[Federal Register Volume 61, Number 190 (Monday, September 30, 1996)]
[Rules and Regulations]
[Pages 51178-51184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24874]
[[Page 51177]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 950 and 990
Public and Indian Housing Performance Funding System: Incentives;
Interim Rule
Federal Register / Vol. 61, No. 190 / Monday, September 30, 1996 /
Rules and Regulations
[[Page 51178]]
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-4072-I-01]
RIN 2577-AB65
Public and Indian Housing Performance Funding System: Incentives
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Interim rule.
-----------------------------------------------------------------------
SUMMARY: This interim rule amends HUD's regulations for the Performance
Funding System that governs payment of operating subsidy to Public
Housing Agencies and Indian Housing Authorities (collectively called
Housing Agencies or HAs). It makes four principal changes: it codifies
incentive adjustments that were made for Federal Fiscal Years 1996
through 1998 via a Notice to Housing Agencies; it adds a provision to
gradually phase down operating subsidies provided to Housing Agencies
when they obtain HUD approval to demolish units; it clarifies how
combining two efficiency units into a one-bedroom unit is to be treated
for operating subsidy eligibility; and it removes a limitation on the
time period that applies to an HA's eligibility to benefit from certain
utility savings efforts.
A rule is necessary because the incentives that were contained in
the referenced Notice were based on legislation that expires after
September 30, 1996. Without action by HUD to continue these incentives
beyond that date, HAs may be reluctant to adopt and implement
worthwhile practices based solely on the provisions of the Notice.
Since the Secretary has authority to regulate in this area,
promulgation of this interim rule will give HAs a regulatory basis for
adopting worthy changes. The change with respect to utility savings is
to conform the regulation to the statute, since a six-year limitation
was just removed from the authorizing statute.
DATES: Effective date: October 30, 1996, except that Secs. 950.725(b),
950.756, 950.757, 990.109(b), 990.114, and 990.116 shall not become
effective until the OMB approval of the information collections
contained in those sections are announced by a separate publication in
the Federal Register.
Comment due date: Comments must be submitted by November 29, 1996.
The deadline for comments on the information collection
requirements is November 29, 1996, although commenters are advised that
a comment is best assured of having its full effect if it is received
by the Office of Management and Budget (OMB) within 30 days of
publication. See the Public Reporting Burden heading under the Findings
and Certifications section of this preamble regarding the information
collection burden.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Office of the General Counsel, Rules Docket Clerk,
room 10276, Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410-0500. Comments should refer to the
above docket number and title of the rule. Facsimile (FAX) comments are
not acceptable. A copy of each communication submitted will be
available for public inspection and copying during regular business
hours (weekdays 7:30 a.m. to 5:30 p.m. Eastern time) at the above
address.
Comments on the information collections contained in the rule,
which are described in detail in the section, Findings and
Certifications, must refer to the docket number and title of the rule
and be sent to:
Joseph F. Lackey, Jr., HUD Desk Officer, Office of Management and
Budget, New Executive Office Building, Washington, DC 20503
and
Reports Liaison Officer, Room 4238, Office of Public and Indian
Housing, Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410-5000.
FOR FURTHER INFORMATION CONTACT: For the public housing program,
contact Joan DeWitt, Director, Finance and Budget Division, Office of
Public and Assisted Housing Operations, Department of Housing and Urban
Development, 451 Seventh Street, SW., Washington, DC 20410, telephone
(voice): (202) 708-1872, ext. 4035. (This is not a toll-free number.)
For hearing- and speech-impaired persons, this number may be accessed
via text telephone by dialing the Federal Information Relay Service at
1-800-877-8339.
For the Indian housing programs, contact Deborah Lalancette,
Director, Housing Management Division, Office of Native American
Programs, Department of Housing and Urban Development, Room B-133, 451
Seventh Street, SW., Washington, DC 20410, telephone (voice): (202)
755-0088. (This is not a toll-free number.) For hearing- and speech-
impaired persons, this number may be accessed via text telephone by
dialing the Federal Information Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Changes to Encourage HAs to Facilitate Resident Employment and
Undertake Entrepreneurial Initiatives
Congress enacted the Balanced Budget Downpayment Act I on January
26, 1996 (Pub. L. No. 104-99), effective only for Federal Fiscal Year
1996. This legislation permitted housing agencies to take actions to
attract and retain working families in occupancy such as the adoption
of ceiling rents, adoption of earned income adjustments that would make
work attractive to tenants, and adoption of local preferences. The
legislation also repealed Federal admissions preferences.
