[Federal Register Volume 61, Number 141 (Monday, July 22, 1996)]
[Rules and Regulations]
[Pages 38014-38022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18356]
[[Page 38013]]
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Part V
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 941
Office of the Assistant Secretary for Public and Indian Housing;
Regulatory Reinvention: Streamlining the Public Housing Development
Regulations; Interim Rule
Federal Register / Vol. 61, No. 141 / Monday, July 22, 1996 / Rules
and Regulations
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[[Page 38014]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 941
[Docket No. FR-3569-I-01]
RIN 2577-AB37
Office of the Assistant Secretary for Public and Indian Housing;
Regulatory Reinvention: Streamlining the Public Housing; Development
Regulations
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Interim rule.
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SUMMARY: This rule amends HUD's regulations for the Public Housing
Development program. In an effort to comply with the President's
regulatory reform initiatives, this rule streamlines these regulations
by eliminating provisions that repeat statutory provisions or are
otherwise unnecessary, as well as revising provisions to allow greater
flexibility to PHAs in carrying out development programs, allowing them
to certify compliance with some requirements. This interim rule will
make the Public Housing Development regulations clearer and more
concise.
DATES: Effective Date: August 21, 1996, except that Secs. 941.101,
941.205, 941.301, 941.303, 941.304, and 941.404 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.
Comments due date: September 20, 1996.
ADDRESSES: Interested persons are invited to submit comments regarding
this interim rule to the Rules Docket Clerk, Office of General Counsel,
Room 10278, Department of Housing and Urban Development, 451 Seventh
Street, S.W., Washington, D.C. 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: William J. Flood, Director, Office of
Capital Improvements, Department of Housing and Urban Development, 451
Seventh Street, SW., Washington, DC 20410, telephone number (202) 708-
1640 (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:
Information Collection Requirements
The information collection requirements contained in this rule, as
described in Sec. 941.101, are the subject of OMB control numbers 2577-
0024, 2577-0033, 2577-0036, and 2577-0039. All of these approval
numbers are currently under review, under the Paperwork Reduction Act
of 1995 (42 U.S.C. 3501-3520), except for 2577-0036, for which a 90-day
extension was granted, effective through 8/31/96. The information
collection notices for these requirements were published on April 4,
1996 (61 FR 15081 and 15101) and on May 9, 1996 (61 FR 21202).
In accordance with the Paperwork Reduction Act, 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.
I. Background
On March 4, 1995, President Clinton issued a memorandum to all
Federal departments and agencies regarding regulatory reinvention. In
response to this memorandum, the Department of Housing and Urban
Development conducted a page-by-page review of its regulations to
determine which can be eliminated, consolidated, or otherwise improved.
HUD has determined that the regulations for the public housing
development program can be improved and streamlined by eliminating
unnecessary provisions.
Although current funding for public housing development is limited,
the regulations for the program are still needed to govern the current
pipeline of projects for which funds have been obligated. In addition,
current legislation allows modernization funds to be used for
developing new units, which requires public housing development
regulations for implementation.
Several provisions in the regulations repeat statutory language
from the U.S. Housing Act of 1937. It is unnecessary to maintain
statutory requirements in the Code of Federal Regulations (CFR), since
those requirements are otherwise fully accessible and binding.
Furthermore, if regulations contain statutory language, HUD must amend
the regulations whenever Congress amends the statute. Therefore, this
interim rule removes repetitious statutory language and replaces it
with a citation to the specific statutory section for easy reference.
Several other provisions in the regulations apply to more than one
program, and these provisions have been in different subparts. This
repetition is unnecessary, and updating these scattered provisions is
cumbersome and often creates confusion. Therefore, this interim rule
consolidates these duplicative provisions, maintaining appropriate
cross-references for the reader's convenience.
Some provisions in the regulations are now obsolete and have been
removed. Lastly, some provisions in the regulations are not regulatory
requirements. For example, several sections in the regulations contain
nonbinding guidance or explanations. While this information is very
helpful to recipients, HUD will more appropriately provide this
information through guidance or other materials rather than maintain it
in the CFR.
The major changes to the rule were made in order to further the
Department's determination that newly developed public housing units
should be attractive and marketable and should assist PHAs to end the
social and economic isolation of low income people and to promote
economic independence.
II. Specific changes
A. Expansion of Development Methods
Language that has limited development methods to the conventional,
turnkey, and acquisition methods is being removed, and PHAs are being
authorized to use any generally accepted method of development.
Two methods described, in addition to the three authorized in the
current regulation, are the force account method and the mixed-finance
method (see new Sec. 941.102). With respect to a PHA that proposes to
develop public housing units using the force account method, the rule
specifies that HUD must determine, before development of a full
proposal, that the PHA has the capability to develop successfully the
public housing units using the force account method. A PHA using the
mixed-finance method must submit and implement its proposal in
accordance with subpart F of this part, which deals only with that
development method. This expansion of development methods gives more
flexibility to PHAs in the development of public housing units.
B. Expansion of Funding Sources
This rule adds reference to the use of modernization funds as a new
funding
[[Page 38015]]
source for development, under certain circumstances (see new
Sec. 941.102(b)). A provision is also added requiring execution of an
Annual Contributions Contract to govern the use of federal funds used,
including modernization funds (see new Sec. 941.302). Donations are
also specifically referenced as a possible funding source for PHA
public housing development.
C. Flexibility for Approval of Replacement Housing Sites
This rule (at new Sec. 941.202(c)(2)) specifically authorizes
construction of public housing units following demolition of public
housing units, on the original site or in the same neighborhood,
exempting such construction from the review concerning minority or
poverty concentration (that otherwise would be required by
Sec. 941.202(c)) if one of several criteria are satisfied:
(1) The number of public housing units to be constructed is no more
than 50 percent of the number of units in the original project;
(2) In the case of replacement of a currently occupied project, the
number of public housing units being constructed is the minimum number
needed to house current residents who want to remain at the site; or
(3) The public housing units being constructed constitute no more
than twenty-five units.
