95-24368. Section 8 Moderate Rehabilitation; Rent Adjustments; Annual and Special Adjustments; Comparability Studies; Rent Reductions  

  • [Federal Register Volume 60, Number 190 (Monday, October 2, 1995)]
    [Proposed Rules]
    [Pages 51658-51662]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-24368]
    
    
    
    
    [[Page 51657]]
    
    _______________________________________________________________________
    
    Part III
    
    
    
    
    
    Department of Housing and Urban Development
    
    
    
    
    
    _______________________________________________________________________
    
    
    
    24 CFR Part 882
    
    
    
    Section 8 Moderate Rehabilitation; Rent Adjustments; Annual and Special 
    Adjustments; Comparability Studies; Rent Reductions; Proposed Rule
    
    Federal Register / Vol. 60, No. 190 / Monday, October 2, 1995 / 
    Proposed Rules 
    
    [[Page 51658]]
    
    
    DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
    
    Office of the Assistant Secretary for Public and Indian Housing
    
    24 CFR Part 882
    
    [Docket No. FR-3709-P-01]
    RIN 2577-AB48
    
    
    Section 8 Moderate Rehabilitation; Rent Adjustments; Annual and 
    Special Adjustments; Comparability Studies; Rent Reductions
    
    AGENCY: Office of the Assistant Secretary for Public and Indian 
    Housing, HUD.
    
    ACTION: Proposed rule.
    
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    SUMMARY: This proposed rule would revise the current regulations on 
    adjusting Section 8 Moderate Rehabilitation Contract Rents. The rule 
    would modify the method used by Public Housing Agencies (PHAs) to 
    determine the amount of the annual increase in the Contract Rents by 
    providing for PHAs to conduct comparability studies for Moderate 
    Rehabilitation projects to prevent the application of the Annual 
    Adjustment Factors from resulting in a material difference between 
    rents charged for assisted units and similar unassisted units. The 
    proposed rule provides a substitute method of determining the initial 
    difference between Moderate Rehabilitation rents and rents charged for 
    comparable unassisted units, if the PHA failed to establish the amount 
    of the difference when the initial Contract Rents were determined. The 
    proposed rule also provides, subject to the availability of 
    appropriations, for special adjustments when an exemption from real 
    property tax expires under certain circumstances. The proposed rule 
    also adds insurance to the categories of cost increases that may result 
    in a special adjustment.
    
    DATES: Comment Due Date: December 1, 1995.
    
    ADDRESSES: Interested persons are invited to submit comments regarding 
    this proposed rule to the Rules Docket Clerk, Office of General 
    Counsel, room 10276, Department of Housing and Urban Development, 451 
    Seventh Street SW, Washington, DC 20410. Communications should refer to 
    the above docket number and title. Facsimile (FAX) comments are not 
    acceptable. A copy of each communication submitted will be available 
    for public inspection and copying during regular business hours.
    
    FOR FURTHER INFORMATION CONTACT: Madeline Hastings, Rental Assistance 
    Division, Room 4226, Department of Housing and Urban Development, 451 
    Seventh Street SW, Washington, DC 20410; telephone (202) 708-2841 
    (voice) or (202) 708-4594 (TDD). (These are not toll-free numbers.)
    
    SUPPLEMENTARY INFORMATION:
    
    I. Paperwork Reduction Act Statement
    
        The information collection requirements contained in this proposed 
    rule have been submitted to the Office of Management and Budget (OMB) 
    for review under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-
    3520). No person may be subjected to a penalty for failure to comply 
    with these information collection requirements until they have been 
    approved and assigned an OMB control number. The OMB control number, 
    when assigned, will be announced by separate notice in the Federal 
    Register.
        The public reporting burden for each of these collections of 
    information is estimated to include the time for reviewing and 
    instructions, searching existing data sources, gathering and 
    maintaining the data needed, and completing and reviewing the 
    collection of information. Information on the estimated public 
    reporting burden is provided under the preamble heading, Other Matters.
        Send comments regarding this burden estimate or any other aspect of 
    this collection of information, including suggestions for reducing this 
    burden, to the Department of Housing and Urban Development, Rules 
    Docket Clerk, 451 Seventh Street SW, Room 10276, Washington, DC 20410; 
    and to the Office of Information and Regulatory Affairs, Office of 
    Management and Budget, Attention Desk Officer for HUD, Washington, DC 
    20503. At the end of the public comment period on this rule, the 
    Department may amend the information collection requirements set out in 
    this rule to reflect public comments or OMB comments received 
    concerning the information collection.
    
