[Federal Register Volume 60, Number 133 (Wednesday, July 12, 1995)]
[Rules and Regulations]
[Pages 36020-36026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17014]
[[Page 36019]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Secretary
_______________________________________________________________________
24 CFR Part 92
HOME Investment Partnerships Program; Interim Rule
Federal Register / Vol. 60, No. 133 / Wednesday, July 12, 1995 /
Rules and Regulations
[[Page 36020]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
24 CFR Part 92
[Docket No. FR-3840-I-01]
RIN 2501-AB95
HOME Investment Partnerships Program
AGENCY: Office of the Secretary, HUD.
ACTION: Interim rule.
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SUMMARY: This interim rule amends the existing interim rule for the
HOME Investment Partnerships Program by making a number of clarifying
and conforming changes that include: extending the interim rule
expiration date; permitting loan guarantees as an eligible form of HOME
assistance; allowing fees waived by private entities to qualify for
match credit; increasing the flexibility of HOME rents when HOME funds
and project-based rental assistance are used to assist the same units;
clarifying the match status of CHDO project-specific, pre-development
loans for which repayment is waived; allowing the use of tenant-based
rental assistance (TBRA) for special needs populations; and replacing
references to OMB Circular A-110 with references to the HUD rule at 24
CFR part 84 that adopted the revised OMB Circular.
DATES: Effective Date: August 11, 1995. Comments due date: September
11, 1995.
ADDRESSES: Interested persons are invited to submit comments regarding
this interim rule to the Rules Docket Clerk, Office of General Counsel,
Room 10276, Department of Housing and Urban Development, 451 Seventh
Street, S.W., Washington, D.C. 20410. Communications should refer to
the above docket number and title. A copy of each communication
submitted will be available for public inspection and copying between
7:30 a.m. and 5:30 p.m. weekdays at the above address. FAXED comments
will not be accepted.
FOR FURTHER INFORMATION CONTACT: Mary Kolesar, Director, Program Policy
Division, Office of Affordable Housing Programs, 451 Seventh Street,
S.W., Washington, D.C. 20410, telephone (202) 708-2470, TDD (202) 708-
2565. (These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act Statement
The information collection requirements for the HOME Investment
Partnerships Program have been approved by the Office of Management and
Budget, under section 3504(h) of the Paperwork Reduction Act of 1980
(44 U.S.C. 3501-3520), and assigned OMB control number 2501-0013. This
interim rule does not contain additional information collection
requirements.
II. Background
The HOME Investment Partnerships Program (HOME) was enacted under
Title II (42 U.S.C. 12701-12839) of the Cranston-Gonzalez National
Affordable Housing Act (NAHA) (Pub. L. 101-625, approved November 28,
1990). Implementing regulations for the HOME Program are at 24 CFR part
92.
The original statute has been amended three times since enactment.
The Housing and Community Development Act of 1992 (HCDA 1992) (Pub. L.
102-550, approved October 28, 1992) included a substantial number of
amendments to the HOME Program. These amendments were implemented in
rules published on December 22, 1992 (57 FR 60960), June 23, 1993 (58
FR 34130), and April 19, 1994 (59 FR 18626). The HUD Demonstration Act
(Pub. L. 103-120, approved October 27, 1993) provided additional
authorization for HOME Program technical assistance. The Multifamily
Housing Property Disposition Reform Act of 1994 (MHPDRA) (Pub. L. 103-
233, approved April 11, 1994) included an additional number of
amendments to the HOME Program. These amendments were implemented in a
rule published on August 26, 1994 (59 FR 44258).
The purpose of this publication is twofold: (1) an interim rule
which implements clarifying and conforming changes in several areas of
the rule, including loan guarantees as an eligible activity, increased
flexibility with regard to HOME rents when HOME funds and project-based
rental assistance are used to assist the same units, replacing
references to OMB Circular A-110 with references to the HUD rule at 24
CFR part 84 that adopted the revised OMB Circular, and the amount of
HOME subsidy subject to recapture in the sale of a homebuyer unit when
net proceeds are insufficient to repay the full subsidy amount; and (2)
a preamble which solicits comments on various policy issues in
anticipation of preparing a final rule. The preamble will discuss the
interim rule changes first before soliciting comments on a wide variety
of issues by section of the rule. While comments are being solicited on
specific sections of the rule, the Department welcomes comments on any
part.
Interim Rule Changes
A change at Sec. 92.2, Definitions, would revise the definition of
single room occupancy (SRO) to clarify neither food preparation nor
sanitary facilities are required in the unit for an existing
residential structure or hotel. This change clarifies that the
Department does not consider a hotel a conversion of nonresidential
space, which requires one or both facilities in the unit.
Section 92.5 was added to implement a Department-wide policy for
the expiration of interim rules within a set period of time if they are
not issued in final form before the end of the period. The rule
provides that the expiration period may be extended by notice published
in the Federal Register. Because the expiration date for the HOME
interim rule is currently June 30, 1995, and a final rule is not
expected before that date, such a notice has been published extending
the expiration date for an additional year. This rule makes the
conforming change to Sec. 92.5.
