[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Proposed Rules]
[Pages 49932-49938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23700]
[[Page 49931]]
_______________________________________________________________________
Part VII
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 906
Public Housing Homeownership Programs; Proposed Rule
Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 /
Proposed Rules
[[Page 49932]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 906
[Docket No. FR-4504-P-01]
RIN 2577-AC15
Public Housing Homeownership Programs
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would set forth the requirements and
procedures governing a new statutory homeownership program to be
administered by public housing agencies (PHAs). Under this rule, a PHA
makes public housing dwelling units, public housing projects, and other
housing projects available for purchase by low-income families as their
principal residences.
DATES: Comments Due Date: Comments on the proposed rule are due on or
before November 15, 1999.
ADDRESSES: Interested persons are invited to submit written comments
regarding this proposed rule to the Rules Docket Clerk, Office of
General Counsel, Room 10276, Department of Housing and Urban
Development, 451 Seventh Street, SW, Washington, DC 20410. Comments
should refer to the above docket number and title. A copy of each
comment submitted will be available for public inspection and copying
between 7:30 a.m. and 5:30 p.m. weekdays at the above address.
Facsimile (FAX) comments will not be accepted.
FOR FURTHER INFORMATION CONTACT: David Sowell, Office of Public Housing
Investments, Office of Public and Indian Housing, Department of Housing
and Urban Development, Room 4138, 451 Seventh Street, SW, Washington,
DC 20410; telephone (202) 401-8812, ext. 4641 (this is not a toll-free
number). Hearing or speech impaired individuals may access this number
via TTY by calling the toll-free Federal Information Relay Service at
1-800-877-8339.
SUPPLEMENTARY INFORMATION: Section 536 of the Quality Housing and Work
Responsibility Act of 1998 (Title V of Public Law 105-276, 112 Stat.
2461, approved October 21, 1998) (``Public Housing Reform Act'')
amended Title I of the United States Housing Act of 1937 (42 U.S.C.
1437 et seq.) (1937 Act) by adding a new section 32, which authorized a
new public housing homeownership program. The new homeownership program
replaces the public housing agency homeownership program that was
authorized under section 5(h) of the 1937 Act. Section 518 of the
Public Housing Reform Act repealed the 5(h) homeownership program, and
section 566 of the Public Housing Reform Act added a new section 5(h)
that deals with audit requirements.
This rule would revise 24 CFR part 906, which currently contains
the regulations for the 5(h) homeownership program. Many of the 5(h)
program requirements would be retained under the new section 32 (of the
1937 Act) homeownership program. The authorizing statutory language for
the 5(h) program was very brief, and the regulatory requirements at
part 906 substantially fleshed out the program. Section 32, which
provides many more explicit statutory requirements than section 5(h)
did, adopted several of the regulatory requirements promulgated at part
906 for the 5(h) program. For example, section 32 addresses the
protection of nonpurchasing residents and the use of the proceeds from
a sale. Similar provisions were provided in the 5(h) regulation. In
addition, the 5(h) regulation permitted sales to residents through
another entity, rather than directly from the PHA, and section 32
permits sales directly to residents or to another entity for resale to
residents.
There is legislative history that indicates the similarities
between the new, statutory section 32 program requirements and the
section 5(h) program requirements at part 906 are deliberate. In
reporting out S. 462, a bill entitled, ``The Public Housing Reform and
Responsibility Act of 1997'', which was the model for the Public
Housing Reform Act, the Senate Committee on Banking, Housing, and Urban
Affairs stated: ``The Committee patterned the new homeownership
provision according to the section 5(h) program which has proven to be
a highly successful program for assisting public housing residents in
becoming homeowners.'' (S. Rept. 105-21, at 28). This statement
supports the retention of the 5(h) program requirements that HUD is
proposing in this rulemaking.
Part 906 is reorganized by this rule into five subparts according
to the subjects covered: a general statement of the program; basic
program requirements; purchaser requirements; program administration;
and program submission and approval. The new statutory homeownership
requirements are integrated with the 5(h) requirements that HUD has
determined are appropriate to retain, such as proposed Sec. 906.39,
which is based upon Sec. 906.20 of the 5(h) rule and covers what must
be contained in a homeownership program.
In order to make the new program more flexible than the 5(h)
program, we have omitted some of the 5(h) program requirements,
including the detailed eligibility and affordability requirements for
purchasers found in Sec. 906.8, the nonroutine maintenance reserve
requirement of Sec. 906.11, and the purchase price and financing
provisions of Sec. 906.12. We specifically invite comments on whether
HUD should specify underwriting standards or the types of documents to
be used to secure that HUD's investment in a property ultimately serves
program purposes.