HUD issued a Notice to housing agencies (PIH 96-24) in the spring
of 1996, providing an incentive under the Performance Funding System
(PFS) for HAs that make significant efforts to utilize the new optional
earned income adjustments for existing residents or that undertake
entrepreneurial activities. The Notice made the incentive effective for
the shorter of the period of three Federal Fiscal Years (FFYs), 1996-
1998, or the period during which there is a shortfall in the
availability of funds to pay full operating subsidy eligibility to all
HAs. Specifically, the Notice permitted HAs that implement the optional
earned income exclusion for existing residents to offset performance
funding system (PFS) funding shortfalls by retaining increases in
dwelling rental income that result from increases in residents' earned
incomes. The Notice also provided an incentive related to other income
earned by the HAs through entrepreneurial activities. This rule adopts
similar changes.
The Secretary has authority under section 3 of the United States
Housing Act of 1937, 42 U.S.C. 1437a, to define the term ``income,'' as
it used for purposes of determining eligibility and rental payment in
the public and Indian housing programs. Although the Appropriations Act
provision expires at the end of the current fiscal year (September 30,
1996), a change made by the Secretary in the definition of income
permitting HAs to adopt an exclusion for earned income can have longer
lasting effect. The Secretary is exercising this authority in another
pending rulemaking, but this rule specifies the impact of adoption of
such an exclusion by an HA.
[[Page 51179]]
Under this new policy, HAs have the authority to establish their
own earned income exclusion, as a means of attracting and retaining
more tenants with earned income. PFS subsidies, however, will be
calculated without respect to either decreases in rental income
resulting from the exclusion, or increases resulting from higher rents
received from households with earned income. In general, HAs that opt
to adopt earned income exclusions will increase their total income if
they are successful in obtaining more and/or higher income working
tenants but will lose income if their policies do not produce a net
increase in rent revenues.
To permit proper determination of operating subsidy eligibility, in
accordance with the principle stated above, a housing agency that
adopts an earned income exclusion will have to calculate and document
the following:
(1) Per unit rental income from resident earned income in the April
1, 1996 rent roll;
(2) A future month's per unit rental income from resident earned
income (see Secs. 950.757(b) and 990.116(b)); and
(3) A future month's rent roll adjusted so that it does not reflect
decreases resulting from the HA's implementation of an optional earned
income exclusion (see Secs. 950.725(b)(1)(ii) and 990.109(b)(1)(ii)).
In addition to the change with respect to an earned income
adjustment, the Department's recent Notice suspended a three percent
change factor applied to project an HA's dwelling rental income. In
recent years this assumption of an increase in the dwelling rental
income has not been realized. In order to ensure that all HAs receive a
level of funding that most nearly reflects their final eligibility
based on actual experience, without requiring them to request a year
end adjustment, the Department suspended use of the change factor for
the same period of time as applies to the earned income exclusion. This
rule codifies that change, as well.
The rationale for incorporating these changes in the PFS regulation
is to ensure some degree of continuity in Departmental policy on which
HAs may rely. The Department believes that these measures can
significantly improve the stability of HAs by permitting HAs to improve
the income mix in their developments, and thus increase dwelling rental
income. The retention by HAs of additional rental income--and other
income--above that permitted under the current PFS formula, up to 100
percent of their PFS eligibility, will directly allow these HAs to
provide better housing services in their communities.
There is statutory authority for these changes under section 9 of
the United States Housing Act of 1937, 42 U.S.C. 1437g. That provision
authorizes HUD to base operating subsidy to housing agencies on a
performance funding system that is substantially based on the system
defined in regulations and in effect on February 5, 1988. These changes
to the PFS are not substantial changes. They deal only with the matter
of how to cope with a subsidy shortfall during the three-year period of
FY 1996 through FY 1998, but they do not apply during any FFY during
which there is not an overall PFS shortfall.
II. Transition Funding for Units Approved for Demolition
This rule also contains a change to the PFS regulations to provide
a short transition period of funding for HAs that have received
approval to demolish HA-owned public or Indian housing units. The
purpose of the change is to encourage and support efforts by an HA to
reduce its overhead costs in a planned and orderly manner when its
inventory of units is reduced by demolition.
