Rule2024-08601
Housing Opportunity Through Modernization Act of 2016-Housing Choice Voucher (HCV) and Project-Based Voucher Implementation; Additional Streamlining Changes
Primary source
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Published
May 7, 2024
Effective
June 6, 2024
Issuing agencies
Housing and Urban Development Department
Abstract
This final rule amends HUD's regulations to implement changes to the Housing Choice Voucher (HCV) tenant-based program and the Project-Based Voucher (PBV) program made by the Housing Opportunity Through Modernization Act of 2016 (HOTMA). HOTMA made several amendments to the HCV and PBV programs, including establishing a statutory definition of public housing agency (PHA)-owned housing, and amending several elements of both programs. In response to public comments, HUD has also included additional regulatory changes in this final rule that are intended to reduce the burden on public housing agencies, by either modifying requirements or simplifying and clarifying existing regulatory language.
Full Text
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<title>Federal Register, Volume 89 Issue 89 (Tuesday, May 7, 2024)</title>
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[Federal Register Volume 89, Number 89 (Tuesday, May 7, 2024)]
[Rules and Regulations]
[Pages 38224-38339]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08601]
[[Page 38223]]
Vol. 89
Tuesday,
No. 89
May 7, 2024
Part II
Department of Housing and Urban Development
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24 CFR Parts 5, 8, 42, et al.
Housing Opportunity Through Modernization Act of 2016--Housing Choice
Voucher (HCV) and Project-Based Voucher Implementation; Additional
Streamlining Changes; Final Rule
Federal Register / Vol. 89 , No. 89 / Tuesday, May 7, 2024 / Rules
and Regulations
[[Page 38224]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5, 8, 42, 50, 91, 92, 93, 247, 290, 882, 888, 891,
903, 908, 943, 945, 960, 972, 982, 983, 985, and 1000
[Docket No. FR-6092-F-03]
RIN 2577-AD06
Housing Opportunity Through Modernization Act of 2016--Housing
Choice Voucher (HCV) and Project-Based Voucher Implementation;
Additional Streamlining Changes
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Final rule.
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SUMMARY: This final rule amends HUD's regulations to implement changes
to the Housing Choice Voucher (HCV) tenant-based program and the
Project-Based Voucher (PBV) program made by the Housing Opportunity
Through Modernization Act of 2016 (HOTMA). HOTMA made several
amendments to the HCV and PBV programs, including establishing a
statutory definition of public housing agency (PHA)-owned housing, and
amending several elements of both programs. In response to public
comments, HUD has also included additional regulatory changes in this
final rule that are intended to reduce the burden on public housing
agencies, by either modifying requirements or simplifying and
clarifying existing regulatory language.
DATES:
Effective date: June 6, 2024, except the following sections, which
are delayed indefinitely: instruction 69, Sec. 982.451(c); instruction
98, Sec. 983.154(g) and (h); instruction 100, Sec. 983.157; and
instruction 103, Sec. 983.204(e).
For more information, see SUPPLEMENTARY INFORMATION.
Compliance dates: Compliance with this rule is required no later
than June 6, 2024, except for the following requirements:
1. 90 days after effective date. PHAs are not required to comply
with changes to the requirements in the following sections until
September 4, 2024: 24 CFR 982.301; 24 CFR 982.503; 24 CFR 982.625-641;
24 CFR 983.58(b); 24 CFR 983.252; 24 CFR 983.260; and 24 CFR 985.3.
2. 180 days after effective date. PHAs are not required to comply
with the new requirements in the following section until December 3,
2024: 24 CFR 982.505.
3. One year after the effective date. Several sections in this
final rule require PHAs to update their Administrative Plans. PHAs are
not required to update their Administrative Plans in compliance with
these new requirements until June 6, 2025. Additionally, PHAs are not
required to comply with the new requirements in the following sections
until June 6, 2025: 24 CFR 983.57; 24 CFR 983.155(b); 24 CFR
983.251(e); and 24 CFR 983.262.