Section 32 gives a right of first refusal to the resident or
residents occupying a public housing unit. The statute does not give
that right to residents of other housing that is to be sold under the
homeownership program. Section 906.13 implements this right of first
refusal, noting that a prospective purchaser still must satisfy other
program requirements.
Section 32 provides for three categories of eligible purchasers:
(1) Low-income families assisted by a PHA; (2) other low-income
families; and (3) entities formed to purchase units for re-sale to low-
income families. This rule clarifies, at Sec. 906.15, that a family
purchasing a property under a PHA homeownership program must be a low-
income family, as defined in section 3 of the 1937 Act, at the time the
contract to purchase the property is executed. This provision
eliminates the need to re-establish eligibility at the time of closing,
and places no limitations on a family's future income as a condition of
homeownership.
Please note that the low-income eligibility requirement applies to
public housing residents, thereby making public housing residents who
earn more than 80 percent of area median income ineligible to
participate in the homeownership program. The Department welcomes
comment on this eligibility requirement.
Section 32 also includes provisions for the protection of
nonpurchasing public housing residents. One of these provisions
requires that each public housing resident displaced by the sale of a
unit will be offered comparable housing that is located in an area that
is generally not less desirable than the location of the displaced
resident's housing. (Relocation of residents of other housing that
would be displaced by a homeownership program would be covered by the
Uniform Relocation Act and part 42 of this title, as stated in
Sec. 906.24.) In a Senate colloquy before
[[Page 49933]]
passage of the Public Housing Reform Act, Senator Mack directly
addressed this provision, and the way in which it was to be
interpreted. The Senator stated:
For purposes of this provision, the phrase ``location of the
displaced resident's housing'' may be construed to mean the public
housing development from which the family was vacated, rather than a
larger geographic area. (Congressional Record of October 8, 1998,
S.11840)
Consistent with this guidance, this proposed rule provides, in
Sec. 906.24, which deals with protections available to nonpurchasing
residents, that ``comparable housing'' means housing that (among other
factors) is located in an area that is generally not less desirable
than the displaced resident's original development.
Findings and Certifications
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this proposed rule, and in so
doing certifies that this rule will not have a significant economic
impact on a substantial number of small entities. The rule provides the
parameters for the use of public housing properties to create
homeownership opportunities for low-income residents of public housing
and other low-income families should a public housing agency choose to
do so with, at most, an incidental effect on small entities.
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. 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 the General Counsel, Department of Housing and Urban
Development, Room 10276, 451 Seventh Street, SW., Washington, DC 20410.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this proposed
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. The rule's
major effects would be on individuals; any involvement of States or
their political subdivisions is limited to their cooperative efforts in
promoting homeownership among public and housing residents and other
low-income families.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal
agencies to assess the effects of their regulatory actions on State,
local, and tribal governments, and on the private sector. This proposed
rule does not impose any Federal mandates on any State, local, or
tribal governments, or on the private sector, within the meaning of the
UMRA.
Paperwork Reduction Act Statement
The information collection requirements contained in this rule, as
described in Secs. 906.17, 906.19, 906.23, 906.27, 906.33, 906.39,
906.41, and 906.49 have been submitted to the Office of Management and
Budget for review under section 3507(d) of the Paperwork Reduction Act
of 1995 (44 U.S.C. Chapter 35).
Estimates of the total reporting and recordkeeping burden that will
result from the collection of information are as follows:
Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
Est. avg. time
Number of Annual freq. for Est. annual
Section reference parties of requirement requirement burden (hrs.)
(hours)
----------------------------------------------------------------------------------------------------------------
906.17.......................................... 5,000 1 4 20,000
906.19.......................................... 30 1 40 1,200
906.23.......................................... 2,000 1 1 2,000
906.27.......................................... 50 1 .50 25
906.33.......................................... 50 1 10 500
906.39.......................................... 50 1 40 2,000
906.41.......................................... 50 1 20 1,000
906.49.......................................... 50 1 .25 12
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Total Reporting and Recordkeeping Burden .............. .............. .............. 25,737
(Hours)....................................
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In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
from members of the public and affected agencies concerning this
collection of information to:
(1) Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) Minimize the burden of the collection of information on those
who are to respond; including through the use of appropriate automated
collection techniques or other forms of information technology, e.g.,
permitting electronic submission of responses.
Interested persons are invited to submit comments regarding the
information collection requirements in this proposal. Comments must be
received within sixty (60) days from the date of this proposal.
Comments must refer to the proposal by name and docket number (FR-4504)
and must be sent to:
Joseph F. Lackey, Jr., HUD Desk Officer, Office of Management and
Budget, New Executive Office Building, Washington, DC 20503
and
Millie Hamman, Reports Liaison Officer, Office of the Assistant
Secretary for Public and Indian Housing, Department of Housing & Urban
Development, 451--7th Street, SW, Room 4238, Washington, DC 20410
[[Page 49934]]
List of Subjects in 24 CFR Part 906
Grant programs--housing and community development, Low and moderate
income housing, Public housing, Reporting and recordkeeping
requirements.