The Department, based on a number of comments it has already
received in revising Sec. 92.205, Eligible activities: general, has
added a new paragraph (b)(2) to specify that loan guarantees are
included within the phrase ``other forms of assistance'' in
Sec. 92.205(b) (the existing paragraph (b) is now designated (b)(1)).
The addition of a loan guarantee feature was prompted by both HUD and
participating jurisdictions' interest in effectively leveraging
additional private funds to finance HOME projects. By expanding
eligible activities to permit loan guarantees, it is the participating
jurisdiction's choice and responsibility to properly underwrite and
manage loans made under the guarantee. There is no implied Federal
guarantee when a jurisdiction chooses to undertake this activity. The
Department has considered how a loan guarantee could be structured and
how to relate the expense involved to a specific HOME project. This
will be done as follows: A PJ or its subrecipient would estimate the
number of loans it potentially wants to guarantee and then establish
the loan guarantee as a project in the HOME Cash and Management
Information System (C/MIS). The amount of funding from HOME or other
resources required for the loan guarantee would be based on the PJ's
current default experience with its portfolio or, in the absence of
empirical data, a reasonable estimate of the default rate. In general,
the Department expects that the specific terms of the loan guarantee
fund would be established by the PJ or subrecipient based on
negotiations with local lenders and/or secondary market entities. The
[[Page 36021]]
rule provides that the amount of HOME funds in the loan guarantee
account may not exceed 20 percent of the total outstanding principal
amount guaranteed, except that a minimum account balance may be
maintained. A minimum balance is permitted to initiate the loan
guarantee program and to meet varying local and secondary market
requirements for loan guarantees. When a PJ has determined (1) the
percentage of outstanding loan principal to be set aside in the loan
guarantee account from HOME or other resources (referred to as the
``fixed percentage''), and (2) a minimum balance needed to initiate the
guarantee and ensure private sector financing (referred to as the
``minimum balance''), PJ would draw down funds equal to the amounts
guaranteed, at the time each loan is guaranteed, until the minimum
balance is reached in the loan guarantee account, and additional funds
would be drawn down when necessary to maintain the account at the fixed
percentage of the outstanding amount guaranteed.
For example, in establishing a loan guarantee amount for a pool
totaling 200 loans (estimated principal value of $4.0 million), a PJ
may determine that local and/or secondary market lenders require the
project account to be maintained at a level of 10 percent of the
outstanding balance of loans guaranteed, with a minimum balance amount
of $100,000. The PJ would draw down funds into its loan guarantee
account at the time the loan is guaranteed equal to the amount of each
guaranteed loan until the minimum balance amount of $100,000 is
deposited in the account (e.g., if five $20,000 loans are guaranteed,
the loan guarantee account would be funded to the minimum balance
amount of $100,000). Additional amounts of HOME funds could be added
when the amount deposited is less than 10 percent of the loans
outstanding. The number of loans initially planned for a loan guarantee
project may not be increased. Housing projects financed with HOME
guaranteed loans must meet HOME requirements. Once the planned number
of loan guarantees is made, or if the loan guarantee activity ends
before that number is reached, information must be reported in the C/
MIS on the units financed under the loan guarantee project. If a
participating jurisdiction wishes to continue with loan guarantee
activity, it would set up another loan guarantee project.
Based on numerous requests to use tenant-based rental assistance
for the special needs populations, the Department in this rule is
making substantial alterations to Sec. 92.211, Tenant-based rental
assistance, outlining under what circumstances that might be done.
Conforming changes are made to Sec. 92.210, Tenant-based rental
assistance: security deposits.
With regard to match requirements, the Department is clarifying in
this rule, at Sec. 92.218(f), that CHDO project specific pre-
development loans for which repayment is waived are not required to be
matched.
Another change amends paragraph (a)(2) in Sec. 92.220, Forms of
match, to recognize as a matching contribution fees and charges,
normally and customarily associated with real estate transactions or
development, that are charged by private institutions or businesses but
are being waived or reduced. Some examples of such fees or charges
include lender origination or servicing fees; title examination,
insurance or recordation fees; or private mortgage insurance fees.
To permit Federal and State project-based assistance programs to
work more effectively with the HOME Program, Sec. 92.252, Qualification
as affordable housing and income targeting: Rental housing, now
explicitly states that when HOME funds are combined with Federal or
State project-based assistance, the rents may be set at the maximum
rent allowable under the Federal or State programs. The Department is
allowing this flexibility for those units occupied by families below 50
percent of median income and paying not more than 30 percent of their
adjusted income as a contribution toward rent, which are the provisions
reflected in the ``low HOME rent'' provision of the rule at
Sec. 92.252(a)(2). The Department is aware of State or local programs
which provide ongoing ``shelter allowances'' or other rental subsidies
to meet the needs of special populations. The Department invites
commenters to describe these situations, whether HOME rents are an
obstacle to overall project feasibility and possible solutions.
