[Federal Register Volume 60, Number 227 (Monday, November 27, 1995)]
[Rules and Regulations]
[Pages 58446-58454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28746]
[[Page 58445]]
_______________________________________________________________________
Part III
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 103 and 125
Fair Housing Initiatives Program; Final Rule
Federal Register / Vol. 60, No. 227 / Monday, November 27, 1995 /
Rules and Regulations
[[Page 58446]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Fair Housing and Equal
Opportunity
24 CFR Parts 103 and 125
[Docket No. FR-3480-F-03]
RIN 2529-AA62
Fair Housing Initiatives Program
AGENCY: Office of the Assistant Secretary for Fair Housing and Equal
Opportunity, HUD.
ACTION: Final rule.
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SUMMARY: This final rule amends the Fair Housing Initiatives Program
(FHIP) regulation at 24 CFR part 125 to provide for the implementation
of statutory amendments pertaining to private enforcement initiatives;
the funding of fair housing organizations; and the implementation of
national (including national fair housing month), regional and local,
and community-based education and outreach programs. In addition, it
corrects a cross-reference contained in part 103.
DATES: Effective date: December 27, 1995.
FOR FURTHER INFORMATION CONTACT: Maxine Cunningham, Director, Office of
Fair Housing Initiatives and Voluntary Programs, Room 5234, 451 Seventh
Street, SW., Washington, DC 20410-2000. Telephone number (202) 708-
0800. A telecommunications device (TDD) for hearing and speech impaired
persons is available at (202) 708-9300. (These are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act Statement
The information collection requirements contained in Sec. 125.105
of this rule have been approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520), and assigned OMB control number 2529-0033. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a valid
control number.
II. Background
A. Program Authority and Description
The Fair Housing Act--Title VIII of the Civil Rights Act of 1968,
as amended, 42 U.S.C. 3601-19--charges the Secretary of Housing and
Urban Development with responsibility to accept and investigate
complaints alleging discrimination based on race, color, religion, sex,
handicap, familial status or national origin in the sale, rental, or
financing of most housing, and in other real estate-related
transactions. In addition, the Fair Housing Act directs the Secretary
to coordinate with State and local agencies administering fair housing
laws, and to cooperate with and render technical assistance to public
or private entities carrying out programs to prevent and eliminate
discriminatory housing practices.
Section 561 of the Housing and Community Development Act of 1987
(1987 Act), 42 U.S.C. 3616 note, established the Fair Housing
Initiatives Program (FHIP) to strengthen the Department's enforcement
of the Fair Housing Act and to further fair housing. This program
assists projects and activities designed to enhance compliance with the
Fair Housing Act and substantially equivalent State and local fair
housing laws. Implementing regulations are found at 24 CFR part 125.
Section 905 of the Housing and Community Development Act of 1992
(HCDA 1992) (Pub. L. 102-550, approved October 28, 1992), substantially
amends section 561 of the Housing and Community Development Act of
1987. On April 1, 1993, the Department published an Advance Notice of
Proposed Rulemaking (ANPR) (58 FR 17172) requesting comment on HUD's
implementation of section 905 of the Housing and Community Development
Act of 1992. The Department received three comments in response to the
ANPR.
On August 29, 1994, HUD published a proposed rule to amend the Fair
Housing Initiatives Program (59 FR 44596). HUD invited public comments
for consideration in drafting a final rule. During the comment period,
which ended October 28, 1994, HUD received 15 public comments, 7 from
individuals (6 of these being identical form comments submitted in
support of comments submitted by an individual broker), 5 from fair
housing enforcement organizations, 1 from an organization representing
realtors, 1 from an organization representing lenders, and 1 from a
lending firm. These comments are discussed in the following section.
B. Public Comments on the Proposed Rule
The public commenters focused on the following issues, listed with
their proposed rule section numbers:
1. Definition of Expert Witness: Sec. 125.103.
2. Definition of Meritorious Claims: Sec. 125.103.
3. Waivers: Sec. 125.106.
3. Eligible Activities: Sec. 125.303.
4. Funding for Regionally Produced and Locally Produced Media
Programs: Secs. 125.303(b)(1) & 125.303(c).
5. Additional Points for Cooperating with Real Estate Industry
Organizations: Sec. 125.303(b)(2)(i).
6. Community-based programs: Sec. 125.303(d).
7. Coordination of Activities: Sec. 125.303(f).
8. Multi-year Grants Subject to Annual Performance Evaluation:
Sec. 125.401.
9. Guidelines for Private Enforcement Testing: Sec. 125.405.
10. Continued Development of Existing Organizations: Sec. 125.502.
11. Operating Budget Limitations: Sec. 125.502(c).
12. Establishing New Organizations: Sec. 125.503.
13. Awarding Funding to Most Resource-Poor Applicant.
14. Distribution of FHIP Funds According to an Allocation Formula.
15. Impact on Small Entities--Regulatory Flexibility Act.
16. Other Miscellaneous Comments.
Definitions of Expert Witness and (Qualified) Fair Housing
Organization: Proposed Section 125.103
One commenter supported the definition of expert witness that would
permit reimbursement for expert witness fees in cases that settle
before the experts testify, and the requirement in the definitions of
fair housing enforcement organization and qualified fair housing
enforcement organization that eligible organizations must have
conducted complaint investigation, testing and enforcement activities
for prescribed periods of time.
Department's response: No response is necessary, since this comment
agrees with the proposed rule.
Definition of Meritorious Claims: Proposed Section 125.103
In Sec. 125.103 of the proposed rule, the Department defines
meritorious claims to mean ``enforcement activities that resulted in
lawsuits, consent decrees, legal settlements, HUD conciliations and
agency initiated settlements with the outcome of monetary awards for
compensatory and/or punitive damages to plaintiffs or complaining
parties, or affirmative relief and monitoring.''