    II. Background
    
    A. Applicability
    
        This proposed rule would be applicable to all projects which are 
    currently, or will be in the future, under a Section 8 Moderate 
    Rehabilitation Housing Assistance Payments (HAP) Contract, as provided 
    in the regular Section 8 Moderate Rehabilitation Program, and the 
    Section 8 Moderate Rehabilitation Single Room Occupancy (SRO) Program 
    for Homeless Individuals. This rule proposes to revise the current 
    regulations in 24 CFR part 882, subpart D, that govern the special 
    procedures for adjusting Contract Rents of regular and SRO Moderate 
    Rehabilitation projects during the term of the HAP Contract. The 
    procedures for both annual and special rent adjustments would be 
    revised by the rule. These are the only upward adjustments to the 
    initial base and Contract Rents set forth in the HAP Contract that are 
    allowed during the term of the HAP Contract. Downward adjustments due 
    to changes in project financing are also permitted during the term of 
    the HAP Contract.
        Regulations governing annual and special rent adjustments for the 
    other Section 8 Programs have been and will be addressed by separate 
    rulemaking. A proposed rule, entitled ``Annual Adjustments of Contract 
    Rents for Section 8 Assisted Housing; Comparability Studies,'' was 
    published in the Federal Register on October 29, 1992 (57 FR 49120). 
    The Department received considerable public comment on the October 29, 
    1992 proposed rule, and, as a result of this public comment, is further 
    considering its October 29, 1992 proposal. Accordingly, the language of 
    this proposed rule which is limited to the Section 8 Moderate 
    Rehabilitation Program and which would make similar amendments to those 
    amendments proposed to be made by the October 29, 1992 rule is not 
    based on the language of the October 29, 1992 proposed rule.
        Additionally, the Department notes that 24 CFR part 888, subpart B, 
    does not apply to the process utilized under the Section 8 Moderate 
    Rehabilitation Program. Although subpart B currently applies to all 
    Section 8 Housing Assistance Programs, its scope is limited to the 
    Automatic Annual Adjustment factors. The Section 8 Moderate 
    Rehabilitation Program does not utilize automatic adjustments and, 
    therefore, adjustments will be made in accordance with Sec. 882.410, 
    not 24 CFR part 888, subpart B.1
    
        \1\ Another proposed rule applicable to the section 8 
    regulations and entitled ``Section 8 Certificate and Voucher 
    Programs Conforming Rule'' was published on February 24, 1993 (58 FR 
    11292).
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    B. Comparability Studies
    
        This proposed rule would implement section 801(c) of the Department 
    of Housing and Urban Development Reform Act of 1989 (Pub. L. 101-235, 
    approved December 15, 1989) (HUD Reform Act), by providing for PHAs to 
    conduct comparability studies for Moderate Rehabilitation projects to 
    prevent a material difference between 
    
