that are consistent with
program objectives and necessary to protect its interest in the section
202 loan.
Sec. 885.520 HAP contract administration.
HUD is responsible for the administration of the HAP Contract.
Sec. 885.525 Default by Borrower.
(a) HAP contract provisions. The HAP contract will provide:
(1) That if HUD determines that the Borrower is in default under
the HAP contract, HUD will notify the Borrower of the actions required
to be taken to cure the default and of the remedies to be applied by
HUD including an action for specific performance under the HAP
contract, reduction or suspension of housing assistance payments and
recovery of overpayments, where appropriate; and
(2) That if the Borrower fails to cure the default, HUD has the
right to terminate the HAP contract or to take other corrective action.
(b) Loan provisions. Additional provisions governing default under
the section 202 loan are included in the regulatory agreement and other
loan documents described in Sec. 885.415.
Sec. 885.530 Notice upon HAP contract expiration.
(a) Notice required. The HAP contract will provide that the
Borrower will, at least one year before the end of the HAP contract
term, notify each family leasing an assisted unit of any increase in
the amount the family will be required to pay as rent as a result of
the expiration.
(b) Service requirements. The notice under paragraph (a) of this
section shall be accomplished by sending a letter by first class mail,
properly stamped and addressed, to the family at its address at the
project, with a proper return address; and serving a copy of the notice
on any adult person answering the door at the leased dwelling unit, or
if no adult responds, by placing the notice under or through the door,
if possible, or else by affixing the notice to the door. Service shall
not be considered to be effective until both required notices have been
accomplished. The date on which the notice shall be considered to be
received by the family shall be the date on which the Borrower mails
the first class letter provided for in paragraph (b) of this section,
or the date on which the notice provided for in paragraph (b) of this
section is properly given, whichever is later.
(c) Contents of notice. The notice shall advise each affected
family that, after the expiration date of the HAP contract, the family
will be required to bear the entire cost of the rent and that the
Borrower may, subject to requirements and restrictions contained in the
regulatory agreement, the lease, and State or local law, change the
rent. The notice also shall state:
(1) The actual (if known) or the estimated rent that will be
charged following the expiration of the HAP contract;
(2) The difference between the new rent and the total tenant
payment toward rent under the HAP contract; and [[Page 2665]]
(3) The date the HAP contract will expire.
(d) Certification to HUD. The Borrower shall give HUD a
certification that families have been notified in accordance with this
section and shall attach to the certification an example of the text of
the notice.
(e) Applicability. This section applies to all HAP contracts
entered into under an agreement to enter into a housing assistance
payments contract executed on or after October 1, 1981, or entered into
under such an agreement executed before October 1, 1981 but renewed or
amended after February 9, 1995.
(Approved by the Office of Management and Budget under control
number 2502-0371).
Sec. 885.535 HAP contract extension or renewal.
Upon expiration of the term of the HAP contract, HUD and the
Borrower may agree (subject to available funds) to extend the term of
the HAP contract or to renew the HAP contract. The number of assisted
units under the extended or renewed HAP contract shall equal the number
of assisted units under the original HAP contract, except that--
(a) HUD and the Borrower may agree to reduce the number of assisted
units by the number of assisted units that are not occupied by eligible
families at the time of the extension or renewal; and
(b) HUD and the Borrower may agree to permit reductions in the
number of assisted units during the term of the extended or renewed HAP
contract as assisted units are vacated by eligible families. Nothing in
this section shall prohibit HUD from reducing the number of units
covered under the extended or renewed HAP contract in accordance with
Sec. 885.515(b).
Sec. 885.600 Responsibilities of Borrower.
(a) Marketing. (1) The Borrower must commence and continue diligent
marketing activities not later than 90 days before the anticipated date
of availability for occupancy of the first unit of the project. Market
activities shall include the provision of notices of availability of
housing under the program to operators of temporary housing for the
homeless in the same housing market.