For the reasons discussed in the preamble, HUD proposes to revise
part 906 of title 24 to read as follows:
PART 906--PUBLIC HOUSING HOMEOWNERSHIP PROGRAMS
Subpart A--General
Sec.
906.1 What is the purpose of this part?
906.3 What requirements are applicable to homeownership programs
previously approved by HUD?
Subpart B--Basic Program Requirements
906.5 What dwelling units and what types of assistance may a PHA
make available under a homeownership program under this part?
906.7 What physical requirements must a property offered for sale
meet?
906.9 What effect do existing restrictions and encumbrances have on
the sale of a property?
Subpart C--Purchaser Requirements
906.11 Who is eligible to purchase housing under a homeownership
program?
906.13 Do current residents have a right of first refusal on units
made available for sale?
906.15 What requirements apply to a family purchasing a property
under a homeownership program?
906.17 How does a family apply to purchase a unit under a
homeownership program?
906.19 What requirements apply to a PRE (purchase and resale
entity), an entity formed for the purpose of purchasing units for
resale to low-income families?
Subpart D--Program Administration
906.23 What protections are available to nonpurchasing public
housing residents?
906.24 What protections are available to nonpurchasing residents of
housing other than public housing?
906.25 What ownership interest is conveyed to a purchaser?
906.27 What limitations apply to net proceeds on the sale of a
property acquired through a homeownership program?
906.31 What requirements are applicable to net proceeds?
906.33 What reporting and recordkeeping requirements apply to
homeownership programs?
906.35 Are the disposition provisions of section 18 of the United
States Housing Act of 1937 applicable to a homeownership program?
906.37 What Davis-Bacon and HUD wage rate requirements apply to
homeownership programs?
Subpart E--Program Submission and Approval
906.38 Does a PHA require HUD approval to implement a homeownership
program under this part?
906.39 What must a homeownership program include?
906.40 What requirements apply to acquisition of non-public
housing?
906.41 What supporting documentation must be submitted to HUD with
the homeownership program?
906.43 Where does a PHA submit a homeownership program for HUD
approval?
906.45 What criteria will HUD use to review a homeownership
program?
906.47 What environmental provisions apply?
906.49 How is HUD approval and authorization indicated?
Authority: 42 U.S.C. 14372-4 and 3535(d).
Subpart A--General
Sec. 906.1 What is the purpose of this part?
(a) This part sets forth the requirements and procedures governing
public housing homeownership programs carried out by public housing
agencies (PHAs), as authorized by (42 U.S.C. 1437z-4) section 32 of the
United States Housing Act of 1937 (``1937 Act''). A PHA may only
transfer public housing units for homeownership under a homeownership
program approved by HUD under this part, except as provided under
Sec. 906.3.
(b) Under a public housing homeownership program, a PHA makes
available for purchase by low-income families for use as their
principal residences public housing dwelling units, public housing
projects, and other housing units or projects owned, assisted, or
operated, or otherwise acquired by the PHA for sale under a
homeownership program in connection with the use of assistance provided
under the 1937 Act (``1937 Act funds''). A PHA may sell all or a
portion of a property for purposes of homeownership in accordance with
a HUD-approved homeownership program, and in accordance with the PHA's
annual plan under part 903 of this title.
Sec. 906.3 What requirements are applicable to homeownership programs
previously approved by HUD?
(a) Any existing section 5(h) or Turnkey III homeownership program
continues to be governed by the requirements of part 906 or part 904 of
this title, respectively, as it existed before [effective date of
Homeownership Program final rule] (contained in the April 1, 1999
edition of 24 CFR, parts 700 to 1699). The use of other program income
for homeownership activities continues to be governed by agreements
executed with HUD.
(b) A PHA may convert an existing homeownership program to a
homeownership program under this part with HUD approval.
Subpart B--Basic Program Requirements
Sec. 906.5 What dwelling units and what types of assistance may a PHA
make available under a homeownership program under this part?
(a) A homeownership program under this part may provide for sale
of:
(1) Units that are public housing units; and
(2) Other units owned, operated, assisted, or acquired for
homeownership sale that have received the benefit of 1937 Act funds or
are to be sold with the benefit of 1937 Act funds (``non-public housing
units'').
(b) A homeownership program under this part may provide for
financing to eligible families (see Sec. 905.15) purchasing dwelling
units under the program, or for acquisition of housing units or
projects by the PHA for sale under the program.
