[Federal Register Volume 64, Number 135 (Thursday, July 15, 1999)]
[Proposed Rules]
[Pages 38284-38286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18066]
[[Page 38283]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 290
Multi-Family Housing; Up-Front Grants and Loans in the Disposition;
Proposed Rulemaking
Federal Register / Vol. 64, No. 135 / Thursday, July 15, 1999 /
Proposed Rules
[[Page 38284]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 290
[Docket No. FR-4310-P-01]
RIN 2502-AH12
Up-Front Grants and Loans in the Disposition of Multifamily
Projects
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would establish generally applicable
requirements to govern the use of up-front grants and loans in the
disposition of HUD-owned multifamily properties by defining the
projects, sales, and purchasers eligible for up-front grants and loans,
and setting both a maximum per-unit and overall cap for up-front grant
amounts. This proposed rule would promote the affordability and
viability of multifamily housing projects.
DATES: Comments Due Date: September 13, 1999.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule to the Rules Docket Clerk, Office of General
Counsel, Room 10278, Department of Housing and Urban Development, 451
Seventh Street, SW, Washington, DC 20410. Communications should refer
to the above docket number and title. A copy of each communication
submitted will be available for public inspection and copying between
7:30 a.m. and 5:30 p.m. weekdays at the above address. FAXED comments
will not be accepted.
FOR FURTHER INFORMATION CONTACT: Marc Harris, Supervisory Project
Manager, Office of Portfolio Management in Multifamily Housing,
Department of Housing and Urban Development, Room 6164, 451 7th Street
SW, Washington, DC 20410, telephone (202) 708-2654. Hearing or speech-
impaired individuals may call 1-800-877-8339 (Federal Information Relay
Service TTY). (Other than the ``800'' number, these are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
I. Background
HUD's statutory authority to manage and dispose of HUD-held
multifamily housing projects is contained in section 207(k) and (l) of
the National Housing Act, in section 203 of the Housing and Community
Development Amendments of 1978 (HCDA 1978) and in section 204 of the
Departments of Veterans Affairs and Housing and Urban Development, and
Independent Agencies Appropriations Act, 1997 (approved September 26,
1996, Public Law 104-204), (FY 1997 Appropriations Act). HCDA 1978
section 203 was amended by the Multifamily Housing Property Disposition
Reform Act of 1994 (MHPDRA) (Public Law 102-233, approved April 11,
1994) which authorized the use of up-front grants for the necessary
cost of rehabilitation and other related development costs at section
203(f)(4). This section also authorizes project-based assistance under
section 8 of the United States Housing Act of 1937 as the source of
funding for the up-front grants.
The Department's authority and discretion in matters relating to
the disposition of multifamily housing projects was expanded by section
204 which permits HUD to manage and dispose of multifamily properties
owned by the Secretary, ``on such terms and conditions as the Secretary
may determine''. Section 204 was amended by section 213 of the
Departments of Veterans Affairs and Housing and Urban Development, and
Independent Agencies Appropriations Act, 1998 (approved October 27,
1997, Public Law 105-65) (FY 1998 Appropriations Act). Section 213
clarified that the General Insurance Fund could be used to provide
grants and loans for the necessary costs of rehabilitation or
demolition, but limited this authority to FYs 1997 and 1998. Section
206 of the Departments of Veterans Affairs and Housing and Urban
Development, and Independent Agencies Appropriations Act, 1999,
(approved October 21, 1998, Pub.L. 105-276) (FY 1999 Appropriations
Act) extends this authority for an additional year, through FY 1999.
The use of the General Insurance Fund as authorized in these
appropriations Acts, however, is limited to grants and loans for
rehabilitation or demolition activities. Section 8 project-based
assistance is the only source of up-front grant funding for total
rebuilding. The FY 1999 Appropriations Act, however, did not provide
any Section 8 project-based funds for property disposition.