(2) Marketing must be done in accordance with the HUD-approved
affirmative fair housing marketing plan and all Federal, State or local
fair housing and equal opportunity requirements. The purpose of the
plan and requirements is to achieve a condition in which eligible
families of similar income levels in the same housing market have a
like range of housing choices available to them regardless of
discriminatory considerations, such as their race, color, creed,
religion, familial status, disability, sex or national origin.
Marketing must also be done in accordance with the communication and
notice requirements of Section 504 at 24 CFR 8.6 and 24 CFR 8.54, i.e.,
TDD requirements for all housing providers and methods to reach those
with speech, visual and hearing impairments.
(3) At the time of HAP contract execution, the Borrower must submit
to HUD a list of leased and unleased assisted units, with a
justification for the unleased units, in order to qualify for vacancy
payments for the unleased units.
(b) Management and maintenance. The Borrower is responsible for all
management functions. These functions include selection and admission
of tenants, required reexaminations of incomes for families occupying
assisted units, collection of rents, termination of tenancy and
eviction, and all repair and maintenance functions (including ordinary
and extraordinary maintenance and replacement of capital items). All
functions must be performed in compliance with equal opportunity
requirements.
(c) Contracting for services. (1) With HUD approval, the Borrower
may contract with a private or public entity for performance of the
services or duties required in paragraphs (a) and (b) of this section.
However, such an arrangement does not relieve the Borrower of
responsibility for these services and duties. All such contracts are
subject to the restrictions governing prohibited contractual
relationships described in Sec. 885.5. (These prohibitions do not
extend to management contracts entered into by the Borrower with the
sponsor or its non-profit affiliate).
(2) Consistent with the objectives of Executive Order 11625 (3 CFR,
1971-1975 Comp., p. 616, unless otherwise noted), Executive Order 12432
(3 CFR, 1983 Comp., p. 198, unless otherwise noted), and Executive
Order 12138 (3 CFR, 1979 Comp., p. 393, unless otherwise noted), the
Borrower will promote awareness and participation of minority and
women's business enterprises in contracting and procurement activities.
(d) Submission of financial and operating statements. The Borrower
must submit to HUD:
(1) Within 60 days after the end of each fiscal year of project
operations, financial statements for the project audited by an
independent public accountant and in the form required by HUD; and
(2) Other statements regarding project operation, financial
conditions and occupancy as HUD may require to administer the HAP
contract and to monitor project operations.
(e) Use of project funds. The Borrower shall maintain a separate
project fund account in a depository or depositories which are members
of the Federal Deposit Insurance Corporation or National Credit Union
Share Insurance Fund and shall deposit all rents, charges, income and
revenues arising from project operation or ownership to this account.
All project funds are to be deposited in Federally-insured accounts.
All balances shall be fully insured at all times, to the maximum extent
possible. Project funds must be used for the operation of the project
(including required insurance coverage), to make required principal and
interest payments on the section 202 loan, and to make required
deposits to the replacement reserve under Sec. 885.605, in accordance
with a HUD-approved budget. Any project funds in the project funds
account (including earned interest) following the expiration of the
fiscal year shall be deposited in a Federally-insured residual receipts
account within 60 days following the end of the fiscal year.
Withdrawals from this account may be made only for project purposes and
with the approval of HUD. If there are funds remaining in the residual
receipts account when the mortgage is satisfied, such funds shall be
returned to HUD.
(f) Reports. The Borrower shall submit such reports as HUD may
prescribe to demonstrate compliance with applicable civil rights and
equal opportunity requirements.
(Approved by the Office of Management and Budget under control
number 2502-0371).
Sec. 885.605 Replacement reserve.
(a) Establishment of reserve. The Borrower shall establish and
maintain a replacement reserve to aid in funding extraordinary
maintenance, and repair and replacement of capital items.
(b) Deposits to reserve. The Borrower shall make monthly deposits
to the replacement reserve in an amount determined by HUD.