The Department believes that addition of these first two criteria
is desirable to permit the demolition and reconstruction of replacement
units on sites that are readily available, but at lower density levels
than the original project. That policy has been endorsed by language in
the Fiscal Year 1995 Rescission Act, Pub. L. No. 104-19, 104 Stat. 194,
approved July 27, 1995. The inclusion of the third criterion will
permit replacement on site where the number of units being demolished
is itself small, in which case the Department would not expect that
replacement of twenty-five of the units would have an effect of
concentrating low-income or minority families in the area.
D. Site Acquisition Requirements
This rule eliminates the ``limited proposal'' (under existing
Sec. 941.404(n)), which has been used by PHAs as an expedited means of
acquiring HUD/VA/RTC and certain other scattered site properties. The
Department believes that its adoption in this rulemaking of a
streamlined procedure for the development of all public housing (and
not just certain types of housing), renders obsolete the separate
limited proposal procedure. HUD also has added a new, optional
provision, at Sec. 941.303, that authorizes a PHA to acquire land on
which to construct a project following submission and approval of an
abbreviated ``site acquisition'' proposal. However, HUD must approve
all contracts for the purchase of property, regardless of the amount
involved or the development method being used.
E. PHA Certifications
PHAs with a satisfactory record of performance are permitted to
certify compliance with certain HUD requirements under this rule, in
order to reduce the amount of HUD review required (see new
Sec. 941.402). For example, a PHA is permitted to certify that the
design and construction plans are in accordance with HUD's design and
construction standards, and that the bidding procedures are in
accordance with Federal procurement requirements.
F. Consolidation of Application and Proposal Provisions
The provisions of Subparts C and D concerning applications and
proposals are consolidated into a new Subpart C. Detail in the current
regulations on selection of applications is removed, substituting a
reference to publication of information pertaining to fund allocation,
application deadlines, selection criteria and procedures through
publication of a Notice of Funding Availability, should new funding
become available (see new Secs. 941.301 through 941.306). [Subpart E on
project development is consequently redesignated as Subpart D.]
The information sought from HAs concerning costs at the proposal
stage is being modified to request that information about demolition
and associated relocation costs be separately identified with respect
to a site that is being acquired for public housing and a site of
existing public housing. This will allow HUD to make appropriate
comparisons with private market development costs.
G. HUD Review of Performance
A new process for HUD review of PHA performance and sanctions for
poor performance is added (see new Sec. 941.501), which parallels that
being used in the Modernization Program. These new provisions place the
emphasis on isolating poor performance and providing technical
assistance where it is needed as the initial HUD response. The rule
gives HUD authority to establish certain review thresholds through
notice of deficiency or corrective action order procedures.
H. Subpart F
Subpart F, which was first authorized in an interim rule published
on May 2, 1996 (61 FR 19708) specifies the conditions and procedures
for the mixed-finance development method. Since this rule revises many
of the sections to which Sec. 941.602 of that rule referred, this rule
revises those cross-references. In addition, the Department anticipates
making additional changes in subpart F to streamline its provisions
further. That action may be taken in a combined final rule issued to
conclude the rulemaking initiated by both that interim rule and this
interim rule.
III. Justification for Interim Rulemaking
HUD generally publishes a rule for public comment before issuing a
rule for effect, in accordance with its own regulations on rulemaking
in 24 CFR part 10. However, part 10 provides for exceptions to the
general rule if the agency finds good cause to omit advance notice and
public participation. The good cause requirement is satisfied when
prior public procedure is ``impracticable, unnecessary, or contrary to
the public interest'' (24 CFR 10.1). HUD finds that good cause exists
to publish this rule for effect without first soliciting public
comment. HUD believes that it would be contrary to the public interest
to delay the effectiveness of the rule to solicit comment, since it
will streamline numerous existing HUD requirements and delegate
significant responsibility to PHAs with respect to implementation of
their development programs.
Delegation of responsibility to PHAs is fully consistent with the
policy and objectives of the United States Housing Act of 1937, as set
forth in section 2 of that Act, which states in relevant part: ``It is
the policy of the United States * * * to assist the several States and
their political subdivisions * * * to remedy the acute shortage of
decent, safe, and sanitary dwellings for families of lower income and,
consistent with the objectives of this Act, to vest in local public
housing agencies the maximum amount of responsibility in the
administration of their housing programs * * *.'' The streamlining
changes to the development program are designed primarily to eliminate
multiple layers of HUD reviews for those PHAs that HUD believes can
develop public housing units without the need for detailed HUD
oversight. Troubled PHAs and other PHAs that HUD believes would benefit
from more detailed oversight would remain subject to existing HUD
review and approval
[[Page 38016]]
requirements for their development programs.
By revising the program, in this matter, HUD believes that
competent PHAs will be able to more expeditiously develop public
housing units and, accordingly, to more efficiently respond to the
housing needs of low income families in their jurisdictions. Troubled
PHAs and other PHAs that may benefit from more detailed HUD oversight
will continue to be subject to existing HUD review and approval
requirements for their development programs. HUD believes that this
dichotomy in the development process will significantly benefit low-
income families.
Although issuing the rule for effect, HUD is soliciting public
comment concerning these changes, and the comments will be reviewed for
possible future changes to the rule in a final version.