A rule change at Sec. 92.254, Qualification as affordable housing:
homeownership, offers participating jurisdictions additional
flexibility to structure recapture provisions to meet local program
design and market conditions. With this change, the Department is
publishing three examples of recapture guidelines that it would find
acceptable.
The first example would authorize a PJ to forgive a portion of the
HOME investment prorated over the time the homeowner has owned and
occupied the unit measured against the required affordability period.
For example: A homebuyer provides a $3,000 downpayment, and a
participating jurisdiction provides a $10,000 second mortgage loan to
defray the cost of acquisition and rehabilitation of the homebuyer
unit, which triggers a five-year period of affordability when the
property is subject to the resale or recapture provisions. Currently,
the HOME regulation would require that the full $10,000 be subject to
recapture and only if the net proceeds do not allow full recapture of
the HOME subsidy plus the homeowner's investment, may the amount to be
recaptured ($10,000) be reduced based on the period of occupancy by the
homebuyer. With this change in the regulation, the PJ could allow the
amount subject to recapture to be reduced during the period of
occupancy. If the homebuyer had to sell after living in the property
for two-years of the five-year affordability period, two fifths of the
HOME subsidy ($4,000) could be written off. The amount subject to
recapture would be $6,000 even when the net proceeds are sufficient to
both recapture the full HOME investment and enable the homeowner to
recover his/her investment. Examples two and three assume that net
proceeds (sales price minus loan repayment and closing costs) are
insufficient to both recapture the HOME investment and enable the
homeowner to recover his/her investment. Example two shows how the PJ
can share the proceeds with the homeowner based on their relative
investment in the property. Example three authorizes the PJ to permit
homebuyers to recapture all of their investment including downpayment
and capital improvements first before any return to the jurisdiction.
Alternatively, when net proceeds are insufficient, the
participating jurisdiction could also permit homebuyers to recapture
all their investment including downpayment and capital improvements
first before any return to the jurisdiction.
In this same section of the rule, a clarifying change is being made
at Sec. 92.254(a)(4)(ii)(C) which describes the amounts of HOME funds
provided per unit which trigger the periods that the property is
subject to the recapture provision. The change being made would clarify
that the amount in question is the per unit amount of HOME funds
provided to the homebuyer. Many participating jurisdictions were
counting both the direct subsidy to the homebuyer as well as the
development subsidy when determining the affordability period. It
should be noted that when resale provisions are used, the period of
affordability is based on the total investment of HOME funds.
[[Page 36022]]
Finally, on September 13, 1994 (59 FR 47010), the Department
published a final rule that adopted OMB's revised Circular A-110 at 24
CFR part 84. This rule makes conforming changes to replace references
to Circular A-110 with references to 24 CFR part 84 at Secs. 92.2 (in
the definition of Community housing development organization), 92.356
(a)(1) and (a)(2), and 92.505(b).
Solicitation of Comments for the Final Rule
The Department is also taking this opportunity to solicit comments
on the current interim rule in anticipation of preparing a final rule
for the HOME Program. The current interim rule consists of all six
interim rules which have been published for the program since its
inception. The Department has received valuable public input on all
those rules and has made many changes based on public comment. As the
Department prepares the final HOME rule, it requests that commenters
distinguish between issues that can be changed by regulation and those
that would require legislative action.
To facilitate public review, the Department has made available the
HOME statute and consolidated interim rule through the American
Communities Information Center at 1-800-998-9999. Commenters may obtain
copies of both the statute and rule by calling the information center.
The Department also presents a discussion of particular sections of
the rule and raises specific questions which it requests that comments
address, below:
Section 92.2 Definitions
Community housing development organization (CHDO)--The Department
has received numerous comments on the definition of CHDO, with regard
to purpose, composition, experience, and history. The Department
invites further comment from State and local officials based on the
experience of qualifying CHDOs and from nonprofits who have
participated in the qualification process and have competed for CHDO
setaside funds.
Homeownership--While ownership or membership in a cooperative has
been included in the definition of homeownership, the Department is
considering allowing participating jurisdictions to classify limited
equity cooperative and/or mutual housing either as homeownership or
rental housing based on State law. Comment is requested.
Project--The Department is considering changes to include in the
definition of project: (1) new construction subdivisions that cover
more than a four block area, and (2) loan guarantee programs funded by
the participating jurisdiction which by their nature cover loans to a
number of units at diverse sites.
Sections 92.60-92.66 Insular Areas
The Department invites comments from insular area participants, who
now have three years of program experience, as to whether changes are
needed in the provisions that guide insular applications and
operations.
Section 92.202 Site and Neighborhood Standards
The Department invites comment on the application of site and
neighborhood standards and their effect on the siting of new
construction projects.