The discretion conferred under section 204 of the FY 1997
Appropriations Act, as amended by the FYs 1998 and 1999 Appropriations
Acts, is very broad, and HUD is, therefore, proposing this rule to
implement generally applicable requirements for up-front grants and
loans. The procedures in this rule would be followed for all up-front
grants and loans made with whatever funds are authorized and available.
If Section 8 project-based assistance is not available, or if the
authorization to use the General Insurance Fund is not extended beyond
FY 1999, up-front grants and loans will not be available as an option
in the disposition of multifamily projects.
This rule would add a new Sec. 290.27 to part 290 to implement
generally applicable requirements for eligible projects, sales and
purchasers, and for a maximum grant or loan amount on a per-unit basis.
Until the regulation takes effect, those portions of the Guidance
Memorandum issued February 27, 1997, which conform with applicable
statutes and regulations, may be used on a case-by-case basis.
HUD's goal in promulgating generally applicable eligibility
requirements for up-front grants and loans is to promote the
affordability and viability of multifamily housing projects. Under this
proposed rule, to be eligible for an up-front grant or loan, a project
would have to be currently serving very low-income residents (at least
50% of units occupied by very low-income residents at the time HUD
approves a Disposition Program); be located in a housing market with a
need for affordable housing (vacancy rate of habitable, affordable,
multifamily housing is 4% or less); and generate sufficient income
after rehabilitation or rebuilding to be viable and provide affordable
housing for at least 20 years or the term of the loan, whichever is
shorter.
The rule would also limit the use of up-front grants or loans in
negotiated sales, which involve no competitive bidding among
prospective purchasers, to three categories of purchasers: (1) the unit
of general local government, including a public housing agency in the
area in which the project is located, (2) the State in which the
project is located, or (3) an agency of the federal government.
Otherwise, an up-front grant or loan will only be considered as a
possible option in a competitive sale. HUD has determined that these
general limitations are appropriate measures to limit its exposure to
loss and conserve housing resources. Making an up-front grant or loan
an option in a negotiated sale with a unit of government is consistent
with the statutory right, under HCDA 1974 section 203, of first refusal
accorded such entities. State and local governments would also be more
familiar and involved with local plans and needs, and would have
greater authority and capacity to control local factors that could
affect the viability and affordability of the project. In all other
cases, a competitive sale is more appropriate to permit choice among a
[[Page 38285]]
range of plans and ensure the best use of up-front grant or loan
amounts.
This rule would also provide for a grant or loan limit of 50
percent of the total development cost (TDC) per project, which may not
exceed $40,000 per affordable, finished unit. The actual grant or loan
amount provided within these limits will be determined on a case-by-
case basis depending upon rehabilitation, demolition, rebuilding, and
other development costs approved by HUD. It will be the responsibility
of the purchaser to obtain funds for the remaining rehabilitation,
demolition or development costs. HUD has determined that it is
appropriate to give the purchaser this responsibility because the
purchaser's ability to raise the balance of funds necessary to complete
the project provides assurance that other lenders or contributors have
made an independent determination that the proposed plan for the
project is viable, and that they are willing to commit to its success.
II. Findings and Certifications
Paperwork Reduction Act Statement
The information collection requirements for the disposition of
multifamily housing projects under 24 CFR part 290 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 2502-0204. This rule does not contain additional information
collection requirements. 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.
Environmental Impact
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 is available for public inspection between
7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules Docket
Clerk, Office of the General Counsel, Department of Housing and Urban
Development, Room 10276, 451 Seventh Street SW, Washington, DC 20410.
Regulatory Planning and Review
This rule has been reviewed in accordance with Executive Order
12866 (captioned ``Regulatory Planning and Review'') and determined
that this rule is a ``significant regulatory action'' as defined in
section 3(f) of the Order (although not economically significant
regulatory action under the Order). Any changes made to this rule as a
result of that 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.
Regulatory Flexibility Act
The Secretary, in accordance with provisions of the Regulatory
Flexibility Act (5 U.S.C. 605(b)), has reviewed this rule before
publication and by approving it certifies that it will not have a
significant economic impact on a substantial number of small entities.