IV. Other Matters
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this interim rule, and in so
doing certifies that this rule will not have a significant economic
impact on a substantial number of small entities. HUD believes that
this rule will further the public interest since the rule will
streamline numerous existing HUD requirements and delegate significant
responsibility to PHAs with respect to implementation of their
development programs.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was made in accordance with HUD regulations in 24 CFR part 50 that
implement section 102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4332). This 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 General Counsel, Room 10276, Department of
Housing and Urban Development, 451 Seventh Street, SW, Washington, DC.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this rule
will not have substantial direct effects on States or their political
subdivisions, or the relationship between the Federal government and
the States, or on the distribution of power and responsibilities among
the various levels of government. To the extent that the programmatic
changes that will result from this rule will have any effect, they will
positively affect the relationship between the Federal Government and
State and local governments in that the rule delegates to the PHA (a
creature of state law) greater responsibility with respect to
implementation of its development program.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule will not have
the potential for significant impact on family formation, maintenance,
or general well-being, and thus is not subject to review under the
Order. The only effect that the rule is likely to have on families is
that it may expedite replacement of public housing units that cannot be
maintained as decent, safe, and sanitary housing.
Regulatory Review
This interim rule was reviewed by the Office of Management and
Budget under Executive Order 12866 as a significant regulatory action.
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.
List of Subjects in 24 CFR Part 941
Grant programs--housing and community development, Loan programs--
housing and community development, Public housing.
Catalog
The Catalog of Federal Domestic Assistance number for the program
affected by this rule is 14.850.
Accordingly, 24 CFR part 941 is amended as follows:
PART 941--PUBLIC HOUSING DEVELOPMENT
1. The authority citation for part 941 continues to read as
follows:
Authority: 42 U.S.C. 1437b, 1437c, 1437g, and 3535(d).
2. Sections 941.101 and 941.102 are revised to read as follows:
Sec. 941.101 Purpose and scope.
(a) Purpose. The U.S. Housing Act of 1937 (Act), 42 U.S.C. 1437,
authorizes HUD to assist public housing agencies (PHAs) with the
development and operation of low-income housing projects and financial
assistance in the form of grants (42 U.S.C. 1437c, 1437g, and 1437l).
The purpose of the program is to develop units which serve the needs of
public housing residents over the long term and have the lowest
possible life cycle costs, taking into account future operating and
replacement costs, as well as original capital investments.
(b) Scope. This part is the regulation under which a PHA develops
low-income housing (excluding Indian housing), herein called public
housing.
(c) Approved information collections. The following sections of
this part have been approved by the Office of Management and Budget in
accordance with the Paperwork Reduction Act of 1995 (42 U.S.C. 3501-
3520) and assigned the OMB approval numbers indicated:
------------------------------------------------------------------------
Approval
No. Sections
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2577-0024.. 941.304(j).
2577-0033.. 941.301, 941.303, 941.304 except para. (j), 941.402,
941.606, 941.610.
2577-0036.. 941.304, except para. (j).
2577-0039.. 941.205, 941.404.
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Sec. 941.102 Development methods and funding.
(a) Methods. A PHA may use any generally accepted method of
development including, but not limited to, conventional, turnkey,
acquisition with or without rehabilitation, mixed-finance, and force
account.
(1) Conventional. Under this method, the PHA is responsible for
selecting a site or property and designing the project. The PHA
advertises for competitive bids to build or rehabilitate the
development on the PHA-owned site. The PHA awards a construction
contract in accordance with 24 CFR part 85. The contractor receives
progress payments from the PHA during construction or rehabilitation
and a final payment upon completion of the project in accordance with
the construction contract. The conventional method may be used for
either new construction or rehabilitation.
(2) Turnkey. The turnkey method involves the advertisement and
selection of a turnkey developer by the PHA, based on the best housing
package for a site or property owned or to be purchased by the
developer. Following HUD approval of the PHA's full proposal, the
developer prepares the design and construction documents. The PHA and
the developer execute the contract of sale to implement the PHA's full
proposal. The developer is responsible for providing a completed
[[Page 38017]]
housing project, which includes obtaining construction financing. Upon
completion of project construction or rehabilitation in accordance with
the contract of sale, the PHA purchases the development from the
developer. This method may be used for either new construction or
rehabilitation.
(3) Acquisition. The acquisition method involves a purchase of
existing property that requires little or no repair work. Any needed
repair work is completed after acquisition, either by the PHA
contracting to have the work done or by having the staff of the PHA
perform the work.
(4) Mixed-finance. This method involves financing from both public
and private sources and may involve ownership of the public housing
units by an entity other than the PHA. This method of development may
be carried out by a PHA only in accordance with the requirements set
forth in subpart F.
(5) Force account. The force account method involves use of PHA
staff to carry out new construction or rehabilitation. A PHA may only
develop a full proposal based on the force account method if HUD has
determined that the PHA has the capability to develop successfully the
public housing units using this method.
(b) Funding. A PHA may develop public housing with:
(1) Development funds reserved by HUD for that purpose;
(2) Modernization funds under section 14 of the Act (42 U.S.C.
1437l), to the extent authorized by law and under procedures approved
by HUD; and/or
(3) Funds available to it from any other source, consistent with
Sec. 941.306(c), or as may be otherwise approved by HUD.
(c) Limit on number of units. (1) General. A PHA may not develop
public housing pursuant to this part beyond the lesser of the number of
units that the PHA had under ACC on August 21, 1996, or the number of
units for which it was receiving operating subsidy on that date, unless
authorized by HUD. HUD may condition such authorization on the PHA's
agreement that such incremental units, once developed, will be
ineligible for capital and/or operating subsidies from HUD.
(2) Replacement housing units. With respect to units constructed to
replace public housing units that were demolished or disposed of, a PHA
may use (in whole or in part) funding from non-HUD sources or from HUD
funding not provided under the Act. However, development of such units
must be approved by HUD in advance for them to be eligible for
inclusion under the ACC.
3. Section 941.103 is amended as follows:
a. By removing the definitions of ``Allocation area'',
``Application'', ``Central city allocation area'', ``Community'',
``Field Office'', ``Housing Assistance Plan'', ``Household type'', and
``Housing type''.
b. By removing the parenthetical phrase ``(in the form prescribed
by HUD)'' from the definitions of ``Construction Contract'' and
``Contract of sale'';
c. By revising the definition of ``Proposal'' to read as set forth
below; and
d. By removing from the definition of ``Total development cost
(TDC)'' the term ``the Field Office'' and adding in its place the term
``HUD'', and by removing from that definition the parenthetical
sentence at the end ``(See 24 CFR 941.204)''.
