[Federal Register Volume 60, Number 138 (Wednesday, July 19, 1995)]
[Proposed Rules]
[Pages 37294-37306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17810]
[[Page 37293]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary for Public and Indian Housing
_______________________________________________________________________
24 CFR Parts 950 and 990
Low-Income Public and Indian Housing--Vacancy Rule; Proposed Rule
Federal Register / Vol. 60, No. 138 / Wednesday, July 19, 1995 /
Proposed Rules
[[Page 37294]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Public and Indian Housing
24 CFR Parts 950 and 990
[Docket No. FR-3647-P-04]
RIN 2577-AB44
Low-Income Public and Indian Housing--Vacancy Rule
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would establish new conditions under which
a Public Housing Agency (PHA), an Indian Housing Authority (IHA), or
Resident Management Corporation (RMC) could include vacant units in its
computation of eligibility under the Performance Funding System (PFS).
(Note: The term housing authority (HA) will be used in this proposed
rule when referring to both PHAs and IHAs.) The proposed rule would
give greater recognition to units that are vacant for reasons beyond
the HA's control, make changes in the current treatment of vacant units
that are part of a modernization program, and, under certain
circumstances, have HAs exclude long-term vacant units from their
inventory of units available for occupancy. The changes being proposed
are based on the recommendations of a regulatory negotiation advisory
committee composed of persons who represent the interests affected by
the current vacancy rule.
DATES: Comments due date: August 18, 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 20410-0500. 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 between 7:30 a.m. and 5:30
p.m. weekdays at the above address.
FOR FURTHER INFORMATION CONTACT: Mr. John T. Comerford, Director,
Financial Management Division, Public and Indian Housing, Room 4210,
U.S. Department of Housing and Urban Development, 451 Seventh Street,
SW., Washington, DC 20410, telephone (202) 708-1872. Hearing- or
speech-impaired individuals may call HUD's TDD number: (202) 708-0850.
[These telephone numbers are not toll-free.]
SUPPLEMENTARY INFORMATION:
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.
Public reporting burden for the collection of information
requirements contained in this rule is estimated to include the time
for reviewing the 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-
0500; and to the Office of Information and Regulatory Affairs, Office
of Management and Budget, Attention: Desk Officer for HUD, Washington,
DC 20503.
Justification for Shortened Comment Period
It is the general practice of the Department to provide a 60-day
public comment period on all proposed rules. However, the Department is
shortening its usual 60-day public comment period to 30 days for this
proposed rule. By statute, the rule cannot become effective unless it
is in place at the beginning of the housing authority's (HA's) fiscal
year. Because a number of HAs affected by this rule have fiscal years
beginning on October 1, 1995, the Department wants to publish a final
rule, which is not permitted to become effective for 30 days after
publication, so that it will be effective by that date. The Department
believes that because the rule has been developed by a consensus
process, there is not likely to be much objection to its general
provisions and that, therefore, the 30 days allowed for comment will be
sufficient.
Regulatory Review Initiative
This proposed rule has been developed through negotiated
rulemaking, sometimes referred to as regulatory negotiations or ``reg-
neg.'' Negotiated rulemaking is a relatively new process for the
Federal government and this was the first use of the process at HUD.
The basic concept of reg-neg is to have the agency that is considering
drafting a rule bring together representatives of affected interests
for formal face-to-face negotiations that are open to the public. The
give-and-take of the negotiation process is expected to foster
constructive, creative, and acceptable solutions to difficult problems.
As such, this proposed rule represents a serious effort by Department
and affected interests to draft a clear, comprehensive rule that meets
the needs of the program and its participants.
Consistent with Executive Order 12866 and the President's
memorandum of March 4, 1995, to all Federal Departments and Agencies on
the subject of Regulatory Reinvention, the Department is reviewing each
of its regulations to determine whether the regulation is a candidate
for elimination, streamlining, or consolidation. As part of this
review, at the final rule stage this rule may undergo revisions in
accordance with the President's regulatory reform initiatives.
Therefore, in addition to comments on the substance of this proposed
rule, the Department welcomes comments on ways, if any, that the rule
may be made more understandable and less burdensome, while still
assuring the goals of the Performance Funding System (PFS).
Background
HUD uses a formula approach called the Performance Funding System
(PFS) to distribute operating subsidies to housing agencies. A
regulatory description of the PFS can be found at 24 CFR parts 950,
subpart J, and 990. Although somewhat oversimplified, the amount of
subsidy received by an HA is the difference between projected expenses
and projected income, with the PFS regulations detailing how these
projections will be made. HAs calculate their PFS eligibility annually
and submit a request for funding as part of their budget process. While
the amount varies, this subsidy can represent a substantial amount of
revenue to an HA. In 1994, HUD distributed over $2.6 billion in
operating subsidies to HAs.
[[Page 37295]]
The amount of dwelling rental income an HA expects to receive is an
important element in estimating subsidy eligibility. If rental income
increases, operating subsidy eligibility will generally decrease.
Likewise, if rental income decreases, an HA may receive a greater
amount of subsidy. With some exceptions, HUD expects that HAs will
project an occupancy level of 97 percent. This standard of 97% has been
part of the PFS since its implementation in 1975.
That part of the PFS that deals with the projection of occupancy
levels is known as the vacancy rule. The vacancy rule was published as
a final rule in 1986 (51 FR 16835, May 7, 1986) and was intended to
create incentives to HAs to return vacant units to occupancy and to
maintain an occupancy level of 97% or higher. The rule provided these
incentives by: defining the conditions under which HUD would approve
the use of an occupancy level of less than 97%; specifying that an HA
need not use an occupancy level higher than 97%; and, in recognition
that a low number of vacancies may make it difficult for a small HA to
reach 97%, allowing small HAs to use an occupancy percentage based on
having 5 or fewer vacant units.
In September 1991, HUD published a proposed rule (56 FR 45814,
September 6, 1991) that would have made significant changes to the way
in which vacant units would be considered eligible for operating
subsidy. These proposed changes would have included:
1. Increasing the occupancy standard from 97% to 98%;
2. Eliminating HUD-approved Comprehensive Occupancy Plans (COPs) as
a means to justify using less than the prescribed occupancy standard;
3. Limiting the amount of subsidy paid for those vacant units that
are greater than 2% of the total number of units available for
occupancy; and
4. Instituting a year-end review to compare the HA's actual
occupancy achieved with its projected occupancy percentage.
Before the comment period on the proposed rule expired, Congress
inserted language in HUD's Appropriation Act for 1992 (105 Stat. 757)
that prohibited HUD from using appropriated funds to implement the
proposed rule. Later, Congress included a provision in the Housing and
Community Development Act of 1992 (section 114(b), Pub. L. 102-550; 42
U.S.C. 1437g(a)(3)(A)) that required that any changes to the PFS
relating to the payment of operating subsidies to vacant public housing
units be accomplished only through the use of negotiated rulemaking
procedures.
Regulatory Negotiations
In July 1994, HUD entered into an Interagency Agreement with the
Federal Mediation and Conciliation Service (FMCS) for convening
services that would assist HUD in assessing the feasibility of
assembling a balanced committee willing and able to work towards the
goal of consensus on a proposed vacancy rule that was within HUD's
statutory authority and addressed the issues of the interested parties.
If HUD proceeded with the formation of a negotiated rulemaking
committee, the Interagency Agreement called for the FMCS to provide
facilitating services.
The final convening report was provided to HUD in September 1994
and concluded that ``there is sufficient support to re-examine the
vacancy rule through a regulatory negotiations process.'' A copy of the
report titled Convening Report for Regulatory--Negotiations on HUD's
Vacancy Rule is in the office of the Rules Docket Clerk.
Chartering of Reg-Neg Committee
As a general rule, a Federal Department is required to comply with
the requirements of the Federal Advisory Committee Act (FACA), Pub. L.
92-463, 5 U.S.C. App., when it establishes or uses a group of non-
Federal members as a source of advice. Under FACA, HUD was required to
request a charter for this reg-neg committee. Approval of the charter
submitted by HUD to the Office of Management and Budget was given on
February 23, 1995.
Substantive Issues for Negotiation
The convening report identified the following issues to be
addressed by the Committee:
What constitutes an acceptable level of vacancies for
housing authorities of various size classifications?
What criteria should be used for providing less than full
subsidy?
What criteria should be used for providing full subsidy
despite less than full occupancy?
Committee Membership
The FMCS conveners consulted and interviewed over 30 officials of
various organizations interested in and affected by the vacancy rule.