(c) Level of reserve. The reserve must be built up to and
maintained at a level determined by HUD to be sufficient to meet
projected requirements. Should the reserve reach that level, the amount
of the deposit to the reserve may be reduced with the approval of HUD.
(d) Administration of reserve. Replacement reserve funds must be
deposited with HUD or in a Federally-insured depository in an interest-
bearing account (s) whose balances are [[Page 2666]] fully insured at
all times. All earnings including interest on the reserve must be added
to the reserve. Funds may be drawn from the reserve and used only in
accordance with HUD guidelines and with the approval of, or as directed
by, HUD.
Sec. 885.610 Selection and admission of tenants.
(a) Written tenant selection procedures. The Owner shall adopt
written tenant selection procedures which ensure nondiscrimination in
the selection of tenants and that are consistent with the purpose of
improving housing opportunities for very low-income elderly or
handicapped persons; and reasonably related to program eligibility and
an applicant's ability to perform the obligations of the lease. The
Owner must comply with the following nondiscrimination authorities:
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and the
implementing regulations at 24 CFR part 8; the Fair Housing Act (42
U.S.C. 3600-3619) and the implementing regulations at 24 CFR parts 100,
108, 109, and 110; Title VI of the Civil Rights Act of 1964 (42 U.S.C.
2000d) and the implementing regulations at 24 CFR part 1; section 3 of
the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and the
implementing regulations at 24 CFR part 135; the Age Discrimination Act
of 1975 (42 U.S.C. 6101-6107) and the implementing regulations at 24
CFR part 146; Executive Order 11246 (as amended), 3 CFR, 1964-1965
Comp., p. 339, and the implementing regulations at 41 CFR Chapter 60;
Executive Order 11063 (Equal Opportunity in Housing), 3 CFR, 1959-1963
Comp., p. 652 and the implementing regulations at 24 CFR part 107; the
Americans with Disabilities Act (42 U.S.C. 12101 et seq.) to the extent
applicable; and other applicable Federal, State and local laws
prohibiting discrimination and promoting equal opportunity. While local
residency requirements are prohibited, local residency preferences may
be applied in selecting tenants only to the extent that they are not
inconsistent with affirmative fair housing marketing objectives and the
Owner's HUD-approved affirmative fair housing marketing plan.
Preferences may not be based on the length of time the applicant has
resided in the jurisdiction. With respect to any residency preference,
persons expected to reside in the community as a result of current or
planned employment will be treated as residents. Owners shall promptly
notify in writing any rejected applicant of the grounds for any
rejection. Additionally, owners shall maintain a written, chronological
waiting list showing the name, race, gender, ethnicity and date of each
person applying for the program.
(b) Application for admission. The Borrower must accept
applications for admission to the project in the form prescribed by HUD
and is obligated to confirm all information provided by the applicant
families on the application. Applicant families must be requested to
complete a release of information consent for verification of
information. Applicants applying for assisted units must complete a
certification of eligibility as part of the application for admission.
Applicant families must meet the disclosure and verification
requirements for Social Security Numbers, as provided by 24 CFR part
750. Applicant families must sign and submit consent forms for the
obtaining of wage and claim information from State Wage Information
Collection Agencies, as provided by 24 CFR part 760. Both the Borrower
and the applicant must complete and sign the application for admission.
On request, the Borrower must furnish copies of all applications for
admission to HUD.
(c) Determination of eligibility and selection of tenants. The
Borrower is responsible for determining whether applicants are eligible
for admission and for the selection of families. To be eligible for
admission, an applicant must be an elderly or handicapped family as
defined in Sec. 885.5, must meet any project occupancy requirements
approved by HUD under Sec. 885.225(a)(1), must meet the disclosure and
verification requirements for Social Security Numbers, as provided by
24 CFR part 750), must sign and submit consent forms for obtaining of
wage and claim information from State Wage Information Collection
Agencies, as provided by 24 CFR part 760, and must, if applying for an
assisted unit, be eligible for admission under part 813 of this
chapter.