FOR FURTHER INFORMATION CONTACT: Ryan Jones, Director, Housing Voucher
Management and Operations Division, Department of Housing and Urban
Development, 451 7th Street SW, Washington, DC 20011; telephone number
202-708-1112 (this is not a toll-free number); email
<a href="/cdn-cgi/l/email-protection#d1999e859c9087bea4b2b9b4a391b9a4b5ffb6bea7"><span class="__cf_email__" data-cfemail="95dddac1d8d4c3fae0f6fdf0e7d5fde0f1bbf2fae3">[email protected]</span></a>. HUD welcomes and is prepared to receive calls
from individuals who are deaf or hard of hearing, as well as from
individuals with speech or communication disabilities. To learn more
about how to make an accessible telephone call, please visit <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION:
I. Background
The HOTMA Statute
On July 29, 2016, HOTMA was signed into law (Pub. L. 114-201, 130
Stat. 782). HOTMA makes numerous significant changes to statutes that
govern HUD programs, including section 8 of the United States Housing
Act of 1937 (1937 Act) (42 U.S.C. 1437f).
The Proposed Rule
On October 8, 2020, HUD issued a proposed rule \1\ to codify the
HOTMA provisions that HUD implemented through the HOTMA Implementation
Notices \2\ in the Federal Register. The proposed rule also sought to
make changes to regulatory provisions unrelated to HOTMA to eliminate
obsolete regulatory provisions and reduce the burden on public housing
agencies, by either modifying requirements or simplifying and
clarifying existing regulatory language. The proposed rule sought to
codify the following HOTMA provisions:
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\1\ Housing Opportunity Through Modernization Act of 2016-
Housing Choice Voucher (HCV) and Project-Based Voucher
Implementation; Additional Streamlining Changes, 85 FR 63664 (Oct.
8, 2020).
\2\ See 81 FR 73030 (Oct. 24, 2016); 82 FR 5458 (Jan. 18, 2017);
82 FR 32461 (Jul. 14, 2017); additional guidance was provided in
Notices PIH 2017-18, PIH 2017-20, and PIH 2017-21.
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<bullet> Section 101: In accordance with HOTMA section 101(a)(1),
the proposed rule included a provision regarding non-life-threatening
deficiencies and an alternative inspections requirement in HOTMA
section 101(a)(1) at Sec. Sec. 982.405, 982.406, and 983.103. The
proposed rule also proposed to revise the definition of life-
threatening deficiencies at Sec. 982.401. Additionally, the proposed
rule sought to include regulations to enforce Housing Quality Standards
(HQS) in section 101(a)(3) at Sec. Sec. 982.404 and 983.208.
<bullet> Section 105: In accordance with HOTMA section 105, the
proposed rule sought to modify and align the definition of ``PHA-owned
unit'' with HOTMA's revised definition of the term at Sec. Sec. 982.4
and 983.3.
<bullet> Section 106: In alignment with HOTMA sections 106(a)(2)
and 106(a)(3), the proposed rule proposed to include regulations on PBV
program cap, PBV units not subject to project cap or program cap, and
PBV project cap in Sec. Sec. 983.6, 983.54, and 983.59.
<bullet> Section 106: Additionally, to conform to the changes in
HOTMA section 106(a)(4), the proposed rule included regulations on
entering into a PBV Housing Assistance Payments (HAP) contract for
rehabilitated and newly constructed housing projects without an
agreement to enter into HAP contract at Sec. 983.154. The proposed
rule sought to codify regulations surrounding PBV additional contract
conditions and tenant-based assistance for families at termination/
expiration without renewal of PBV HAP contract; PBV priority of
assistance contracts; PBV adding units to HAP contract without
competition; and PBV initial term of HAP contract and extension of
term, in sections 106(a)(4) and 106(a)(5) throughout Part 983. The
proposed rule sought to codify regulations that allow for rent
adjustments using an operating cost adjustment factor (OCAF) in HOTMA
section 106(a)(6) at Sec. 983.302.