Section 92.203 Income Determinations
Because continued affordability and eligibility were contemplated
in HOME-assisted rental housing, the Department adopted the Section 8
definitions of income in 24 CFR part 813 for use in the HOME program.
Recently, in an August 10, 1994 proposed rule in the Federal Register,
the Department invited comment on income definitions in the Community
Development Block Grant Program. The Department will consider those
comments for the final HOME rule, but also invites additional comments
on this subject.
Section 92.205 Eligible Activities: General
The Department has permitted the refinancing of single family
properties under certain conditions but has not allowed refinancing of
multifamily properties. Refinancing of multifamily projects has not
generally been viewed as a net increase in the number of affordable
housing units, a primary goal of the program. The Department would
welcome comments regarding when and under what conditions multifamily
refinancing might be permitted.
Sections 92.218-92.222 Match Requirements
The Department in this interim rule recognizes the waiver of fees
or charges by private or public institutions as a source of match. The
Department is open to additional public comment about other possible
sources of match which meet the statutory tests of not being derived
from Federal funds and being a true contribution to affordable housing.
Should the Department count State and local contributions to social
services provided in HOME-assisted or HOME-eligible housing as a source
of match? Another issue on which the Department requests comment is
whether donated professional services should be valued at a higher rate
than other volunteer labor currently valued at $10 per hour. Comment on
these and other possible sources of match are invited.
Section 92.251 Property Standards
The Department in implementing the HOME Program took note of the
program's purpose to expand the supply of decent, safe, and sanitary
housing, and adopted the Section 8 Housing Quality Standards as a
minimum standard. The Department is open to suggestions as to whether a
different standard might be more suitable, particularly as it relates
to new construction. Should the Department adopt the Minimum Property
Standards? Allow the PJ to adopt a written `decent, safe and sanitary'
standard? Keep the Section 8 HQS for tenant based rental assistance
units only? Continue to require the Cost Effective Energy Standards for
units with over $25,000 in rehabilitation? Authorize emergency repairs
to structures that may not meet housing quality standards? Comment is
invited on the housing standards issue.
Section 92.254 Qualification as Affordable Housing: Homeownership
The Department in this interim rule takes further steps to make the
recapture provisions of the rule more flexible. In recognizing an
owner's investment in the property, the rule permits a greater return
from net proceeds to the homeowner.
The Department also invites comment on the appraisal requirement to
determine eligibility i.e. the property has an initial purchase price
that does not exceed 95 percent of the median purchase price for the
area. Alternative approaches to assure that HOME funds are invested
only in modest housing are requested.
The Department also wishes comment on the permanent foundation
requirement for manufactured housing when the owner owns both the unit
and the land on which it is situated.
Section 92.257 Religious Organizations
In the August 26, 1994 interim rule, the Department modified this
section to be more permissive with regard to control of a secular
entity established by a religious organization. The Department invites
further comment on this section of the rule.
[[Page 36023]]
Section 92.258 Limitation on the Use of HOME Funds With FHA Mortgage
Insurance
When HOME funds are used in combination with FHA insurance, the
period of affordability is extended to the term of the mortgage. The
Department invites comments on this policy.
Subpart G, Sections 92.300-92.303 Community Housing Development
Organizations
The Department has tried to implement the CHDO setaside with a view
of these funds as an entitlement for CHDOs who ``own, sponsor or
develop'' HOME projects. The Department invites comments on the ``own,
sponsor or develop'' provisions set out in the rule and discussed in
CPD Notice 94-01.
Subpart H, Other Federal Requirements
Over time the rule has been amended to reflect statutory changes
with regard to environmental reviews and revised to reflect
clarifications on other requirements. The Department invites comments
on additional changes which might provide clarification or
simplification of the requirements for PJs.
Subpart K, Program Administration
In preparing a final rule, the Department will be reviewing this
subpart paying special attention to the sections on the cash and
management information system, written agreements and monitoring.
Comments on these and other sections are welcome.
III. Findings and Certifications
Justification for Interim Rulemaking
The Department has determined that this interim rule should be
adopted without the delay occasioned by requiring prior notice and
comment. This interim rule only makes a number of clarifying changes to
existing provisions. As such, prior notice and comment are unnecessary
under 24 CFR part 10. This rule is being published as an interim rule
and not as a final rule because the HOME program regulation at 24 CFR
part 92 has not yet been issued as a final rule.
Environmental Review
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 implement section 102(2)(C) of the National Environmental Policy
Act of 1969. The Finding of No Significant Impact is available for
public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the
Office of the Rules Docket Clerk.
Regulatory Planning and Review
This interim rule has been reviewed in accordance with Executive
Order 12866, issued by the President on September 30, 1993 (58 FR
51735, October 4, 1993). Any changes to the interim rule resulting from
this review are available for public inspection between 7:30 a.m. and
5:30 p.m. weekdays in the Office of the Rules Docket Clerk.