Sec. 941.103 Definitions.
* * * * *
Proposal. A document submitted by a PHA to HUD, in accordance with
subpart C of this part, for approval of the development of a public
housing project. As used in this part, ``proposal'' refers to both the
``site acquisition proposal'' (Sec. 941.303), and the ``full proposal''
(Sec. 941.304), unless specifically indicated otherwise.
* * * * *
4. Section 941.201 is amended as follows:
a. By removing from paragraph (a) the term ``The field office'' and
adding in its place the term ``HUD'';
b. By redesignating paragraph (c) as paragraph (d); and
c. By adding a new paragraph (c), to read as follows:
Sec. 941.201 PHA eligibility.
* * * * *
(c) Troubled PHAs. Unless HUD determines that a PHA that has been
classified as troubled or modernization-troubled, in accordance with 24
CFR part 901, has adequate capacity to develop public housing units,
the PHA so classified shall engage a HUD-approved program manager to
develop and implement the PHA's proposal. HUD shall review the
solicitation and the selection before award of a contract is made by
such a PHA.
* * * * *
5. Section 941.202 is amended:
a. By redesignating paragraphs (c)(1) introductory text, (c)(1)(i),
(c)(1)(ii), and (c)(2), as paragraphs (c)(1)(i) introductory text,
(c)(1)(i)(A), (c)(1)(i)(B), and (c)(1)(ii), respectively;
b. By redesignating the introductory text of paragraph (c) as the
introductory text of paragraph (c)(1);
c. By adding a new paragraph (c)(2) to read as set forth below;
d. Removing paragraph (c)(3); and
e. In paragraph (f), by removing the phrase ``local housing
assistance plan approved by the field office'' and adding in its place
the phrase ``local plan approved by HUD''.
Sec. 941.202 Site and neighborhood standards.
* * * * *
(c) * * *
(2) Notwithstanding any other provision of this paragraph (c),
public housing units constructed after demolition of public housing
units may be built on the original public housing site, or in the same
neighborhood, if one of the following criteria is satisfied:
(i) The number of public housing units being constructed is no more
than 50 percent of the number of units in the original project;
(ii) In the case of replacement of a currently occupied project,
the number of public housing units being constructed is the minimum
number needed to house current residents who want to remain at the
site; or
(iii) The public housing units being constructed constitute no more
than twenty-five units.
* * * * *
6. Section 941.203 is revised to read as follows:
Sec. 941.203 Design and construction standards.
(a) Physical structures shall be designed, constructed and equipped
so as to improve or harmonize with the neighborhoods they occupy, meet
contemporary standards of modest comfort and liveability, promote
security, and be attractive and marketable to the people they are
intended to serve. Building design and construction shall strive to
encourage in residents a proprietary sense, whether or not
homeownership is intended or contemplated.
(b) Projects must comply with:
(1) A national building code, such as Uniform Building Code,
Council of American Building Officials Code, or Building Officials
Conference of America Code;
(2) Applicable State and local laws, codes, ordinances, and
regulations; and
(3) Other Federal requirements, including any Federal fire-safety
requirements and HUD minimum property standards (e.g., 24 CFR part 200,
subpart S, and Sec. 941.208).
(c) Projects for families with children shall consist to the
maximum extent
[[Page 38018]]
practicable of low-density housing (e.g., non-elevator structures,
scattered sites or other types of low-density developments appropriate
in the community).
(d) High-rise elevator structures shall not be provided for
families with children regardless of density, unless the PHA
demonstrates and HUD determines that there is no practical alternative.
High-rise buildings for the elderly may be used if the PHA demonstrates
and HUD determines that such construction is appropriate, taking into
consideration land costs, the safety and security of the prospective
occupants, and the availability of community services.
Sec. 941.204 [Removed]
7. Section 941.204 is removed.
8. Section 941.205 is revised to read as follows:
Sec. 941.205 PHA contracts.
(a) ACC requirements. In order to be considered as eligible project
expenses, all development related contracts entered into by the PHA
shall provide for compliance with the provisions of the ACC.
(b) Contract forms. HUD may prescribe the form of any development
related contracts, and the PHA shall use such forms. If a form is not
prescribed, the PHA may develop its own form; however, it must contain
all applicable federal requirements.
(c) When HUD approval is required. The PHA is authorized to execute
all development-related contracts without prior HUD review or approval
with the exception of:
(1) All forms of site or property acquisition contracts regardless
of development method; and
(2) Contracts whose amount exceeds a contract approval threshold
established by HUD for that PHA; and
(3) A contract for the selection of a program manager to develop
and implement the PHA's proposal (see Sec. 941.201(c)).
(d) Each PHA shall certify before executing any contract with a
contractor that the contractor is not suspended, debarred, or otherwise
ineligible under 24 CFR part 24. The PHA also shall ensure that all
subgrantees, contractors, and subcontractors select only contractors
who are not listed as suspended, debarred, or otherwise ineligible
under 24 CFR part 24.
Sec. 941.206 [Removed]
9. Section 941.206 is removed.
10. Section 941.208 is revised to read as follows:
Sec. 941.208 Other Federal requirements.
(a) General. The PHA shall be subject to all statutory, regulatory,
and executive order requirements applicable to public housing
development (see, e.g., 24 CFR parts 5, 8, 35, 50, and 965), as may be
more fully described by HUD in notices, handbooks, or other guidance.