Two commenters with six concurring commenters objected to the
proposed rule replacing ``bona fide allegation'' with the ``meritorious
claim'' standard. These commenters asserted that the proposed rule
change will allow fair housing organizations to engage in harassing
behavior, and that the
[[Page 58447]]
meritorious claim standard will make any business that has made an
economic decision to settle out of court an instant target of fair
housing groups.
One commenter also felt that the definition in the proposed rule is
too broad since almost every claim falls into the proposed definition.
This comment recommended that the Department change the definition of
meritorious claim to read: ``enforcement activities that resulted in a
monetary award for compensatory or punitive damages, or a settlement
for an amount significantly in excess of the normal costs of defense.''
In contrast, two commenters supported the Department's decision to
define meritorious claims, but suggested that ``affirmative relief and
monitoring'' require more than an agreement with a real estate company,
lender or insurance company to ``promote'' Fair Housing. These
commenters recommended that HUD define affirmative relief to mean
developing an explicit marketing program to gain customers, building or
renovating a branch office, providing below market rate loans to
targeted neighborhoods, hiring minority employees, and changing the
compensation basis for commissioned loan officers.
Department's response: Some of these comments have misinterpreted
the role of ``meritorious claims'' in the FHIP regulation. This
definition is used for the purpose of defining the terms fair housing
enforcement organization and qualified fair housing enforcement
organization. To qualify as one of these organizations, it is
necessary, under the statute, to be ``engaged in complaint intake,
complaint investigation, testing for fair housing violations and
enforcement of meritorious claims'' (emphasis added).
As for the commenters that suggested additional definition of the
phrase ``affirmative relief and monitoring'' as used in meritorious
claims, the Department believes that, taken as a whole, the proposed
rule's definitions of fair housing enforcement organization and
qualified fair housing enforcement organization are sufficiently
stringent to ensure that only experienced organizations qualify.
Meritorious claims'' is only one element in these definitions, which
also include the elements of complaint intake, complaint investigation,
and testing for fair housing violations.
This definition is clarified in the final rule to include
conciliationsith substantially equivalent agencies (under 24 CFR
115.6).
Waivers: Proposed Section 125.106
Two commenters objected to the waiver provision of Sec. 125.106.
One commenter recognized the need for flexibility, but suggested that
any waiver to the rule should be subject to public comment.
Department's response: The very purpose of the waiver provision is
to provide needed flexibility that would be lost by subjecting each
waiver to public comment. Such a waiver provision is a common feature
of many HUD rulemakings (see the notice, ``Waiver of Regulations and
Directives Issued by HUD; Supersession of Redelegations of Authority,''
at 56 FR 16337, April 22, 1991). The waiver provision at Sec. 125.106
is modified by adding the phrase ``Upon determination of good cause,''
and provides that the waiver be issued by the Assistant Secretary.
As part of its overall process of reinventing regulations, the
Department is developing a separate waiver provision rule that would
apply to every HUD regulation. When this cross-cutting regulation
becomes effective, this program-specific waiver provision will be
eliminated.
Eligible Activities: Proposed Section 125.203
One commenter suggested adding the following activities to
Sec. 125.203: (1) Linking fair housing organizations regionally in
enforcement activities designed to combat broader housing market
discriminatory practices; (2) discovering and providing remedies for
discrimination in the public and private real estate markets and real
estate related transactions, including, but not limited to, making or
purchasing of loans or the provision of other financial assistance
sales and rentals of housing and housing advertising; and (3) carrying
out special projects, including the development of prototypes to
respond to new or sophisticated forms of discrimination against persons
protected under the Fair Housing Act.
Department's response: Applications for the activities listed would
not be excluded from consideration, even without being specifically
listed. The preface to the list of eligible activities at Sec. 125.203
stated that eligible activities ``may include (but are not limited to)
the following:''. By only suggesting activities that would be
acceptable without attempting to provide an exhaustive or exclusive
list, this approach may have caused some confusion by seeming to confer
exclusive status on the listed activities. To prevent such problems,
and as a part of the Department's efforts to streamline its rules and
eliminate unnecessary regulatory verbiage, such advisory, non-exclusive
lists are being eliminated from the final rule. The final rule provides
at Sec. 125.104(d) that eligible activities will be announced in
Notices of Funding Availability published in the Federal Register.
Funding for Regionally Produced and Locally Produced Media Programs:
Proposed Sections 125.303(b)(1) & 125.303(c)
Two commenters objected to permitting regional and local education
and outreach funds to be used to develop radio, television and print
public service announcements. One of these argued that it is not an
efficient expenditure of limited funds, since money will be wasted
duplicating what should be developed and produced on a national level.
This commenter suggested that funds should be used to develop a high
quality national media campaign, and HUD should provide remaining
resources to other groups to disseminate the campaign.
Department's response: A complete ban on the development of
regional and local media materials is not appropriate. The Department
seeks to encourage innovation while avoiding duplication in its award
of FHIP funds.
Additional Points for Cooperating with Real Estate Industry
Organizations: Proposed Section 125.303(b)(2)(i)
One commenter supported the proposed rule's giving an applicant
preference points if the applicant demonstrates cooperation with real
estate industry organizations.
In contrast, two commenters objected to HUD encouraging cooperation
with the real estate industry by awarding ``preference points'' to
applicants which cooperate with the real estate industry. One of these
commenters argued that industry would not cooperate or otherwise
support an effort that would encourage people to file complaints
against members of the industry.