Impact on Small Entities
In accordance with the Regulatory Flexibility Act (5 U.S.C.
605(b)), the undersigned hereby certifies that this interim rule does
not have a significant economic impact on a substantial number of small
entities, because jurisdictions that are statutorily eligible to
receive formula allocations are relatively larger cities, counties or
States.
Regulatory Agenda
This interim rule was not listed in the Department's Semiannual
Agenda of Regulations published on May 8, 1995 (60 FR 23368, 23379)
under Executive Order 12866 and the Regulatory Flexibility Act.
Federalism Impact
The General Counsel has determined, as the Designated Official for
HUD under section 6(a) of Executive Order 12612, Federalism, that this
interim rule does not have federalism implications concerning the
division of local, State, and federal responsibilities. While the HOME
Program interim rule amended by this interim rule was determined to be
a rule with federalism implications and the Department submitted a
Federalism Assessment concerning the interim rule to OMB, this amending
rule only makes limited adjustments to the interim rule and does not
significantly affect any of the factors considered in the Federalism
Assessment for the interim rule.
Impact on the Family
The General Counsel, as the designated official under Executive
Order 12606, The Family, has determined that this interim rule would
not have significant impact on family formation, maintenance, and
general well-being. Assistance provided under this interim rule can be
expected to support family values, by helping families achieve security
and independence; by enabling them to live in decent, safe, and
sanitary housing; and by giving them the means to live independently in
mainstream American society. This interim rule would not, however,
affect the institution of the family, which is requisite to coverage by
the Order.
The Catalog of Federal Domestic Assistance Number for the HOME
Program is 14.239.
List of Subjects in 24 CFR Part 92
Administrative practice and procedure, Grant programs--housing and
community development, Grant programs--Indians, Indians, Low and
moderate income housing, Manufactured homes, Rent subsidies, Reporting
and recordkeeping requirements.
Accordingly, part 92 of title 24 of the Code of Federal
Regulations, is amended as follows:
PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM
1. The authority citation for part 92 continues to read as follows:
Authority: 42 U.S.C. 3535(d) and 12701-12839.
2. Section 92.2 is amended by revising paragraph (6) of the
definition of ``Community housing development organization'', and by
revising the definition of ``Single room occupancy (SRO) housing'', to
read as follows:
Sec. 92.2 Definitions.
* * * * *
Community housing development organization * * *
(6) Has standards of financial accountability that conform to 24
CFR 84.21, ``Standards for Financial Management Systems.''
* * * * *
Single room occupancy (SRO) housing means housing (consisting of
single room dwelling units) that is the primary residence of its
occupant or occupants. The unit must contain either food preparation or
sanitary facilities (and may contain both) if the project consists of
new construction, conversion of non-residential space, or
reconstruction. For acquisition or rehabilitation of an existing
residential structure or hotel, neither food preparation nor sanitary
facilities are required to be in the unit. If the units do not contain
sanitary facilities, the building must contain sanitary facilities that
are shared by tenants. SRO does not include facilities for students.
* * * * *
3. Section 92.5 is revised to read as follows:
[[Page 36024]]
Sec. 92.5 Expiration of interim rule.
This part shall expire and shall not be in effect after June 30,
1996, unless it is published as a final rule or the Department
publishes a notice in the Federal Register to extend the effective
date.
4. In Sec. 92.205, paragraph (b) is revised to read as follows:
Sec. 92.205 Eligible activities: general.
* * * * *
(b) Forms of assistance. (1) A participating jurisdiction may
invest HOME funds as equity investments, interest-bearing loans or
advances, noninterest-bearing loans or advances, interest subsidies
consistent with the purposes of this part, deferred payment loans,
grants, or other forms of assistance that HUD determines to be
consistent with the purposes of this part. Each participating
jurisdiction has the right to establish the terms of assistance,
subject to the requirements of this part.
(2) A participating jurisdiction may invest HOME funds to guarantee
loans made by lenders and, if required, the participating jurisdiction
may establish a loan guarantee account with HOME funds. The amount of
the loan guarantee account must be based on a reasonable estimate of
the default rate on the guaranteed loans, but under no circumstances
may the amount on deposit exceed 20 percent of the total outstanding
principal amount guaranteed; except that the account may include a
reasonable minimum balance. While loan funds guaranteed with HOME funds
are subject to all HOME requirements, funds which are used to repay the
guaranteed loans are not.
* * * * *
5. In Sec. 92.210, paragraph (f) is revised to read as follows:
Sec. 92.210 Tenant-based rental assistance: security deposits
* * * * *
(f) The provisions at Sec. 92.211 (a), (b), (c), (d), (f), (g) and
(i), applicable to tenant-based rental assistance, are applicable to
HOME security deposit assistance.
6. Section 92.211 is revised to read as follows:
Sec. 92.211 Tenant-based rental assistance.