Under the current PFS regulations, units are no longer eligible for
operating subsidy when the Department approves the unit for
deprogramming (including approval to demolish the unit) and the unit is
vacant. The only funding provided after that point is funding for
direct costs relating to preserving and protecting the unit pending
actual demolition or disposition.
This abrupt cut-off in subsidy does not provide an opportunity for
affected HAs to reduce their overhead costs in a planned and orderly
way. An HA that undertakes a significant reduction to its inventory
will need to rethink and possibly restructure the way it does business.
This is especially true if the units are not going to be replaced or if
some different type of development management is contemplated. Some HAs
are contemplating the demolition of up to 20% of their inventory.
Faced with the prospect of a sudden and sharp decrease in subsidy
funding, some HAs may decide to postpone the decision to seek HUD
approval to demolish units that clearly meet the criteria for such an
action, especially where the units are not being replaced by tenant-
based subsidy, such as Section 8 Certificates or Vouchers. By retaining
these units in its inventory, an HA continues to receive some level of
operating subsidy support.
This proposed rule strikes a balance between the need to eliminate
disincentives and the need to achieve a reduction in operating subsidy
as a result of demolition activity. Subsidy funding will be continued
to units approved by HUD for demolition under the following conditions:
(1) Units replaced with Section 8 Certificates or Vouchers will not
be eligible for phase-down subsidy;
(2) Units that have been continuously vacant for the twelve-month
period immediately preceding HUD approval for the demolition will be
eligible for subsidy funding based on 20% of the Allowable Expense
Level (AEL) for 12 months beginning with the month that the demolition
request was approved by HUD; and
(3) For units that have not been continuously vacant for twelve
months, the rule phases out the subsidy over a three-year period,
starting with the month in which the unit is approved for demolition
and is vacant. For the initial 12-month period, the unit will be
eligible for subsidy funding based on 100% of AEL. For the next 12-
month period, the unit will be eligible for subsidy funding based on
66% of the AEL. For the third 12-month period, the unit will be
eligible for funding based on 33% of the AEL.
(4) Units that are approved for demolition and are replaced with
conventional public or Indian housing units will not be eligible for
phase-down subsidy when the replacement units become eligible for
subsidy.
(5) Units that are removed from the inventory as a result of being
combined with other units are not considered to be demolished units for
this purpose.
The intent of this change is to maintain the momentum that has been
achieved to demolish the worst parts of the public housing inventory.
The Department is concerned that if it does not address the legitimate
transitional funding need problems of HAs undergoing inventory and
funding reductions, this momentum will be lost.
This change to the PFS regulations falls within the authority of
the Secretary to define the PFS for payment of operating subsidy. The
change merely removes some of the obstacles to demolishing seriously
deteriorated or obsolete housing stock, while coping with an operating
subsidy shortfall.
One limitation on the Department's ability to issue rules on the
subject of PFS is the statutory requirement that ``any proposed
regulation providing for amendment, alteration, adjustment, or other
change in the performance funding system relating to vacant units shall
be issued pursuant to a negotiated rule making procedure * * *.''
This rule will provide additional operating subsidy to certain HAs
that had or will have (vacant) units approved
[[Page 51180]]
for demolition in 1995 or later. The additional costs to the PFS are
estimated as follows: $17.6 million in FY 1997 (including $1.3 million
for FY 1995, $6 million for FY 1996, and $10.3 million for FY 1997);
$19.6 million in FY 1998; and $25.5 million in FY 1999. The
corresponding savings for the PFS resulting from the demolitions are as
follows: $4.9 million in FY 1996; $10.8 million in FY 1997; $44.1
million in FY 1998; and $81.9 million in FY 1999. When the savings are
compared with the cost, the results are a net cost of $1.9 million for
FYs 1995 through 1997, but a net savings of $24.5 million and $56.4
million, respectively, for FYs 1998 and 1999. Thus, the net effect of
this rule on PFS during the period is a savings in total operating
subsidy eligibility amount.
Moreover, compared to the magnitude of the PFS in its entirety,
this phase-down funding is minimal in scale. The $1,900,000 of net cost
in FYs 1996 and 1997 can be contrasted with the amount provided in the
FY 1997 HUD appropriations bill as passed by the House of
$2,850,000,000. In addition, it should be noted that most HAs that are
demolishing public or Indian housing units are receiving certificates
as replacement for those lost units. Those HAs are not eligible for
phase-down of subsidy under this rule, and so are not affected by this
provision.