Department's response: Although HCDA 1992 section 905, the
statutory amendment and expansion of FHIP, acknowledges (in subsection
905(a), Findings) the evidence of continuing and pervasive
discrimination in housing markets, it also recognizes that ``continuing
educational efforts by the real estate industry are a useful way to
increase understanding by the public of their fair housing rights and
responsibilities''. Later, in subsection 905(d)(1), the statute
provides that, ``The Secretary shall encourage cooperation with real
estate industry organizations in the national education
[[Page 58448]]
and outreach program.'' The Department wishes to encourage every effort
to reach the goal of compliance with the letter and the spirit of the
Fair Housing Act, and believes, along with the Congress, that the real
estate industry can make valuable contributions to achieving this goal.
The two comments disagreeing with the preference for cooperation with
the industry assume, justifiably, that persons aware of their rights
would more likely act to enforce those rights when they are violated.
However, this assumption does not lead to the conclusion that the
industry charged with observing those rights would be uncooperative in
informing the public and its individual members of the industry's
responsibilities. To the contrary, the industry would benefit through
reduced compliance costs from active engagement in informing the public
of their rights and the resulting greater awareness of its own
responsibilities. Further, it would be fair to assume that the national
goals of the Fair Housing Act can be more quickly and efficiently
achieved with the active, positive participation of industry than
without it.
Community-Based Programs: Proposed Section 125.303(d)
One commenter objected to HUD's interpretation of the term
``community based activities'' in the authorizing statute to allow HUD
to set aside a special funding for community based neighborhood groups.
This commenter argued that Congress intended the term ``community based
activities'' to mean that education and outreach activities could be
developed for local communities by fair housing organizations or other
eligible applicants.
Department's response: Although this comment is not relevant to the
rule itself, which does not address special funding for community based
groups, the Department agrees that education and outreach activities
could be developed for local communities by fair housing organizations
or other eligible applicants. However, this comment provides yet
another opportunity for the Department to stress that in order to be
flexible and responsive to diverse needs, the FHIP will be administered
so as to permit the targeting of funds in NOFAs to specific types of
activities, locations, and recipients.
The description of activities that are ``community-based'' in scope
is also modified in the final rule to use the more familiar term
``neighborhood'' rather than ``geographic area.''
Coordination of Activities: Proposed Section 125.303(f)
One commenter suggested expanding Sec. 125.303(f) to require that a
private FHO provide evidence with the application that it has consulted
with State and/or local public enforcement agencies to coordinate
activities to be funded under the Private Enforcement Initiative with
existing and/or planned public enforcement efforts.
Department's response: The Department disagrees with this comment.
Consultation and coordination of public and private efforts could have
a negative impact on an applicant's ability to maintain the
confidentiality of proposed testing targets and strategies.
Multi-Year Grants Subject to Annual Performance Evaluation: Proposed
Section 125.401
Five commenters supported making funding of PEI multi-year grants
subject to a performance review of the previous year's activities. One
of these commenters suggested that HUD solicit comments from interested
parties, including those involved as defendants to FHIP funded testing
complaints, when conducting the performance review. Two of these
commenters also suggested that HUD continue funding if HUD fails to
complete the review in a timely fashion since a recipient may not have
the cash reserves to maintain staff until a review is completed. These
two commenters also suggested that HUD consider four year funding
cycles since many enforcement actions require up to four years or more
to complete litigation, or monitor requirements of consent decrees or
HUD conciliations.
Department's response: Each of these comments may be implemented by
the Department in a NOFA or through its own internal procedures. HUD
has already initiated multi-year funding in its FHIP NOFAs and intends
to continue to do so. HUD will not discontinue funding if it is at
fault for not completing a performance review in a timely fashion, but
if the Department is unable to complete its review due to recipient
deficiencies (such as inadequate accounting for funds and activities),
funds may be discontinued. Interested parties may contact the
Department at any time with information relevant to its evaluation of
FHIP-funded recipients. With respect to comments from those involved as
defendants as a result of FHIP-funded testing, while these persons are
free to comment, their status as defendants in a pending action would
normally preclude the Department from acting on their comments while
the action is pending.
Eligible Applicants Under the Private Enforcement Initiative: Proposed
Section 125.402
One commenter objected to awarding PEI funds to non-testing groups.
Only groups with at least one year of experience in complaint intake,
investigation, testing, and enforcement should get PEI awards.
Department's response: The Department agrees with this and related
comments. Please refer to the discussion under the heading, ``Continued
Development of Existing Organizations: Proposed 125.502'', below.
Guidelines for Private Enforcement Testing: Proposed Section 125.405
Section 125.405 is currently entitled, ``Guidelines for private
enforcement testing.'' The proposed rule would remove the testing
guidelines in Sec. 125.405, but a new Sec. 125.107 would prohibit
testers from having prior felony convictions or convictions of crimes
involving fraud or perjury, and would require that testers receive
training or be experienced in testing procedures and techniques.
Three commenters with six concurring commenters objected to the
absence of a consistent standard for conducting testing under the
proposed rule. In general, these commenters criticized the Department
for removing most of Sec. 125.405, and stressed the need for regulatory
controls to ensure that testers are objective and credible. These
commenters also stressed the need for the Department to ensure that
grantees do not have any conflicts of interest which might interfere
with testing.
One of these commenters with six concurring commenters asserted
that HUD erroneously assumes that an established fair housing
organization knows how to conduct valid testing and/or has the
integrity to conduct valid testing. These commenters also alleged that
not all reports are accurate and true, and recommended that HUD more
closely scrutinize information submitted by fair housing organizations
in grant applications and quarterly reports. They agreed the final rule
should prohibit a fair housing organization receiving FHIP funding from
owning a for-profit subsidiary which directly competes with licensed
real estate brokers, and that at a minimum, a for-profit subsidiary of
a fair housing organization should not have any access to the ``set-
aside'' apartments that are included in a settlement agreement with a
fair housing organization.