(a) General. A participating jurisdiction may use HOME funds for
tenant-based rental assistance only if the participating jurisdiction
makes the certification about inclusion of this type of assistance in
its consolidated plan in accordance with Secs. 91.225(d)(1),
91.325(d)(1), or 91.425(a)(2)(i) of this title, and specifies local
market conditions that lead to the choice of this option.
(b) Tenant selection. A participating jurisdiction may use HOME
funds for tenant-based rental assistance in the following manner:
(1) Federal preferences. The participating jurisdiction selects
families in accordance with written tenant selection policies and
criteria that are consistent with the purposes of providing housing to
very low- and low-income families and are reasonably related to
preference rules established under section 6(c)(4)(A) of the Housing
Act of 1937 (42 U.S.C. 1437 et seq.). Selection policies and criteria
meet the ``reasonably related'' requirement if at least 50 percent of
the families assisted qualify, or would qualify in the near future
without tenant-based rental assistance, for one of the three Federal
preferences under section 6(c)(4)(A) of the Housing Act of 1937. These
are families that occupy substandard housing (including families that
are homeless or living in a shelter for homeless families); families
that are paying more than 50 percent of (gross) family income for rent;
or families that are involuntarily displaced. [For FY 1995 only, a
Federal preference is also given to families that include one or more
adult members who are employed.]
(2) Local Preferences for Individuals with Special Needs. (i) The
participating jurisdiction may establish a preference for individuals
with special needs. The participating jurisdiction may offer, in
conjunction with a tenant-based rental assistance program, particular
types of services that may be most appropriate for persons with a
particular disability. Generally, tenant-based rental assistance and
the related services should be made available to all persons with
disabilities who can benefit from such services.
(ii) The participating jurisdiction may also provide a preference
for a specific category of individuals with disabilities (e.g., persons
with HIV/AIDS or chronic mental illness) if the specific category is
identified in the participating jurisdiction's housing strategy or
consolidated plan as having unmet need and the preference is needed to
narrow the gap in benefits and services received by such persons.
(iii) Preferences cannot be administered in a manner that limits
the opportunities of persons in a protected class. For example, a
participating jurisdiction may not determine that persons given a
preference under the program are therefore prohibited from applying for
or participating in other programs or forms of assistance.
(iv) To the extent that a participating jurisdiction is operating a
tenant-based rental assistance program targeted exclusively to
individuals with disabilities or to a specific category of individuals
with disabilities, at least 50% of the individuals must qualify or
would qualify in the near future for one of the three Federal
preferences as described in paragraph (b)(1) of this section.
(3) Existing tenants in the HOME-assisted projects. A participating
jurisdiction may select low-income families currently residing in the
units that are designated for rehabilitation or acquisition under the
participating jurisdiction's HOME program without requiring that the
family meet the written tenant selection policies and criteria.
Families so selected may use the tenant-based assistance in the
rehabilitated or acquired unit or in other qualified housing.
(c) Portability of assistance. A participating jurisdiction may
require the family to use the tenant-based assistance within the
participating jurisdiction's boundaries or may permit the family to use
the assistance outside its boundaries.
(d) Program operation. A tenant-based rental assistance program
must be operated consistently with the requirements of this section and
Sec. 92.210, if applicable. The participating jurisdiction may operate
the program itself, or may contract with a PHA or other entity with the
capacity to operate a rental assistance program. The tenant-based
rental assistance may be provided through an assistance contract to an
owner that leases a unit to an assisted family or directly to the
family.
(e) Term of rental assistance contract. The term of the rental
assistance contract providing assistance with HOME funds may not exceed
24 months, but may be renewed, subject to the availability of HOME
funds. The term of the rental assistance contract must begin on the
first day of the term of the lease. For a rental assistance contract
between a participating jurisdiction and an owner, the term of the
contract must terminate on termination of the lease. For a rental
assistance contract between a participating jurisdiction and a family,
the term of the contract need not end on termination of the lease, but
no payments may be made after termination of the lease until a family
enters into a new lease.
(f) Rent reasonableness. The participating jurisdiction must
disapprove a lease if the rent is not reasonable, based on rents that
are
[[Page 36025]]
charged for comparable unassisted rental units.
(g) Lease requirements. The lease must comply with the requirements
in Sec. 92.253 (a) and (b).
(h) Maximum subsidy. (1) The amount of the monthly assistance that
a participating jurisdiction may pay to, or on behalf of, a family may
not exceed the difference between a rent standard for the unit size
established by the participating jurisdiction and 30 percent of the
family's monthly adjusted income.
(2) The participating jurisdiction must establish a minimum tenant
contribution to rent.
(3) The participating jurisdiction's rent standard for a unit size
must be based on:
(i) Local market conditions; or
(ii) May not be less, for each unit size, than 80 percent of the
published Section 8 Existing Housing fair market rent (in effect when
the payment standard amount is adopted) nor more than the fair market
rent or HUD-approved community-wide exception rent (in effect when the
participating jurisdiction adopts its rent standard amount).