(1) Under this part, a PHA may use assistance from amounts it
receives under the Capital Fund under section 9(d) of the 1937 Act or
from other income earned from its 1937 Act programs to provide
financing assistance to public housing residents only. Public housing
residents may use such assistance to purchase the unit in which they
reside, another public housing unit, or a residence not located in a
public housing development.
(2) A PHA may provide financing assistance for other eligible
purchasers from other income, i.e., income not from 1937 Act programs,
such as proceeds from selling public housing units, loan repayments,
and public housing debt forgiveness funding not already committed to
another purpose.
(c) A PHA must not use 1937 Act funds to rehabilitate units that
are not public housing units.
Sec. 906.7 What physical requirements must a property offered for sale
meet?
A property offered for sale under a homeownership program must meet
local code requirements (or, if no local code exists, the housing
quality standards established by HUD for the Section 8 Housing
Assistance Payments Program for Existing Housing, under part 882 of
this title) and the requirements for elimination of lead-based paint
hazards in HUD-associated housing, under part 35, subpart C of this
title. When a prospective purchaser
[[Page 49935]]
with disabilities requests accessible features, the features must be
added in accordance with part 8 of this title. Further, the property
must be in good repair, with the major components having a remaining
useful life that is sufficient to justify a reasonable expectation that
homeownership will be affordable by the purchasers. These standards
must be met as a condition for conveyance of a dwelling to an
individual purchaser.
Sec. 906.9 What effect do existing restrictions and encumbrances have
on the sale of a property?
(a) If the property is subject to indebtedness under the Annual
Contributions Contract (ACC), HUD will continue to make any debt
service contributions for which it is obligated under the ACC, and the
property sold will not be subject to the encumbrance of that
indebtedness.
(b) Upon sale of a public housing unit, in accordance with the HUD-
approved homeownership program, HUD will execute a release of the title
restrictions prescribed by the ACC. Because the property will no longer
be subject to the ACC after sale, it will cease to be eligible for
public housing Operating Fund or Capital Fund payments.
Subpart C--Purchaser Requirements
Sec. 906.11 Who is eligible to purchase housing under a homeownership
program?
Low-income families and entities that purchase units from the PHA
for resale to low-income families (``purchase and resale entities'' or
PREs) are eligible to purchase properties made available for sale under
a PHA homeownership program.
Sec. 906.13 Do current residents have a right of first refusal on
units made available for sale?
(a) Yes, in selling a public housing unit under a homeownership
program, the PHA must initially offer the unit to the resident
occupying the unit, if any, or to an organization serving as a conduit
for sales to any such resident. (See Sec. 906.19.) The resident must
qualify to purchase the unit under the requirements specified by the
PHA, in accordance with Sec. 906.15.
(b) No, this program does not require the PHA, when selling a unit
that is a non-public housing unit, to offer the unit for sale first to
the current resident under the program.
Sec. 906.15 What requirements apply to a family purchasing a property
under a homeownership program?
(a) Low-income requirement. A family purchasing a property under a
PHA homeownership program must be a low-income family, as defined in
section 3 of the 1937 Act (42 U.S.C. 1437a), at the time the contract
to purchase the property is executed.
(b) Principal residence requirement. The dwelling unit sold to an
eligible family must be used as the principal residence of the family.
(c) Financial capacity requirement. Eligibility must be limited to
families who are capable of assuming the financial obligations of
homeownership, under minimum income standards for affordability, taking
into account the unavailability of public housing operating subsidies
and modernization funds after conveyance of the property by the PHA. A
homeownership program may, however, take account of any available
subsidy from other sources.
(d) Down payment requirement. (1) Each family purchasing housing
under a homeownership program must provide a downpayment in connection
with any loan for acquisition of the housing, in an amount determined
by the PHA or PRE, in accordance with an approved homeownership
program. Except as provided in paragraph (d)(2) of this section, the
PHA or PRE must permit the family to use grant amounts, gifts from
relatives, contributions from private sources, and other similar
amounts in making the downpayment.
(2) The family must use its own resources other than grants, gifts,
contributions, or similar amounts, to contribute an amount of the
downpayment that is not less than one percent of the purchase price of
the housing. The PHA or PRE must take reasonable steps, and maintain
records, that are verifiable by HUD through audits to verify the source
of this one percent contribution.
(e) Other requirements established by the PHA. A PHA may establish
requirements or limitations for families to purchase housing under a
homeownership program, including requirements or limitations regarding:
(1) Employment or participation in employment counseling or
training activities;
(2) Criminal activity;
(3) Participation in homeownership counseling programs;
(4) Evidence of regular income; and
(5) Other requirements.
Sec. 906.17 How does a family apply to purchase a unit under a
homeownership program?