    [[Page 51659]]
    rents charged for assisted units and similar unassisted units. The rule 
    also would revise 24 CFR 882.410 to provide that upon request to the 
    PHA by the Moderate Rehabilitation owner (Owner) to the PHA for an 
    annual adjustment, a comparability study may be conducted to ensure 
    that the application of the Annual Adjustment Factor (AAF) would not 
    result in a new Contract rent that is materially different from the 
    rents charged for comparable unassisted units. HUD will prescribe 
    procedures on how a comparable rent shall be determined.
        Under the proposed rule, when the application of the AAF to the 
    base rent, plus the monthly rehabilitation debt service and utility 
    allowance, produces an amount which is 110 percent or more of the most 
    recently published Fair Market Rents (FMRs) for Existing Housing or 
    exception rent approved by HUD, a comparability study would be 
    conducted by the PHA. The Owner would be given notice of the PHA's 
    intent to conduct a comparability study within a limited timeframe. 
    Where the results of the PHA's comparability study show that a material 
    difference would result between the adjusted Contracts Rents and rents 
    being charged for similar unassisted units, allowing for any difference 
    which may have existed with respect to the initial Contract Rent (see 
    Section D of this preamble), the Contract rent would be set at the 
    maximum allowable Contract rent (which will be defined later in this 
    preamble). However, the Contract Rent would be reduced below its 
    current level based upon the comparability study.
        A material difference between the assisted and comparable 
    unassisted rents exists if the adjusted base rent is greater than the 
    maximum allowable Contract rent plus any amount attributable to an 
    initial difference. The maximum allowable base rent is a dollar amount 
    equal to 105 percent of the comparable rent.
        The rule also would provide that Contract Rents will never be 
    reduced as a result of a comparability study. Contract rents may be 
    reduced when the project has been refinanced in such a manner that the 
    periodic payment of the Owner has been reduced. The Owner is required 
    to notify the PHA of any refinancing that occurs during the term of the 
    HAP Contract.
    
    C. Initial Difference
    
        In determining whether a material difference exists, the PHA must 
    allow for any difference which may have existed with respect to the 
    initial Contract Rent. The initial difference is defined as a dollar 
    amount equal to the difference between the original comparable rent at 
    the time the unit went under HAP contract and the initial Contract 
    Rent. In many cases, however, PHAs never established the initial 
    difference. The Regular Moderate Rehabilitation rent formula is based 
    on a cost approach and therefore in most instances PHAs neglected to 
    perform a comparability analysis. Because of the nature of the Moderate 
    Rehabilitation program, the Department will assume that in most cases 
    an initial difference actually existed between comparable unassisted 
    rents and initial Contract Rents.
        For those contracts where an initial difference was never 
    established, the Department has created a substitute method to allow 
    for the initial difference. Where an initial difference was never 
    established, the initial difference will be assumed to be ten percent 
    of the initial Contract Rent, unless an owner can document that the 
    initial difference was greater.
        Providing for a substitute method that assumes the initial 
    difference is ten percent if it was never established is consistent 
    with HUD's procedures established for Section 8 New Construction and 
    Substantial Rehabilitation Properties where current contract rents are 
    above the published FMRs. In a direct issuance to HUD's Field Offices 
    (Notice H-95-12, issued March 7, 1995), HUD stated: ``In order to 
    provide a fair number to owners who may not be able to show proof of 
    the initial difference which existed in the initial Section 8 contract 
    rents, HUD will use 10% of the initial Section 8 contract rent (plus 
    the Financial Adjustment Factor, if applicable) where evidence of the 
    initial difference cannot be provided by the owner.'' (Page 4 of Notice 
    H-95-12). Accordingly, HUD's use of the 10 percent initial difference 
    in this rule is to maintain consistency and uniformity, to the extent 
    possible, in its Section 8 programs.
    