[[Page 58449]]
Three commenters made suggestions as to specific criteria which
should be contained in the final rule. One commenter suggested that the
final rule require the following: (1) Grantees of FHIP testing and
enforcement funds must demonstrate that testers have the training or
experience to properly conduct tests; (2) Testers must objectively
report their findings; (3) Grantees may not compromise the integrity of
tests and tester reports; (4) Grantees must ensure that potential
conflicts of interest do not interfere with the design, conduct or
evaluation of tests; and (5) Grantees will file complaints/lawsuits as
a result of testing only if there is a reasonable cause to believe that
a violation of the Fair Housing Act occurred.
This commenter further objected to general testing where no bona
fide allegation of discrimination exists, stating that general testing
poses a hardship on the industry by taking valuable time for the
testing to determine whether discrimination exists and takes resources
away from testing those situations where there is an allegation of
discrimination. This commenter opined that the purposes of the FHIP
program support requiring a bona fide allegation prior to commencement
of testing.
One commenter with six concurring commenters recommended that HUD
require the following before initiating any action: (1) Fair housing
organizations submit for HUD review and approval detailed documentation
concerning any ``bona fide'' allegation of fair housing violations; (2)
HUD give written approval to a fair housing organization before
commencement of testing; and (3) once the fair housing organization
begins testing, the fair housing organization submits to HUD detailed
activity logs and written test conclusions.
Similarly, yet another commenter suggested that HUD maintain the
following in the final rule: (1) Recipients of HUD FHIP funding may not
have an economic interest in the outcome of the test for
discrimination, have a specific bias toward the business tested, be a
licensed competitor of the respondent, be related to one of the parties
in the case, or have any other specific bias or conflict of interest
which would prevent or limit his or her objectivity; (2) Testers may
not communicate their test results with one another; and (3) Testers
must report all relevant information.
In contrast, three commenters supported the removal of testing
guidelines. One of these commenters reasoned that federal courts and
HUD ALJs are in the best position to determine the validity of testing
procedures. This commenter also stated that testing is continually
evolving to accommodate changing discriminatory practices identified in
the market place, and suggested that the rule should be flexible enough
to accommodate changing practices. However, the commenter suggested
that the final rule provide that HUD will scrutinize applicants that
have little or no legal administrative results for enforcement
activities.
Department's response: HUD agrees with the commenters who recommend
conflict of interest provisions be maintained in the rule, and most of
the conflict provisions at Sec. 125.405(c)(3) of the current rule are
included with the tester provisions at Sec. 125.107 of this final rule.
HUD also agrees with the commenter who stated that testing is
continually evolving to accommodate changing discriminatory practices
identified in the market place, and that the rule should be flexible
enough to accommodate changing practices. For these reasons, the
Department is not including additional specific requirements for
testing in this final rule, including the requirement for a bona fide
allegation prior to testing.
Continued Development of Existing Organizations: Proposed Section
125.502
Two commenters objected to HUD making the third category of
applicants (``[n]onprofit groups organizing to build their capacity to
provide fair housing enforcement'') eligible to receive FHIP funding
under Sec. 125.502. One of the commenters suggested that funding for
this category is already available under Sec. 125.503, Establishing New
Organizations, and that funding for ``capacity building'' should only
be used to assist existing groups. This commenter also felt that since
all of the activities under private enforcement are eligible for
funding, HUD is undermining the intent of the statute to promote high
quality enforcement activities. The commenter warned that HUD should
consider the practical risks of providing enforcement funds to
organizations with no proven track record. This commenter further
disagreed with HUD that making this category of nonprofit groups
eligible for funding will increase the number of private non-profit
fair housing organizations, and suggested that qualifications are more
important than numbers. Finally, this commenter argued that mere status
as a nonprofit organization should not qualify the organization to
receive funds for fair housing enforcement since many nonprofits
opposing fair housing efforts will be eligible.
Department's response: The Department does not agree with these
comments. Section 905 specifically includes nonprofit groups organizing
to build their capacity to provide fair housing enforcement as eligible
for continued development funding. If continued development funding
were limited to fair housing organizations, it would not differ from
the Private Enforcement Initiative, and there would be no need for this
separate category of FHIP activities. As distinct from activities under
proposed Sec. 125.503, which are specifically intended to result in the
establishment of new organizations, the activities funded under
proposed Sec. 125.502 are intended to permit existing organizations,
whether or not they are already fair housing organizations, to build
their capacity to provide fair housing enforcement. The argument that
nonprofits opposing fair housing efforts will be funded is not valid,
since funds are competitively awarded after an evaluation of the
proposed activities. Activities that oppose fair housing efforts would
not be funded, and any grantee who did engage in activities opposing
fair housing activities would be liable for misuse of funds.
To preserve the distinct characters of the Private Enforcement
Initiative and the Fair Housing Organization Initiative highlighted by
these comments, and in response to a comment discussed above (Eligible
Applicants under the Private Enforcement Initiative: Proposed
Sec. 125.402), the final rule limits eligible applicants for PEI
funding to qualified fair housing organizations (QFHOs) and fair
housing enforcement organizations with at least 1 year of experience in
complaint intake, complaint investigation, testing for fair housing
violations and enforcement of meritorious claims.
Establishing New Organizations: Proposed Section 125.503
One commenter suggested that the final rule contain criteria that
an applicant must satisfy to establish a new organization. The
commenter suggested that an applicant should have a firm grasp of all
federal, state and local fair housing laws, successful experience in
investigating, testing, conciliating and litigating fair housing
complaints or access to training to receive high quality assistance in
the development of the new organization.
With regard to targeted areas (Sec. 125.503(c)), this commenter
also
[[Page 58450]]
suggested that HUD should consider funding applicants if the applicant
demonstrates the need--the existence of a FHAP or QFHO within the state
should never outweigh the documented need for private enforcement
activities.