Three national HA associations--the Council of Large Public Housing
Authorities (CLPHA), the National Association of Housing and
Redevelopment Officials (NAHRO), and the Public Housing Authority
Directors Association (PHADA)--worked together to suggest executive
directors of HAs for committee membership that would reflect a balance
among HAs in terms of size and number of vacant units. The national
associations committed themselves to serving as staff support to the
HAs selected for membership.
The members of the Committee were:
Housing Agencies
Housing Authority of the City Of Houston (TX)
Cuyahoga Metropolitan Housing Authority (Cleveland, OH)
Housing Authority of the Birmingham District (AL)
New York City Housing Authority (NY)
Housing Authority of the City of Newark (NJ)
Housing Authority of the City of Reno (NV)
Housing Authority of the City of Littleton (CO)
Housing Authority of the City of South Bend (IN)
Tenant Organizations and Public Interest Groups
Bromley Heath Tenant Management Corporation, Jamaica Plain, MA
New Jersey Association of Public and Subsidized Housing Residents, Inc.
Housing and Development Law Institute, Washington, DC
Illinois Association of Housing Authorities
Federal Government
U.S. Department of Housing and Urban Development
Development of Proposed Rule
The first meeting of the Committee took place March 7-9, 1995, in
Washington, DC. The FMCS conveners also served as facilitators for the
Committee. Committee members agreed to a set of protocols that covered
the areas of participation, decisionmaking, meetings, the role of the
FMCS facilitators, and the intended product of the negotiations. The
Committee agreed to define consensus as unanimous agreement to advance
a specific proposal as the Committee's recommendation on any given
point. As framed by one member, the goal of the negotiation should be a
proposed rule that makes sense to all committee members or,
alternatively, no proposed rule at all.
The Committee members then began a discussion among themselves over
possible issues that needed to be addressed. The FMCS facilitators used
a variety of techniques, including brainstorming, supposition, and
suggestion, to have the group focus on what the general objective or
objectives should be for a new vacancy rule and
[[Page 37296]]
to develop a list of factors that would make it possible to achieve the
objectives. Points of discussion included:
1. The appropriateness of the current occupancy standard of 97% and
the use of five or fewer vacant units in determining the occupancy
percentage for small HAs.
2. Circumstances that create vacant units or cause vacant units to
remain vacant for long periods of time. These included modernization,
turnover, litigation, legislation, insurance claims, natural disasters,
and market factors.
3. Circumstances or causes of vacancies that would warrant
continuation of some level of subsidy payment.
4. Recognition of direct costs that are incurred by an HA
regardless of the level of its vacancies.
5. Factors that could be incorporated into a vacancy rule that
would promote the occupancy of vacant units.
6. Circumstances under which waivers of the regulatory provisions
would be permitted.
The discussion process continued throughout the afternoon of the
first day's session. The Committee reached consensus on retaining the
provisions of the current rule with respect to small HAs being able to
use an occupancy percentage of less than 97%, if the percentage is
based on having five or fewer vacant units. The Committee, recognizing
budgetary realities, rejected as not feasible or productive the
possibility of redefining the 97% occupancy goal at a different optimum
level.
A synopsis of the first day's efforts to develop a new vacancy rule
was presented to the Committee by the facilitator at the start of the
second day. The Committee, under the guidance of the facilitator, used
the synopsis as a starting point to continue its discussion. Discussion
included how litigation, Federal and State legislation, and regulatory
action can serve as barriers to vacant units or buildings being
reoccupied, demolished, sold, consolidated, or modernized.
Much of the discussion during the second morning segment was on the
issue of vacant units that were undergoing modernization or were being
scheduled for modernization. The Committee viewed modernization as a
positive undertaking on the part of HAs to reduce vacancies, for which
continued subsidy support is appropriate at some level. Topics
discussed under this issue included sources of funding; scheduling of
work and the ability of an HA to control its modernization; what
constitutes a reasonable period of time in advance of modernization
work for vacating occupied units or not reoccupying vacant units; and
the treatment of small HAs that compete for modernization funding,
where the resources may be insufficient to fund all approvable
applications.
The facilitator prepared a new synopsis for the Committee to use as
it began the second afternoon segment of the negotiations. After
reviewing the synopsis, the Committee started to discuss the
circumstances under which it would be reasonable to receive full or
partial subsidy funding for vacant units. Full or partial subsidy was
understood to mean receiving 100% or some lower level of the current
Allowable Expense Level (AEL). A chart that presented the various cost
items that comprise the AEL was provided to the Committee for its use.
The Committee discussed whether and to what extent certain costs would
be applicable to vacant units undergoing modernization, excess vacant
units or empty buildings not undergoing modernization.
For partial funding purposes, the Committee agreed that the
determination of the appropriate partial amount should be expressed in
terms of a percentage of the AEL, and not in terms of reimbursement of
actual allowable costs, because of the administrative burden that a
direct reimbursable system would entail. The Committee then discussed
various levels of partial subsidy support and whether it was reasonable
to apply one partial subsidy level to all the different scenarios under
consideration (vacant units undergoing modernization, excess vacant
units, or empty buildings not undergoing modernization).
During the discussion the point was made that the current vacancy
rule permits vacant units that are part of a funded, on-schedule
modernization program to receive full funding. The Committee agreed to
full subsidy eligibility for vacant units undergoing modernization, if
the units have to be vacant in order to accomplish the work and the
units are included in a HUD-approved modernization budget. The HA must
place the vacant units under construction within two Federal Fiscal
Years (FFYs) of funding approval. The Committee discussed a proposal to
permit vacant units proposed for rehabilitation in the second year of
an HA's Five-Year Action Plan to be eligible for full funding, but
rejected the idea because of the annual cycle of Federal
appropriations. Discussion continued on what partial subsidy level
would be sufficient for the HA to maintain the structural integrity of
vacant buildings/units in other circumstances. The session ended with
an agreement to revisit this topic the following day.
The third day's session began with a discussion by members on
whether a new vacancy rule should contain a section describing the
general circumstances under which a waiver might be given. The
Committee felt that there may be circumstances beyond an HA's or
Resident Management Corporation's (RMC) control that have brought about
a vacancy problem that, despite the HA's/RMC's documented best efforts,
is not correctable or would place an unreasonable burden on the HA/RMC.
The Committee agreed that the procedures and the documentation needed
for obtaining a waiver would not be part of the new rule, but would be
contained in a notice.
An updated synopsis was presented to the Committee for review and
discussion. The Committee then returned to the issue of partial
subsidies and agreed that an appropriate level of subsidy support would
be 20% of the AEL. The Committee agreed that this level of support
would be applied against vacant units that have been vacant for more
than 12 months and were not undergoing modernization or were not vacant
due to circumstances beyond the HA's control. These long-term vacant
units will be removed from the HA's inventory of unit months available
(UMAs). However, the Committee noted and emphasized that full funding
of utilities under the current PFS would be continued. The Committee
also agreed that the new vacancy rule would eliminate the current
provisions regarding Comprehensive Occupancy Plans (COPs) and
reiterated that units approved by HUD for deprogramming would not be
included in the calculation of UMAs. A final synopsis containing all
the consensus agreements made to that date was prepared for the
Committee.
The second meeting of the Committee took place April 4-5, 1995, in
Washington, DC. The meeting began with a discussion on whether the
proposed rule language should reflect consequences that could occur if
funds already appropriated by Congress for the Comprehensive Grant
Program (CGP) were rescinded. If funds for the CGP were to be
significantly decreased, HAs might have to delay placing some vacant
units under a construction contract. This could lead to the HA having
long-term vacancies that would not be eligible for full operating
subsidy. The Committee agreed to language that
[[Page 37297]]
would permit the HA to seek a waiver to deal with this situation.
The Committee also discussed the treatment of Resident Management
Corporations (RMCs) that have responsibility for administering
modernization programs, but are dependent upon the HA to provide
funding. The Committee found that there are parallels between requests
made by HAs for Comprehensive Improvement Assistance Program (CIAP)
funds and requests made by RMCs for CGP funds, in that an otherwise
approvable application or request could be denied because of
insufficient funding. The Committee agreed to language that would treat
this situation as a circumstance or action that was beyond the RMC's
control.
The Committee then began a section-by-section review of the
proposed rule language that had been prepared by HUD staff based on the
agreements reached at the first meeting. Edits and clarifications were
proffered for incorporation into a new draft. The Committee then
followed the same process in its review of the preamble material.
A copy of the approved minutes is available for public inspection
and copying from the Department's Rules Docket Clerk (see Addresses in
this preamble).