    D. Special Adjustments
    
        This proposed rule would clarify and expand the availability of 
    special rent adjustments. Special adjustments may not be approved 
    because of cost increases particular to operation of the individual 
    Owner or project, but only may be granted for ``general increases'' 
    that affect operation of housing in the community. The proposed rule 
    would provide that these special adjustments may only be approved to 
    reflect ``substantial general'' increases in ``actual and necessary'' 
    expenses of owning and maintaining the dwelling unit. The Owner does 
    not have a contractual or regulatory right to receive the special 
    adjustment. HUD ``may approve'' a special adjustment, and the PHA ``may 
    make'' a special adjustment. A special adjustment must be determined in 
    accordance with HUD procedures and be approved by HUD.
        The proposed rule would implement section 142 of the Housing and 
    Community Development Act of 1992 (Pub.L. 102-550, approved October 28, 
    1992). Section 142 allows HUD to give a special adjustment, subject to 
    the availability of appropriations, to the extent HUD determines such 
    adjustments are necessary to reflect increases in the actual and 
    necessary expenses of owning and maintaining the units that have 
    resulted from the expiration of a real property tax exemption. In 
    addition, the proposed rule would include insurance in the categories 
    of cost increases that may result in a special adjustment, provided 
    that the insurance cost increases are actual and necessary expenses 
    which have resulted from substantial general increases in insurance 
    costs. Special adjustments are currently limited by the regulations 
    pertaining to real property taxes or special assessments, and increases 
    of utility rates or cost of utilities not covered by regulated rates.
        On September 16, 1994 (59 FR 47772), HUD published a final rule 
    that implements section 542 of the Cranston-Gonzalez National 
    Affordable Housing Act of 1990 (Pub.L. 101-625, approved November 28, 
    1990). Consistent with section 542, the September 16, 1994 final rule 
    provides for PHAs to recommend, and HUD to approve, subject to the 
    availability of appropriations, a special adjustment, on a project by 
    project basis, to reflect substantial increases in operating, 
    maintenance and capital repair costs primarily due to the general 
    prevalence in the community of drug-related criminal activity. The 
    authority for this special adjustment is strictly subject to the 
    availability for appropriations for this purpose.
        The September 16, 1994 final rule codified the section 542 special 
    rent adjustments provisions in Sec. 882.410(a)(2). This proposed rule 
    would move these provisions to Sec. 882.410(d), and would make some 
    organizational and minor clarifying language changes. However, the 
    substance of the special rent adjustment provisions as implemented in 
    Sec. 882.410(a)(2) in the September 16, 1994 final rule, remains the 
    same as in Sec. 882.410(d)(1),(2),(4) and (6) of this proposed rule. 
    
    [[Page 51660]]
    
    
    III. Other Matters
    
    Executive Order 12866
    
        This proposed rule was reviewed by the Office of Management and 
    Budget (OMB) under Executive Order 12866 on Regulatory Planning and 
    Review, issued by the President on September 30, 1993. Any changes made 
    in this proposed rule as a result of that review are clearly identified 
    in the docket file, which is available for public inspection in the 
    office of the Department's Rules Docket Clerk, Room 10276, 451 Seventh 
    Street, SW, Washington, DC.
    
    Environmental Impact
    
        With respect to the rule's proposal to implement the comparability 
    studies provision of the HUD Reform Act, an environmental assessment is 
    unnecessary since statutorily required establishment and review of rent 
    schedules that do not constitute a development decision affecting the 
    physical condition of specific project areas or buildings sites is 
    categorically excluded from HUD's National Environmental Policy Act 
    (NEPA) procedures under 24 CFR 50.20(l). With respect to the proposed 
    rule's special rent adjustment provision, a Finding of No Significant 
    Impact with respect to the environment has been made in accordance with 
    HUD regulations at 24 CFR part 50, which implements section 102(2)(C) 
    of NEPA in connection with development of the September 16, 1994 final 
    rule that implements section 542 of the NAHA, and which provides for 
    special rent adjustments certain operating and maintenance costs 
    incurred as a result of a general prevalence of drug-related criminal 
    activity in the community. That Finding of No Significant Impact is 
    applicable to this proposed rule available for public inspection 
    between 7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules 
    Docket Clerk, Office of the General Counsel, Department of Housing and 
    Urban Development Room 10276, 451 Seventh Street, SW, Washington, DC 
    20410.
    
    Executive Order 12612, Federalism
    
        The General Counsel, as the Designated Official for HUD under 
    section 6(a) of Executive Order 12612, Federalism, has determined that 
    the policies contained in this proposed rule do not have federalism 
    implications and, thus, are not subject to review under the order. The 
    rule is limited to revising the regulations applicable to the Section 8 
    Moderate Rehabilitation Program on the matter of adjustment of Contract 
    Rents.
    
    Executive Order 12606, the Family
    
        The General Counsel, as the Designated Official under Executive 
    Order 12606, The Family, has determined that this proposed rule would 
    not have potential for significant impact on family formation, 
    maintenance, and general well-being, and, thus, is not subject to 
    review under the order. The rents paid by families in housing governed 
    under this rule are based on the income of the families, and not on the 
    Contract Rents affected by this rule. Therefore, the proposed rule is 
    not subject to review under that order.
    