The purpose to be served by a negotiated rulemaking is to assure
that all interested parties have an opportunity to advance their
interests during the development of a proposal that will affect them.
Since the phase-down of subsidy for units approved for demolition
produces an overall savings to the PFS and is minimal in effect when
compared with the overall level of PFS funding, the impact on HAs and
tenants of this rule does not rise to the level to necessitate
participation in a negotiated rulemaking. Therefore, the Department has
determined that the phase-down provision does not constitute the type
of change in PFS relating to vacant units for which a negotiated
rulemaking is required.
III. Treatment of Combination of Two Efficiency Units Into a One
Bedroom Unit
In recognition of the marketing problem HAs have regarding
efficiency apartments and the resulting high vacancy rates in these
units, the Department wants to support HAs which make the decision to
convert efficiency units into one bedroom units. This rule amends
Secs. 990.108(d) and 950.720(e), Costs resulting from combination of
two or more units, to treat the conversion of two efficiency units into
a one-bedroom unit as eligible for funding under this section.
IV. Changes to Utility Savings Retention Period
In enacting the 1996 Omnibus Appropriations Act, Congress removed
the statutory restriction of six years imposed after the first year of
utility rate savings that an HA is permitted to share. Therefore, this
rule removes the language from the rule that enforced that time limit.
Now, the utility rate savings can continue to be shared for as long as
the actions of the HA continue to be cost-effective.
This change is being made not only for public housing but also for
Indian housing. Section 201(b)(2) of the United States Housing Act of
1937 (42 U.S.C. 1437aa(b)(2), ``the 1937 Act'') provides that
amendments to provisions found in title II of the 1937 Act do not apply
to Indian housing unless the amendment so states. Nevertheless, when
the statutory authority to extend the period of permitted rate savings
sharing from one year to seven years was implemented, the extension was
made applicable to Indian housing despite the absence of specific
mention of Indian housing in the statutory amendment. The preamble of
the rule implementing the extension stated (at 59 FR 33653) that, ``Not
to do so would frustrate the goals of providing incentives to undertake
energy conservation activities.'' That policy still governs, and
therefore this change to extend the period during which utility rate
savings can continue is being applied to Indian housing, as well.
V. Findings and Certifications
A. Justification for Interim Rule
The Department generally publishes a rule for public comment before
issuing a rule for effect, in accordance with its regulations on
rulemaking in 24 CFR part 10. However, part 10 provides that prior
public procedure will be omitted if HUD determines that it is
``impracticable, unnecessary, or contrary to the public interest'' (24
CFR 10.1).
The change made by this interim rule merely adds an optional
exclusion to the definition of income used by Housing Agencies, which
supports the statutory policy of obtaining a broad range of income
levels in public housing and Indian housing developments and the
Secretary's policy of encouraging HAs to increase the number of working
families residing in these developments. As noted earlier, the
Department has already authorized the use of such income exclusions for
a limited period of time, based on the Balanced Budget Downpayment Act
I, in a Notice. Authorization of such an optional exclusion in this
rule is expected to increase the number of HAs using it, helping to
encourage the participation of working families in these programs.
Implementation of the rule's provisions is needed as soon as
possible to facilitate the adoption of this type of exclusion to
realize the benefits of increasing the incentives for working families
to participate and to prevent HAs who are now excluding earned income
from having to change their policy starting on October 1, 1996, only to
re-institute it later. Therefore, the Department has determined that
good cause exists to omit prior public procedure for this final rule
because such delay would be contrary to the public interest and
unnecessary.
In the interest of obtaining the fullest participation possible in
determining the factors that should be considered in an HA's
determination to adopt an earned income exclusion and to assure that
other changes made are well-tailored to HA operations, the Department
does invite public comment on the rule. The comments received within
the 60-day comment period will be considered during development of a
final rule that will supersede this interim rule.
B. Impact on the Environment
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 interim 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 (42 U.S.C. 4332).
C. Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule do not have significant impact 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 rule is not subject to review under the Order. The rule adds some
incentives to the formula 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.
[[Page 51181]]
D. Impact on the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule does not have
potential for significant impact on family formation, maintenance, and
general well-being. Therefore, the rule is not subject to review under
the Order. No significant change in existing HUD policies or programs
results from promulgation of this rule, as those policies and programs
relate to family concerns. The rule merely involves the amount of
funding that a HA should receive under a refinement of an existing
procedure.
E. Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule will not have a significant
impact on a substantial number of small entities. This rule will permit
some modest increase in subsidy eligibility for HAs that take advantage
of the incentives. The rule would be unlikely to have any significant
impact on small HAs.
F. Unfunded Mandates Reform Act
The Secretary has reviewed this rule before publication and by
approving it certifies, in accordance with the Unfunded Mandates Reform
Act of 1995 (2 U.S.C. 1532), that this rule does not impose a Federal
mandate that will result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year.
G. Regulatory Review
This interim rule was reviewed by the Office of Management and
Budget under Executive Order 12866. Any changes made in this interim
rule as a result of that review are clearly identified in the docket
file for this interim rule, which is available for public inspection in
the HUD's Office of the Rules Docket Clerk, Room 10276, 451 Seventh
Street, SW., Washington, DC 20410-0500.
H. Public Reporting Burden
The information collection requirements contained in this rule, as
described in Secs. 950.725(b), 950.756, 950.757, 990.109(b), 990.114,
and 990.116 have been submitted to the Office of Management and Budget
for review under the Paperwork Reduction Act of 1995 (42 U.S.C. 3501-
3520).
1. In accordance with 5 CFR 1320.5(a)(1)(iv), the Department is
setting forth the following concerning the proposed collection of
information:
(a) Title of the information collection proposal: Performance
Funding System Incentives.
(b) Summary of the collection of information: The information
collected is alternate information about rental income that would have
been collected if the HA had not adopted an earned income exclusion,
information about vacant units that have been approved for demolition
and would not otherwise be eligible for operating subsidy, and
identifying increases in earned income so as to exclude some of that
income.
(c) Description of the need for the information and its proposed
use: The information is needed to permit calculation of operating
subsidy eligibility for HAs that want to take advantage of incentives
to facilitate resident employment and to encourage demolition of
seriously deteriorated vacant units.
(d) Description of the likely respondents, including the estimated
number of likely respondents, and proposed frequency of response to the
collection of information: The likely respondents are the approximately
700 HAs that are estimated to take advantage of the incentives.
(e) Estimate of the total reporting and recordkeeping burden that
will result from the collection of information: The total number of
burden hours for this collection of information is estimated to be
16,120 hours, including the time for reviewing instructions, gathering
and maintaining the data, and calculating and requesting the incentive
adjustment. The information will be collected as part of the annual
calculation of eligibility for operating subsidy. The 700 HAs will
determine the effect of the incentives, at a cost of about $15 per
hour, for a total cost of $241,800. This amount is expected to be more
than offset by the resulting increase in operating subsidy payments.
These estimates were developed by consulting with eight housing
agencies.
Reporting Burden:
----------------------------------------------------------------------------------------------------------------
Proposed section Est. ave.
Type of collection of 24 CFR Number of Frequency of response time Annual burden
affected respondents response (hrs.) (hrs.)
----------------------------------------------------------------------------------------------------------------
Addition to PFS rent roll of 950.725& 990.109 700 1 3 2,100
Earned Income Exclusions. (b)(1)(ii).
Phase-down for demolished 950.756, 990.114 20 1 1 20
units.
Incentive for increases in 950.757, 990.116 700 1 20 14,000
earned income.
---------------
Total Burden............ ................ .............. .............. .............. 16,120
----------------------------------------------------------------------------------------------------------------
2. In accordance with 5 CFR 1320.8(b)(3), the Department makes the
following statement:
The reason for collecting the information is to give HUD the basis
for approving a request for a PFS incentive adjustment in operating
subsidy. The information will be used by HUD to approve an adjustment
based on the adoption of an earned income exclusion and/or based on a
phase-down of operating subsidy in connection with demolition of units.
The information collected is public information and does not lend
itself to confidentiality. In accordance with the Paperwork Reduction
Act, HUD may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless the collection displays
a currently valid OMB control number.
3. In accordance with 5 CFR 1320.8(d)(1), the Department is
soliciting comments from members of the public and affected agencies
(see DATES and ADDRESSES sections above) concerning the proposed
collection of information to:
(a) Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
(b) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
(c) Enhance the quality, utility, and clarity of the information to
be collected; and
(d) Minimize the burden of the collection of information on those
who
[[Page 51182]]
are to respond; including through the use of appropriate automated
collection techniques or other forms of information technology, e.g.,
permitting electronic submission of responses.