(d) Unit assignment. If the Borrower determines that the family is
eligible and is otherwise acceptable and units are available, the
Borrower will assign the family a unit. The Borrower will assign the
family a unit of the appropriate size in accordance with HUD's general
occupancy guidelines. If no suitable unit is available, the Borrower
will place the family on a waiting list for the project and notify the
family of when a suitable unit may become available. If the waiting
list is so long that the applicant would not be likely to be admitted
for the next 12 months, the Borrower may advise the applicant that no
additional applications for admission are being considered for that
reason, except that the Borrower may not refuse to place an applicant
on the waiting list if the applicant is otherwise eligible for
assistance and claims that he or she qualifies for a Federal preference
as provided in Sec. 885.427.
(e) Ineligibility determination. If the Borrower determines that an
applicant is ineligible for admission or the Borrower is not selecting
the applicant for other reasons, the Borrower will promptly notify the
applicant in writing of the determination, the reasons for the
determination, and that the applicant has a right to request a meeting
with the Borrower or managing agent to review the rejection, in
accordance with HUD requirements. The review, if requested, may not be
conducted by a member of the Borrower's staff who made the initial
decision to reject the applicant. The applicant may also exercise other
rights (e.g., rights granted under Federal, State or local civil rights
laws) if the applicant believes he or she is being discriminated
against on a prohibited basis. The informal review provisions for the
denial of a Federal preference are provided at Sec. 880.613(h) of this
chapter.
(f) Records. Records on applicants and approved eligible families,
which provide racial, ethnic, gender, handicap status, and place of
previous residency data required by HUD, must be retained for three
years.
(g) Reexamination of family income and composition--(1) Regular
reexaminations. The Borrower must reexamine the income and composition
of the family at least every 12 months. Upon verification of the
information, the Borrower shall make appropriate adjustments in the
total tenant payment in accordance with part 813 of this chapter and
determine whether the family's unit size is still appropriate. The
Borrower must adjust tenant rent and the housing assistance payment and
must carry out any unit transfer in accordance with the administrative
instructions issued by HUD. At the time of reexamination under
paragraph (g)(1) of this section, the Borrower must require the family
to meet the disclosure and verification requirements for Social
Security Numbers, as provided by 24 CFR part 750. For requirements
regarding the signing and submitting of consent forms by families for
obtaining of wage and claim information from State Wage Information
Collection Agencies, see 24 CFR part 760.
(2) Interim reexaminations. The family must comply with the
provisions in its lease regarding interim reporting of changes in
income. If the Borrower receives information concerning a
[[Page 2667]] change in the family's income or other circumstances
between regularly scheduled reexaminations, the Borrower must consult
with the family and make any adjustments determined to be appropriate.
See 24 CFR 750.10(d)(2)(i) for the requirements for the disclosure and
verification of Social Security Numbers at interim reexaminations
involving new family members. For requirements regarding the signing
and submitting of consent forms by families for the obtaining of wage
and claim information from State wage information collection agencies,
see 24 CFR part 760. Any change in the family's income or other
circumstances that results in an adjustment in the total tenant
payment, tenant rent and housing assistance payment must be verified.
(3) Continuation of housing assistance payments. (i) A family shall
remain eligible for housing assistance payments until the total tenant
payment equals or exceeds the gross rent. The termination of subsidy
eligibility will not affect the family's other rights under its lease.
Housing assistance payments may be resumed if, as a result of changes
in income, rent or other relevant circumstances during the term of the
HAP contract, the family meets the income eligibility requirements of
part 813 of this chapter and housing assistance is available for the
unit under the terms of the HAP contract. The family will not be
required to establish its eligibility for admission to the project
under the remaining requirements of paragraph (c) of this section.
(ii) A family's eligibility for housing assistance payments may be
terminated in accordance with HUD requirements for such reasons as
failure to submit requested verification information, including
information related to disclosure and verification of Social Security
Numbers (as provided by 24 CFR part 750) or failure to sign and submit
consent forms for the obtaining of wage and claim information from
State wage information collection agencies (as provided by 24 CFR part
760).