Families who are interested in purchasing a unit must submit
applications to the PHA or PRE for that specific purpose, and those
applications must be handled separately from applications for other PHA
programs. Application for homeownership must not affect an applicant's
place on any other PHA waiting list for rental units.
Sec. 906.19 What requirements apply to a PRE (purchase and resale
entity), an entity formed for the purpose of purchasing units for
resale to low-income families?
(a) In general. In the case of a purchase of units for resale to
low-income families by a PRE, the PHA must have an approved
homeownership program that describes the use of a PRE to sell the units
to low-income families within 5 years from the date of the PRE's
acquisition of the units.
(b) PRE requirements. The PHA must demonstrate in its homeownership
program that the PRE has the necessary legal capacity and practical
capability to carry out its responsibilities under the program. The
PHA's homeownership program also must contain a written agreement that
specifies the respective rights and obligations of the PHA and the PRE
and which include:
(1) Assurances that the PRE will comply with all provisions of the
HUD-approved homeownership program;
(2) Assurances that the PRE will be subject to a title restriction
providing that the property may be resold or otherwise transferred only
by conveyance of individual dwellings to eligible families, in
accordance with the HUD-approved homeownership program, or by
reconveyance to the PHA, and that the property will not be encumbered
by the PRE without the written consent of the PHA;
(3) Protection against fraud or misuse of funds or other property
on the part of the PRE, its employees, and agents;
(4) Assurances that the resale proceeds will be used only for the
purposes specified by the HUD-approved homeownership program;
(5) Limitation of the PRE's administrative and overhead costs, and
of any compensation or profit that may be realized by the PRE, to
amounts that are reasonable in relation to its responsibilities and
risks;
(6) Accountability to the PHA and residents for the recordkeeping,
reporting and audit requirements of Sec. 906.33;
(7) Assurances that the PRE will administer its responsibilities
under the plan on a nondiscriminatory basis, in accordance with the
Fair Housing Act and implementing regulations; and
(8) Adequate legal remedies for the PHA and residents, in the event
of the PRE's failure to perform in accordance with the agreement.
(c) Sale to low-income families. The requirement for a PRE to sell
units
[[Page 49936]]
under a homeownership program only to low-income families must be
recorded as a deed restriction at the time of purchase by the PRE.
(d) Resale within five years. A PRE must agree that, with respect
to any units it acquires under a homeownership program under this part,
it will transfer ownership to the PHA if the PRE fails to resell the
unit to a low-income family within 5 years of the PRE's acquisition of
the unit.
(e) Required notices to families. A PRE must provide the notices to
purchasing families that are required by the PHA, in accordance with
the environmental and other requirements referenced in Sec. 906.47.
Subpart D--Program Administration
Sec. 906.23 What protections are available to nonpurchasing public
housing residents?
(a) If a public housing resident does not exercise the right of
first refusal under Sec. 906.13, the PHA:
(1) Must notify the resident residing in the unit 90 days prior to
the displacement date, except in cases of imminent threat to health or
safety, that:
(i) The public housing unit will be sold;
(ii) The transfer of possession of the unit will not occur until
the resident is relocated; and
(iii) Each resident displaced by such action will be offered
comparable housing (as defined in paragraph (b) of this section);
(2) Must provide for the payment of the actual costs and reasonable
relocation expenses of the resident to be displaced;
(3) Must ensure that the resident is offered comparable housing
under paragraph (a)(1)(iii) of this section;
(4) Must provide counseling for displaced residents of their rights
to comparable housing, including their rights under the Fair Housing
Act to choice of a unit on a nondiscriminatory basis, without regard to
race, color, religion, national origin, disability, age, sex, or
familial status; and
(5) Must not transfer possession of the unit until the resident is
relocated.
(b) For purposes of this section, the term ``comparable housing''
means housing:
(1) That meets housing quality standards;
(2) That is located in an area that is generally not less desirable
than the displaced resident's original development; and
(3) Which may include:
(i) Tenant-based assistance (tenant-based assistance must only be
provided upon the relocation of the resident to the comparable
housing);
(ii) Project-based assistance; or
(iii) Occupancy in a unit owned, operated, or assisted by the PHA
at a rental rate paid by the resident that is comparable to the rental
rate applicable to the unit from which the resident is vacated.
Sec. 906.24 What protections are available to nonpurchasing residents
of housing other than public housing?
Residents of non-public housing that would be displaced by a
homeownership program are eligible for assistance under the Uniform
Relocation Act and part 42 of this title. For purposes of this part, a
family that was over-income at the time of admission to public housing
and was admitted in accordance with section 3(a)(5) of the 1937 Act, is
treated as a nonpurchasing resident of non-public housing.
Sec. 906.25 What ownership interest is conveyed to a purchaser?