Catalog
The Catalog of Federal Domestic Assistance number for the
programs affected by this rule is 14.850.
List of Subjects
24 CFR Part 950
Aged, Grant programs--housing and community development, Grant
programs--Indians, Indians, Individuals with disabilities, Low and
moderate income housing, Public housing, Reporting and recordkeeping
requirements.
24 CFR Part 990
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
Accordingly, parts 950 and 990 of title 24 of the Code of Federal
Regulations are amended as follows:
PART 950--INDIAN HOUSING PROGRAMS
1. The authority citation for part 950 continues to read as
follows:
Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437aa-1437ee and
3535(d).
2. In Sec. 950.705, a new paragraph (c) is added, to read as
follows:
Sec. 950.705 Determination of amount of operating subsidy under PFS.
* * * * *
(c) A special phase-down of subsidy to IHAs is applicable when
demolition of units is approved by HUD in Federal Fiscal Year 1995 and
later. See Sec. 950.756.
Sec. 950.715 [Amended]
3. In Sec. 950.715, paragraph (b)(2) is amended by removing the
phrase ``for an additional period not to exceed six years''.
4. In Sec. 950.720, paragraph (e) is amended by redesignating the
text as paragraph (e)(1), and by adding a new paragraph (e)(2), to read
as follows:
Sec. 950.720 Other costs.
* * * * *
(e) * * *
(2) An exception to paragraph (e)(1) of this section is made when
an IHA combines two efficiency units into a one-bedroom unit. In these
cases, the AEL for the requested year shall be multiplied by the number
of unit months not included in the requested year's unit months
available as a result of these combinations that have occurred since
the Base Year.
* * * * *
5. In Sec. 950.725, paragraph (b) is amended by redesignating
paragraph (b)(1) as paragraph (b)(1)(i), by adding a new paragraph
(b)(1)(ii), and by revising paragraph (b)(2), to read as follows:
Sec. 950.725 Projected operating income level.
* * * * *
(b) * * *
(1) * * *
(ii) The Rent Roll used for calculating the projected operating
income level will not reflect decreases resulting from the IHA's
implementation of an optional earned income exclusion authorized by the
definition of ``annual income'' in Sec. 950.102. But see Sec. 950.757
for the earned income incentive adjustment.
(2) Three percent increase. The average monthly dwelling rental
charge per unit, computed under paragraph (b)(1) of this section, is
increased by 3 percent to obtain the projected average monthly dwelling
rental charge per unit of the IHA for the Requested Budget Year, except
that for the shorter of Federal Fiscal Years 1996 through 1998 or the
period during which HUD has an operating subsidy shortfall, no increase
factor will be used.
* * * * *
Sec. 950.730 [Amended]
6. In Sec. 950.730, paragraph (c)(1)(i) is amended by removing the
phrase, ``up to an additional six years,''.
7. A new Sec. 950.756 is added to read as follows:
Sec. 950.756 Phase-down of subsidy for units approved for demolition.
(a) General. Units that have both been approved by HUD for
demolition and been vacated in FFY 1995 and after will be excluded from
an IHA's determination of Unit Months Available when vacated, but they
will remain eligible for subsidy in the following way:
(1) For the first twelve months beginning with the month that a
unit meets both conditions of being approved for demolition and vacant,
the full AEL will be allowed for the unit.
(2) During the second twelve-month period after meeting both
conditions, 66 percent of the AEL will be allowed for the unit.
(3) During the third twelve-month period after meeting both
conditions, 33 percent of the AEL will be allowed for the unit.
(b) Special case for long-term vacant units. Units that have been
vacant for longer than 12 months when they are approved for demolition
are eligible for funding equal to 20% of the AEL for a 12-month period.
(c) Treatment of units replaced with Section 8 Certificates or
Vouchers. Units that are replaced with Section 8 Certificates or
Vouchers are not subject to the provisions of this section.
(d) Treatment of units replaced with Indian housing units. When
replacement conventional Indian housing units become eligible for
operating subsidy, the demolished unit is no longer eligible for any
funding under this section.
(e) Determination of what units are ``replaced.'' For purposes of
this section, replacements are applied first against units that
otherwise would fall in paragraph (a) of this section; any remaining
replacements should be used to reduce the number of units qualifying
under paragraph (b) of this section.