<bullet> Section 106: Further, to conform to the changes in HOTMA
sections 106(a)(7) through (a)(9), the proposed rule sought to codify
HOTMA's changes to PBV preference for voluntary services in section
106(a)(7) at Sec. 983.251 and owner-maintained waiting lists in
section 106(a)(7) at Sec. 983.251. The proposed rule also sought to
codify changes to environmental requirements for existing housing in
section 106(a)(8) at Sec. 983.56 and attaching PBVs to projects where
the PHA has an ownership interest in section 106(a)(9) at Sec. 983.51.
The proposed rule also sought to implement the following HOTMA HCV
provision:
<bullet> Section 112: In accordance with HOTMA section 112, the
proposed rule proposed to include the manufactured
[[Page 38225]]
home space rent calculation in section 112 at Sec. 982.623, and to
address the PHA option to make housing assistance payments directly to
families instead of an owner for manufactured home space rentals in a
proposed change to Sec. 982.623.
HUD also proposed changes that were not statutorily required, to
better clarify or revise existing regulatory requirements, including
changing the current requirements to refine the Davis-Bacon wage
requirements and inserting references to obligations under Section 504
of the Rehabilitation Act of 1973 (Section 504) and the Americans with
Disabilities Act (ADA). Through these changes, HUD sought to improve
the administration of the program, simplify program rules, and reduce
administrative burden and cost. For additional information, please see
the proposed rule.\3\
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\3\ 85 FR 63664 (Oct. 8, 2020), <a href="https://www.federalregister.gov/documents/2020/10/08/2020-21400/housing-opportunity-through-modernization-act-of-2016-housing-choice-voucher-hcv-and-project-based">https://www.federalregister.gov/documents/2020/10/08/2020-21400/housing-opportunity-through-modernization-act-of-2016-housing-choice-voucher-hcv-and-project-based</a>.
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HUD received 44 comments on the proposed rule, which were
considered and are discussed in Section IV of this preamble. Additional
details about the proposed changes may be found in the ``Housing
Opportunity Through Modernization Act of 2016-Housing Choice Voucher
(HCV) and Project-Based Voucher Implementation; Additional Streamlining
Changes'' proposed rule at 85 FR 63664 (Oct. 8, 2020).
The NSPIRE Rulemaking
On May 11, 2023, after the proposed rule was published, HUD
published the ``Economic Growth Regulatory Relief and Consumer
Protection Act: Implementation of National Standards for the Physical
Inspection of Real Estate (NSPIRE) final rulemaking (``the NSPIRE final
rule'').\4\ The NSPIRE final rule established a new approach to
defining and assessing housing quality by consolidating and modernizing
inspection standards for public housing, multifamily housing, Community
Planning and Development programs, and the HCV and PBV programs.
Several of the changes made in this final rule from the proposed rule
are designed to incorporate or be consistent with the NSPIRE final
rule, and some additional changes are made to build upon changes made
by the NSPIRE final rule.
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\4\ See 88 FR 30442.
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II. The Final Rule
After considering the public comments received on the October 8,
2020, proposed rule, and after further review, HUD makes the following
changes at this final rule stage. Where a section has been relocated
either from the prior regulations or from what HUD proposed, the
section numbers shown in the headings of this preamble refer to the
regulation sections as they appear in this final rule.
Notes concerning application of this rulemaking to projects
underway.
HUD wishes to clarify that no change in this rulemaking requires a
PHA, or any other party, to repeat a stage in the selection or
development process which has already been completed for a PBV project
prior to the compliance date of this rulemaking. If, for instance, a
PHA has selected a site under the prior site selection standards before
the effective date of this rulemaking, the PHA is not required to
complete a new selection. Similarly, an Agreement to enter into HAP
contract signed before the effective date of this rulemaking does not
need to be amended to incorporate changes to this rulemaking.