Components of Proposed Rule
The following elements of the proposed rule evolved from the
consensus-seeking process applied in the reg-neg Committee. Although
the Committee recognized that there are anomalies that will not be
reached by the general elements of this proposed rule, its provisions
were developed to address the majority of the situations facing HAs.
(1) The standard for expected occupancy will continue to be 97%.
The proposed rule would also maintain the five-unit exception, as in
the current regulation, for small HAs where small numbers of vacant
units would make it extremely difficult to attain a 97% occupancy rate.
(2) HAs will be allowed to take into consideration circumstances
and actions beyond the HA's control that prohibit the HA from
occupying, selling, demolishing, rehabilitating, reconstructing,
consolidating, or modernizing vacant units. Such circumstances and
actions are limited to:
(a) Litigation, such as a court order or settlement agreement that
is legally enforceable. Units that are being held vacant as part of a
court-ordered or HUD-approved desegregation effort would be an example.
(b) Laws. Federal, Tribal, or State laws of general applicability,
or their implementing regulations. For example, demolition or
disposition requirements that have the effect of preventing an HA from
taking action to remove unusable units from its inventory may be
considered a circumstance beyond the HA's control. However, units
vacant only because they do not meet minimum standards pertaining to
construction or habitability under Federal, State, or local laws or
regulations will not be considered vacant due to circumstances and
actions beyond the PHA's control.
(c) Changing market conditions. For example, small PHAs that are
located in areas experiencing population loss or economic dislocations
may face a lack of demand in the foreseeable future, even after the HA
has taken aggressive marketing and outreach measures.
(d) Natural disasters.
(e) Insufficient funding for otherwise approvable applications made
for Comprehensive Improvement Assistance Program (CIAP) funds.
(f) RMC Funding. The failure of a PHA to fund an otherwise
approvable RMC request for Federal modernization funding.
(g) Casualty Losses. Delays in repairing damage to vacant units due
to the time needed for settlement of insurance claims.
(3) An HA with vacant units in a project that is otherwise viable,
but is undergoing modernization that includes work necessary to
reoccupy the vacant units will not be penalized for the vacancies when
the HA determines its operating subsidy eligibility, if one of the
following conditions is met:
(a) The vacant units are under construction (i.e., construction
contract awarded or force account work started); or
(b) Treatment of the vacant units is included in a HUD-approved
modernization budget (e.g., an approved Annual Statement for the
Comprehensive Grant Program (CGP) or CIAP Budget), but the time period
for placing the vacant units under construction has not yet expired.
The HA must place the vacant units under construction within two
Federal Fiscal Years (FFYs) after the FFY in which the modernization
funds are approved. For example, if the HA receives HUD approval for
the modernization budget in FFY 1996, the HA must start construction on
the vacant units by September 30, 1998. If the HA fails to place the
vacant units under construction within this 2-year time frame, the
units will be treated as long-term vacancies and the HA is eligible for
limited subsidy for those units.
The 2-year provision to place vacant units under construction will
not be extended. Failure to meet this provision affects subsidy
eligibility only, not the use of the modernization funds, which are
governed by a modernization implementation schedule that may be longer
than 2 years.
Because of the funding cycle for modernization funds, HAs with FYs
beginning January 1 or April 1 may not have approved modernization
budgets at the time they develop operating budgets for those years.
These HAs would use their current approved modernization budget to
determine their subsidy eligibility, but would be permitted to submit
an operating budget revision when the modernization budget had been
approved.
(4) Any HA that estimates it will have vacant units in its
requested budget year in excess of 3% of the units available for
occupancy (and in excess of five vacant units), after adjusting for
units that are vacant for reasons beyond its control (as described in
item 2 under this heading), and vacant units that are covered by funded
modernization (as described in item 3 under this heading), will receive
less than full operating subsidy for these vacant units. If a unit has
been vacant for longer than 12 months, it will be removed from the HA's
calculation of units available for occupancy and subsidy eligibility
will be limited to 20% of the Allowable Expense Level. Units that are
vacant for 12 months or less will be included in the HA's calculation
of units available for occupancy, but the HA will have to presume
dwelling rental income will be generated by these units.
(5) Provisions in the current vacancy rule relating to
Comprehensive Occupancy Plans (COPs) will be eliminated. An HA that has
a HUD-approved COP at the time the new vacancy rule becomes effective
may choose to determine its PFS eligibility under the existing rule or
to terminate its COP and become subject to the new rule.
(6) Because the 2-year provision to place vacant units under
construction is new, the proposed rule contains a transition section to
address the treatment of units already under an approved modernization
budget at the time the new rule becomes effective. Such units may have
a longer time period, if already approved by HUD.
(7) The new vacancy rule would permit the granting of waivers to
HAs or RMCs when necessary to address unusual situations. HUD will
establish
[[Page 37298]]
procedures for requesting a waiver and required documentation. HUD will
take prompt action in responding to a waiver request, and any relief
provided will be in accordance with these procedures and at a level
established at HUD's discretion on a case-by-case basis.
Computation of Subsidy Under Proposed Rule
In computing its per-unit Dwelling Rental Income under the
Performance Funding System, an HA will determine its Projected
Occupancy Percentage in much the same manner as in the current rule.
The HA will either take a ``snapshot'' of the last day of the month
which is 6 months before the start of its fiscal year or take the
average occupancy during that month. The HA will then use the data to
develop an estimated average occupancy percentage for its Requested
Budget Year (RBY). The conditions under which the RBY occupancy
percentage will be used as the projected occupancy percentage for
purposes of determining operating subsidy eligibility are described
below:
(1) If the RBY percentage is 97% or higher, the HA will use 97% as
its projected occupancy percentage. If the HA estimates a RBY
percentage of less than 97% but can demonstrate that it will have an
average of five or fewer vacant units in the requested budget year, the
HA may use its RBY percentage as its projected occupancy percentage.
(Reference in this part to ``more than five units'' or ``fewer than
five units'' refers to a circumstance in which 5 units equals or
exceeds 3% of the number of units to which the 3% threshold is
applicable.)
Example: The ABC Housing Authority has 1,000 units available for
occupancy. It estimates for its RBY an average of 980 units will be
occupied, an occupancy rate of 98%. Since the RBY percentage is
higher than 97%, it will use 97% as its projected occupancy
percentage.
Example: The XYZ Housing Authority has 50 units available for
occupancy. It estimates that for its RBY an average of 46 units will
be occupied; a RBY occupancy percentage of 92%. Since the Authority
estimates that it will have four vacant units in the RBY, it will
use 92% as its projected occupancy percentage.
(2) If the RBY occupancy percentage is less than 97% and the HA has
more than 5 vacant units, the HA will adjust its estimate of vacant
units to exclude units undergoing modernization. (see item 3 under the
section of the preamble headed COMPONENTS OF PROPOSED RULE). The HA
will also adjust its estimate for units that are vacant due to
circumstances and actions beyond the HA's control (see item 2 under the
section of the preamble headed COMPONENTS OF PROPOSED RULE). After
making these adjustments, the HA will recalculate its estimated vacancy
percentage. If the recalculated vacancy percentage is 3% or less (or
the HA would have five or fewer vacant units), the HA will use its RBY
occupancy percentage as its projected occupancy percentage.
Example: The ABC Housing Authority has 1,000 units available for
occupancy. It estimates that for its RBY an average of 950 units
will be occupied, a RBY occupancy percentage of 95%. Of its 50
vacant units, 40 units are part of a HUD-approved modernization
budget and will be under a construction contract during the budget
year. The Authority will adjust its 50 vacancies to exclude the 40
vacant units undergoing modernization and recalculate its RBY
vacancy percentage (10/1,000 = 1%). Since the recalculated RBY
vacancy percentage is less than 3%, the Authority will use its RBY
occupancy percentage of 95% as its projected occupancy percentage.
Example: The XYZ Housing Authority is a small HA with 50 units
available for occupancy. It estimates for its RBY an average of 40
units will be occupied, a RBY occupancy percentage of 80%. The
Authority documents that 5 of the vacancies are efficiencies in a
building serving elderly residents. There is no demand for these
units despite aggressive marketing and outreach and selling,
demolishing, or reconfiguration of the units is not possible. Since
the Authority can show that these 5 vacancies are due to
circumstances or action beyond its control, it will adjust its 10
vacancies to exclude these 5. With the number of vacant units now
recalculated to be 5, the Authority will use its RBY occupancy
percentage of 80% as its projected occupancy percentage.