(b) Lead-based paint. In addition to the applicable requirements of
24 CFR part 35, all existing properties constructed prior to 1978 and
proposed to be acquired for family projects under this part shall be
tested for lead-based paint on applicable surfaces, as defined in 24
CFR part 965. If lead based paint is found, the cost of testing and
abatement shall be considered when justifying new construction or
meeting maximum total development cost limitations. For any units
containing lead-based paint, compliance with 24 CFR part 965, subpart
H, is required, and abatement shall be completed prior to occupancy.
11. Subpart C is revised to read as follows:
Subpart C--Application and Proposal
Sec.
941.301 Application.
941.302 Annual contributions contract; drawdowns and advances.
941.303 Site acquisition proposal.
941.304 Full proposal content.
941.305 Technical processing and approval.
941.306 Maximum development cost.
Subpart C--Application and Proposal
Sec. 941.301 Application.
If funding is made available for public housing development, HUD
will provide information about fund allocation, application deadline,
and selection criteria and procedures through a Notice of Funding
Availability (NOFA).
Sec. 941.302 Annual contributions contract; drawdowns and advances.
(a) A PHA wishing to develop public housing shall execute an ACC or
ACC amendment covering the entire amount of reserved development funds
or the amount of modernization funds (under section 14 of the Act, 42
U.S.C. 1437l) it proposes to use in accordance with this part. This ACC
or ACC amendment must be executed by both the PHA and HUD before funds
can be provided to the PHA.
(b) Until HUD has approved a PHA's full proposal, a PHA may only
draw down funds under the ACC for pre-development costs for materials
and services related to proposal preparation and submission.
Expenditures for pre-development costs shall not exceed three percent
of the total development cost stated in the executed ACC.
(c) HUD may approve the following in writing:
(1) Amounts in excess of three percent of TDC for pre-development
costs; and/or
(2) Drawdown of funds to enable a PHA to acquire a site after
approval by HUD of the PHA's site acquisition proposal, in accordance
with Sec. 941.303.
(d) After HUD approval of the full proposal, the PHA may draw down
additional funds under the ACC to develop the public housing units in
accordance with the approved full proposal.
Sec. 941.303 Site acquisition proposal.
When a PHA determines that it is necessary to acquire land for
development through new construction, it may spend funds authorized
under this part to acquire development sites. HUD must approve a PHA's
proposed use of funds before it may acquire sites in this manner. A PHA
must submit the following documents for HUD review and approval, in
accordance with the standards set forth in Sec. 941.305:
(a) Justification. A justification for acquiring land prior to PHA
proposal approval;
(b) Site information. An identification and description of the
proposed site, site plan, neighborhood, and evidence of PHA control of
the site for at least sixty (60) days after proposal submission.
(c) Zoning. Evidence that construction or rehabilitation is
permitted by current zoning ordinances or regulations or evidence to
indicate that needed rezoning is likely and will not delay the project.
(d) Development schedule. A copy of the PHA development schedule,
including the PHA architect estimates of the time required to complete
each major development stage.
(e) Environmental assessment. All available environmental
information on the proposed development (to expedite the HUD
environmental review).
(f) Appraisal. An appraisal of the proposed site by an independent,
state-certified appraiser.
Sec. 941.304 Full proposal content.
Each full proposal shall include at a minimum the following:
(a) Project description. A description of the housing, including
the number of units, schematic drawings of the proposed building and
unit plans, outline specifications or rehabilitation work write-ups,
and the types and amounts of non-dwelling space to be provided;
[[Page 38019]]
(b) Description of development method. A description of the PHA's
proposed development method, and a demonstration by the PHA that it
will be able to use this method successfully to develop the public
housing units. If the PHA proposes to use the turnkey method, it must
submit a Board-approved certification that the developer was selected
as the result of a public solicitation for proposals and that the
selection was based on an objective rating system, using such factors
as site location, project design, price, and developer experience. If
the PHA proposes to use the acquisition method, the PHA must submit a
certification by the PHA and owner that the property was not
constructed with the intent that it would be sold to the PHA. If the
PHA proposes to use the mixed-finance method, it should have consulted
with HUD on its plans. If the PHA proposes to use the force account
method to develop the public housing units, it must have already
received approval from HUD of its capability to carry out the
development successfully in this manner;
(c) Site information. An identification and description of the
proposed site, site plan, neighborhood, and evidence of PHA or turnkey
developer control of the site for at least sixty (60) days after
proposal submission;
(d) Project costs. (1) Categories of cost. The detailed budget of
the costs of developing the project, in accordance with the form
prescribed by HUD. With respect to costs of demolition and relocation,
the description must distinguish between costs related to existing
public housing property and costs related to acquisition of a new
public housing site;
(2) Budget and payment schedule. A budget that identifies the
sources of funding for relocation benefits, and a payment schedule
anticipated to be provided under a construction contract;
(e) Appraisal. An appraisal of the proposed site or property by an
independent, state-certified appraiser;
(f) Financial feasibility. Identification of funds sufficient to
complete the development, including a reasonable contingency;
(g) Zoning. Evidence that construction or rehabilitation is
permitted by current zoning ordinances or regulations or evidence to
indicate that needed rezoning is likely and will not delay the project;
(h) Facilities. A statement addressing the adequacy of existing
facilities and services for the prospective occupants of the project, a
description of public improvements needed to ensure the viability of
the proposed project with a description of the sources of funds
available to carry out such improvements, and, if applicable, a
statement addressing the minority enrollment and capacity of the school
system to absorb the number of school-aged children expected to reside
in the project;
(i) Relocation. A certification by the PHA that it will comply with
all applicable Federal relocation requirements;
(j) Life-cycle analysis. For new construction and substantial
rehabilitation, the criteria to be used in equipping the proposed
project(s) with heating and cooling systems, and which shall include a
life-cycle cost analysis of the installation, maintenance and operating
costs of such systems pursuant to section 13 of the Act (42 U.S.C.