Additionally, if parties wish to amend an existing Agreement to
enter into HAP contract to take advantage of changes made by this
rulemaking, such as the changes made to include a description of
broadband infrastructure work in the Agreement, nothing in this
rulemaking prevents such an amendment after the rule is in effect.
However, HUD notes that if a project is under an Agreement to enter
into HAP contract as of the effective date of this rule, parties cannot
nullify the Agreement to enter into HAP contract to proceed without an
Agreement as will be otherwise allowed under this rule when Sec.
983.154(f) and (g) take effect.
Sec. 888.113 Fair Market Rents for Existing Housing: Methodology
In response to public comments, HUD revises Sec. 888.113 to
increase flexibility for PHAs. This final rule will provide PHAs the
option in the HCV program to use Small Area Fair Market Rents (SAFMRs)
in a non-metropolitan area with notification to their local HUD field
office, which provides PHAs operating in non-metropolitan counties the
same opportunity to establish payment standards that better align with
rents that vary significantly between zip code areas within the non-
metropolitan counties. In paragraph (a) this final rule modifies the
requirement under Sec. 888.113 that the FMR calculation exclude newly
built units. HUD no longer publishes separate FMRs for newly
constructed rental units; therefore, the FMRs calculated under Sec.
888.113 should be reflective of the entire rental market. This final
rule also clarifies existing practice in paragraph (c)(3) that where a
PHA that elects to use SAFMRs may exercise this option in one
metropolitan area or non-metropolitan county, and is not required to
exercise this option in other metropolitan areas or non-metropolitan
counties. This final rule changes paragraph (c)(3) which will allow
PHAs to notify HUD when opting-in to use SAFMRs, rather than require
HUD's approval.
This final rule revises paragraph (h) to align with the change to
paragraph (c)(3) described above and to improve readability. Paragraph
(h) is also revised to include a cross-reference to separate
requirements regarding applicability of exception payment standards
based on Small Area FMRs to PBV projects, to more clearly signal that
Small Area FMRs may impact PBVs both as described in paragraph (h) and
where HUD approves use of exception payment standards. This final rule
also revises paragraph (h)(1) to clarify that the PHA and owner may
mutually agree to apply the SAFMR to a PBV project where the project
was selected before ``either or both'' the SAFMR designation and the
PHA administrative policy. The intent of this provision, as explained
in the preamble to the Small Area FMR final rule (81 FR 80567,
published November 16, 2016), was to permit a PHA that had established
an Administrative Plan policy to apply Small Area FMRs to all future
PBV projects to also establish a policy permitting the PHA to apply the
Small Area FMRs to current PBV projects, provided the owner was willing
to mutually agree to do so. This approach was intended to offer
``maximum flexibility'' to the PHA for varied circumstances. However,
the prior language the use of ``both'' inadvertently created confusion
with respect to projects selected between the two events (the Small
Area FMR designation and the PHA administrative policy extending Small
Area FMRs to future PBV projects). Consequently, HUD is making a
technical correction to paragraph (h)(1) to clarify that if the PHA is
applying the Small Area FMRs to future PBV projects, the PHA may also
establish a policy to extend the use of Small Area FMRs to current PBV
projects, including those projects selected after the Small Area FMR
designation but prior to the effective date of the PHA administrative
policy, if the owner is willing to do so.
This final rule also makes minor revisions to paragraphs (h)(1) and
(h)(2). First, the final rule includes ``county-wide FMRs,'' for
consistency with other changes in the regulation that allow voluntary
use of SAFMRs in non-
[[Page 38226]]
metropolitan areas and to avoid any implication that the PBV Small Area
FMR flexibilities in paragraph (h) would not be available in non-
metropolitan counties where HUD publishes SAFMRs. Second, this final
rule changes ``designation'' to ``designation/implementation'' to
improve clarity; this is not a substantive change, but rather it
reflects that the applicable date for a PHA that chooses to implement
Small Area FMRs under paragraph (c)(3) of this section would more
appropriately be termed the date of ``implementation.'' This final rule
also clarifies the effective date of a rent increase due to Small Area
FMR. The proposed rule left unchanged a provision stating that the
effective date of a rent increase would occur on the ``first annual
anniversary'' of the HAP contract, but this final rule replaces ``first
annual anniversary'' with ``next annual anniversary'' to clarify that
the effective date of a rent increase occurs on the next annual
anniversary after the agreement, even if that is not the first
anniversary of the project.