(3) If the RBY vacancy percentage is greater than 3% and the HA has
more than 5 vacant units, even after adjusting for vacant units
undergoing modernization or units vacant due to circumstances and
actions beyond its control, the HA will then recalculate its RBY
occupancy percentage by excluding from its calculation of units months
available (UMAs), all vacant units that have been vacant for longer
than 12 months that are not either undergoing modernization or vacant
for reasons beyond the HA's control. The long-term vacancies removed
will be eligible to receive a reduced operating subsidy calculated at
20% of the HA's AEL. The conditions under which the recalculated RBY
occupancy percentage will be used as the projected occupancy percentage
for purposes of determining operating subsidy eligibility for a low-
occupancy HA are described below:
(a) If the recalculated RBY occupancy percentage estimate is 97% or
higher, the HA will use 97%.
Example: The ABC Housing Authority has 1,000 units available for
occupancy. It estimates for its RBY an average of 950 units will be
occupied, a RBY occupancy percentage of 95%. The 50 vacant units do
not meet the criteria of being either vacant units undergoing
modernization or vacant due to circumstances or actions beyond the
HA's control. There are 25 long-term vacancies in the group of 50.
The Authority will remove these 25 units from its determination of
units available for occupancy and recalculate its RBY occupancy
percentage (950/975 = 98%). Since the RBY occupancy percentage is
higher than 97%, it will use 97% as its projected occupancy
percentage.
(b) If the recalculated RBY occupancy percentage is less than 97%,
but the RBY vacancy rate after adjusting for vacant units undergoing
modernization and units that are vacant due to circumstances and
actions beyond the HA's control is 3% or less (or the HA has five or
fewer vacant units), the HA may use its recalculated RBY Occupancy
Percentage as its projected occupancy percentage.
Example: The ABC Housing Authority has 1,000 units available for
occupancy. It estimates for its RBY that an average of 900 units
will be occupied, a RBY occupancy percentage of 90%. Of its 100
vacant units, 50 units are part of a HUD-approved modernization
budget and will be under a construction contract during the budget
year. The remaining 50 units fall outside the definition of being
vacant due to circumstances or actions beyond the HA's control; 25
of these units have been vacant for more than 12 months (long-term
vacancies) and 25 have been vacant for 12 months or less. When the
Authority excludes its long-term vacancies from its inventory of
units available for occupancy and recalculates its RBY occupancy
percentage, it finds that the recalculated RBY occupancy percentage
is still below 97%, (900/975 = 92%). The Authority will then take
its 75 vacancies, exclude the 50 vacant units undergoing
modernization, and recalculate its RBY vacancy percentage. Since the
resulting vacancy percentage is 3% or below (25/975 = 3%), the
Authority will use its recalculated RBY occupancy percentage of 92%
as its projected occupancy percentage.
(c) If the vacancy percentage is greater than 3% and the HA has
more than five vacant units after adjusting for vacant units undergoing
modernization and units that are vacant due to circumstances and
actions beyond the HA's control, the HA will use 97% as its projected
occupancy percentage, but will be allowed to adjust the 97% by the
number of vacant units undergoing modernization and units that are
vacant due to circumstances and actions beyond the HA's control. For a
small HA using five vacant units as its occupancy objective for the
RBY, the HA will determine what percentage five
[[Page 37299]]
units represents as a portion of its units available for occupancy and
subtract that percentage from 100%. The result will be used as the HA's
projected occupancy percentage; however, the HA will be allowed to
adjust the projected occupancy percentage by vacant units undergoing
modernization and units that are vacant for circumstances and actions
beyond the HA's control.
Example: The ABC Housing Authority has 1,000 units available for
occupancy. It estimates for its RBY an average of 900 units will be
occupied, a RBY occupancy percentage of 90%. Of its 100 vacant
units, 50 units are part of a HUD-approved modernization budget and
will be under a construction contract during the budget year. The
remaining 50 units fall outside the definition of being vacant due
to circumstances or actions beyond the HA's control; none of the
vacancies are long-term vacancies. The Authority will have to use a
projected occupancy percentage of 97%, but will adjust the 97% by
the number of vacant units undergoing modernization. The 50 vacant
units undergoing modernization represent 5% of the Authority's
inventory and the 5% will be subtracted from the 97%. The Authority
will use 92% as its projected occupancy percentage.
(4) The relationship between the RBY occupancy percentage and the
projected occupancy percentage is illustrated in the chart below:
Relationship Between the RBY Occupancy Percentage and the Projected
Occupancy Percentage
------------------------------------------------------------------------
RBY occupancy percentage Projected occupancy percentage
------------------------------------------------------------------------
1. RBY Occupancy Percentage is 97% 1. Use 97%.
or higher.
2. RBY Occupancy Percentage is less 2. Use the RBY Occupancy
than 97%, but HA estimates it will Percentage.
have 5 or fewer vacant units in
RBY.
3. RBY Occupancy Percentage is less 3. Use the RBY Occupancy Percentage
than 97% and HA has more than 5 if vacancy percentage is 3% or
vacant units. less after adjusting for vacant
units undergoing modernization and
units vacant due to circumstances
and actions beyond the HA's
control.
4. RBY Occupancy Percentage is less 4. HA will exclude all long-term
than 97% and HA has more than 5 vacant units from its inventory of
vacant units, even after adjusting units available for occupancy and
for vacant units undergoing will recalculate its RBY Occupancy
modernization and units vacant due Percentage:
to circumstances and actions
beyond the HA's control.
a. If the recalculated RBY
Occupancy Percentage is 97% or
higher, the HA will use 97%.
b. If the recalculated RBY
Occupancy Percentage is less than
97%, but the HA estimates it will
have 5 or fewer vacant units in
the RBY, the HA will use the RBY
Occupancy Percentage.
c. If the recalculated RBY
Occupancy Percentage is less than
97% and HA has more than 5 vacant
units, even after making all
adjustments, the HA will use 97%,
but will be allowed to adjust the
97% for vacant units undergoing
modernization and units vacant due
to circumstances and actions
beyond the HA's control. A small
HA will determine what percentage
five units represents as a portion
of its units available for
occupancy and will make
adjustments against that
percentage.
------------------------------------------------------------------------
Comparison of Current and Proposed Rule
The proposed rule distinguishes itself from the current regulation
in several important respects, as follows:
(1) Conditions under which a vacant unit is considered eligible for
subsidy. The proposed rule would limit the circumstances under which an
HA could include excess long-term vacancies in its inventory of units
available for occupancy to those units that are: (a) Under construction
as part of a modernization program; (b) included in a HUD-approved
modernization budget, and the time period for placing the vacant units
under construction has not yet expired; or (c) subject to circumstances
and actions recognized to be beyond the HA's control. If long-term
vacant units are removed from an HA's inventory, those units would be
eligible for a reduced subsidy, calculated at 20% of the AEL, and would
continue to be eligible for utility costs. Section 990.108(b)(3)
describes the eligibility of long-term vacancies for these other costs.
The current rule does not make a distinction in the length of time a
unit has been vacant. The Committee believed that a reduced subsidy
level of 20% for such vacant units would be sufficient to maintain the
structural integrity of the units, but would also provide incentive to
returning the units to occupancy as soon as feasible.
(2) Treatment of vacant units in CIAP, CGP or other funded
modernization programs. Under the existing rule, the Department allows
each HA an opportunity to receive special treatment in determining
operating subsidy eligibility if the HA has or applies to have vacant
units in a funded, on-schedule modernization program. This special
treatment has been provided in two ways: first, if an HA anticipates
that it will have less than 97% occupancy in its budget year, the HA
may be able to use that lower percentage in its operating subsidy
calculations, by showing that its occupancy rate would be 97% or higher
after adjusting for vacant units in an on-schedule modernization
program. Second, if an HA has a HUD-approved Comprehensive Occupancy
Plan (COP), the HA would be permitted to adjust its otherwise fixed
occupancy goals if the HA could demonstrate that it had submitted an
approvable application for modernization work that was rejected because
of insufficient HUD funds. This special treatment has allowed an HA to
be eligible for full operating subsidy for vacant units that are
undergoing modernization and for units awaiting modernization when
funds become available.
The Committee supported the principle embodied in the existing
rule, i.e., HAs should not be unduly burdened in undertaking
modernization activities because of lost rental revenue. However, the
Committee believed that eligibility for full operating subsidy to this
group of vacant units should be limited to units that are actually
under a construction contract or included in an approved modernization
budget. The existing rule does not make this distinction and permits
the special treatment when funds are first
[[Page 37300]]
committed to the modernization program, often for the development of
architectural and engineering (A & E) specifications. The A & E work
may cover a number of units, buildings, or projects that will not
actually go to construction for some period of time; furthermore, the
construction work might not require the unit to be vacant.