1437k);
(k) Project development schedule. A copy of the PHA development
schedule, including the PHA architect or turnkey developer estimates of
the time required to complete each major development stage;
(l) Environmental assessment. All available environmental
information on the proposed development (to expedite the HUD
environmental review);
(m) Occupancy and operation policies. Statement of all PHA policies
and practices that will be used in occupancy and operation that
contribute to an overall objective of ending the social and economic
isolation of low income people and promoting their economic
independence;
(n) New construction certification. If a PHA's proposal involves
new construction, evidence of compliance with section 6(h) of the Act
in one of the following two ways:
(1) Submission of a PHA comparison of the cost of new construction
in the neighborhood where the PHA proposes to construct the housing and
the cost of acquisition of existing housing (with or without
rehabilitation) in the same neighborhood; or
(2) Certification by the PHA, accompanied by supporting
documentation, that there is insufficient existing housing in the
neighborhood to develop public housing through acquisition; and
(o) Additional HUD-requested information. Any additional
information that may be needed for HUD to determine whether it can
approve the proposal pursuant to Sec. 941.305.
Sec. 941.305 Technical processing and approval.
(a) Standards. HUD shall review the full proposal, submitted in
accordance with Sec. 941.304, and the site acquisition proposal,
submitted in accordance with Sec. 941.303, to determine whether each
proposal complies with all statutory, executive order, and regulatory
requirements applicable to public housing development including, if
applicable, the comments received as a result of Intergovernmental
Review. In addition, HUD shall carry out any necessary statutory and
executive order reviews with respect to the proposal under review. If
HUD determines that the proposal under review is acceptable, it shall
notify the PHA in writing and shall forward to it for execution an ACC
(or ACC amendment). If the PHA already has executed an ACC (or ACC
amendment) for the entire reserved amount, HUD shall notify the PHA
that it is authorized to draw down funds in accordance with
Sec. 941.302.
(b) Approved proposal. Units developed under this part shall be
developed only in accordance with an approved proposal.
(c) Approved amendments. Material changes in the approved proposal,
including any increase in the budget or any change in the payment
schedule, require an amendment to the proposal, which must be approved
by HUD. The determination of what constitutes a material change will be
made by HUD.
Sec. 941.306 Maximum development cost.
(a) Limit on approved HUD funds to Total Development Cost. No funds
provided by HUD pursuant to the Act may be used to pay costs in excess
of the TDC without the written approval of HUD. Approval of a higher
project cost will only be given upon the following demonstration by the
PHA:
(1) That the excess costs are reasonable and necessary to develop a
modest non-luxury project consistent with the standards set forth in
this part, providing for efficient project design, durability, energy
conservation, safety, security, economical maintenance, and healthy
family life in a neighborhood environment; and
(2) That the PHA has the funds available to pay for such excess
costs.
(b) Determination of maximum TDC. HUD will determine the maximum
total development cost (TDC) in accordance with section 6 of the Act.
The maximum TDC for a development is calculated by multiplying the
number of units for each bedroom size and structure type in the project
times the applicable unit TDC limit for the bedroom size and structure
type and adding the resulting amounts for all units in the project.
(c) Donations. Donations from other funding sources may be obtained
by the PHA to supplement project costs which otherwise could not be
included,
[[Page 38020]]
provided that the added funds are not used for items that would result
in substantially increased operating, maintenance or replacement costs,
and the HUD certification required under section 102 of the HUD Reform
Act (42 U.S.C. 3545) can be made in accordance with 24 CFR part 12
(subpart D). Although donations are not subject to the TDC limitations
set forth in paragraph (a) of this section, donations must be included
in the project development cost budget, and legally acceptable written
commitments for such donations must be provided by the PHA for HUD
approval.
12. Subpart D is revised to read as follows:
Subpart D--Project Development
Sec.
941.401 Site and property acquisition.
941.402 Project design and construction.
941.403 Acceptance of work and contract settlement.
941.404 Completion of development.
Subpart D--Project Development
Sec. 941.401 Site and property acquisition.
(a) Applicability. The provisions of this section apply to projects
being developed under the conventional, acquisition, and force account
methods, and may apply to other development methods, as deemed
appropriate by HUD.
(b) Purchase agreement. The purchase agreement shall reflect any
conditions established by HUD, such as the site engineering studies
that must be completed to determine whether the site is suitable for
development of the project.
(c) Title.--(1) General. After HUD approves the site or property
acquisition contract and notifies the PHA that it is authorized to take
title, the PHA shall obtain title in accordance with the following
certification. The PHA shall certify to HUD that it obtained a title
insurance policy that guaranteed that the title was good and marketable
before taking title and that it promptly recorded the deed and
declaration of trust in the form prescribed by HUD.
(2) Limitation. After HUD notifies a PHA that has been determined
to be troubled or modernization troubled in accordance with part 901 of
this chapter, or a PHA that has for other reasons been notified in
writing that it may not use the procedure specified in paragraph (c)(1)
of this section, that the site or property acquisition contract has
been approved, the PHA shall submit to HUD evidence that title to the
site or property is good and marketable. If HUD approves the title
evidence, it will inform the PHA that it is authorized to acquire title
to the site or property. The PHA shall record promptly the deed and
declaration of trust in the form prescribed by HUD, and HUD may require
the PHA to submit evidence of such recordation.
Sec. 941.402 Project design and construction.
(a) Compliance with HUD construction standards and Federal
procurement requirements.
(1) General. A PHA may certify that its proposed design and
construction plans for the development are in accordance with HUD's
design and construction standards at Sec. 941.203, and that its bidding
procedures are in accordance with Federal procurement requirements.
(2) Limitation. In the case of a PHA determined to be troubled or
modernization troubled in accordance with part 901 of this chapter or a
PHA that has for other reasons been notified in writing that it may not
use the procedure specified in paragraph (a)(1) of this section, the
PHA must submit the proposed design and construction plans and its
bidding procedures (unless HUD notifies the PHA that it may use the
certification procedure specified in paragraph (a)(1) of this section).