(Approved by the Office of Management and Budget under control
number 2502-0371).
Sec. 885.615 Obligations of the family.
(a) Requirements. The family shall:
(1) Pay amounts due under the lease directly to the Borrower.
(2) Supply such certification, release of information, consent,
complete forms or documentation as the Borrower or HUD determines
necessary, including information and documentation relating to the
disclosure and verification of Social Security Numbers, as provided by
24 CFR part 750, and the signing and submission of consent forms for
the obtaining of wage and claim information from State Wage Information
Collection Agencies, as provided by 24 CFR part 760;
(3) Allow the Borrower to inspect the dwelling unit at reasonable
times and after reasonable notice;
(4) Notify the Borrower before vacating the dwelling unit; and
(5) Use the dwelling unit solely for residence by the family, and
as the family's principal place of residence.
(b) Prohibitions. The family shall not:
(1) Assign the lease or transfer the unit; or
(2) Occupy, or receive assistance for the occupancy of, a unit
governed under this part while occupying, or receiving assistance for
occupancy of, another unit assisted under any Federal housing
assistance program, including any section 8 program.
(Approved by the Office of Management and Budget under control
number 2502-0371).
Sec. 885.620 Overcrowded and underoccupied units.
If the Borrower determines that because of change in family size, a
unit is smaller than appropriate for the eligible family to which it is
leased, or that the unit is larger than appropriate, housing assistance
payments with respect to the unit will not be reduced or terminated
until the eligible family has been relocated to an appropriate
alternate unit. If possible, the Borrower will, as promptly as
possible, offer the family an appropriate alternate unit. The Borrower
may receive vacancy payments for the vacated unit if the Borrower
complies with the requirements of Sec. 885.650.
Sec. 885.625 Lease requirements.
(a) Term of lease. The term of the lease may not be less than one
year. Unless the lease has been terminated by appropriate action, upon
expiration of the lease term, the family and Borrower may execute a new
lease for a term not less than one year, or may take no action. If no
action is taken, the lease will automatically be renewed for successive
terms of one month.
(b) Termination by the family. All leases may contain a provision
that permits the family to terminate the lease upon 30 days advance
notice. A lease for a term that exceeds one year must contain such
provision.
(c) Form. The Borrower shall use the lease form prescribed by HUD.
In addition to required provisions in the lease form, the Borrower may
include a provision in the lease permitting the Borrower to enter the
leased premises, at any time, without advance notice where there is
reasonable cause to believe that an emergency exists or that health or
safety of a family member is endangered.
Sec. 885.630 Termination of tenancy and modification of lease.
The provisions of part 247 of this title apply to all decisions by
a Borrower to terminate the tenancy or modify the lease of a family
residing in a unit.
Sec. 885.635 Security deposits.
(a) Collection of security deposit. At the time of the initial
execution of the lease, the Borrower:
(1) Will require each family occupying a unit to pay a security
deposit in an amount equal to one month's total tenant payment or $50,
whichever is greater; and
(2) May require each family occupying an unassisted unit to pay a
security deposit equal to one month's rent payable by the family. The
family is expected to pay the security deposit from its own resources
and other available public or private resources. The Borrower may
collect the security deposit on an installment basis.
(b) Security deposit provisions applicable to assisted and
unassisted units.--(1) Administration of security deposit. The Borrower
must place the security deposits in a segregated interest-bearing
account. The Borrower shall maintain a record of the amount in this
account that is attributable to each family in residence in the
project. Annually for all families, and when computing the amount
available for disbursement under paragraph (b)(3) of this section, the
Borrower shall allocate to the family's balance, the interest accrued
on the balance during the year. Unless prohibited by State or local
law, the Borrower may deduct for the family, from the accrued interest
for the year, the administrative cost of computing the allocation to
the family's balance. The amount of the administrative cost adjustment
shall not exceed the accrued interest allocated to the family's balance
for the year. The amount of the segregated, interest-bearing account
maintained by the Borrower must at all times equal the total amount
collected from the families then in occupancy plus any accrued interest
and less allowable administrative cost adjustments. The Borrower must
comply with any applicable State and local laws concerning interest
payments on security deposits.