A homeownership program may provide for sale to the purchasing
family of any ownership interest that the PHA considers appropriate
under the homeownership program, including:
(a) Ownership in fee simple;
(b) A condominium interest;
(c) An interest in a limited dividend cooperative; or
(d) A shared appreciation interest with a PHA providing financing.
Sec. 906.27 What limitations apply to net proceeds on the sale of a
property acquired through a homeownership program?
(a) A PHA must establish such limitations (by an appropriate form
of title restriction) on the resale of property acquired through a
homeownership program as the PHA considers appropriate for the PHA to
recapture:
(1) Some or all of the economic gain derived from any such resale
(i.e., appreciation) occurring during the 5-year period beginning upon
purchase of the dwelling unit by the eligible family, in addition to
some or all of the assistance provided under the homeownership program
to the family; and
(2) After the expiration of such 5-year period, only such amounts
as are equivalent to the assistance provided under the homeownership
program to the family.
(b) In establishing the limitations described in paragraph (a)(1)
of this section, the PHA may consider:
(1) The aggregate amount of assistance provided under the
homeownership program to the family;
(2) The contribution of equity by the purchasing family;
(3) The period of time elapsed between purchase by the homebuyer
under the homeownership program and resale by the homebuyer;
(4) The reason for resale;
(5) Any improvements made by the family purchasing under the
homeownership program;
(6) Any appreciation in the value of the property; and
(7) Any other factors that the PHA considers appropriate.
(c) For the purposes of this section, the value of the property
must be determined by a certified appraiser within one month before the
resale.
Sec. 906.31 What requirements are applicable to net proceeds?
(a) PHA use of net proceeds. The PHA must use any net proceeds of
any sales under a homeownership program remaining after payment of all
costs of the sale for purposes relating to low-income housing and in
accordance with the PHA plan of the PHA carrying out the program.
(b) PRE use of resale net proceeds. The PHA may require the PRE to
return the net proceeds from the resale and from managing the units to
the PHA. If the PHA permits the PRE to retain the net proceeds, the PRE
must use these proceeds for low-income housing purposes.
Sec. 906.33 What reporting and recordkeeping requirements apply to
homeownership programs?
The PHA is responsible for the maintenance of records (including
sale and financial records) for all activities incident to
implementation of the HUD-approved homeownership program. Where a PRE
is responsible for the sale of units, the PHA must ensure that the
PRE's responsibilities include proper recordkeeping and accountability
to the PHA, sufficient to enable the PHA to monitor compliance with the
approved homeownership program and to meet its audit responsibilities.
All books and records must be subject to inspection and audit by HUD
and the General Accounting Office (GAO). The PHA must report annually
to HUD on the progress of each program approved under this part.
Sec. 906.35 Are the disposition provisions of section 18 of the United
States Housing Act of 1937 applicable to a homeownership program?
The provisions of section 18 of the United States Housing Act of
1937 (42 U.S.C. 1437p) do not apply to disposition of public housing
dwelling units under a homeownership program approved by HUD.
[[Page 49937]]
Sec. 906.37 What Davis-Bacon and HUD wage rate requirements apply to
homeownership programs?
(a) Type of activities covered. Rehabilitation, repairs and
accessibility modifications performed pursuant to Sec. 906.7 are
subject to Davis-Bacon or HUD-determined wage rate requirements when
involving units that are:
(1) Public housing units that will be sold under a homeownership
program; and
(2) Non-public housing units owned or acquired by a PHA with the
intent to use 1937 Act funds to rehabilitate the units, finance the
sale of the units, or otherwise provide assistance to purchasers of the
units.
(b) Type of workers covered. These prevailing wage requirements
cover laborers and mechanics involved in the construction work and
technical workers, such as architects, technical engineers, draftsmen,
and technicians. See Secs. 968.110(e) and 968.105 of this title for
further guidance concerning Davis-Bacon and HUD-determined wage rates.
Subpart E--Program Submission and Approval
Sec. 906.38 Does a PHA require HUD approval to implement a
homeownership program under this part?
A PHA must obtain HUD approval before implementing a homeownership
program. A homeownership program must be carried out in accordance with
the requirements of this part and the PHA's plan submitted under part
903 of this title.
Sec. 906.39 What must a homeownership program include?
A homeownership program must include the following matters, as
applicable to the particular factual situation:
(a) Property description. (1) If the program involves only
financing assistance to the family purchasing the unit, the PHA need
not specify property addresses, but it must describe the area in which
the assistance is to be used.
(2) If the PHA is selling existing public housing, it must describe
the property, including identification of the property by project
number, or street address if there is no project number, and the
specific dwellings to be sold, with bedroom distribution by size and
type broken down by project.