Department's response: The Department initially reasoned, in the
proposed rule, that addressing the national need for private fair
housing enforcement organizations would best be served by making this
category of funding for establishing new organizations broadly
available. The commenter emphasizes the broad range of specialized
knowledge and experience that would be necessary to establish a
successful, efficient enforcement organization, and the Department
agrees with the validity of these observations. In order to accommodate
both concerns (national need and specialized knowledge), the final rule
provides that QFHOs, FHOs, and other organizations with at least three
years of experience in complaint intake, complaint investigation, and
enforcement of meritorious claims involving the use of testing evidence
are eligible applicants for funding to establish new organizations.
This will maximize the pool of eligible applicants, while still
limiting it to those with substantial fair housing enforcement
experience.
The Department also agrees with the comment that the rule should
permit funding applications for areas with a demonstrated need for a
fair housing organization. The Department, in its FHIP NOFA published
annually in the Federal Register, may identify targeted unserved and
underserved areas that will receive priority for funding under the
Establishing New Organizations component of the Fair Housing
Organizations Initiative. The final rule provides that an applicant may
also seek funding to establish a new organization in a locality not
identified as a target area, but in such a case, the applicant must
submit sufficient evidence to establish the proposed area as being
currently underserved by fair housing enforcement organizations or as
containing large concentrations of protected classes.
Awarding Funding to Most Resource-Poor Applicant
In the preamble of the proposed rule, the Department specifically
solicited public comment on whether it should award FHIP funds to the
applicant that is most resource-poor when choosing between two
otherwise equally deserving applicants. The Department received three
public comments on this issue. All three commenters objected to using
the ``resource-poor'' factor to award funding in the event of a tie
between two applicants.
Two commenters stated that a QFHO or FHO may have solid funding for
particular activities, but the specific activity for which it seeks
FHIP funds may be one that its local funder will not support. These
commenters also suggested that HUD's objective should not be to
distribute the funds in the most efficient manner, but rather in a
manner that will have the greatest impact on fair housing enforcement.
Another commenter supported funding resource-poor organizations,
but felt that funding for more substantial organizations was more
critical.
Department's response: The Department will provide for tie-breaking
criteria in individual NOFAs, and in that way, it will be able to use a
variety of factors, such as the term of the proposed activities and the
amount of funding requested, as appropriate in the context of the
priorities identified for a particular funding round.
Distribution of FHIP Funds According to an Allocation Formula
One comment in response to the ANPR suggested that HUD fund FHIP as
a noncompetitive, entitlement category to provide general operating
funds. In the proposed rule, HUD responded that with the present level
of FHIP funding, entitlement funding would not be an efficient method
of implementing FHIP. However, HUD stated that it might consider such
an approach in the future, depending upon the amount of future
appropriations, and the number of QFHOs. HUD also requested public
comment on the issue of distributing FHIP funds according to an
allocation formula, and on what criteria might be used to provide for
the fair and equitable distribution of funds on such a basis.
The Department received three comments from the public on this
issue. One commenter recommended that FHIP funding should be an
entitlement program, and that HUD should give preference to fair
housing groups which have been in existence for more than 5 years, with
a history of litigation.
Two commenters supported the concept of FHIP as an entitlement
program, and offered to work with HUD in developing an equitable
formula. However, no criteria for distribution were suggested.
Department's response: Although the comments received on this issue
favored a formula distribution, the lack of suggestions for specific
distribution criteria, and the continuing limiting factor of the
amounts made available for funding require that funding continue on a
competitive basis.
Miscellaneous Comments
One commenter with six concurring commenters suggested that HUD
adopt the following as part of the final rule: (1) The Department
should provide an administrative procedure for members of the public to
file complaints against fair housing organizations that engage in
questionable practices, and if an ALJ determines that the litigation is
baseless, then HUD should deny further FHIP funding to the offending
fair housing group for 5 years from the date of the ALJ's
determination; (2) HUD should require that each fair housing
organization submit its entire budget to HUD to ensure that FHIP funds
do not constitute more than 50% of its total budget pursuant to section
125.502(c)(1); (3) Fair housing groups should have the same monetary
award limitations as HUD has: $10,000 for the first offense, $25,000
for the second offense, and $50,000 for the third offense; and (4) HUD
should require that each fair housing organization file a detailed
report with HUD on the disbursements of any settlement award, and that
this report be available for public inspection.
Department's response: (1) Aggrieved parties may call HUD's
attention to misconduct on the part of its grantees at any time.
However, as a general rule, the Department will not act on any matter
which involves a pending action before a court or other tribunal.
Because of the broad range of possible findings, the Department does
not consider a funding ban for any fixed term an appropriate remedy to
be set in a rule. In reviewing applications, the Department currently
considers an applicant's experience in formulating and carrying out
programs to prevent or eliminate discriminatory practices, including
the applicant's management of past and current FHIP or other civil
rights projects. Any past misconduct by an applicant is taken into
account during this review.
(2) The Department's FHIP NOFAs currently require applicants to
submit an operating budget that describes the applicant's total planned
expenditures from all sources, including the value of in-kind and
monetary contributions, in the year for which funding is sought. This
is required so that the 50% budget determination pursuant to proposed
section 125.502(c)(1) may be made. To memorialize this requirement
under a rule is not necessary.
(3) Because the authorizing statute does not set monetary award
limitations on fair housing groups, HUD will not
[[Page 58451]]
impose them administratively without a clear mandate to do so.
(4) The laws under which non-profits are organized require them to
file annual reports, including financial information, which is a matter
of public record. Beyond this extent, the Department will not require
additional disclosure.
