E9-23022. Loan Guaranty: Assistance to Eligible Individuals in Acquiring Specially Adapted Housing; Cost-of-Construction Index

AGENCY:

Department of Veterans Affairs.

ACTION:

Final rule.

SUMMARY:

This document amends the Department of Veterans Affairs' (VA's) Loan Guaranty regulations concerning assistance to eligible individuals in acquiring specially adapted housing. This final rule implements provisions of the Housing and Economic Recovery Act of 2008, which authorized VA to provide for automatic annual increases in the dollar amounts available to certain Specially Adapted Housing grant recipients.

DATES:

Effective Date: October 26, 2009.

FOR FURTHER INFORMATION CONTACT:

Katherine Faliski, Assistant Director for Loan Policy and Valuation, Loan Guaranty Service (26), Veterans Benefits Administration, Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, [phone]. (This is not a toll-free telephone number.)

SUPPLEMENTARY INFORMATION:

In a document published in the Federal Register on May 12, 2009 (74 FR 22145), VA proposed to amend the Specially Adapted Housing (SAH) regulations (38 CFR part 36, subpart C) to implement provisions of Public Law 110-289, the Housing and Economic Recovery Act of 2008. Section 2605 of the law directed the Secretary of Veterans Affairs to establish a residential home cost-of-construction index for the purpose of increasing certain SAH grant amounts. It also authorized the Secretary to “use an index developed in the private sector that the Secretary determines is appropriate for [this purpose].”

The comment period ended June 11, 2009, and VA received only one response, which was from an association representing homebuilders. This commenter indicated its support for the proposed rule with regard to VA's plan to implement “much needed increases in grant amounts that are provided to severely disabled Veterans” through the SAH program. However, the commenter disagreed with VA's choice of index.

VA proposed the Turner Building Cost Index (TBCI) for increasing the amounts of SAH grant assistance available. We based the choice mainly on the fact that the TBCI emphasizes the costs of labor and materials, rather than property values or sales prices. Since property values do not necessarily reflect the expense a Veteran or servicemember might have to incur when adapting a home, we believed the TBCI to be the best-suited index for the SAH program.

The commenter pointed out that, in its opinion, the TBCI is not appropriate, because the TBCI measures primarily non-residential building construction costs. Instead, the commenter recommended that VA adopt an index like the U.S. Census Bureau's Price Deflator Index of New One-Family Houses Under Construction (“Fisher Index”). The commenter stated that the Census Bureau's Index is preferable to the TBCI because it tracks new homes under construction as opposed to non-residential buildings. It also pointed out that the Fisher Index is developed by a Government organization whose methodology is readily available.

Due to the commenter's position, VA further researched the methodologies used to develop the various indices. VA discussed with representatives from Turner and the U.S. Census Bureau the strengths and weaknesses of applying each of their respective indices (the TBCI, the Fisher Index, and the Laspeyres Price Index) to the SAH program and determined that, at this time, the TBCI is the most appropriate for calculating the annual SAH increases. VA concurs with the commenter's preference for a cost index that is maintained by a Government organization. However, VA points out that the indices produced by the U.S. Census Bureau are primarily value-driven, as they are derived by subtracting the cost of land and “other costs not related to construction” from the value of the home.

VA believes that, for the purposes of the SAH program, an index based on actual cost of materials and labor is more suitable than one based on the value of homes. The SAH authorizing statutes expressly require payment of SAH assistance based on “costs” to the individual. Section 2605 of the Housing and Economic Recovery Act of 2008 also refers expressly to costs, not value. Additionally, VA has determined that, at least for the first year of implementation, the TBCI will afford Veterans more purchasing power when constructing or adapting a home than the Fisher or Laspeyres indices.

Admittedly, the TBCI is not perfectly tailored for the SAH program. The commenter is correct in that the TBCI is mainly driven by commercial construction costs and that the statute refers to a residential index.

VA has determined, however, that although the TBCI may not be intended for estimating residential construction costs in general, it is a reliable indicator for the types of residential costs unique to the SAH program. For instance, many Veterans need SAH assistance to reinforce their homes with steel piers, purchase wheelchair lifts, and pay engineering fees—all types of expenses not generally associated with residential construction, yet very relevant to Veterans who participate in the SAH program. Furthermore, VA analyzed data from the last forty years and saw that, had SAH assistance been tied to the TBCI during that time, today's grant amount would be about $6,000 higher than had it been tied to the Fisher or Laspeyres. Given that the TBCI is cost-based; the types of adaptations in the SAH program are not “typical” residential costs; the difference in the indices over four decades is relatively small; and the advantages of the TBCI weigh in a Veteran's favor, we have decided to adopt the TBCI as the cost-of-construction index for determining fiscal year 2010 grant amounts.

For the above reasons, we will not make any changes to the proposed rule based upon the comment we received. However, we will monitor the cost indices available in the marketplace and propose changes to VA's Loan Guaranty regulations if we determine that increases in SAH grant amounts should be based upon an alternative cost-of-construction index.

Unfunded Mandates

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any year. This final rule would have no such effect on State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act

This document contains no provisions constituting collections of information.

Executive Order 12866

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Executive Order classifies a regulatory action as a “significant regulatory action,” requiring review by the Office of Management and Budget (OMB) unless OMB waives such a review, if it is a regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

The economic, interagency, budgetary, legal, and policy implications of this final rule have been examined, and it has been determined not to be a significant regulatory action under Executive Order 12866.

Regulatory Flexibility Act

The Secretary hereby certifies that the adoption of the final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. This final rule will directly affect only individuals and will not directly affect small entities. Therefore, pursuant to 5 U.S.C. 605(b), the rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are 64.106, Specially Adapted Housing for Disabled Veterans; and 64.118, Veterans Housing—Direct Loans for Certain Disabled Veterans.

Lists of Subjects in 38 CFR Part 36

• Condominiums
• Housing
• Indians
• Individuals with disabilities
• Loan programs—housing and community development
• Loan programs—Indians
• Loan programs—veterans
• Manufactured homes
• Mortgage insurance
• Reporting and recordkeeping requirements
• Veterans

Approved: September 15, 2009.

John R. Gingrich,

Chief of Staff, Department of Veterans Affairs.

For the reasons set out in the preamble, VA amends 38 CFR part 36 (Subpart C) as set forth below.

PART 36—LOAN GUARANTY

1. The authority citation for part 36 continues to read as follows:

Authority: 38 U.S.C. 501 and as otherwise noted.

Subpart C—Assistance to Certain Disabled Veterans in Acquiring Specially Adapted Housing

2. Add § 36.4412 to read as follows:

§ 36.4412

Annual adjustments to the aggregate amount of assistance available.

(a) On October 1 of each year, the Secretary will increase the aggregate amounts of assistance available for grants authorized under 38 U.S.C. 2101(a) and 2101(b). Such increase will be equal to the percentage by which the Turner Building Cost Index for the most recent calendar year exceeds that of the next preceding calendar year.

(b) Notwithstanding paragraph (a) of this section, if the Turner Building Cost Index for the most recent full calendar year is equal to or less than the next preceding calendar year, the percentage increase will be zero.

(c) No later than September 30 of each year, the Secretary will publish in the Federal Register the aggregate amounts of assistance available for the upcoming fiscal year.

(Authority: 38 U.S.C. 2102(e))