(3) Recognition of Circumstances Beyond an HA's/RMC's Control That
Cause Vacancies. The proposed rule would permit an HA or RMC to be
eligible for full operating subsidies for its vacant units if it can
show that the circumstances or actions causing the vacancies are beyond
the HA's/RMC's control and are prohibiting it from occupying, selling,
demolishing, rehabilitating, reconstructing, consolidating, or
modernizing the vacant units. A listing of eligible circumstances is
provided in the section of this preamble titled Components of the
Proposed Rule. The existing regulation gives special recognition only
to vacant units in projects with funded, on-schedule modernization
programs.
(4) Elimination of Comprehensive Occupancy Plans (COPs). Under the
proposed rule, no new COPs would be approved. An HA that has a HUD-
approved COP at the time the new vacancy rule becomes effective will
have the option of choosing to determine its PFS eligibility under the
existing rule or to terminate its COP and be subject to the new rule.
HAs are still encouraged to undertake the structured, analytical
approach encompassed in the COP concept, i.e., to identify the causes
of their vacancy problems and develop vacancy reduction strategies and
actions that are responsive to the problems and appropriate to the
management and resources of the HA.
Other Matters
Public Reporting Burden
The information collection requirements contained in this proposed
rule have been submitted to the Office of Management and Budget under
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520). The
Department has determined that the following provisions contain
information collection requirements.
Tabulation of Annual Reporting Burden--Contributions for Operating Subsidies--Performance Funding System; Low-
Income Public Housing--Vacancy; Proposed Rule
----------------------------------------------------------------------------------------------------------------
No. of
Section of No. of responses Total Hours per Total
Description of information collection 24 CFR respondents per annual responses hours
affected respondent responses
----------------------------------------------------------------------------------------------------------------
Determining operating income level......... 950.725;
990.109 3,100 1 3,100 1 3,100
Total reporting burden................. ........... 3,100 1 3,100 1 3,100
----------------------------------------------------------------------------------------------------------------
Environmental Impact
In accordance with 40 CFR 1508.4 of the regulations of the Council
on Environmental Quality and 24 CFR 50.20(o) of the HUD regulations,
the policies and procedures contained in this proposed rule relate only
to operating costs that do not affect a physical structure or property
and, therefore, are categorically excluded from the requirements of the
National Environmental Policy Act.
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 will not have a
significant economic impact on a substantial number of small entities.
The proposed rule would result in eligibility criteria for low-income
public and Indian housing operating subsidies that may impact those HAs
with large numbers of long-term vacant units. However, HUD's data
incident to establishing the Vacancy Reduction Program indicates that
high-vacancy PHAs are relatively few in number (and high-vacancy IHAs
virtually nonexistent), and that a preponderance of the program's
vacancies are in a very limited number of the larger PHAs. Most HAs
will be unaffected by this proposed rule.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this proposed rule would 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, the proposed rule is not subject to review under the
Order. The rule will refine the criteria under which operating
subsidies are paid on HUD-assisted housing owned and operated by HAs,
but will not interfere with State or local government functions.
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. No significant change in existing HUD policies
or programs will result from promulgation of this proposed rule, as
those policies and programs relate to family concerns. The proposed
rule merely involves the amount of funding that an HA should receive
under a refinement of an existing procedure.
Regulatory Agenda
This proposed rule was listed as Item No. 1526 in the Department's
Semiannual Agenda of Regulations published on May 8, 1995 (60 FR 23368,
23402), in accordance with Executive Order 12866 and the Regulatory
Flexibility Act.
The Catalog of Federal Domestic Assistance Program numbers for
this proposed rule are 14.145, 14.146, and 14.147.
List of Subjects
24 CFR Part 950
Aged, Grant programs--housing and community development, Grant
programs--Indians, Disability, Homeownership, Indians, Low and moderate
income housing, Public housing, Reporting and recordkeeping
requirements.
[[Page 37301]]
24 CFR Part 990
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
For the reasons set out in the preamble, parts 950 and 990 of title
24 of the Code of Federal Regulations are proposed to be amended as
follows:
PART 950--INDIAN HOUSING PROGRAMS
1. The authority citation for part 950 would continue to read as
follows:
Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437aa-1437ee and
3535(d).
2. Section 950.102 would be amended by adding definitions for
``Long-term vacancy'', ``Units vacant due to circumstances and actions
beyond the IHA's control'', and ``Vacant unit undergoing
modernization'', and by revising the definition for ``Unit months
available'', to read as follows:
Sec. 950.102 Definitions.
* * * * *
Long-term vacancy. This term means the same as it is used in the
definition of ``Unit Months Available'' in this section.
* * * * *
Unit months available. Project Units multiplied by the number of
months the Project Units are available for occupancy during a given IHA
fiscal year. For purposes of this subpart, a unit is considered
available for occupancy from the date established as the End of the
Initial Operating Period for the Project until the time the unit is
approved by HUD for deprogramming and is vacated or is approved for
nondwelling use. A unit will be considered a long-term vacancy and will
not be considered available for occupancy in any given IHA Requested
Budget Year if the IHA determines that:
(1) The unit has been vacant for more than 12 months at the time
the IHA determines its Actual Occupancy Percentage;
(2) The unit is not either:
(i) A vacant unit undergoing modernization; or
(ii) A unit vacant for circumstances and actions beyond the IHA's
control, as these terms are defined in this section; and
(3) The IHA determines that it will have a vacancy percentage of
more than 3 percent and will have more than five vacant units, for its
Requested Budget Year, even after adjusting for vacant units undergoing
modernization and units that are vacant for circumstances and actions
beyond the IHA's control, as defined in this section. (Reference in
this subpart to ``more than five units'' or ``fewer than five units''
shall refer to a circumstance in which 5 units equals or exceeds 3
percent of the number of units to which the 3 percent threshold is
applicable.)
Units vacant due to circumstances and actions beyond the IHA's
control. Dwelling units that are vacant due to circumstances and
actions that prohibit the IHA from occupying, selling, demolishing,
rehabilitating, reconstructing, consolidating or modernizing vacant
units and are beyond the IHA's control. For purposes of this
definition, circumstances and actions beyond the IHA's control are
limited to:
(1) Litigation. The effect of court litigation such as a court
order or settlement agreement that is legally enforceable. An example
would be units that are being held vacant as part of a court-ordered or
HUD-approved desegregation plan.
(2) Laws. Federal, Tribal, or State laws of general applicability,
or their implementing regulations. Units vacant only because they do
not meet minimum standards pertaining to construction or habitability
under Federal, State, or local laws or regulations will not be
considered vacant due to circumstances and actions beyond the IHA's
control.
(3) Changing market conditions. For example, IHAs may face a lack
of demand in the foreseeable future, even after the IHA has taken
aggressive marketing and outreach measures.
(4) Natural disasters.
(5) Insufficient funding for otherwise approvable applications made
for Comprehensive Improvement Assistance Program (CIAP) funds.
(6) Resident Organization Funding. The failure of an IHA to fund an
otherwise approvable RO request for Federal modernization funding;
(7) Casualty Losses. Delays in repairing damage to vacant units due
to the time needed for settlement of insurance claims.
* * * * *
Vacant unit undergoing modernization. Except as provided in
Sec. 950.775(a), a vacant unit in an otherwise viable project (as
determined using the indicia in Sec. 970.6 of this chapter), when the
project is undergoing modernization that includes work that is
necessary to reoccupy the vacant unit, and in which one of the
following conditions is met:
(1) The unit is under construction (i.e., the construction contract
has been awarded or force account work has started); or
(2) The treatment of the vacant unit is included in a HUD-approved
modernization budget (e.g., the Annual Statement for the Comprehensive
Grant Program (CGP) (Form HUD-52837 or its successor), or the
Comprehensive Improvement Assistance Program (CIAP) Budget (Form HUD-
52825 or its successor)), but the time period for placing the vacant
unit under construction has not yet expired. The IHA must place the
vacant unit under construction within two Federal Fiscal Years (FFYs)
after the FFY in which the modernization funds are approved.
* * * * *
3. Section 950.720 would be amended by revising paragraph (b), to
read as follows:
Sec. 950.720 Other costs.