These requirements address only one aspect (up-front grants) of the
requirements governing the management and disposition of HUD-owned
multifamily housing projects, and should not affect the ability of
small entities, relative to larger entities, to bid for and acquire
projects that HUD determines to sell. Nevertheless, HUD is soliciting
comment specifically to elicit issues of importance to small entities.
Executive Order 12612, Federalism
HUD has determined, in accordance with Executive Order 12612,
Federalism, that this rule will not have a substantial, direct effect
on the States or on the relationship between the Federal government and
the States, or on the distribution of power or responsibilities among
the various levels of government. The specific requirements of this
rule do not impose any additional terms and conditions on States or
local governments that acquire projects under this rule, and therefore
no further review is necessary or appropriate.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance Program number and title
is 14.156, Lower Income Housing Assistance Program (Section 8).
List of Subjects in 24 CFR Part 290
Low- and moderate-income housing, Mortgage insurance, Reporting and
recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, part 290 of
title 24 of the Code of Federal Regulations is proposed to be amended
as follows:
PART 290--MANAGEMENT AND DISPOSITION OF HUD-OWNED MULTIFAMILY
PROJECTS AND CERTAIN MULTIFAMILY PROJECTS SUBJECT TO HUD-HELD
MORTGAGES
1. The authority citation for 24 CFR part 290 continues to read as
follows:
Authority: 12 U.S.C. 1701z-11, 1701z-12, 1713, 1715b, 1715z-1b;
42 U.S.C. 3535(d) and 3535(i).
2. A new Sec. 290.27 is added to subpart A to read as follows:
Sec. 290.27 Up-front grants and loans.
(a) General. HUD may provide up-front grants and loans for
rehabilitation, demolition, rebuilding and other related development
costs as part of the disposition of a multifamily housing project that
is HUD-owned, upon making a determination that such a grant or loan
would be more cost-effective than project-based rental assistance.
(b) Eligible projects. An up-front grant or loan can be made
available in the sale of a HUD-owned multifamily housing project that:
(1) Has more than 50% of the units in the project occupied by very
low-income residents at the time a disposition plan is approved by HUD;
(2) Is located in a housing market or submarket in which there is
not sufficient habitable, affordable, rental housing, as defined in
Sec. 290.3;
(3) Will generate, after rehabilitation or rebuilding, sufficient
rental income in a competitive market to cover all operating expenses,
meet after sale debt service requirements, fund required reserves and
throw-off positive cash flow;
(4) Will provide affordable housing for at least 20 years or the
term of the loan, whichever is shorter, after the rehabilitation and/or
rebuilding is completed; and
(5) Meets such other requirements, including deed restrictions,
loan provisions, and monetary penalties for non-performance, as HUD may
determine are appropriate on a case-by-case basis.
(c) Eligible sales and purchasers--(1) Negotiated sales to
governmental entities. A negotiated sale of a project with an up-front
grant or loan can only be made to the unit of general local government,
which includes public housing agencies, in the area in which the
project is located; or a State agency designated by the chief executive
officer of the State in which the project is located; or an agency of
the Federal government.
(2) Other sales and purchasers. All sales which provide up-front
grants or loans to entities other than those described in paragraph
(c)(1) of this section must be conducted through a competitive
selection process. All general and limited partnerships or their
nominees, joint ventures or other entities assembled for purposes of
purchasing the project and which have
[[Page 38286]]
a governmental entity as a partner or other participant are considered
profit motivated purchasers and not governmental entities, whether or
not there is a non-profit, public, corporate or individual general
partner.
(d) Up-front grant or loan amount. The maximum that HUD will fund
per project in an up-front grant or loan is 50 percent of total
development cost (TDC), or $40,000 per affordable, finished unit,
whichever amount is less. TDC covers construction materials, artisan
services, professional services, developers services, and overhead,
relocation and operating losses that are incurred to plan, perform and
complete repairs or rebuilding.
Dated: March 25, 1999.
William Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 99-18066 Filed 7-14-99; 8:45 am]
BILLING CODE 4210-27-P
