[Federal Register Volume 60, Number 13 (Friday, January 20, 1995)]
[Rules and Regulations]
[Pages 4344-4346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1414]
[[Page 4343]]
_______________________________________________________________________
Part VII
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Secretary
_______________________________________________________________________
24 CFR Part 907
Homeownership Demonstration Program in Omaha, NE; Final Rule
Federal Register / Vol. 60, No. 13 / Friday, January 20, 1995 / Rules
and Regulations
[[Page 4344]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
24 CFR Part 907
[Docket No. R-95-1704; FR-3573-F-02]
RIN 2577-AB38
Homeownership Demonstration Program in Omaha, NE
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
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SUMMARY: This final rule implements section 132 of the Housing and
Community Development Act of 1992. Section 132 establishes a
demonstration program to facilitate self-sufficiency and permits the
homeownership sale of single family homes administered by the Housing
Authority of the City of Omaha in the State of Nebraska. The purpose of
the demonstration is to exhibit the effectiveness of promoting
homeownership and providing support services.
EFFECTIVE DATE: January 20, 1995.
FOR FURTHER INFORMATION CONTACT: Gary Van Buskirk, Homeownership
Division, Office of Public and Indian Housing, Department of Housing
and Urban Development, 451 Seventh Street, SW., Room 4112, Washington,
DC 20410. Telephone number, voice (202) 708-4233, TDD (202) 708-0850.
(These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION:
I. Background
On January 24, 1994 (59 FR 3626), HUD published an interim rule
implementing section 132 of the Housing and Community Development Act
of 1992 (Pub. L. 102-550, approved Oct. 28, 1992) (section 132).
Section 132 establishes a demonstration program to facilitate self-
sufficiency and to permit the homeownership sale of single family homes
administered by the Housing Authority of the City of Omaha in the State
of Nebraska. The purpose of the demonstration is to exhibit the
effectiveness of promoting homeownership and providing support
services.
The interim rule was closely modeled on the interim rule for the
Section 5(h) Homeownership Program, codified in 24 CFR part 906. The
Housing Authority for the City of Omaha (Housing Authority), which is
administering this demonstration program, is already administering a
homeownership program approved pursuant to section 5(h) of the United
States Housing Act of 1937, and it has indicated to HUD that it wishes
to operate the two programs in a similar fashion. While this
demonstration program and the Section 5(h) program are similar, the
preamble to the interim rule described several differences (59 FR
3626).
HUD is publishing this final rule for effect immediately upon
publication. Generally, in accordance with section 7(o) of the
Department of Housing and Urban Development Act, HUD does not publish a
rule or regulation for effect until after the expiration of the 30-day
calendar period beginning on the day after the rule or regulation is
published. However, because section 132(g) of the Housing and Community
Development Act of 1992 provides that the final rule implementing the
Homeownership Demonstration Program in Omaha, Nebraska ``shall take
effect upon issuance,'' the section 7(o) provision does not apply to
this final rule.
II. Comments on the January 24, 1994 Interim Rule
HUD solicited public comments on the interim rule implementing the
Homeownership Demonstration Program in Omaha, Nebraska. By the
expiration of the public comment period on March 25, 1994, HUD had
received two comments, one from the Housing Authority of the City of
Omaha (Housing Authority), and one from the Public Housing Agency of
Saint Paul, Minnesota (Saint Paul Housing Agency). The final rule
contains four changes to the interim rule, as further described below,
in response to public comments: (1) HUD has deleted Sec. 907.5(b); (2)
HUD has deleted the requirement in Sec. 907.6(b) for fire and safety
inspections; (3) HUD has added applicants for public housing as
eligible homebuyers in Sec. 907.8(c); and (4) HUD has revised
Sec. 907.8(d) to acknowledge that the Housing Authority may submit for
HUD's approval an order of preference for participants. The following
discussion summarizes the comments and provides HUD's responses to
those comments.
1. The Housing Authority objected to certain sections of the
interim rule that were modeled on the Section 5(h) interim regulations
(codified at 24 CFR part 906), asserting that the borrowed language in
those sections is inapplicable to this demonstration program. One of
these sections is Sec. 907.5(b), regarding negotiations with residents
wishing to initiate a homeownership plan. The Housing Authority stated
that section 132 would not exist if the Housing Authority did not
already desire to implement a homeownership program.