* * * * *
(b) (1) Costs attributable to units approved for deprogramming and
vacant may be eligible for inclusion, but must be limited to the
minimum services and protection necessary to protect and preserve the
units until the units are deprogrammed. Costs attributable to units
temporarily unavailable for occupancy because the units are utilized
for IHA-related activities are not eligible for inclusion. In
determining the PFS operating subsidy, these units shall not be
included in the calculation of Unit Months Available. Units approved
for deprogramming shall be listed by the IHA, and supporting
documentation regarding direct costs attributable to such units shall
be included as a part of the Performance Funding System calculation in
which the IHA requests operating subsidy for these units. If the IHA
requires assistance in this matter, the IHA should contact the HUD
Field Office.
(2) Units approved for nondwelling use to promote economic self-
sufficiency services and anti-drug activities are eligible for
operating subsidy under the conditions provided in this paragraph
(b)(2), and the costs attributable to these units are to be included in
the operating budget. If a unit satisfies the conditions stated below,
it will be eligible for subsidy at the rate of the AEL for the number
of months the unit is devoted to such use. Approval will be given for a
period of no more than 3 years. HUD may renew the approval to allow
payments after that period only if the IHA can demonstrate that no
other sources for paying the non-utility operating costs of the unit
are available. The conditions the unit must satisfy are:
(i) The unit must be used for either economic self-sufficiency
activities
[[Page 37302]]
directly related to maximizing the number of employed residents or for
anti-drug programs directly related to ridding the development of
illegal drugs and drug-related crime. The activities must be directed
toward and for the benefit of residents of the development.
(ii) The IHA must demonstrate that space for the service or program
is not available elsewhere in the locality and that the space used is
safe and suitable for its intended use or that the resources are
committed to make the space safe and suitable.
(iii) The IHA must demonstrate satisfactorily that other funding is
not available to pay for the non-utility operating costs. All rental
income generated as a result of the activity must be reported as income
in the operating subsidy calculation.
(iv) Operating subsidy may be approved for only one site (involving
one or more contiguous units) per public housing development for
economic self-sufficiency services or anti-drug programs, and the
number of units involved should be the minimum necessary to support the
service or program. Operating subsidy for any additional sites per
development can only be approved by HUD Headquarters.
(v) The IHA must submit a certification with its Performance
Funding System Calculation that the units are being used for the
purpose for which they were approved and that any rental income
generated as a result of the activity is reported as income in the
operating subsidy calculation. The IHA must maintain specific
documentation of the units covered. Such documentation should include a
listing of the units, the street addresses, and project/management
control numbers.
(3) Long-term vacant units that are not included in the calculation
of Unit Months Available are eligible for operating subsidy in the
Requested Budget Year at the rate of 20 percent of the AEL. Allowable
utility costs for long term vacant units will continue to be funded in
accordance with Sec. 950.715.
* * * * *
4. In Sec. 950.725, paragraph (b)(3) would be revised, to read as
follows:
Sec. 950.725 Projected operating income level.
(b) * * *
(3) Projected Occupancy Percentage. The IHA shall determine its
projected percentage of occupancy for all Project Units (Projected
Occupancy Percentage), as follows:
(i) General. Using actual occupancy data collected before the start
of the budget year as a beginning point, the IHA will develop estimates
for its Requested Budget Year (RBY) of: how many units the IHA will
have available for occupancy; how many of the available units will be
occupied and how many will be vacant, and what the average occupancy
percentage will be for the RBY. The conditions under which the RBY
occupancy percentage will be used as the projected occupancy percentage
for purposes of determining operating subsidy eligibility are described
below.
(ii) High Occupancy IHA--No Adjustments Necessary. If the IHA's RBY
Occupancy Percentage, calculated in accordance with Sec. 950.760, is
equal to or greater than 97%, the IHA's Projected Occupancy Percentage
is 97%. If the IHA's RBY Occupancy Percentage is less than 97%, but the
IHA demonstrates that it will have an average of five or fewer vacant
units in the requested budget year, the IHA will use its RBY Occupancy
Percentage as its projected occupancy percentage.
(iii) Adjustments in Determining Occupancy. If the IHA's RBY
Occupancy Percentage is less than 97% and the IHA has more than 5
vacant units, the IHA will adjust its estimate of vacant units to
exclude vacant units undergoing modernization and units that are vacant
due to circumstances and actions beyond the IHA's control. After making
this adjustment, the IHA will recalculate its estimated vacancy
percentage for the RBY.
(A) High Occupancy IHA after adjustment. If the recalculated
vacancy percentage is 3% or less (or the IHA would have five or fewer
vacant units), the IHA will use its RBY Occupancy Percentage as its
projected occupancy percentage.
(B) Low Occupancy IHA--adjustment for long-term vacancies. If the
recalculated vacancy percentage is greater than 3% (or more than 5
vacant units), the IHA will then further adjust its RBY Occupancy
Percentage by excluding from its calculation of Unit Months Available
(UMAs), all units that have been vacant for longer than 12 months that
are not vacant units undergoing modernization or are not units vacant
due to circumstances and actions beyond the IHA's control.
(iv) Low Occupancy IHA after all adjustments. An IHA that has
determined its RBY Occupancy Percentage in accordance with paragraph
(b)(iii)(B) of this section will be eligible for operating subsidy as
follows:
(A) Long-term vacancies removed from the calculation of UMAs will
be eligible to receive a reduced operating subsidy calculated at 20% of
the IHA's AEL.
(B) If the recalculated RBY Occupancy Percentage is 97% or higher,
the IHA will use 97%.
(C) If the recalculated RBY Occupancy Percentage is less than 97%,
but the vacancy rate after adjusting for vacant units undergoing
modernization and units that are vacant due to circumstances and
actions beyond the IHA's control is 3% or less (or the IHA has five or
fewer vacant units), the IHA may use its recalculated RBY Occupancy
Percentage as its projected occupancy percentage.
(D) If the recalculated RBY Occupancy Percentage is less than 97%
and the vacancy percentage is greater than 3% (or the IHA has more than
five vacant units) after adjusting for vacant units undergoing
modernization and units that are vacant due to circumstances and
actions beyond the IHA's control, the IHA will use 97% as its projected
occupancy percentage, but will be allowed to adjust the 97% by the
number of vacant units undergoing modernization and units that are
vacant due to circumstances and actions beyond the IHA's control. For a
small IHA using five vacant units as its occupancy objective for the
RBY, the IHA will determine what percentage five units represents as a
portion of its units available for occupancy and subtract that
percentage from 100%. The result will be used as the IHA's projected
occupancy percentage, but the IHA will be allowed to adjust the
projected occupancy percentage by vacant units undergoing modernization
and units that are vacant for circumstances and actions beyond the
IHA's control.
* * * * *
5. Section 950.760 would be revised to read as follows:
Sec. 950.760 Determining Actual and Requested Budget Year Occupancy
Percentages.
(a) Actual Occupancy Percentage. When submitting Performance
Funding System Calculations for Requested Budget Years beginning on or
after January 1, 1996, the IHA shall determine an Actual Occupancy
Percentage for all Project Units included in the Unit Months Available.
The IHA shall have the option of basing this option on either:
(1) The number of units occupied on the last day of the month that
ends 6 months before the beginning of the Requested Budget Year; or
(2) The average occupancy during the month ending 6 months before
the beginning of the Requested Budget Year. If the IHA elects to use an
average occupancy under this paragraph (a)(2),
[[Page 37303]]
the IHA shall maintain a record of its computation of its Actual
Occupancy Percentage.
(b) Requested Budget Year Occupancy Percentage. The IHA will
develop a Requested Budget Year Occupancy Percentage by taking the
Actual Occupancy Percentage and adjusting it to reflect changes up or
down in occupancy during the Requested Budget Year due to HUD-approved
activities such as units undergoing modernization, new development,
demolition, or disposition. If after the submission and approval of the
Performance Funding System Calculations for the Requested Budget Year,
there are changes up or down in occupancy because of modernization, new
development, demolition or disposition that are not reflected in the
Requested Budget Year Occupancy Percentage, the IHA may submit a
revision to reflect the actual change in occupancy due to these
activities.
(c) Documentation Required to be Maintained. The IHA must maintain,
and upon HUD's request, make available to HUD specific documentation of
the occupancy status of all units, including long-term vacancies,
vacant units undergoing modernization, and units vacant due to
circumstances and actions beyond the IHA's control. This documentation
shall include a listing of the units, street addresses, and project/
management control numbers.
Sec. 950.770 [Removed and Reserved]
6. Section 950.770, Comprehensive Occupancy Plan (COP)
Requirements, would be removed and reserved.