Finally, this final rule revises paragraph (i)(2) to reflect the
renumbering of Sec. 982.503(e) to (f). This final rule also revises
paragraph (i)(3) to reflect the phase-out of success rate payment
standards in 982.503(f).
Sec. 903.3 What is the purpose of this subpart?
This final rule clarifies HUD's intent regarding applicability of
part 903 to the project-based voucher program. Previously, Sec.
903.4(a)(2)(i) defined tenant-based assistance to broadly mean
assistance provided under section 8(o) of the 1937 Act, which included
project-based assistance under section 8(o)(13). When Sec. 903.12 was
amended to make express reference to project-based assistance under
section 8(o)(13), an unintended consequence was confusion regarding
whether the term ``tenant-based assistance'' should still be
interpreted to include project-based assistance under section 8(o)(13).
In Sec. 903.3(b)(2), the term ``project-based'' is added to the
reference of participants who benefit from PHA plans as a source to
locate basic PHA policies, rules and requirements concerning the PHA's
operations, programs and services.
Sec. 903.4 What are the public housing agency plans?
This final rule revises and defines both tenant-based assistance
and project-based assistance under 903.4(a)(2)(i) to address confusion
regarding whether the existing regulatory language also covers project-
based assistance under section 8(o)(13). HUD now also makes specific
reference to tenant-based assistance, project-based assistance, and/or
tenant and project-based assistance throughout part 903 to bring
clearer meaning to each provision.
Sec. 903.6 What information must a PHA provide in the 5-Year Plan?
HUD adds paragraph (c) to Sec. 903.6 to clarify that when a PHA
intends to select one or more projects for project-based assistance
without competition, the PHA must first include a statement of this
intent in its 5-Year Plan to put the public on notice. The proposed
rule referenced this requirement in 983.51(c)(1) but only generically
referenced the PHA Plan.
Sec. 903.7 What information must a PHA provide in the Annual Plan?
This final rule clarifies the requirements for PHAs that provide
project-based assistance under section 8(o)(13) with respect to what
information a PHA must provide in the Annual Plan. HUD now makes
specific references to project-based assistance in paragraphs (a)(1),
(c), (d), (e)(4), (f), and (l)(1)(iii) and (2). HUD also inserts a new
paragraph (r) which contains text that was previously located in Sec.
903.12, as HUD determined that the project-based assistance statement
requirement in that section was not appropriately located.
Finally, in the Federal Register notice published on January 18,
2017 (82 FR 5458), HUD stated, ``The HOTMA amendments permit a PHA to
establish a preference based on who qualifies for voluntary services,
including disability-related services, offered in conjunction with the
assisted units.'' HUD further provided ``The revised statute permits
such a preference to be established if it is consistent with the PHA
Plan. As part of the PHA Plan review process, the Office of Fair
Housing and Equal Opportunity, in consultation with the Office of
General Counsel, will review each proposed preference for consistency
with fair housing and civil rights requirements. As part of this
process, HUD may request the PHA or owner provide any additional
documentation necessary to determine consistency with the PHA Plan and
all applicable Federal fair housing and civil rights requirements.'' In
this final rule, HUD clarifies that the Office of Fair Housing and
Equal Opportunity, in consultation with the Office of General Counsel,
may review proposed preferences as part of the PHA Plan review process.
Approval of a PHA Plan does not constitute compliance with federal fair
housing and civil rights requirements. As stated in the comment
discussion of Sec. 983.251, adoption of such preferences cannot
conflict with Section 504 or other federal civil rights requirements.