One commenter suggested that all privately enforced Fair Housing
Act actions be reviewed by the Attorney General through use of a
similar declaration process as in qui tam litigation. This commenter
further suggested some sort of governmental review/approval of FHIP-
funded litigation counsel and regulatory control/cap for FHIP-funded
legal fees. In addition, the commenter suggested that the final rule
address HUD's own liability for frivolous lawsuits brought by private
litigants under Rule 11 of the Federal Rules of Civil Procedure, and
contain regulatory protection of proprietary information disclosed with
the expectation of confidence during the litigation process.
Department's response: Review by the Attorney General through use
of a declaration process is beyond the scope of the Department's
rulemaking and would have to be pursued through a legislative
amendment. The Department is not liable under Rule 11 of the Federal
Rules of Civil Procedure for lawsuits brought by private litigants.
Protection of proprietary information should be pursued under the rules
of the forum in which an action is brought, and the Department declines
to address this issue in its rule.
One commenter supported the continued eligibility of real estate
organizations to receive educational and outreach funds, but urged HUD
to make real estate organizations eligible in their own right to
receive FHIP Educational and Outreach funds. The commenter stated that
real estate organizations do carry out programs to prevent and
eliminate discriminatory housing practices. The commenter also asserted
that real estate organizations provide essential education to both real
estate professionals and the public on fair housing rights and
responsibilities, and are in the unique position of having direct
contact with members of the public at the time of sale, lease or
purchase.
Department's response: Real estate organizations are eligible to
receive educational and outreach funds, in accordance with section 905,
as ``public or private entities that are formulating or carrying out
programs to prevent or eliminate discriminatory housing practices''.
Section 905 recognized the value of real estate organizations in
continuing educational efforts to increase understanding by the public
of their fair housing rights and responsibilities, and the Department
agrees.
Finally, one commenter recommended that FHIP place emphasis on
enforcement over education; that FHIP deadlines should be reasonable
(90 days to apply and staggered for each Initiative); that NOFA
criteria should be more explicit; and that non-funded proposals should
be given feedback.
Department's response: Because of the way the FHIP program is
organized, it does place more emphasis on enforcement over education.
Three of the Initiatives basically fund enforcement activities; only
the Education and Outreach Initiative funds strictly educational
activities. Issues as to deadlines and criteria are addressed in NOFAs,
in which the Department makes every effort to assure the efficient and
equitable distribution of funds. Feedback on proposals is a
Departmental administrative issue that is outside the scope of this
rule. Such a service is heavily dependent on the availability of
resources to the Department.
III. Reinvention of the FHIP Final Rule
As mentioned in the discussion of the comments on the proposed
rule, the Department is taking advantage of the publication of this
final rule to streamline the FHIP rule in accordance with its overall
effort to reinvent regulations. Rather than amending individual
sections within part 125, the entire part has been re-drafted to
eliminate extraneous material such as language that only repeats the
statutory language, or provisions that are only advisory (rather than
binding) or non-exclusive, such as lists of suggested activities. The
rule is not substantively changed beyond those issues addressed in the
proposed rule and in response to the comments submitted on the proposed
rule. The result sought is a program that will be more responsive and
administratively flexible to address the needs recognized in the
authorizing statute.
IV. Technical Correction to Part 103
Presently, 24 CFR 103.405(b)(3) makes reference to actions that are
to be taken ``in accordance with 24 CFR 104.40''. There is no such
section, and the correct reference should be to 24 CFR 104.410(a). The
correction is made in this final rule.
V. Findings and Certifications
Regulatory Planning and Review.
This rule has been reviewed in accordance with Executive Order
12866, issued by the President on September 30, 1993 (58 FR 51735,
October 4, 1993). Any changes to the rule resulting from this review
are available for public inspection between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk.
Environmental Review.
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR Part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969. The Finding of No Significant Impact is available for
public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the
Office of the Rules Docket Clerk at the above address.
Impact on Small Entities.
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this final rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities. The purpose
of the rule is to provide funding for fair housing investigation and
enforcement, and education and outreach activities.
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 will not have substantial direct effects on
states or their political subdivisions, or on 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 is
limited to implementing statutorily required revisions to the existing
Fair Housing Initiatives Program Regulation.
Impact on the Family.
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule has potential
for a beneficial, although indirect, impact on family formation,
maintenance, and general well-being. By promoting the values of fair
housing, the rule would benefit families by seeking to end
discrimination as a factor in the availability of housing. Accordingly,
[[Page 58452]]
since the impact on the family is beneficial, although indirect, no
further review is considered necessary.
List of Subjects
24 CFR Part 103
Administrative practice and procedure, Aged, Fair housing,
Individuals with disabilities, Intergovernmental relations,
Investigations, Mortgages, Penalties, Reporting and recordkeeping
requirements.
24 CFR Part 125
Fair housing, Grant programs--housing and community development,
Reporting and recordkeeping requirements.
The Catalog of Federal Domestic Assistance Numbers for the Fair
Housing Initiatives Program are 14.408, 14.409, 14.410 and 14.413.
Accordingly, the Department amends parts 103 and 125 of title 24 of
the Code of Federal Regulations as follows:
PART 103--FAIR HOUSING-COMPLAINT PROCESSING
1. The authority citation for part 103 continues to read as
follows:
Authority: 42 U.S.C. 3601-3619; 42 U.S.C. 3535(d).
2. In Sec. 103.405, paragraph (b)(3) is revised to read as follows:
Sec. 103.405 Issuance of charge.
* * * * *
(b) * * *
(3) Serve the charge and notifications in accordance with 24 CFR
104.410(a); and
* * * * *
3. Part 125 is revised to read as follows:
PART 125--FAIR HOUSING INITIATIVES PROGRAM
Sec.
125.103 Definitions.
125.104 Program administration.
125.105 Applications requirements.
125.106 Waivers.
125.107 Testers.
125.201 Administrative Enforcement Initiative.
125.301 Education and Outreach Initiative.
125.401 Private Enforcement Initiative.
125.501 Fair Housing Organizations Initiative.
Authority: 42 U.S.C. 3616 note; 42 U.S.C. 3535(d).