(f) Treatment of units combined with other units. Units that are
removed from the inventory as a result of being combined with other
units are not considered to be demolished units for this purpose.
(g) Retroactive effect. This section is to be applied retroactively
for units approved for demolition during Federal Fiscal Years 1995 and
1996. IHAs affected by this provision may submit a revised calculation
of operating subsidy eligibility for the subject fiscal year(s).
8. A new Sec. 950.757 is added to read as follows:
Sec. 950.757 Three-year incentive adjustments.
(a) Applicability. For the period of Federal Fiscal Year 1996
through Federal Fiscal Year 1998, the provisions of this section apply
to permit IHAs to retain certain sources of income that would otherwise
be offset by a reduction of subsidy. The combined amount retained in
accordance with the provisions of this section may not exceed the
amount of the PFS subsidy shortfall applicable to an IHA in the subject
fiscal year.
(b) Increases in earned income. IHAs are permitted to retain any
increase in dwelling rental income realized after April 1, 1996 as a
result of increased resident earned income, where the governing body of
the IHA has certified that the IHA is making significant efforts to
increase the earned income of existing residents by adopting the
optional earned income exclusion and not just taking actions regarding
new admissions. To implement this paragraph (b), the IHA will compare
the rental income per occupied unit from earned income from April 1,
1996 to the
[[Page 51183]]
rental income per occupied unit from earned income on the date of the
rent roll used for PFS calculation. If an IHA does not have the April
1, 1996 data available, HUD may approve the use of data from a later
month.
(c) Increases in other income. IHAs are permitted to retain any
increase in ``other income'' based on using the definition provided in
this section, as compared with using the definition found in
Sec. 950.102. For purposes of this section, the amount of ``other
income'' is limited to the following three sources:
(1) Excess Utilities: charges to tenants for excess utility
consumption for IHA-supplied utilities.
(2) Nondwelling Rental Income: Rent billed to lessees of dwelling
units rented for nondwelling purposes. Rent billed to lessees of
nondwelling facilities will not be included except for rent billed to
other HUD programs (e.g.; Section 8, congregate housing, family
investment centers).
(3) Other Income: Only charges to other HUD programs (e.g.; Section
8, congregate housing, family investment centers) for use of community
space, central office management and maintenance space will be taken
into consideration. IHAs will calculate the amount of ``other income''
to be retained in a manner prescribed by HUD.
PART 990--ANNUAL CONTRIBUTIONS FOR OPERATING SUBSIDY
9. The authority citation for part 990 continues to read as
follows:
Authority: 42 U.S.C. 1437(g) and 3535(g).
10. In Sec. 990.104, a new paragraph (c) is added, to read as
follows:
Sec. 990.104 Determination of amount of operating subsidy under PFS.
* * * * *
(c) A special phase-down of subsidy to HAs is applicable when
demolition of units is approved by HUD in Federal Fiscal Year 1995 and
later. See Sec. 990.114.
Sec. 990.107 [Amended]
11. In Sec. 990.107, paragraph (b)(2) is amended by removing the
phrase ``for an additional period not to exceed six years''.
12. In Sec. 990.108, paragraph (d) is amended by redesignating the
text as paragraph (d)(1), and by adding a new paragraph (d)(2), to read
as follows:
Sec. 990.108 Other costs.
* * * * *
(d) * * *
(2) An exception to paragraph (d)(1) of this section is made when
an HA combines two efficiency units into a one-bedroom unit. In these
cases, the AEL for the requested year shall be multiplied by the number
of unit months not included in the requested year's unit months
available as a result of these combinations that have occurred since
the Base Year.
* * * * *
13. In Sec. 990.109, paragraph (b) is amended by redesignating
paragraph (b)(1) as paragraph (b)(1)(i), by adding a new paragraph
(b)(1)(ii), and by revising paragraph (b)(2), to read as follows:
Sec. 990.109 Projected operating income level.
* * * * *
(b) * * *
(1) * * *
(ii) The Rent Roll used for calculating the projected operating
income level will not reflect decreases resulting from the HA's
implementation of an optional earned income exclusion authorized by the
definition of ``annual income'' in 24 CFR 913.106(d). But see
Sec. 990.116 for the earned income incentive adjustment.
(2) Three percent increase. The average monthly dwelling rental
charge per unit, computed under paragraph (b)(1) of this section, is
increased by 3 percent to obtain the projected average monthly dwelling
rental charge per unit of the HA for the Requested Budget Year, except
that for the shorter of Federal Fiscal Years 1996 through 1998 or the
period during which HUD has an operating subsidy shortfall, no increase
factor will be used.