Further explanation of these issues is located in that discussion and
in HUD's January 2017 notice.
Sec. 903.11 Are certain PHAs eligible to submit a streamlined Annual
Plan?
HUD makes a minor revision to Sec. 903.11(c)(1) and (3) to include
the requirement that a PHA must identify its participation in the
project-based assistance program in the streamlined Annual Plan
consistent with the changes to Sec. 903.7 made by this final rule.
HUD is also revising paragraphs (a)(3) and (c)(3). These paragraphs
allow PHAs to submit a streamlined Annual Plan if they do not own or
operate public housing. This final rule clarifies that PHAs that
participate in the project-based assistance program are still eligible
to submit a streamlined Annual Plan.
Sec. 903.12 What are the streamlined Annual Plan requirements for
small PHAs?
In this final rule, HUD moves the PBV requirements previously
located in Sec. 903.12 to Sec. 903.7 as described above. HUD makes a
minor revision to Sec. 903.12 to include the requirement that in the
streamlined Annual Plan for Small PHAs, a PHA must identify its
participation in the PBV program consistent with the changes to Sec.
903.7 made by this final rule. HUD also makes express reference to
project-based assistance in paragraph (b).
Sec. 903.13 What is a Resident Advisory Board and what is its role in
development of the Annual Plan?
This final rule clarifies in Sec. 903.13(b)(1) and (3) the
requirements that Resident Advisory Board composition provides for
reasonable representation of families receiving project-based
assistance, in addition to families receiving tenant-based assistance.
Sec. 903.15 What is the relationship of the public housing agency
plans to the Consolidated Plan and a PHA's Fair Housing requirements?
This final rule clarifies in paragraph (c) that all admission and
occupancy policies for section 8 project-based housing programs, in
addition to public housing and section 8 tenant-based must comply with
Fair Housing Act requirements and other civil rights laws and
regulations and with a PHA's plans to affirmatively further fair
housing.
[[Page 38227]]
Sec. 982.4 Definitions
In this final rule, HUD has revised the organizational structure of
the cross-references for clarity and consistency with cross references
in other sections. In addition, this final rule makes the following
changes to definitions:
HUD adds the definition of ``building,'' to clarify that a building
is a structure with a roof and walls that contains one or more dwelling
units.
HUD adds the definitions of ``foster adult'' and ``foster child''
to the HCV program to clarify that foster adult and foster child are
members of the household, but not members of a family. These
definitions are identical to the definitions added by the Housing
Opportunity Through Modernization Act of 2016: Implementation of
Sections 102, 103, and 104 final rule.\5\
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\5\ See ``Housing Opportunity Through Modernization Act of 2016:
Implementation of Sections 102, 103, and 104'' final rule at 88 FR
9600 (Feb. 14, 2023).
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HUD revises the definition of ``housing quality standards'' to make
a technical correction to the existing definition and eliminate
confusion regarding the use of the alternative inspection option. Under
the statute, the term ``housing quality standards'' (HQS) refers to the
standards prescribed by HUD under section 8(o)(8)(B)(i) or variations
approved by HUD under section 8(o)(8)(B)(ii) of the United States
Housing Act of 1937. While the alternative inspection option at Sec.