    Regulatory Flexibility Act
    
        The Secretary, in accordance with the Regulatory Flexibility Act (5 
    U.S.C. 605(b)), has reviewed this proposed rule before publication and 
    by approving it certifies that this proposed rule would not have a 
    significant economic impact on a substantial number of small entities. 
    Specifically, the rule would modify the procedures for adjusting 
    Contract Rents in the Section 8 Moderate Rehabilitation Program.
    
    Paperwork Reduction Act Statement
    
        The information collection requirements contained in this rule have 
    been submitted to the Office of Management and Budget for approval 
    under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520). The 
    following provisions of the rule have been determined by the Department 
    to contain collection of information requirements:
    
    ----------------------------------------------------------------------------------------------------------------
                                                                     Number                                         
                                                      Number of    responses      Total      Hours per              
                Submission requirements             rrespondents      per         annual      response   Total hours
                                                                   respondent   responses                           
    ----------------------------------------------------------------------------------------------------------------
    PHAs complete study...........................           130            1          130           20         2600
    Notify owners of results where it is found                                                                      
     that a material difference exists............            65            1           65            1           65
    Owner appeal of results.......................            22            1           22            8          176
    PHA process appeal............................            22            1           22            4           88
    Owner final appeal............................             4            1            4            4           16
    HUD review of final appeal and notify owner of                                                                  
     result.......................................             4            1            4            4           16
    Owner submit request for special rent                                                                           
     adjustment due to expiration of real property                                                                  
     tax exemption................................           100            1          100           10         1000
    PHA process owner request for special rent                                                                      
     adjustment due to expiration of real property                                                                  
     tax exemption................................           100            1          100            8          800
    HUD review request for special rent adjustment                                                                  
     due to expiration of real property tax                                                                         
     exemption....................................            75            1           75            8          600
    Owner submit request for special rent                                                                           
     adjustment due to increases in insurance                                                                       
     costs........................................           100            1          100           10         1000
    PHA process owner request for special rent                                                                      
     adjustment due to increases in insurance                                                                       
     costs........................................           100            1          100            8          800
    HUD review request for special rent adjustment                                                                  
     due to increases in insurance costs..........            75            1           75            8          600
                                                   -----------------------------------------------------------------
          Total...................................         7,761                                                    
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    List of Subjects in 24 CFR Part 882
    
        Grant programs--housing and community development, Homeless, Lead 
    poisoning, Manufactured homes, Rent subsidies, Reporting and 
    recordkeeping requirements.
    
        Accordingly, 24 CFR part 882, subpart D is proposed to be amended 
    as follows:
    
    PART 882--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--EXISTING 
    HOUSING
    
        1. The authority citation for part 882 continues to read as 
    follows:
    
    
    [[Page 51661]]
    
        Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d). Subpart H 
    is also issued under 42 U.S.C. 11361 and 11401.
    
        2. Section 882.410 is revised to read as follows:
    
    
    Sec. 882.410  Rent adjustments.
    