* * * * *
Sec. 990.110 [Amended]
14. In Sec. 990.110, paragraph (c)(1) is amended by removing the
phrase, ``up to an additional six years,''.
15. A new Sec. 990.114 is added to read as follows:
Sec. 990.114 Phase-down of subsidy for units approved for demolition.
(a) General. Units that have both been approved by HUD for
demolition and been vacated in FFY 1995 and after will be excluded from
an HA's determination of Unit Months Available when vacated, but they
will remain eligible for subsidy in the following way:
(1) For the first twelve months beginning with the month that a
unit meets both conditions of being approved for demolition and vacant,
the full AEL will be allowed for the unit.
(2) During the second twelve-month period after meeting both
conditions, 66 percent of the AEL will be allowed for the unit.
(3) During the third twelve-month period after meeting both
conditions, 33 percent of the AEL will be allowed for the unit.
(b) Special case for long-term vacant units. Units that have been
vacant for longer than 12 months when they are approved for demolition
are eligible for funding equal to 20% of the AEL for a 12-month period.
(c) Treatment of units replaced with Section 8 Certificates or
Vouchers. Units that are replaced with Section 8 Certificates or
Vouchers are not subject to the provisions of this section.
(d) Treatment of units replaced with public housing units. When
replacement conventional public housing units become eligible for
operating subsidy, the demolished unit is no longer eligible for any
funding under this section.
(e) Determination of what units are ``replaced.'' For purposes of
this section, replacements are applied first against units that
otherwise would fall in paragraph (a) of this section; any remaining
replacements should be used to reduce the number of units qualifying
under paragraph (b) of this section.
(f) Treatment of units combined with other units. Units that are
removed from the inventory as a result of being combined with other
units are not considered to be demolished units for this purpose.
(g) Retroactive effect. This section is to be applied retroactively
for units approved for demolition during Federal Fiscal Years 1995 and
1996. HAs affected by this provision may submit a revised calculation
of operating subsidy eligibility for the subject fiscal year(s).
16. A new Sec. 990.116 is added to read as follows:
Sec. 990.116 Three-year incentive adjustments.
(a) Applicability. For the period of Federal Fiscal Year 1996
through Federal Fiscal Year 1998, the provisions of this section apply
to permit HAs to retain certain sources of income that would otherwise
be offset by a reduction of subsidy. The combined amount retained in
accordance with the provisions of this section may not exceed the
amount of the PFS subsidy shortfall applicable to an HA in the subject
fiscal year.
(b) Increases in earned income. HAs are permitted to retain any
increase in dwelling rental income realized after April 1, 1996 as a
result of increased resident earned income, where the Board of
Commissioners of the HA has certified that the HA is making significant
efforts to increase the earned income of existing residents by adopting
the optional earned income exclusion and not just taking actions
regarding new admissions. To implement this
[[Page 51184]]
paragraph (b), the HA will compare the rental income per occupied unit
resulting from earned income from April 1, 1996 to the rental income
per occupied unit resulting from earned income on the date of the rent
roll used for PFS calculation. If an HA does not have the April 1, 1996
data available, HUD may approve the use of data from a later month.
(c) Increases in other income. HAs are permitted to retain any
increase in ``other income'' based on using the definition provided in
this section, as compared with using the definition found in
Sec. 990.102. For purposes of this section, the amount of ``other
income'' is limited to the following three sources:
(1) Excess Utilities: charges to tenants for excess utility
consumption for HA supplied utilities.
(2) Nondwelling Rental Income: rent billed to lessees of dwelling
units rented for nondwelling purposes. Rent billed to lessees of
nondwelling facilities will not be included except for rent billed to
other HUD programs (e.g.; Section 8, congregate housing, family
investment centers).
(3) Other Income: Only charges to other HUD programs (e.g.; Section
8, congregate housing, family investment centers) for use of community
space, central office management and maintenance space will be taken
into consideration. HAs will calculate the amount of ``other income''
to be retained in a manner prescribed by HUD.
Dated: July 29, 1996.
Christopher Hornig,
Acting Assistant Secretary for Public and Indian Housing.
[FR Doc. 96-24874 Filed 9-27-96; 8:45 am]
BILLING CODE 4210-33-P