982.406 allows a PHA to comply with the initial and regular inspection
requirements by relying on an alternative inspection (i.e., an
inspection conducted for another housing program), that does not mean
the standards of the alternative inspection become the applicable HQS
for the HCV program. For example, assume a PHA places a unit under a
HAP contract by using the alternative inspection option for initial
inspections under Sec. 982.406(e). Under that option, the PHA may
place a unit under HAP contract on the basis that the unit passed an
alternative inspection for a different housing program if certain
conditions are met prior to conducting its own inspection. However, the
PHA must still conduct its own HQS inspection within 30 days of
receiving the Request for Tenancy Approval (RFTA) and may not make
housing assistance payments to the owner until the PHA has inspected
the unit. The PHA conducts its inspection of the unit based on the HQS
established by HUD for the HCV program, not the housing standards that
were applicable under the alternative inspection. Likewise, any interim
inspection conducted by the PHA for a unit under HAP contract is to
determine that the unit meets the HQS established by HUD for the HCV
program, regardless of whether the PHA is relying on an alternative
inspection of another housing program (that may have different
standards) for regular inspections. For these same reasons, HUD is also
revising the definition of HQS for the PBV program at Sec. 983.3 and
making conforming changes to Sec. Sec. 982.401, 982.605(a),
982.609(a), 982.614(a), 982.618(b), 982.621, and 983.101(a) in this
final rule.
HUD revises the definition of ``independent entity'' from the
definition in the proposed rule to clarify when the unit of general
local government meets the definition of an independent entity and more
clearly explain the requirements and prohibited connections for a HUD-
approved entity.
HUD revises the proposed definition of ``Request for Tenancy
Approval (RFTA)'' to make clear that the RFTA may be submitted not just
by the family, but also on behalf of a family.
HUD revises the definition of ``Small Area Fair Market Rents'' from
the proposed rule to remove language suggesting that the definition
only applies to areas meeting the definition at Sec. 888.113(d)(2).
HUD removed this reference because the SAFMRs in part 982 are not meant
to be limited to the mandatory Small Area FMR metropolitan areas, and
as such the ``Small Area Fair Market Rents'' definition deleted the
citation to Sec. 888.113(d)(2), which only covers mandatory
metropolitan areas designated as Small Area FMR areas.
HUD revises the definition of ``tenant-paid utilities'' by stating
that utilities and services may include those required by HUD through
Federal Register notice with opportunity for comment.
Sec. 982.54 Administrative Plan
This final rule revises the requirements for the PHA Administrative
Plan. Specifically, this final rule requires PHAs at Sec.
982.54(d)(22) to specify in the Administrative Plan the PHA's policy
for withholding HAP for units that do not meet HQS. This final rule
also requires at Sec. 982.54(d)(4)(iv) that the PHA Administrative
Plan include the PHA's policy concerning residency for foster children
and adults and requires at Sec. 982.54(d)(23) that the PHA's
Administrative Plan include the PHA's policy on assisting families with
relocating and finding a new unit. This final rule also modifies Sec.
982.54(d)(4)(iii) to include Sec. Sec. 982.552, 982.554, and 982.55 as
regulations that PHAs must follow in establishing their standards for
denying admission or terminating assistance based on criminal activity
or alcohol abuse and which must be included in their Administrative
Plan. HUD's directives and guidance on a PHA's use of criminal activity
as an admission screening factor are contained in PIH Notice 2015-19,
Guidance for Public Housing Agencies (PHAs) and Owners of Federally-
Assisted Housing on Excluding the Use of Arrest Records in Housing
Decisions. Through this notice and other issuances, such as the 2016
Office of General Counsel's Guidance on the Application of Fair Housing
Act Standards to the Use of Criminal Records by Providers of Housing
and Real Estate-Related Transactions, HUD has required PHAs to adopt
admission policies that do not intentionally discriminate against
members of a protected class or otherwise have an unjustified
discriminatory effect on members of a protected class, even when the
PHA has no intent to discriminate. HUD urges PHAs to achieve a sensible
and effective balance between allowing individuals with a criminal
record to access HUD-subsidized housing and ensuring the safety of all
residents of such housing.
Consistent with the NSPIRE final rule, HUD modifies Sec.