(Community-wide exception rents are maximum gross rents approved by HUD
for the Rental Certificate Program under Sec. 882.106(a)(3) of this
title for a designated municipality, county, or similar locality, which
apply to the whole PHA jurisdiction.) A participating jurisdiction may
approve on a unit-by-unit basis a subsidy based on a rent standard that
exceeds the applicable fair market rent by up to 10 percent for 20
percent of units assisted.
(i) Housing quality standards. Housing occupied by a family
receiving tenant-based assistance under this section must meet the
performance requirements set forth in Sec. 882.109 of this title. In
addition, the housing must meet the acceptability criteria set forth in
Sec. 882.109 of this title, except for such variations as are proposed
by the participating jurisdiction and approved by HUD. Local climatic
or geological conditions or local codes are examples which may justify
such variations.
(j) Use of Section 8 assistance. In any case where assistance under
section 8 of the United States Housing Act of 1937 becomes available to
a participating jurisdiction, recipients of tenant-based rental
assistance under this part will qualify for tenant selection
preferences to the same extent as when they received the tenant-based
rental assistance under this part.
7. In Sec. 92.218, a new paragraph (f) is added to read as follows:
Sec. 92.218 Amount of matching contribution.
* * * * *
(f) HOME funds made available as project-specific assistance to
community housing development organizations pursuant to Sec. 92.301 are
subject to matching requirements. HOME funds used for such assistance
for which repayment is waived under the provisions of Sec. 92.301(a)(3)
or Sec. 92.301(b)(3) are not required to be matched.
8. In Sec. 92.220, paragraphs (a)(1)(ii)(A), (a)(2), and (a)(5)
introductory text, are revised to read as follows:
Sec. 92.220 Form of matching contribution.
(a) * * *
(1) * * *
(ii) * * *
(A) If the loan is made from funds borrowed by a jurisdiction or
public agency or corporation (including proceeds from general
obligation debt), the contribution is the present discounted cash value
of the difference between the payments to be made on the borrowed funds
and payments to be received from the loan to the project based on a
discount rate equal to the interest rate on the borrowed funds.
* * * * *
(2) Forbearance of fees. (i) State and local taxes, charges or
fees. The value, based on customary and reasonable means for
establishing value, of State or local taxes, fees, or other charges
that are normally and customarily imposed or charged by a State or
local government on all transactions or projects in the conduct of
State or local government operations but are waived, foregone, or
deferred (including State low-income housing tax credits) in a manner
that achieves affordability of housing assisted with HOME funds. Fees
or charges that are associated with the HOME Program only (rather than
normally and customarily imposed or charged on all transactions or
projects) are not eligible forms of matching contributions. The amount
of any real estate taxes may be based on post-improvement property
value, using customary and reasonable means of establishing value. For
taxes, fees, or charges that are given for future years, the value is
the present discounted cash value, based on a rate equal to the rate
for the Treasury security with a maturity closest to the number of
years for which the taxes, fees, or charges are waived, foregone, or
deferred.
(ii) Other charges or fees. Amount of fees or charges normally and
customarily imposed or charged by public or private institutions
associated with the transfer or development of real estate but are
waived or foregone, in whole or in part, in a manner that achieves
affordability of housing assisted with HOME funds. Fees or charges that
are associated with the HOME Program only (rather than normally and
customarily imposed or charged on all transactions or projects) are not
eligible forms of matching contributions.
* * * * *
(5) Proceeds from multi-family and single family affordable housing
project bond financing validly issued by a State or local government,
or an agency, instrumentality, or political subdivision of a State and
repayable with revenues from the affordable housing project financed,
as follows:
* * * * *
9. In Sec. 92.252, paragraph (a)(2) is revised to read as follows:
Sec. 92.252 Qualification as affordable housing and income targeting:
Rental housing.
(a) * * *
(2) * * *
(i)(A) Occupied by very low-income families whose rent does not
exceed 30 percent of the family's monthly adjusted income as determined
by HUD. To obtain the maximum monthly rent that may be charged for a
unit (in a project that does not receive Federal or State project-based
rental subsidy) that is subject to this limitation, the owner or
participating jurisdiction multiplies the annual adjusted income of the
tenant family by 30 percent and divides by 12 and, if applicable,
subtracts a monthly allowance for any utilities and services (excluding
telephone) to be paid by the tenant; or
(B) Occupied by very low-income families who pay as a contribution
toward rent not more than 30 percent of the family's monthly adjusted
income as determined by HUD if the units receive Federal or State
project-based rental subsidy. The maximum rent (i.e., tenant
contribution plus project-based rental subsidy) is the rent allowable
under the Federal or State project-based rental subsidy program; or
(ii) Occupied by very low-income families and bearing rents not
greater than 30 percent of the gross income of a family whose income
equals 50 percent of the median income for the area, as determined by
HUD, with adjustment for smaller and larger families, except that HUD
may establish income ceilings higher or lower than 50 percent of the
median for the area on the basis of HUD's findings that such variations
are necessary because of prevailing levels of construction costs or
fair market rents, or unusually high or low family incomes. In
determining the
[[Page 36026]]
maximum monthly rent that may be charged for a unit that is subject to
this limitation, the owner or participating jurisdiction must subtract
a monthly allowance for any utilities and services (excluding
telephone) to be paid by the tenant. HUD will provide average occupancy
per unit assumptions to be used in calculating the maximum rent allowed
under paragraph (a)(2)(ii) of this section;
(iii) If the rent determined under this paragraph (a)(2) is higher
than the applicable rent under paragraph (a)(1) of this section, then
the applicable maximum rent for units under this paragraph would be
that calculated under paragraph (a)(1) of this section except for units
that receive Federal or state project-based rental assistance.