(2) Family notification requirement. In order to be considered for
the refund of the security deposit, a family must [[Page 2668]] provide
the Borrower with a forwarding address or arrange to pick up the
refund.
(3) Use of security deposit. The Borrower, subject to State and
local law and the requirements of paragraph (b)(3) of this section, may
use the family's security deposit balance as reimbursement for any
unpaid family contribution or other amount which the family owes under
the lease. Within 30 days (or shorter time if required by State or
local law) after receiving notification under paragraph (b)(2) of this
section the Borrower must:
(i) Refund to a family which does not owe any amount under the
lease the full amount of the family's security deposit balance;
(ii) Provide to a family owing under the lease a list itemizing
each amount, along with a statement of the family's rights under State
and local law. If the amount which the Borrower claims is owed by the
family is less than the amount of the family's security deposit
balance, the Borrower must refund the excess balance to the family. If
the Borrower fails to provide the list, the family will be entitled to
the refund of the full amount of the family's security deposit balance.
(4) Disagreements. If a disagreement arises concerning
reimbursement of the security deposit, the family will have the right
to present objections to the Borrower in an informal meeting. The
Borrower must keep a record of any disagreements and meetings in a
tenant file for inspection by HUD. The procedures of paragraph (b)(4)
of this section do not preclude the family from exercising its rights
under State or local law.
(5) Decedent's interest in security deposit. Upon the death of a
member of a family, the decedent's interest, if any, in the security
deposit will be governed by State or local law.
(c) Reimbursement by HUD for assisted units. If the family's
security deposit balance is insufficient to reimburse the Borrower for
any unpaid amount which the family owes under the lease for an assisted
unit and the Borrower has provided the family with the list required by
paragraph (b)(3)(ii) of this section, the Borrower may claim
reimbursement from HUD for an amount not to exceed the lesser of:
(1) The amount owed the Borrower; or
(2) One month's contract rent, minus the amount of the family's
security deposit balance. Any reimbursement under this section will be
applied first toward any unpaid tenant rent due under the lease. No
reimbursement may be claimed for unpaid rent for the period after
termination of the tenancy. The Borrower may be eligible for vacancy
payments following a vacancy in accordance with the requirements of
Sec. 885.650.
(Approved by the Office of Management and Budget under control
number 2502-0371).
Sec. 885.640 Adjustment of rents.
(a) Contract rents.--(1) Adjustment based on approved budget. If
the HAP contract provides, or has been amended to provide, that
contract rents will be adjusted based upon a HUD-approved budget, HUD
will calculate contract rent adjustments based on the sum of the
project's operating costs and debt service (as calculated by HUD), with
adjustments for vacancies, the project's non-rental income, and other
factors that HUD deems appropriate. The calculation will be made on the
basis of information provided by the Borrower on a form acceptable to
the Secretary. The automatic adjustment factor described in part 888 of
this chapter is not used to adjust contract rents under paragraph
(a)(1) of this section, except to the extent that the amount of the
replacement reserve deposit is adjusted under Sec. 880.602 of this
chapter.
(2) Annual and special adjustments. If the HAP contract provides
that contract rents will be adjusted based on the application of an
automatic adjustment factor and by special additional adjustments:
(i) Consistent with the HAP contact, contract rents may be adjusted
in accordance with part 888 of this chapter;
(ii) Special additional adjustments will be granted, to the extent
determined necessary by HUD, to reflect increases in the actual and
necessary expenses of owning and maintaining the assisted units which
have resulted from substantial general increases in real property
taxes, assessments, utility rates or similar costs (i.e., assessments
and utilities not covered by regulated rates), and which are not
adequately compensated for by an annual adjustment. The Borrower must
submit to HUD required supporting data, financial statements and
certifications for the special additional adjustment.