The other section is Sec. 907.8(d), in the last sentence regarding
the order of preference for participants, which ends ``in accordance
with HUD approved preferences.'' The Housing Authority stated that this
sentence may be confusing, asserting that section 132 gives the Housing
Authority the right to make its own order of preference, and suggesting
that the sentence would more clearly read: ``* * * in accordance with
preferences as established by the Housing Authority and approved by
HUD.''
HUD Response: HUD agrees with the Housing Authority that the first
sentence of Sec. 907.5(b) is inapposite, given that the Housing
Authority has initiated the homeownership program. The remaining two
sentences of Sec. 907.5(b) encourage the Housing Authority to maximize
resident participation in planning and implementing the homeownership
program. While HUD continues to encourage maximum resident
participation, it agrees that it does not need to include such advice
in the rule and therefore has deleted Sec. 907.5(b).
With regard to Sec. 907.8(d), HUD does not object to a process in
which the Housing Authority develops and submits to HUD an order of
preference for participants, and has changed the section of the rule
accordingly.
2. The Housing Authority objected to several other provisions of
the interim rule, asserting that they are otherwise inappropriate for
this demonstration program. The first such provision is Sec. 907.5(a),
in the third sentence regarding consultation about vacant units with
resident organizations or resident management corporations. The Housing
Authority remarked that such consultation every time there is a vacancy
would be repetitive, since the Housing Authority would already have
consulted both residents and their organizations in developing the
plan. The Housing Authority further noted that this provision is
unnecessary, since the Housing Authority does not intend to sell vacant
units.
HUD Response: Section 907.5(a) does not require repetitive resident
consultation whenever there is a vacancy. It requires that resident
consultation take place during the process of developing the
homeownership plan even if the plan encompasses vacant units. Once the
plan is developed and approved by HUD, the rule does not require
further consultation when a unit included in the homeownership program
becomes vacant.
The Housing Authority also objected to the first sentence in
Sec. 907.8(c), [[Page 4345]] regarding homebuyer eligibility, as
inappropriate for this demonstration program. The Housing Authority
asserted that applicants for public housing, as well as residents,
could be eligible to become homebuyers, and therefore that the sentence
should be amended to allow such applicants to be eligible.
HUD Response: HUD agrees that applicants for public housing can
also be eligible homebuyers and has modified Sec. 907.8(c) accordingly.
Another provision that the Housing Authority regarded as
inappropriate to this demonstration program is Sec. 907.11, regarding
maintenance reserves. The Housing Authority remarked that this
requirement is unusual for the single family homes affected by this
program, and that these reserves would not be necessary if the
qualifying resident was required to have sufficient income.
HUD Response: HUD's previous experiences in overseeing low-income
homeownership has demonstrated that those administering such programs
must provide adequately for foreseeable future maintenance needs.
Failure to take such expenses into account can lead to defaults and
foreclosures because homeowners could not withstand the financial
impact of such expenses. The provision in the rule gives the Housing
Authority two options for handling foreseeable maintenance costs. The
Housing Authority can either establish maintenance reserves or it can
demonstrate that homebuyer income will be sufficient over the long term
to manage the expense.
The Housing Authority also commented that several sections of the
interim rule contain inappropriate references to cooperatives,
condominiums, or entities as purchasers. These sections include
Secs. 907.7(a), 907.7(b), 907.8(c)(2), and 907.20(h). The Housing
Authority stated that section 132 confines this program to single
family homes, such that families, not entities, will be the purchasers.
HUD Response: The rule gives the Housing Authority flexibility to
structure the terms of purchase in a number of different ways,
including by means of a cooperative or a condominium. HUD understands
that at this time the Housing Authority does not believe that it needs
the flexibility. However, it is important to allow maximum flexibility
in the future to accommodate possible changes in circumstances without
resorting to a waiver or change in the regulation.
The final aspect of the interim rule that the Housing Authority
found inappropriate to this demonstration program is the reference in
several sections to affirmative fair housing marketing strategies.
These sections include Secs. 907.7(b), 907.8(d), and 907.20(n). The
Housing Authority stated that it intends to sell only to residents, and
that marketing strategies should therefore only be required if it ever
intends to sell units to other than its residents.