        (a) Annual adjustments. (1) Contract Rents will be adjusted 
    annually as provided in paragraph (a) of this section upon submittal to 
    the PHA by the Owner of a revised schedule of Contract Rents, provided 
    that the unit is in decent, safe, and sanitary condition and that the 
    Owner is otherwise in compliance with the terms of the Lease and 
    Contract. The Annual Adjustment Factors (AAFs) which are published 
    annually by HUD (see Schedule C, 24 CFR part 888) will be utilized.
        (2) On or after each annual anniversary date of the Contract, the 
    Contract Rents may be adjusted in accordance with this paragraph and 
    other established HUD procedures. Contract Rents will only be adjusted 
    for housing assistance payments for the months commencing 60 days after 
    the PHA receives the Owner's revised schedule of Contract Rents. 
    Contract Rents will not be adjusted retroactively or cumulatively. The 
    annual adjustment with respect to any anniversary date must be 
    requested prior to the next annual anniversary date.
        (3) The adjusted Contract Rents cannot exceed the amount 
    established by multiplying the applicable AAF by the base rents then 
    adding the monthly rehabilitation debt service.
        (4) Rents to be adjusted by the AAF must then be examined in 
    accordance with paragraphs (b) and (c) of this section and may be 
    adjusted accordingly.
        (b) Overall limitation.  (1) Notwithstanding any other provisions 
    of this part, adjustments as provided in this section must not result 
    in material differences between the rents charged for assisted and 
    unassisted units of similar age, quality, and type in the same market 
    area, as determined by the PHA (and approved by HUD in the case of 
    adjustments under paragraph (d) of this section). A material difference 
    between the assisted and comparable unassisted rent is determined to 
    exist if the adjusted Contract rent is greater than the maximum 
    allowable Contract rent plus any difference which may have existed 
    initially. The maximum allowable base rent is a dollar amount equal to 
    105 percent of the comparable rent.
        (2) In determining whether a material difference exists, the PHA 
    must allow for any difference which may have existed with respect to 
    the initial Contract Rent. If the PHA did not establish an initial 
    difference at the time the HAP contract was executed, ten percent of 
    the initial Contract Rent shall be used as a substitute, unless an 
    owner can document that the initial difference was greater.
        (c) Comparability Studies. (1) A comparability study will be 
    conducted for the purpose of determining whether a material difference, 
    as described in paragraph (b) of this section, will result from 
    application of the AAF. The PHA will notify the Owner in writing of its 
    intention to conduct a comparability study.
        (2) If the Contract rent, as adjusted by the AAF, plus the utility 
    allowance, is less than 110 percent of the current Existing Housing FMR 
    or exception rent (if granted for a geographical area in accordance 
    with Sec. 882.408(b)), the adjusted Contract Rent for the project shall 
    be approved by the PHA in accordance with HUD prescribed procedures and 
    the PHA shall not conduct a comparability study.
        (3) If the Contract rent, adjusted by the AAF, plus the utility 
    allowance, is 110 percent or more of the current Existing Housing FMR 
    or if an exception rent limit (if granted for a geographical area in 
    accordance with Sec. 882.408(b)), the PHA will conduct a comparability 
    study to determine and approve an adjusted base rent that is not 
    materially different from rents charged for comparable unassisted 
    units.
        (4)(i) In conducting a comparability study, the project's Contract 
    rents, as adjusted by the AAFs, will be compared to rents charged for 
    unassisted units of similar quality, type and age in the same market 
    area.
        (ii) Comparability studies will be conducted by PHA staff. PHA 
    staff conducting the comparability studies will make adjustments 
    necessary to accommodate any difference between the comparables and the 
    assisted project that significantly affect the amount of rent charged 
    (including, without limitation, adjustments for utility charges).
        (5) If it is determined by the comparability study that a material 
    difference would result (as provided in paragraph (b) of this section) 
    from application of the full AAF, a notice showing the results of the 
    study will be provided to the Owner within 30 business days of receipt 
    of the Owner's request for a rent increase. The Contract Rent will be 
    set at the maximum allowable Contract rent (as defined in paragraph (b) 
    of the section). However, the Contract Rent will never be reduced as a 
    result of a comparability study.
        (6) Where the results of a comparability study show that a material 
    difference would not result from application of the full AAF, the base 
    rent will be adjusted by the full AAF to determine the new Contract 
    Rent.
        (7)(i) Appeals of the decision to disapprove a full adjustment 
    under the AAF must be made to the appropriate PHA within 30 business 
    days from the date of the notice as required in paragraph (c)(5) of 
    this section. Sufficient documentation must be provided of any 
    objections to the decision.
        (ii) The PHA will review the appeal within 30 business days from 
    receipt of the documentation.
        (8) Final appeals of the PHA decision may be made to the 
    appropriate HUD Field Office.
        (d) Special adjustments. (1) A special adjustment, to the extent 
    determined by HUD to reflect increases in the actual and necessary 
    expenses of owning and maintaining the unit which are not adequately 
    compensated for by annual adjustments under this part, and which have 
    resulted from substantial general increases in real property taxes, 
    assessments, utility rates, utilities not covered by regulated rates, 
    or increases in insurance costs, may be recommended by the PHA for 
    approval by HUD.
        (2) Subject to the availability of appropriations for the purpose 
    specified in paragraph (d)(2) of this section, a special adjustment may 
    be recommended by the PHA for approval by HUD when HUD determines, 
    based upon a clear demonstration by the Owner, that a project is 
    located in a community where drug-related criminal activity is 
    generally prevalent, and not specific to a particular project, and the 
    project's operating, maintenance, and capital repair expenses have 
    substantially increased primarily as a result of the prevalence of such 
    drug-related activity.
        (i) HUD may, on a project-by-project basis, provide adjustments to 
    the maximum monthly rents to a level no greater than 120 percent of the 
    current gross rents for each unit size under a Housing Assistance 
    Payments Contract to cover the costs of maintenance, security, capital 
    repairs and reserves required for the Owner to carry out a strategy 
    acceptable to HUD for addressing the problem of drug-related criminal 
    activity.
        (ii) Where the strategy involves physical improvements, HUD will 
    perform an environmental review to the extent required under HUD's 
    environmental regulations at 24 CFR 
    