Sec. 125.103 Definitions.
In addition to the definitions that appear at section 802 of title
VIII (42 U.S.C. 3602), the following definitions apply to this part:
Assistant Secretary means the Assistant Secretary for Fair Housing
and Equal Opportunity in the Department of Housing and Urban
Development.
Department means the Department of Housing and Urban Development
(HUD).
Expert witness means a person who testifies, or who would have
testified but for a resolution of the case before a verdict is entered,
and who qualifies as an expert witness under the rules of the court
where the litigation funded by this part is brought.
Fair housing enforcement organization (FHO) means any organization,
whether or not it is solely engaged in fair housing enforcement
activities, that--
(1) Is organized as a private, tax-exempt, nonprofit, charitable
organization;
(2) Is currently engaged in complaint intake, complaint
investigation, testing for fair housing violations and enforcement of
meritorious claims; and
(3) Upon the receipt of FHIP funds will continue to be engaged in
complaint intake, complaint investigation, testing for fair housing
violations and enforcement of meritorious claims.
The Department may request an organization to submit documentation
to support its claimed status as an FHO.
FHIP means the Fair Housing Initiatives Program authorized by
section 561 of the Housing and Community Development Act of 1987 (42
U.S.C. 3616 note).
Meritorious claims means enforcement activities by an organization
that resulted in lawsuits, consent decrees, legal settlements, HUD and/
or substantially equivalent agency (under 24 CFR 115.6) conciliations
and organization initiated settlements with the outcome of monetary
awards for compensatory and/or punitive damages to plaintiffs or
complaining parties, or other affirmative relief, including the
provision of housing.
Qualified fair housing enforcement organization (QFHO) means any
organization, whether or not it is solely engaged in fair housing
enforcement activities, that--
(1) Is organized as a private, tax-exempt, nonprofit, charitable
organization;
(2) Has at least 2 years experience in complaint intake, complaint
investigation, testing for fair housing violations and enforcement of
meritorious claims; and
(3) Is engaged in complaint intake, complaint investigation,
testing for fair housing violations and enforcement of meritorious
claims at the time of application for FHIP assistance.
For the purpose of meeting the 2-year qualification period for the
activities included in paragraph (2) of this definition, it is not
necessary that the activities were conducted simultaneously, as long as
each activity was conducted for 2 years. It is also not necessary for
the activities to have been conducted for 2 consecutive or continuous
years. An organization may aggregate its experience in each activity
over the 3 year period preceding its application to meet the 2-year
qualification period requirement.
The Department may request an organization to submit documentation
to support its claimed status as a QFHO.
Title VIII means title VIII of the Civil Rights Act of 1968, as
amended (42 U.S.C. 3600-3620), commonly cited as the Fair Housing Act.
Sec. 125.104 Program administration.
(a) FHIP is administered by the Assistant Secretary.
(b) FHIP funding is made available under the following initiatives:
(1) The Administrative Enforcement Initiative;
(2) The Education and Outreach Initiative;
(3) The Private Enforcement Initiative; and
(4) The Fair Housing Organizations Initiative.
(c) FHIP funding is made available in accordance with the
requirements of the authorizing statute (42 U.S.C. 3616 note), the
regulation in this part, and Notices of Funding Availability (NOFAs),
and is awarded through a grant or other funding instrument.
(d) Notices of Funding Availability under this program will be
published periodically in the Federal Register. Such notices will
announce amounts available for award, eligible applicants, and eligible
activities, and may limit funding to one or more of the Initiatives.
Notices of Funding Availability will include the specific selection
criteria for awards, and will indicate the relative weight of each
criterion. The selection criteria announced in Notices of Funding
Availability will be designed to permit the Department to target and
respond to areas of concern, and to promote the purposes of the FHIP in
an equitable and cost efficient manner.
(e) All recipients of FHIP funds must conform to reporting and
record maintenance requirements determined appropriate by the Assistant
Secretary. Each funding instrument will include provisions under which
the Department may suspend, terminate or recapture
[[Page 58453]]
funds if the recipient does not conform to these requirements.
(f) Recipients of FHIP funds may not use such funds for the payment
of expenses in connection with litigation against the United States.
(g) All recipients of funds under this program must conduct audits
in accordance with part 44 or part 45, as appropriate, of this title.
Sec. 125.105 Application requirements.
Each application for funding under the FHIP must contain the
following information, which will be assessed against the specific
selection criteria set forth in a Notice of Funding Availability.
(a) A description of the practice (or practices) that has affected
adversely the achievement of the goal of fair housing, and that will be
addressed by the applicant's proposed activities.
(b) A description of the specific activities proposed to be
conducted with FHIP funds including the final product(s) and/or any
reports to be produced; the cost of each activity proposed; and a
schedule for completion of the proposed activities.
(c) A description of the applicant's experience in formulating or
carrying out programs to prevent or eliminate discriminatory housing
practices.
(d) An estimate of public or private resources that may be
available to assist the proposed activities.
(e) A description of the procedures to be used for monitoring
conduct and assessing results of the proposed activities.
(f) A description of the benefits that successful completion of the
project will produce to enhance fair housing, and the indicators by
which these benefits are to be measured.
(g) A description of the expected long term viability of project
results.
(h) Any additional information that may be required by a Notice of
Funding Availability published in the Federal Register.
(Approved by the Office of Management and Budget under control
number 2529-0033. An agency may not conduct or sponsor, and a person
is not required to respond to, a collection of information unless
the collection displays a valid control number.)
Sec. 125.106 Waivers.
Upon determination of good cause, the Assistant Secretary may
waive, in a published Notice of Funding Availability or other Federal
Register notice, any requirement in this part that is not required by
statute.