(3) If the PHA is acquiring units with 1937 Act funds to sell under
the program, it must comply with the provisions of Sec. 906.40
concerning this element of the program.
(b) Repair or rehabilitation. If applicable, a plan for any repair
or rehabilitation required under Sec. 906.7, based on the assessment of
the physical condition of the property that is included in the
supporting documentation.
(c) Purchaser eligibility and selection. The standards and
procedures to be used for homeownership applications and the
eligibility and selection of purchasers, consistent with the
requirements of Sec. 906.15. If the homeownership program allows
application for purchase of units by families who are not presently
public housing or Section 8 residents and not already on the PHA's
waiting lists for those programs, the program must include an
affirmative fair housing marketing strategy for such families,
including specific steps to inform them of their eligibility to apply,
and to solicit applications from those in the housing market who are
least likely to apply for the program without special outreach.
(d) Sale and financing. Terms and conditions of sale and financing.
(e) Consultation with residents and purchasers. A description of
resident input obtained during the resident consultation process
required by the PHA plan under part 903 of this title, and a plan for
consultation with purchasers during the implementation stage to help
insure program solvency.
(f) Counseling. Counseling, training, and technical assistance to
be provided to purchasers.
(g) Sale via PRE. If the plan contemplates sale to residents by an
entity other than the PHA, a description of that entity's
responsibilities and information demonstrating that the requirements of
Sec. 906.19 have been met or will be met in a timely fashion.
(h) Nonpurchasing residents. If applicable, a plan for
nonpurchasing residents, in accordance with Sec. 906.23.
(i) Sale proceeds. An estimate of the sale proceeds and an
explanation of how they will be used, in accordance with Sec. 906.31.
(j) Administration. An administrative plan, including estimated
staffing requirements and a listing of staff positions that will be
responsible for the day-to-day implementation and monitoring of the
program, the percentage of time each staff member will spend on
homeownership activities and the funding source for staff salaries.
(k) Records, accounts and reports. A description of the
recordkeeping, accounting and reporting procedures to be used,
including those required by Sec. 906.33.
(l) Budget. A budget estimate, showing any rehabilitation or repair
cost, any financing assistance, and the costs of implementing the
program, and the sources of the funds that will be used.
(m) Timetable. An estimated timetable for the major steps required
to carry out the plan.
Sec. 906.40 What requirements apply to acquisition of non-public
housing?
(a) Proposal contents. The PHA must submit an acquisition proposal
to the HUD Field Office for review and approval before its
homeownership plan containing acquisition of non-public housing can be
approved. This proposal must contain the following:
(1) Project description. A description of the housing, including
the number of units, unit types and number of bedrooms, and any
nondwelling facilities of the project to be acquired;
(2) Certification. Certification by the PHA that the property was
not constructed or is not being constructed with the intent that it
would be sold to the PHA;
(3) Site information. A description of the proposed general
location of the property to be acquired, or where specific properties
have been identified, street addresses of the properties;
(4) Project costs. The detailed budget of costs for acquiring the
project, including relocation and closing costs, and an identification
of the sources of funding;
(5) Appraisal. An appraisal of the proposed property by an
independent, state-certified appraiser (when the sites have been
identified);
(6) Project acquisition schedule. A copy of the PHA acquisition
schedule;
(7) Environmental information. All available environmental
information on the properties to be acquired (when sites have been
identified), to expedite the environmental review under part 58 of this
title (if a responsible entity has assumed environmental responsibility
for the project) or under part 50 of this title (if HUD is performing
the environmental review);
(8) Additional HUD-requested information. Any additional
information that may be needed for HUD to determine whether it can
approve the proposal.
(b) Cost limit. The acquisition cost of the project is limited by
the housing cost cap limit, as described in HUD Notice PIH 99-17,
issued on March 15, 1999.
Sec. 906.41 What supporting documentation must be submitted to HUD
with the homeownership program?
The following supporting documentation must be submitted to
[[Page 49938]]
HUD with the proposed homeownership program, as appropriate for the
particular program:
(a) Property value estimate. An estimate of the fair market value
of the property, including the range of fair market values of
individual dwellings, with information to support the reasonableness of
the estimate. (The purpose of this data is merely to assist HUD in
determining whether, taking into consideration the estimated fair
market value of the property, the plan adequately addresses any risks
of fraud and abuse and of windfall profit upon resale, pursuant to
Sec. 906.27. A formal appraisal need not be submitted with the proposed
homeownership program.)
(b) Physical assessment. An assessment of the physical condition of
the property, based on the standards specified in Sec. 906.7.
(c) Workability. An itemized statement demonstrating the practical
workability of the program, based on analysis of data on such elements
as purchase prices, costs of repair or rehabilitation, homeownership
costs, family incomes, availability of financing, and the extent to
which there are eligible residents who are expected to be interested in
purchase. (See Sec. 906.45(a).)