    [[Page 51662]]
    part 50 prior to approving the special adjustment.
        (3) Subject to the availability of appropriations, a special 
    adjustment also may be recommended by the PHA for approval by HUD when 
    and to the extent HUD determines such adjustments are necessary to 
    reflect increases in such actual and necessary expenses that have 
    resulted from expiration of an exemption from real property tax.
        (4) The special rent adjustments described in paragraph (d) of this 
    section only will be approved if and to the extent the Owner clearly 
    demonstrates that these general increases have caused increases in the 
    Owner's operating costs which are not adequately compensated for by 
    annual adjustments.
        (5) Special adjustments are a separate component of the Contract 
    Rent and are never added to the Base Rent for the purpose of 
    calculating annual rent adjustments.
        (6) The Owner must submit financial information to the PHA which 
    clearly supports the increase. For Contracts of more than twenty units, 
    the Owner must submit audited financial information.
        (e) Effective date of special adjustments. The effective date of 
    the adjusted Contract Rent will be the first day of the month following 
    the actual increase, or the first day of the month after the Owner's 
    written request for the special adjustment, whichever is later. Special 
    adjustments for security will not be made retroactively.
        (f) Term of special adjustments. (1) The term of a special rent 
    adjustment will be coterminous with the period of the increased cost to 
    the Owner, subsequent to its effective date. HUD will approve the term 
    of the special adjustment and the special adjustment must be terminated 
    at the end of the specified term. The special adjustment must be 
    reviewed annually by the PHA to determine whether it is still 
    justifiable. The PHA may request and HUD may approve a decrease or an 
    increase in the term.
        (2) Special adjustments are removed from the Contract Rent at the 
    end of the approved term. The removal of a special adjustment from the 
    Contract Rent at the end of the approved term is not and will not be 
    considered a reduction of Contract Rents.
        (g) Rent reductions. Contract Rents will never be reduced as a 
    result of a comparability study, but may be reduced when the project 
    has been refinanced in such a manner that the periodic payment of the 
    Owner has been reduced. The Owner is required to notify the PHA of any 
    refinancing that occurs during the term of the HAP Contract. When the 
    property acquisition portion of a loan has been refinanced, procedures 
    prescribed by HUD will be utilized to recompute the base rents in 
    relation to AAFs. Such procedures shall not be applicable to projects 
    under subpart H of this part.
    
        Editorial Note: This document was received at the Office of the 
    Federal Register on September 26, 1995.
    
        Dated: December 1, 1994.
    Joseph Shuldiner,
    Assistant Secretary for Public and Indian Housing.
    [FR Doc. 95-24368 Filed 9-29-95; 8:45 am]
    BILLING CODE 4210-33-P
    
    

Document Information

Published:
10/02/1995
Department:
Housing and Urban Development Department
Entry Type:
Proposed Rule
Action:
Proposed rule.
Document Number:
95-24368
Pages:
51658-51662 (5 pages)
Docket Numbers:
Docket No. FR-3709-P-01
RINs:
2577-AB48: Section 8 Moderate Rehabilitation; Rent Adjustments; Annual and Special Adjustments; Comparability Studies; Rent Reduction (FR-3709)
RIN Links:
https://www.federalregister.gov/regulations/2577-AB48/section-8-moderate-rehabilitation-rent-adjustments-annual-and-special-adjustments-comparability-stud
PDF File:
95-24368.pdf
CFR: (2)
24 CFR 882.410(a)(2)
24 CFR 882.410