7. A new Sec. 950.775 would be added, to subpart J, to read as
follows:
Sec. 950.775 Transition provisions.
(a) Treatment of units already under an approved modernization
budget. Vacant units to be rehabilitated under modernization budgets
approved in FFY 1995 or prior are subject to the modernization
implementation schedule, without extension, previously approved by HUD.
It is the intent of HUD not to penalize IHAs that have longer
construction schedules in an approved modernization budget.
(b) Treatment of Existing COPs. (1) An IHA that on [effective date
of final rule] is operating under a Comprehensive Occupancy Plan (COP)
approved by HUD under Sec. 950.770, as that section existed before
[effective date of final rule] may, until the expiration of its COP,
continue to determine its PFS eligibility under the provisions of part
950 effective on [1 day before effective date of final rule]. If the
IHA does not elect to continue to determine its PFS eligibility using
its COP, the IHA's PFS eligibility will be calculated in accordance
with this part.
(2) HUD will not approve any extensions of existing COPs.
8. A new Sec. 950.777 would be added to subpart J, to read as
follows:
Sec. 950.777 Waivers.
(a) Documentation for Waiver. A waiver may be granted in accordance
with Sec. 999.101 of this chapter. Any request for a waiver should
include documentation that the IHA has made best efforts to correct the
problems underlying its excess vacancies and could not correct the
problems in a cost-effective manner.
(b) Effect of Rescission. If there is a rescission of appropriated
funds that reduces the level of Comprehensive Grant Program funding in
an approved Annual Statement under the CGP, to the extent that the IHA
can document that it is not possible to complete all the vacant unit
rehabilitation in the IHA's approved Annual Statement, the IHA may seek
and HUD may grant a waiver for 1 fiscal year to permit full PFS
eligibility for those units approved but not funded.
PART 990--ANNUAL CONTRIBUTIONS FOR OPERATING SUBSIDY
9. The authority citation for part 990 would continue to read as
follows:
Authority: 42 U.S.C. 1437g and 3535(d).
10. Section 990.102 would be amended by adding definitions for
``Long-term vacancy'', ``Units vacant due to circumstances and actions
beyond the PHA's control'', and ``Vacant unit undergoing
modernization''; by revising the definitions for ``Unit approved for
deprogramming'' and ``Unit months available''; and by removing the
definition for ``Vacant, On-Schedule Modernization Units'', to read as
follows:
Sec. 990.102 Definitions.
* * * * *
Long-term vacancy. This term means the same as it is used in the
definition of ``Unit Months Available'' in this section.
* * * * *
Unit approved for deprogramming. (1) A dwelling unit for which HUD
has approved the PHA's formal request to remove the dwelling unit from
the PHA's inventory and the Annual Contributions Contract but for which
removal (i.e., deprogramming) has not yet been completed; or
(2) A nondwelling structure or a dwelling unit used for nondwelling
purposes that the PHA has determined will no longer be used for PHA
purposes and that HUD has approved for removal from the PHA's inventory
and Annual Contributions Contract.
Unit months available. Project Units multiplied by the number of
months the Project Units are available for occupancy during a given PHA
fiscal year. For purposes of this part, a unit is considered available
for occupancy from the date established as the End of the Initial
Operating Period for the Project until the time the unit is approved by
HUD for deprogramming and is vacated or is approved for nondwelling
use. A unit will be considered a long-term vacancy and will not be
considered available for occupancy in any given PHA Requested Budget
Year if the PHA determines that:
(1) The unit has been vacant for more than 12 months at the time
the PHA determines its Actual Occupancy Percentage;
(2) The unit is not either:
(i) A vacant unit undergoing modernization; or
(ii) A unit vacant for circumstances and actions beyond the PHA's
control, as these terms are defined in this section; and
(3) The PHA determines that it will have a vacancy percentage of
more than 3 percent and will have more than five vacant units, for its
Requested Budget Year, even after adjusting for vacant units undergoing
modernization and units that are vacant for circumstances and actions
beyond the PHA's control, as defined in this section. (Reference in
this part to ``more than five units'' or ``fewer than five units''
shall refer to a circumstance in which five units equals or exceeds 3
percent of the number of units to which the 3 percent threshold is
applicable.)
Units vacant due to circumstances and actions beyond the PHA's
control. Dwelling units that are vacant due to circumstances and
actions that prohibit the PHA from occupying, selling, demolishing,
rehabilitating, reconstructing, consolidating or modernizing vacant
units and are beyond the PHA's control. For purposes of this
definition, circumstances and actions beyond the PHA's control are
limited to:
(1) Litigation. The effect of court litigation such as a court
order or settlement agreement that is legally enforceable. An example
would be units that are being held vacant as part of a court-ordered or
HUD-approved desegregation plans.
(2) Laws. Federal or State laws of general applicability, or their
implementing regulations. Units vacant only because they do not meet
[[Page 37304]]
minimum standards pertaining to construction or habitability under
Federal, State, or local laws or regulations will not be considered
vacant due to circumstances and actions beyond the PHA's control.
(3) Changing market conditions. For example, small PHAs that are
located in areas experiencing population loss or economic dislocations
may face a lack of demand in the foreseeable future, even after the PHA
has taken aggressive marketing and outreach measures.
(4) Natural disasters.
(5) Insufficient funding for otherwise approvable applications made
for Comprehensive Improvement Assistance Program (CIAP) funds.
(6) RMC funding. The failure of a PHA to fund an otherwise
approvable RMC request for Federal modernization funding;
(7) Casualty losses. Delays in repairing damage to vacant units due
to the time needed for settlement of insurance claims.
* * * * *
Vacant unit undergoing modernization. Except as provided in
Sec. 990.119(a), a vacant unit in an otherwise viable project (as
determined using the indicia in Sec. 970.6 of this chapter), when the
project is undergoing modernization that includes work that is
necessary to reoccupy the vacant unit, and in which one of the
following conditions is met:
(1) The unit is under construction (i.e., the construction contract
has been awarded or force account work has started); or
(2) The treatment of the vacant unit is included in a HUD-approved
modernization budget (e.g., the Annual Statement for the Comprehensive
Grant Program (CGP) (Form HUD-52837 or its successor), or the
Comprehensive Improvement Assistance Program (CIAP) Budget (Form HUD-
52825 or its successor)), but the time period for placing the vacant
unit under construction has not yet expired. The PHA must place the
vacant unit under construction within two Federal Fiscal Years (FFYs)
after the FFY in which the modernization funds are approved.
11. Section 990.108 would be amended by revising paragraph (b), to
read as follows:
Sec. 990.108 Other costs.
* * * * *
(b) (1) Costs attributable to units approved for deprogramming and
vacant may be eligible for inclusion, but must be limited to the
minimum services and protection necessary to protect and preserve the
units until the units are deprogrammed. Costs attributable to units
temporarily unavailable for occupancy because the units are utilized
for PHA-related activities are not eligible for inclusion. In
determining the PFS operating subsidy, these units shall not be
included in the calculation of Unit Months Available. Units approved
for deprogramming shall be listed by the PHA, and supporting
documentation regarding direct costs attributable to such units shall
be included as a part of the Performance Funding System calculation in
which the PHA requests operating subsidy for these units. If the PHA
requires assistance in this matter, the PHA should contact the HUD
Field Office.
(2) Units approved for nondwelling use to promote economic self-
sufficiency services and anti-drug activities are eligible for
operating subsidy under the conditions provided in this paragraph
(b)(2), and the costs attributable to these units are to be included in
the operating budget. If a unit satisfies the conditions stated below,
it will be eligible for subsidy at the rate of the AEL for the number
of months the unit is devoted to such use. Approval will be given for a
period of no more than 3 years. HUD may renew the approval to allow
payments after that period only if the PHA can demonstrate that no
other sources for paying the non-utility operating costs of the unit
are available. The conditions the unit must satisfy are:
(i) The unit must be used for either economic self-sufficiency
activities directly related to maximizing the number of employed
residents or for anti-drug programs directly related to ridding the
development of illegal drugs and drug-related crime. The activities
must be directed toward and for the benefit of residents of the
development.
(ii) The PHA must demonstrate that space for the service or program
is not available elsewhere in the locality and that the space used is
safe and suitable for its intended use or that the resources are
committed to make the space safe and suitable.
(iii) The PHA must demonstrate satisfactorily that other funding is
not available to pay for the non-utility operating costs. All rental
income generated as a result of the activity must be reported as income
in the operating subsidy calculation.