(b) Rent for unassisted units. The rent payable by families
occupying units that are not assisted under the HAP contract shall be
equal to the contract rent computed under paragraph (a) of this
section.
(Approved by the Office of Management and Budget under control
number 2502-0371).
Sec. 885.645 Adjustment of utility allowances.
In connection with adjustments of contract rents as provided in
Sec. 885.640(a), the Borrower must submit an analysis of any project's
utility allowances. Such data as changes in utility rates and other
facts affecting utility consumption should be provided as part of this
analysis to permit appropriate adjustments in the utility allowances
for assisted units. In addition, when approval of a utility rate change
would result in a cumulative increase of 10 percent or more in the most
recently approved utility allowances, the Borrower must advise HUD and
request approval of new utility allowances. Whenever a utility
allowance for an assisted unit is adjusted, the Borrower will promptly
notify affected families and make a corresponding adjustment of the
tenant rent and the amount of the housing assistance payment.
(Approved by the Office of Management and Budget under control
number 2502-0371).
Sec. 885.650 Conditions for receipt of vacancy payments for assisted
units.
(a) General. Vacancy payments under the HAP contract will not be
made unless the conditions for receipt of these housing assistance
payments set forth in this section are fulfilled.
(b) Vacancies during rent-up. For each unit that is not leased as
of the effective date of the HAP contract, the Borrower is entitled to
vacancy payments in the amount of 80 percent of the contract rent for
the first 60 days of vacancy, if the Borrower:
(1) Conducted marketing in accordance with Sec. 885.600(a) and
otherwise complied with Sec. 885.600;
(2) Has taken and continues to take all feasible actions to fill
the vacancy; and
(3) Has not rejected any eligible applicant except for good cause
acceptable to HUD.
(c) Vacancies after rent-up. If an eligible family vacates a unit,
the Borrower is entitled to vacancy payments in the amount of 80
percent of the contract rent for the first 60 days of vacancy if the
Borrower:
(1) Certifies that it did not cause the vacancy by violating the
lease, the HAP contract, or any applicable law;
(2) Notified HUD of the vacancy or prospective vacancy and the
reasons for the vacancy immediately upon learning of the vacancy or
prospective vacancy;
(3) Has fulfilled and continues to fulfill the requirements
specified in Sec. 885.600(a) (2) and (3) and Sec. 885.650(b) (2) and
(3); and
(4) For any vacancy resulting from the Borrower's eviction of an
eligible family, certifies that it has complied with Sec. 885.630.
(d) Vacancies for longer than 60 days. If a unit continues to be
vacant after the 60-day period specified in paragraph (b) or (c) of
this section, the Borrower may [[Page 2669]] apply to receive
additional vacancy payments in an amount equal to the principal and
interest payments required to amortize that portion of the debt service
attributable to the vacant unit for up to 12 additional months for the
unit if:
(1) The unit was in decent, safe and sanitary condition during the
vacancy period for which payment is claimed;
(2) The Borrower has fulfilled and continues to fulfill the
requirements specified in paragraph (b) or (c) of this section, as
appropriate; and
(3) The Borrower has demonstrated to the satisfaction of HUD that:
(i) For the period of vacancy, the project is not providing the
Borrower with revenues at least equal to project expenses (exclusive of
depreciation) and the amount of payments requested is not more than the
portion of the deficiency attributable to the vacant unit; and
(ii) The project can achieve financial soundness within a
reasonable time.
(e) Prohibition of double compensation for vacancies. If the
Borrower collects payments for vacancies from other sources (tenant
rent, security deposits, payments under Sec. 885.635(c), or
governmental payments under other programs), the Borrower shall not be
entitled to collect vacancy payments to the extent these collections
from other sources plus the vacancy payment exceed contract rent.
(Approved by the Office of Management and Budget under control
number 2502-0371).
Dated: December 22, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 95-552 Filed 1-9-95; 8:45 am]
BILLING CODE 4210-27-P