(b) Contract administration. The PHA shall be responsible for
contract administration and shall contract for the services of an
architect, or other person licensed under State law, to assist and
advise the PHA in contract administration and inspections to assure
that the work is done in accordance with HUD requirements. A HUD
representative may periodically visit the project site to monitor PHA
contract administration.
(c) Prevailing wage rates. See Sec. 965.101 of this chapter.
Sec. 941.403 Acceptance of work and contract settlement.
(a) Notification of completion. The contractor or developer shall
notify the PHA in writing when the contract work, including any
approved off-site work, will be completed and ready for inspection.
(b) Acceptance. (1) General. A PHA may carry out the final
inspection of the work and may accept the completed work. If, upon
inspection, the PHA determines that the work is complete and
satisfactory, except for work that is appropriate for delayed
completion, the work shall be accepted by the PHA. The PHA shall
certify to HUD before it pays the contractor or developer that it has
inspected the work and determined that it is acceptable and in
compliance with the construction contract or contract of sale and HUD
requirements. The PHA shall determine any hold-back for items of
delayed completion, and the amount due and payable for the work that
has been accepted including any conditions precedent to payment that
are stated in the construction contract or contract of sale. The
contractor or developer shall be paid for items of delayed construction
only after inspection and acceptance of this work by the PHA.
(2) Limitation. In the case of a PHA determined to be troubled or
modernization troubled in accordance with part 901 of this chapter or a
PHA that has for other reasons been notified in writing that it may not
use the procedure specified in paragraph (b)(1) of this section, the
procedure described in paragraph (b)(1) of this section will be
followed, except that HUD must concur in the necessary PHA
determinations and approvals.
(c) Guarantees and warranties. The construction contract or
contract of sale shall specify the project guaranty period and amounts
to be withheld and shall provide for assignment to the PHA of all
manufacturer and supplier warranties required by the construction
documents. The PHA shall inspect each dwelling unit and the overall
project approximately three months after the beginning of the project
guaranty period and three months before its expiration and also as may
be necessary to exercise its rights before expiration of any
warranties. The PHA shall require repair or replacement, prior to the
expiration of the guaranty or warranty periods, of any defective items.
(d) Title to turnkey projects. (1) General. When the work has been
inspected and accepted on a turnkey project, in accordance with
paragraph (b) of this section, the PHA is authorized to take title to
the completed project in accordance with the following certification.
The PHA shall certify to HUD that it obtained a title insurance policy
that guaranteed that the title was good and marketable before taking
title and that it promptly recorded the deed and declaration of trust
in the form prescribed by HUD.
(2) Limitation. After inspection and acceptance of the work in
accordance with paragraph (b) of this section, a PHA that has been
determined to be troubled or modernization troubled in accordance with
part 901 of this chapter, or a PHA that has for other reasons been
notified in writing that it may not use the procedure specified in
paragraph (d)(1) of this section shall submit to HUD evidence that
title to the completed project is good and marketable. If HUD approves
the title evidence, it will inform the PHA that it
[[Page 38021]]
is authorized to acquire title to the completed project. The PHA shall
record promptly the deed and declaration of trust in the form
prescribed by HUD, and HUD may require submission of evidence of such
recordation.
Sec. 941.404 Completion of development.
(a) When all development has been completed and paid for, but not
later than 12 months after the end of the initial operating period
unless a longer period is approved by HUD, the PHA shall submit a
statement of the actual development cost. For this purpose, the initial
operating period with respect to each project is the period commencing
with the date of initiation of the project and ending with the earliest
of the following three dates: the end of the calendar quarter in which
ninety-five percent of the dwelling units in the project are occupied;
the end of the calendar quarter that is six, seven, or eight months
after the date of full availability of the project; or the end of the
calendar quarter next preceding the date of physical completion of the
project.
(b) HUD shall review the statement and establish the actual
development cost of the project, which becomes the maximum total
development cost for purposes of the ACC.
13. Subpart E is revised to read as follows:
Subpart E--Performance Review
Sec. 941.501 HUD review of PHA performance; sanctions.
(a) HUD determination. HUD shall carry out such reviews of the
performance of each PHA as may be necessary or appropriate to make the
determinations required by this paragraph (a), taking into
consideration all available evidence.
(1) Conformity with PHA proposal. HUD shall determine whether the
PHA has carried out its activities under this subpart in a timely
manner and in accordance with its approved proposal.
(i) In making this determination, HUD shall review the PHA's
performance under previous inspections, audit findings and other
sources to determine whether the development activities undertaken
during the period under review conform substantially to the activities
specified in the approved PHA proposal. HUD also shall review a PHA's
development schedule to determine whether the PHA has carried out its
development activities in a timely manner;
(ii) HUD shall review a PHA's performance to determine whether the
activities carried out comply with the requirements of the Act, and
other applicable laws and regulations.
(2) Continuing capacity. HUD shall determine whether the PHA has a
continuing capacity to carry out its development plan in a timely
manner. The primary factors to be considered in arriving at a
determination that a PHA has a continuing capacity are those described
in paragraph (a)(1) of this section (``conformity with PHA proposal'').
HUD shall give particular attention to PHA efforts to accelerate the
progress of the program and to prevent the recurrence of past
deficiencies or noncompliance with applicable laws and regulations.
(b) Notice of deficiency. Based on HUD reviews of PHA performance
and findings of any of the deficiencies in paragraph (d) of this
section, HUD may issue to the PHA a notice of deficiency stating the
specific program requirements that the PHA has violated and requesting
the PHA to take any of the actions specified in paragraph (e) of this
section.