HUD Response: Implementing this demonstration program in accordance
with fair housing objectives is of the utmost importance. The final
rule has retained almost verbatim the civil rights related program
requirements contained in the interim rule. Additionally, in response
to the Housing Authority's comment above, the final rule includes as
eligible homebuyers both current residents and applicants for public
housing. Since HUD has changed the rule in this manner, the Housing
Authority must comply with Secs. 907.7(b), 907.8(d), and 907.20(n) of
the rule. The affirmative fair housing marketing strategy is thus an
integral part of this program, especially in view of the fact that the
potential market for this program is 602 units or 20 percent of the
total units administered by the Housing Authority.
3. The Housing Authority also objected to two sections of the
interim rule containing language that it asserted is unnecessary to the
rule. First, it objected to the parenthetical sentence in Sec. 907.2,
regarding the 20 percent ceiling. It asserted that this parenthetical
is unnecessary and may lead to confusion, especially with regard to
additional units developed by the Housing Authority. The Housing
Authority explained that the manner in which it may have acquired any
particular single family home and when it acquired that home is
irrelevant. Second, it objected to the parenthetical example in the
second sentence of Sec. 907.8(c), describing sources of funds that a
cooperative homeownership plan may include, claiming it is unnecessary.
HUD Response: The parenthetical language must remain to describe
properly the statutory requirement that the demonstration program may
be applied to not more that 20 percent of the total number of public
housing units administered by the Housing Authority. The total number
of public housing units administered by the Housing Authority can be
expected to change over time as units are sold and as other units are
added to the Housing Authority's inventory. If the 20 percent
requirement were permitted to be reapplied to whatever the current
number of units is at a given time, the Housing Authority would
conceivably be able to continue selling units until it reached a level
at which 20 percent would no longer equal a whole unit. For example, if
it began with 100 units and sold 20 percent (20 units), 80 units would
remain. It could then reapply the 20 percent standard and sell 20
percent of 80 units (16 units), and then have 64 units remaining. The
process would then go on until only 4 units were left and applying 20
percent would leave less than a whole unit. Clearly this was not the
way that Congress contemplated the 20 percent provision to be applied.
Therefore, the 20 percent should be applied once (as of the enactment
date of the law, October 28, 1992) to establish a base figure. HUD
calculated that 20 percent of the total units at the time of enactment
was 602 units. The Housing Authority should also be able to add 20
percent of any newly acquired units that are not replacement units to
the base figure as well. Newly acquired units that are replacement for
units that left the Housing Authority's inventory should not be
counted, since the units they are replacing were already taken into
consideration in establishing the base figure of 602 units.
4. The Housing Authority objected to two provisions of the interim
rule as burdensome or wasteful. First, the Housing Authority suggested
that the requirement in the third sentence of Sec. 907.6(b) for fire
and safety inspections by local officials would be duplicative, since
the Housing Authority will have already inspected the property several
times. This requirement would be difficult, if not impossible, to
fulfill, remarked the Housing Authority, since the City of Omaha does
not normally conduct such inspections of existing single family homes.
HUD Response: HUD did not intend to create a burden in terms of
inspections beyond that customarily imposed by the locality. HUD has
therefore deleted this requirement.
Second, the Housing Authority commented that the environmental
review required in Sec. 907.18(d) would be an unwarranted expense to
the taxpayer, since HUD will have already reviewed all the single
family homes in the program.
HUD Response: The regulations in 24 CFR part 50 establish HUD's
responsibilities in complying with several environmental requirements,
including the National Environmental Policy Act (NEPA). In approving
the homeownership plan, HUD must consult these regulations to determine
which if any of these requirements apply. While HUD intends to perform
its obligations in a rational and cost-effective manner, it cannot
categorically [[Page 4346]] dispense with its environmental
responsibilities.
5. The Public Housing Agency of Saint Paul, Minnesota (Saint Paul
Housing Agency) suggested that instead of approving a separate
homeownership demonstration program, HUD should develop various
alternative programs to be approved and administered under the Section
5(h) regulations. According to the Saint Paul Housing Agency, one such
alternative could be this Omaha Demonstration Program, with its mandate
to affirmatively further fair housing objectives. A second such
alternative could be the program that the Saint Paul Housing Agency has
developed, which provides for homeownership through a lease/purchase
contract with financial assistance. A third such alternative could be a
program geared toward a metropolitan area and its special needs for
affordable housing solutions. The Saint Paul Housing Authority remarked
that by providing different variations of homeownership programs, HUD
would allow housing agencies discretion to implement a program to meet
local needs while staying within the Section 5(h) guidelines.