* * * * *
10. In Sec. 92.254, paragraph (a)(4)(ii) is revised to read as
follows:
Sec. 92.254 Qualification as affordable housing: homeownership.
(a) * * *
(4) * * *
(ii) A participating jurisdiction may structure the recapture
provisions, subject to HUD approval, based on its program design and
market conditions.
(A) The following methods of recapture would be acceptable to the
Department:
(1) Recapture the entire amount of the HOME investment, except that
the HOME investment amount may be reduced prorata based on the time the
homeowner has owned and occupied the unit measured against the required
affordability period.
(2) If the net proceeds (i.e., the sales price minus loan
repayment, other than HOME funds, and closing costs) are not sufficient
to recapture the full (or a reduced amount as provided for in paragraph
(a)(4)(ii)(A)(1) of this section) HOME investment plus enable the
homeowner to recover the amount of the homeowner's downpayment and any
capital improvement investment, the participating jurisdiction's
recapture provisions may share the net proceeds. The net proceeds may
be divided proportionally as set forth in the following mathematical
formulas:
[GRAPHIC][TIFF OMITTED]TR12JY95.003
(3) Alternatively, the PJ may also allow the homebuyer to recover
all the homebuyer's investment (downpayment and capital improvements)
first before recapturing the HOME investment.
(B) The HOME investment that is subject to recapture is based on
the amount of HOME assistance that enabled the homebuyer to buy the
dwelling unit. This is also the amount upon which the affordability
period is based. This includes any HOME assistance that reduced the
purchase price from fair market value to an affordable price, but
excludes the amount between the cost of producing the unit and the
market value of the property (i.e., the development subsidy). The
recaptured funds must be used to carry out HOME-eligible activities. If
no HOME funds will be subject to recapture, the provisions at
Sec. 92.254(a)(4)(i) apply.
(C) Upon recapture of the HOME funds used in a single-family,
homebuyer project with two to four units, the affordability period on
the rental units may be terminated at the discretion of the
participating jurisdiction.
* * * * *
11. In Sec. 92.356, paragraphs (a)(1) and (a)(2) are revised to
read as follows:
Sec. 92.356 Conflict of interest.
(a) * * *
(1) In the procurement of property and services by participating
jurisdictions, state recipients, and subrecipients, the conflict of
interest provisions in 24 CFR 85.36 and 24 CFR 84.42, respectively,
apply.
(2) In all cases not governed by 24 CFR 85.36 and 24 CFR 84.42, the
provisions of this section apply. These cases include the acquisition
and disposition of real property and the provision of assistance by the
participating jurisdiction, by the state recipient, by subrecipients,
or to individuals, housing developers, and other private entities under
eligible activities which authorize such assistance (e.g.,
rehabilitation of housing).\4\
\4\ See Sec. 92.505 concerning the availability of OMB
Circulars.
---------------------------------------------------------------------------
* * * * *
12. Section 92.505, is revised to read as follows:
Sec. 92.505 Applicability of uniform administrative requirements.
(a) Governmental entities. The requirements of OMB Circular No. A-
87 and the following requirements of 24 CFR part 85 apply to the
participating jurisdiction, state recipients, and any governmental
subrecipient receiving HOME funds: Secs. 85.6, 85.12, 85.20, 85.22,
85.26, 85.32-85.34, 85.36, 85.44, 85.51, and 85.52, of this title.
(b) Non-profit organizations. The requirements of OMB Circular No.
A-122 and the following requirements of 24 CFR part 84 apply to
subrecipients receiving HOME funds that are private nonprofit
organizations: Secs. 84.2, 84.5, 84.13-84.16, 84.21, 84.22, 84.26-
84.28, 84.30, 84.31, 84.34-84.37, 84.40-84.48, 84.51, 84.60-84.62,
84.72, and 84.73, of this title.
Dated: May 16, 1995.
Henry G. Cisneros,
Secretary.
[FR Doc. 95-17014 Filed 7-11-95; 8:45 am]
BILLING CODE 4210-32-P