(iv) Operating subsidy may be approved for only one site (involving
one or more contiguous units) per public housing development for
economic self-sufficiency services or anti-drug programs, and the
number of units involved should be the minimum necessary to support the
service or program. Operating subsidy for any additional sites per
development can only be approved by HUD Headquarters.
(v) The PHA must submit a certification with its Performance
Funding System Calculation that the units are being used for the
purpose for which they were approved and that any rental income
generated as a result of the activity is reported as income in the
operating subsidy calculation. The PHA must maintain specific
documentation of the units covered. Such documentation should include a
listing of the units, the street addresses, and project/management
control numbers.
(3) Long-term vacant units that are not included in the calculation
of Unit Months Available are eligible for operating subsidy in the
Requested Budget Year at the rate of 20 percent of the AEL. Allowable
utility costs for long term vacant units will continue to be funded in
accordance with Sec. 990.107.
* * * * *
12. In Sec. 990.109, paragraph (b)(3) would be revised, to read as
follows:
Sec. 990.109 Projected operating income level.
(b) * * *
(3) Projected Occupancy Percentage. The PHA shall determine its
projected percentage of occupancy for all Project Units (Projected
Occupancy Percentage), as follows:
(i) General. Using actual occupancy data collected before the start
of the budget year as a beginning point, the PHA will develop estimates
for its Requested Budget Year (RBY) of: how many units the PHA will
have available for occupancy; how many of the available units will be
occupied and how many will be vacant, and what the average occupancy
percentage will be for the RBY. The conditions under which the RBY
occupancy percentage will be used as the projected occupancy percentage
for purposes of determining operating subsidy eligibility are described
below.
(ii) High Occupancy PHA--No Adjustments Necessary. If the PHA's RBY
Occupancy Percentage, calculated in accordance with Sec. 990.117, is
equal to or greater than 97%, the PHA's Projected Occupancy Percentage
is 97%. If the PHA's RBY Occupancy Percentage is less than 97%, but the
PHA demonstrates that it will have an average of five or fewer vacant
units in the requested budget year, the PHA will use its RBY Occupancy
Percentage as its projected occupancy percentage.
(iii) Adjustments in Determining Occupancy. If the PHA's RBY
Occupancy Percentage is less than 97% and the PHA has more than 5
vacant
[[Page 37305]]
units, the PHA will adjust its estimate of vacant units to exclude
vacant units undergoing modernization and units that are vacant due to
circumstances and actions beyond the PHA's control. After making this
adjustment, the PHA will recalculate its estimated vacancy percentage
for the RBY.
(A) High Occupancy PHA After Adjustment. If the recalculated
vacancy percentage is 3% or less (or the PHA would have five or fewer
vacant units), the PHA will use its RBY Occupancy Percentage as its
projected occupancy percentage.
(B) Low Occupancy PHA--Adjustment for Long-Term Vacancies. If the
recalculated vacancy percentage is greater than 3% (or more than 5
vacant units), the PHA will then further adjust its RBY Occupancy
Percentage by excluding from its calculation of Unit Months Available
(UMAs), all units that have been vacant for longer than 12 months that
are not vacant units undergoing modernization or are not units vacant
due to circumstances and actions beyond the PHA's control.
(iv) Low Occupancy PHA After All Adjustments. A PHA that has
determined its RBY Occupancy Percentage in accordance with paragraph
(b)(iii)(B) of this section will be eligible for operating subsidy as
follows:
(A) Long-term vacancies removed from the calculation of UMAs will
be eligible to receive a reduced operating subsidy calculated at 20% of
the PHA's AEL.
(B) If the recalculated RBY Occupancy Percentage is 97% or higher,
the PHA will use 97%.
(C) If the recalculated RBY Occupancy Percentage is less than 97%,
but the vacancy rate after adjusting for vacant units undergoing
modernization and units that are vacant due to circumstances and
actions beyond the PHA's control is 3% or less (or the PHA has five or
fewer vacant units), the PHA may use its recalculated RBY Occupancy
Percentage as its projected occupancy percentage.
(D) If the recalculated RBY Occupancy Percentage is less than 97%
and the vacancy percentage is greater than 3% (or the PHA has more than
five vacant units) after adjusting for vacant units undergoing
modernization and units that are vacant due to circumstances and
actions beyond the PHA's control, the PHA will use 97% as its projected
occupancy percentage, but will be allowed to adjust the 97% by the
number of vacant units undergoing modernization and units that are
vacant due to circumstances and actions beyond the PHA's control. For a
small PHA using five vacant units as its occupancy objective for the
RBY, the PHA will determine what percentage five units represents as a
portion of its units available for occupancy and subtract that
percentage from 100%. The result will be used as the PHA's projected
occupancy percentage, but the PHA will be allowed to adjust the
projected occupancy percentage by vacant units undergoing modernization
and units that are vacant for circumstances and actions beyond the
PHA's control.
* * * * *
13. Section 990.117 would be revised to read as follows:
Sec. 990.117 Determining Actual and Requested Budget Year Occupancy
Percentages.
(a) Actual Occupancy Percentage. When submitting Performance
Funding System Calculations for Requested Budget Years beginning on or
after January 1, 1996, the PHA shall determine an Actual Occupancy
Percentage for all Project Units included in the Unit Months Available.
The PHA shall have the option of basing this option on either:
(1) The number of units occupied on the last day of the month that
ends 6 months before the beginning of the Requested Budget Year; or
(2) The average occupancy during the month ending 6 months before
the beginning of the Requested Budget Year. If the PHA elects to use an
average occupancy under this paragraph (a)(2), the PHA shall maintain a
record of its computation of its Actual Occupancy Percentage.
(b) Requested Budget Year Occupancy Percentage. The PHA will
develop a Requested Budget Year Occupancy Percentage by taking the
Actual Occupancy Percentage and adjusting it to reflect changes up or
down in occupancy during the Requested Budget Year due to HUD-approved
activities such as units undergoing modernization, new development,
demolition, or disposition. If after the submission and approval of the
Performance Funding System Calculations for the Requested Budget Year,
there are changes up or down in occupancy because of modernization, new
development, demolition or disposition that are not reflected in the
Requested Budget Year Occupancy Percentage, the PHA may submit a
revision to reflect the actual change in occupancy due to these
activities.
(c) Documentation Required to be Maintained. The PHA must maintain,
and upon HUD's request, make available to HUD specific documentation of
the occupancy status of all units, including long-term vacancies,
vacant units undergoing modernization, and units vacant due to
circumstances and actions beyond the PHA's control. This documentation
shall include a listing of the units, street addresses, and project/
management control numbers.
Sec. 990.118 [Removed and Reserved]
14. Section 990.118, Comprehensive Occupancy Plan Requirements,
would be removed and reserved.
15. Section 990.119 would be revised to read as follows:
Sec. 990.119 Transition provisions.
(a) Treatment of Units Already Under an Approved Modernization
Budget. Vacant units to be rehabilitated under modernization budgets
approved in FFY 1995 or prior are subject to the modernization
implementation schedule, without extension, previously approved by HUD.
It is the intent of HUD not to penalize PHAs that have longer
construction schedules in an approved modernization budget.
(b) Treatment of Existing COPs. (1) A PHA that on [effective date
of final rule] is operating under a Comprehensive Occupancy Plan (COP)
approved by HUD under Sec. 990.118, as that section existed before
[effective date of final rule] may, until the expiration of its COP,
continue to determine its PFS eligibility under the provisions of part
990 effective on 1 day before effective date of final rule. If the PHA
does not elect to continue to determine its PFS eligibility using its
COP, the PHA's PFS eligibility will be calculated in accordance with
this part.
(2) HUD will not approve any extensions of existing COPs.
16. A new Sec. 990.121 would be added to subpart A, to read as
follows:
Sec. 990.121 Waivers.
(a) Documentation for Waiver. A waiver may be granted in accordance
with Sec. 999.101 of this chapter. Any request for a waiver should
include documentation that the PHA has made best efforts to correct the
problems underlying its excess vacancies and could not correct the
problems in a cost-effective manner.
(b) Effect of Rescission. If there is a rescission of appropriated
funds that reduces the level of Comprehensive Grant Program funding in
an approved Annual Statement under the CGP, to the extent that the PHA
can document that it is not possible to complete all the vacant unit
rehabilitation in the PHA's approved Annual Statement, the PHA may seek
and HUD may grant a waiver for 1 fiscal year to permit full PFS
[[Page 37306]]
eligibility for those units approved but not funded.
Dated: June 27, 1995.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 95-17810 Filed 7-18-95; 8:45 am]
BILLING CODE 4210-33-P