HUD Response: HUD agrees that the Section 5(h) program should
accommodate many different models and has striven to preserve such
flexibility in the recently published final Section 5(h) rule. HUD did
not initiate the Omaha demonstration program. The primary innovation
permitted by the Omaha demonstration that could not be accommodated by
the existing Section 5(h) program is the wide discretion granted to the
Omaha Housing Authority to select who is eligible to participate in the
program. In most other respects, the Omaha Demonstration Program
closely parallels the Section 5(h) program.
III. Other Matters
National Environmental Policy Act
At the time of the development of the interim rule, a Finding of No
Significant Impact with respect to the environment was made in
accordance with HUD regulations at 24 CFR part 50, implementing section
102(2)(C) of the National Environmental Policy Act of 1969, 42 U.S.C.
4332. That Finding remains applicable to this final rule, and is
available for public inspection and copying between 7:30 a.m. and 5:30
p.m. weekdays at the Office of Rules Docket Clerk, 451 Seventh Street
SW., Room 10276, Washington, DC 20410-0500.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication, and by
approving it certified that this rule does not have a significant
economic impact on a substantial number of small entities. This rule is
limited in scope to Omaha, Nebraska.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule does not have
potential for significant impact on family formation, maintenance, or
general well-being, except to the extent that the program authorized by
the rule increases homeownership opportunities for low-income families
in Omaha, Nebraska. Any such impact is beneficial and merits no further
review under the Order.
Executive Order 12611, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12611, Federalism, has determined that the policies
contained in this rule will not have substantial direct effects on
States or their political 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,
this rule is not subject to review under the order.
Semi-Annual Agenda of Regulations
This rule was listed as sequence number 1895 in HUD's Semiannual
Agenda of Regulations published on November 14, 1994 (59 FR 57632,
57673) under Executive Order 12886 and the Regulatory Flexibility Act.
List of Subjects in 24 CFR Part 907
Low and moderate income housing, Public housing, Reporting and
recordkeeping requirements.
Accordingly, the interim rule, which amended title 24 of the Code
of Federal Regulations by adding a new part 907 to chapter IX, and
which was published in the Federal Register on January 24, 1994 (59 FR
3626), is adopted as a final rule with the following changes:
PART 907--HOMEOWNERSHIP DEMONSTRATION PROGRAM
1. The authority citation for part 907 continues to read as
follows:
Authority: 42 U.S.C. 3535(d); sec. 132, Pub. L. 102-550, 106
Stat. 3712-3713.
Sec. 907.1 [Amended]
2. Section 907.1 is amended by removing the paragraph designation
and the paragraph heading for paragraph (a), and by removing paragraph
(b).
Sec. 907.5 [Amended]
3. Section 907.5 is amended by removing the paragraph designation
and the paragraph heading for paragraph (a), and by removing paragraph
(b).
Sec. 907.6 [Amended]
4. In Sec. 907.6, paragraph (b) is amended by removing from the
middle of sentence three that begins with ``The Housing Authority prior
* * *'', the phrase ``and that the property has passed recent fire and
other applicable safety inspections conducted by appropriate local
officials''.
5. Section 907.8 is amended by revising the first sentence in the
introductory text of paragraph (c), and by revising paragraph (d), to
read as follows:
Sec. 907.8 Purchaser eligibility and selection.
* * * * *
(c) Homebuyer eligibility. Eligibility shall be limited to
residents and applicants for public housing, who are capable of
assuming the financial obligations of homeownership under minimum
income standards for affordability, taking into account the
unavailability of public housing operating subsidies and modernization
funds after conveyance of the property by the Housing Authority. * * *
* * * * *
(d) Procedures/Affirmative Fair Housing Marketing Strategy. The
Housing Authority must establish written equitable procedures for
identifying and selecting eligible families to participate in the
homeownership program. The Housing Authority must have an affirmative
fair housing marketing strategy that applies whenever homeownership
opportunities are made available to other than current residents of the
property. Selections made from the Housing Authority's waiting list for
the homeownership program must be in a nondiscriminatory manner in
accordance with preferences as submitted by the Housing Authority and
approved by HUD.
* * * * *
Dated: January 12, 1995.
Henry G. Cisneros,
Secretary.
[FR Doc. 95-1414 Filed 1-19-95; 8:45 am]
BILLING CODE 4210-32-P