(d) PHA performance in homeownership. A statement of the commitment
and capability of the PHA (and any other entity with substantial
responsibility for implementing the homeownership program) to
successfully carry out the homeownership program. The statement must
describe the PHA's (and other entity's) past experience in carrying out
homeownership programs for low income families, and (if applicable) its
reasons for considering such programs to have been successful. A PHA
that has not previously implemented a homeownership program for low
income families instead must submit a statement describing its
experience in carrying out public housing modernization and development
projects under parts 941 and 968 of this title, respectively.
(e) Nondiscrimination certification. The PHA's or PRE's
certification that it will administer the plan on a nondiscriminatory
basis, in accordance with the Fair Housing Act, Title VI of the Civil
Rights Act of 1964, Executive Order 11063, and implementing
regulations, and will assure compliance with those requirements by any
other entity that may assume substantial responsibilities for
implementing the program.
(f) Legal opinion. An opinion by legal counsel to the PHA, stating
that counsel has reviewed the program and finds it consistent with all
applicable requirements of Federal, State, and local law, including
regulations as well as statutes. At a minimum, the attorney must
certify that the documents to be used will fully implement the sale to
a low-income family restriction of Sec. 906.41(e), the resale reverter
of Sec. 906.41(d), and the restriction of use of resale proceeds of
Sec. 906.27.
(g) Board resolution. A resolution by the PHA's Board of
Commissioners, evidencing its approval of the program.
(h) Other information. Any other information that may reasonably be
required for HUD review of the program. Except for the PHA-HUD
implementing agreement under Sec. 906.49, HUD approval is not required
for documents to be prepared and used by the PHA in implementing the
program (such as contracts, applications, deeds, mortgages, promissory
notes, and cooperative or condominium documents), if their essential
terms and conditions are described in the program. Consequently, those
documents need not be submitted as part of the program or the
supporting documentation.
Sec. 906.43 Where does a PHA submit a homeownership program for HUD
approval?
A PHA must submit its proposed homeownership program together with
supporting documentation, in a format prescribed by HUD, to the Special
Applications Center, 77 W. Jackson Street, Chicago, Illinois, with a
copy to the appropriate HUD Field Office.
Sec. 906.45 What criteria will HUD use to review a homeownership
program?
HUD will use the following criteria in reviewing a homeownership
program:
(a) Workability. The program must be practically workable, with
sound potential for long-term success. Financial viability, including
the capability of purchasers to meet the financial obligations of
homeownership, is a critical requirement.
(b) Legality. The program must be consistent with law, including
the requirements of this part and any other applicable Federal, State,
and local statutes and regulations, and existing contracts. Subject to
the other two criteria stated in this section, any provision that is
not contrary to those legal requirements may be included in the
program, at the discretion of the PHA, whether or not expressly
authorized in this part.
(c) Documentation. The program must be clear and complete enough to
serve as a working document for implementation, as well as a basis for
HUD review.
(d) PHA performance in homeownership. The PHA (and any other entity
with substantial responsibility for implementing the homeownership
program) must have demonstrated the commitment and capability to
successfully implement the homeownership program based upon the
criteria stated in 906.41(d).
Sec. 906.47 What environmental provisions apply?
(a) Generally, the environmental provisions applicable to HUD-
financed programs are found in part 58 of this title (if a responsible
entity has assumed environmental review responsibility for the project)
and part 50 of this title (if HUD is performing the environmental
review).
(b) Where the PHA's homeownership program involves no acquisition
or rehabilitation of units in anticipation of the sale but assistance
to the homebuyer will be provided with 1937 Act funds, an environmental
review is not required under part 58 or part 50 of this title. However,
the requirements of Sec. 58.6 or Sec. 50.19(b)(15) of this title are
still applicable.
Sec. 906.49 How is HUD approval and authorization indicated?
HUD may approve a homeownership program as submitted or return it
to the PHA for revision and resubmission. Upon HUD notification to the
PHA that the homeownership program is approvable (in final form that
satisfies all applicable requirements of this part), the PHA and HUD
will execute a written implementing agreement, in a form prescribed by
HUD, to evidence HUD approval and authorization for implementation. The
program itself, as approved by HUD, must be incorporated in the
implementing agreement. Any of the items of supporting documentation
may also be incorporated, if agreeable to the PHA and HUD. The PHA is
obligated to carry out the approved homeownership program and other
provisions of the implementing agreement without modification, except
with written approval by HUD.
Dated: August 27, 1999.
Deborah Vincent,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-23700 Filed 9-13-99; 8:45 am]
BILLING CODE 4210-33-P