Sec. 125.107 Testers.
The following requirements apply to testing activities funded under
the FHIP:
(a) Testers must not have prior felony convictions or convictions
of crimes involving fraud or perjury.
(b) Testers must receive training or be experienced in testing
procedures and techniques.
(c) Testers and the organizations conducting tests, and the
employees and agents of these organizations may not:
(1) Have an economic interest in the outcome of the test, without
prejudice to the right of any person or entity to recover damages for
any cognizable injury;
(2) Be a relative of any party in a case;
(3) Have had any employment or other affiliation, within one year,
with the person or organization to be tested; or
(4) Be a licensed competitor of the person or organization to be
tested in the listing, rental, sale, or financing of real estate.
Sec. 125.201 Administrative Enforcement Initiative.
The Administrative Enforcement Initiative provides funding to State
and local fair housing agencies administering fair housing laws
recognized by the Assistant Secretary under Sec. 115.6 of this
subchapter as providing rights and remedies which are substantially
equivalent to those provided in title VIII.
Sec. 125.301 Education and Outreach Initiative.
(a) The Education and Outreach Initiative provides funding for the
purpose of developing, implementing, carrying out, or coordinating
education and outreach programs designed to inform members of the
public concerning their rights and obligations under the provisions of
fair housing laws.
(b) Notices of Funding Availability published for the FHIP may
divide Education and Outreach Initiative funding into separate
competitions for each of the separate types of programs (i.e.,
national, regional and/or local, community-based) eligible under this
Initiative.
(c) National program applications, including those for Fair Housing
Month funding, may be eligible to receive, as provided for in Notices
of Funding Availability published in the Federal Register, a preference
consisting of additional points if they:
(1) Demonstrate cooperation with real estate industry
organizations; and/or
(2) Provide for the dissemination of educational information and
technical assistance to support compliance with the housing
adaptability and accessibility guidelines contained in the Fair Housing
Amendments Act of 1988.
(d) Activities that are regional are activities that are
implemented in adjoining States or two or more units of general local
government within a state. Activities that are local are activities
whose implementation is limited to a single unit of general local
government, meaning a city, town, township, county, parish, village, or
other general purpose political subdivision of a State. Activities that
are community-based in scope are those which are primarily focused on a
particular neighborhood area within a unit of general local government.
(e) Each non-governmental recipient of regional, local, or
community-based funding for activities located within the jurisdiction
of a State or local enforcement agency or agencies administering a
substantially equivalent (under part 115 of this subchapter) fair
housing law must consult with the agency or agencies to coordinate
activities funded under FHIP.
Sec. 125.401 Private Enforcement Initiative.
(a) The Private Enforcement Initiative provides funding on a
single-year or multi-year basis, to investigate violations and obtain
enforcement of the rights granted under the Fair Housing Act or State
or local laws that provide rights and remedies for discriminatory
housing practices that are substantially equivalent to the rights and
remedies provided in the Fair Housing Act. Multi-year funding may be
contingent upon annual performance reviews and annual appropriations.
(b) Organizations that are eligible to receive assistance under the
Private Enforcement Initiative are:
(1) Qualified fair housing enforcement organizations.
(2) Fair housing enforcement organizations with at least 1 year of
experience in complaint intake, complaint investigation, testing for
fair housing violations and enforcement of meritorious claims. For the
purpose of meeting this 1 year qualification period, it is not
necessary that the activities were conducted simultaneously, as long as
each activity was conducted for 1 year. It is also not necessary for
the activities to have been conducted for a continuous year. An
organization may aggregate its experience in each activity over the 2-
year period preceding its application to meet this 1 year qualification
period requirement.
Sec. 125.501 Fair Housing Organizations Initiative.
(a) The Fair Housing Organizations Initiative of the FHIP provides
funding to develop or expand the ability of existing eligible
organizations to
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provide fair housing enforcement, and to establish, on a single-year or
multi-year basis contingent upon annual performance reviews and annual
appropriations, new fair housing enforcement organizations.
(b) Continued development of existing organizations.
(1) Eligible applicants. Eligible for funding under this component
of the Fair Housing Organizations Initiative are:
(i) Qualified fair housing enforcement organizations;
(ii) Fair housing enforcement organizations; and
(iii) Nonprofit groups organizing to build their capacity to
provide fair housing enforcement.
(2) Operating budget limitation. (i) Funding under this component
of the Fair Housing Organizations Initiative may not be used to provide
more than 50 percent of the operating budget of a recipient
organization for any one year.
(ii) For purposes of the limitation in this paragraph, operating
budget means the applicant's total planned budget expenditures from all
sources, including the value of in-kind and monetary contributions, in
the year for which funding is sought.
(c) Establishing new organizations.
(1) Eligible applicants. Eligible for funding under this component
of the Fair Housing Organizations Initiative are:
(i) Qualified fair housing enforcement organizations;
(ii) Fair housing enforcement organizations; and
(iii) Organizations with at least three years of experience in
complaint intake, complaint investigation, and enforcement of
meritorious claims involving the use of testing evidence.
(2) Targeted areas. FHIP Notices of Funding Availability may
identify target areas of the country that may receive priority for
funding under this component of the Fair Housing Organizations
Initiative. An applicant may also seek funding to establish a new
organization in a locality not identified as a target area, but in such
a case, the applicant must submit sufficient evidence to establish the
proposed area as being currently underserved by fair housing
enforcement organizations or as containing large concentrations of
protected classes.
Dated: August 17, 1995.
Elizabeth K. Julian,
Acting Deputy, Assistant Secretary for Policy and Initiatives, Fair
Housing and Equal Opportunity.
[FR Doc. 95-28746 Filed 11-24-95; 8:45 am]
BILLING CODE 4210-28-P