(c) Corrective action order. (1) Based on HUD reviews of PHA
performance and findings of any of the deficiencies in paragraph (d) of
this section, HUD may issue to the PHA a corrective action order,
whether or not a notice of deficiency has been issued previously with
respect to the specific deficiency on which the corrective action order
is based. HUD may order corrective action at any time by notifying the
PHA of the specific program requirements that the PHA has violated, and
specifying that any of the corrective actions listed in paragraph (e)
of this section must be taken. HUD shall design corrective action to
prevent a continuation of the deficiency, mitigate any adverse effects
of the deficiency to the extent possible, or prevent a recurrence of
the same or similar deficiencies;
(2) Before ordering corrective action, HUD shall notify the PHA and
give it an opportunity to consult with HUD regarding the proposed
action;
(3) Any corrective action ordered by HUD shall become a condition
of the grant agreement (ACC);
(d) Basis for corrective action. HUD may order a PHA to take
corrective action only if it determines:
(1) The PHA has not carried out its activities under the
development program in a timely manner and in accordance with its
approved proposal, or HUD requirements, as determined in paragraph
(a)(l) of this section;
(2) The PHA does not have a continuing capacity to carry out its
proposal in a timely manner or in accordance with its proposal or HUD
requirements, as determined in paragraph (a)(2) of this section;
(3) The PHA has failed to repay HUD for amounts awarded under the
development programs that were improperly expended;
(e) Types of corrective action. HUD may direct a PHA to take one or
more of the following corrective actions:
(1) Submit additional information:
(i) Concerning the PHA's administrative, planning, budgeting,
accounting, management, and evaluation functions to determine the cause
for a PHA not meeting the standards in paragraphs (a)(1) or (a)(2) of
this section;
(ii) Explaining any steps the PHA is taking to correct the
deficiencies;
(iii) Documenting that PHA activities were not inconsistent with
the PHA's proposal or other applicable laws, regulations or program
requirements; and
(iv) Demonstrating that the PHA has a continuing capacity to carry
out the proposal in a timely manner;
(2) Submit schedules for completing the work identified in its
proposal and report periodically on its progress in meeting the
schedules;
(3) Notwithstanding 24 CFR 941.205(c), 24 CFR 941.402(a) and 24 CFR
85.36(g), submit to HUD documents for prior approval, which may
include, but are not limited to:
(i) Complete design, construction and bid documents (prior to
soliciting bids);
(ii) Complete rehabilitation drawings/specifications or work write-
ups;
(iii) Development budgets, including modifications;
(iv) Proposed award of contracts, including construction contracts,
turnkey contracts of sale, letters of commitment, and contracts with
the architect/engineer (prior to execution);
(4) Submit additional material in support of one or more of the
statements, resolutions, and certifications submitted as part of the
PHA proposal, or periodic performance report;
(5) Not incur financial obligations, or to suspend payments for one
or more activities;
(6) Reimburse, from non-HUD sources, one or more program accounts
for any amounts improperly expended;
(f) Failure to take corrective action. In cases where HUD has
ordered corrective action and the PHA has failed to take the required
actions within a reasonable time, as specified by HUD, HUD may take one
or more of the following steps:
(1) Terminate future draw downs and/or advances to the PHA. In such
case, the amount of advances made to the PHA shall be repaid by the PHA
from
[[Page 38022]]
any funds or assets available for that purpose;
(2) Require alternative management of development functions by an
entity other than the PHA;
(3) Cancel the fund reservation if the PHA fails to start (begin
construction or rehabilitation), or complete (acquisition) within 30
months from the date of the fund reservation pursuant to section 5(k)
of the Act;
(4) Recapture for good cause any grant amounts previously provided
to a PHA, based upon a determination that the PHA has failed to comply
with the requirements of the development program.
(g) Right to appeal. Before taking any of the actions described in
paragraph (f) of this section, HUD shall notify the PHA and give it an
opportunity, within a prescribed period of time, to present any
arguments or additional facts and data concerning the proposed action.
14. Section 941.602(a) is revised to read as follows:
Sec. 941.602 Applicability of other requirements.
(a) Relationship of this subpart to other requirements in 24 CFR
part 941. The requirements contained in this subpart apply only to the
development of public housing units using mixed-finance development
methods under this subpart and to the operation of public housing units
that are owned, or that will be owned, by an owner entity under this
subpart. Other requirements for the development of public housing, as
set forth in subparts A through E of this part, shall not apply to the
development of public housing units pursuant to this subpart, except as
may be required by HUD. Applicable requirements include, but shall not
be limited to, the following:
(1) Section 941.103 (``Definitions'') (definitions of the following
terms only shall apply to this subpart: ``Annual Contributions Contract
(ACC),'' ``cooperation agreement,'' ``design documents,''
``reformulation,'' and ``Total Development Cost (TDC).''
(2) Section 941.201 (``PHA eligibility'') (except that specific
requirements governing the cooperation agreement, as set forth in
Sec. 941.201(c), shall be determined in accordance with this subpart);
(3) Section 941.202 (``Site and neighborhood standards'');
(4) Section 941.203 (``Design and construction standards'');
(5) Section 941.205 (``PHA contracts'') (except that the reference
to ``development related contracts entered into by the PHA'' shall be
construed to mean ``development related contracts entered into by the
PHA or the owner entity'');
(6) Section 941.207 (``Relocation and acquisition'');
(7) Section 941.208 (``Other Federal requirements'');
(8) Section 941.209 (``Audit'');
(9) Section 941.306 (``Maximum development cost'');
(10) Section 941.402 (``Project design and construction'');
(11) Section 941.403 (``Acceptance of work and contract
settlement'');
(12) Section 941.404 (``Completion of development''); and
(13) Section 941.501 (``HUD review of PHA performance;
sanctions'').
* * * * *
Dated: June 11, 1996.
Kevin Emanuel Marchman,
Acting Assistant Secretary for Public and Indian Housing.
[FR Doc. 96-18356 Filed 7-17-96; 3:59 pm]
BILLING CODE 4210-33-P