982.54(d)(21)(i) to require the PHA to include in its Administrative
Plan any life-threatening deficiencies adopted by the PHA. Under the
proposed rule, the PHA's Administrative Plan had to include the
specific life-threatening conditions that would be identified through
the PHA's inspections, including the HUD required life-threatening
conditions and any life-threatening deficiencies adopted by the PHA
prior to January 18, 2017. Since the deficiencies that HUD requires
must be considered life-threatening are mandatory and not a matter of
PHA administrative policy, requiring the PHA to list the HUD-required
life-threatening deficiencies in the Administrative Plan is unnecessary
and burdensome. In addition, singling out life-threatening deficiencies
adopted by the PHA prior to January 18, 2017, which was related to how
HUD initially implemented the non-life-threatening initial inspection
option in the HOTMA Implementation Federal Register notice (82 FR 5458,
published January 18, 2017), may create confusion. The revised text in
this final rule clarifies that the Administrative Plan must include a
list of any PHA designated life-threatening deficiencies that, in
addition to all HUD-required life-threatening deficiencies, will be
applied
[[Page 38228]]
by the PHA, regardless of date that the PHA designated the deficiency
as life-threatening.
Sec. 982.301 Information When Family Is Selected
This final rule makes changes to the information provided to a
family when they are selected. For transparency and to ensure equal
access, this section specifies that PHAs must provide information in a
way that ensures meaningful access to individuals with limited English
proficiency. Additionally, the final rule expands upon the requirement
in the proposed rule to provide information on reasonable accommodation
policies and procedures in the information packet, by also requiring
that the packet specifically address an increase in the payment
standard as a reasonable accommodation. The final rule also includes a
requirement that reasonable accommodations must also be covered in the
oral briefing. In this section, this final rule removes all references
to the welfare to work program, since it no longer exists. Finally,
this rule reorganizes paragraph (a) so that paragraph (a)(1) represents
a list of what must be provided in an oral briefing, moving some
content from paragraphs (a)(2) and (3); this reorganization does not
change the requirements of paragraph (a) in any way.
Sec. 982.305 PHA Approval of Assisted Tenancy
This final rule reorganizes Sec. 982.305(b) of the proposed rule
by relocating paragraph (b)(2)(iii) of the proposed rule to a new
paragraph (b)(3) and moving the previous paragraph (b)(3) to a new
paragraph (b)(4). For clarity and simplicity, this final rule removes
the requirement that the PHA determine that the unit is covered by the
alternative inspection and simplifies this provision to state that an
alternative inspection is allowed and alternatively cross references
what the PHA is subject to and the alternative inspection option at
Sec. 982.406. In addition, this final rule does not make the proposed
non-substantive change to paragraph (c)(3).
Sec. 982.352 Eligible Housing
This final rule changes proposed Sec. 982.352(b)(1)(v)(A)(3) by
removing the exception of applicability of Sec. 982.405(e),
acknowledging that sometimes independent entities schedule inspections,
and in those cases, they must consider complaints and any other
information brought to their attention.
Sec. 982.401 Housing Quality Standards
NSPIRE includes the new standards for setting HQS at Sec. 5.703
for all HUD programs including the standards for life-threatening and
non-life-threatening conditions and the amount of time required to
correct such deficiencies. Other than a conforming change related to
the revised definition of HQS discussed previously in the description
of the changes to Sec. 982.4, this final rule makes no change to the
section as codified in the NSPIRE rule (88 FR 30442 (May 11, 2023)).
Sec. 982.404 Maintenance: Owner and Family Responsibility; PHA
Remedies
HUD makes several clarifying revisions to this section, which
includes changes to certain terminology such as changing ``fails to
comply'' to ``has HQS deficiencies'' and consistently changing
``defect'' to ``deficiency.'' These clarifying changes also make it
clear that a unit is ``not in compliance with HQS'' when it has
deficiencies that are not remedied within the appropriate timeframe.
This final rule also revises paragraph (a)(2) to provide clarifying
changes from the proposed rule text that ensure the paragraph is clear
that it does not provide a different requirement from the remainder of
the section, and amends paragraph (a)(4) to align with the HOTMA
statutory text. HUD provides in paragraph (b)(4) that, in the case of a
family being responsible for HQS deficiency repairs, the family need
not itself make the repairs but rather is responsible for taking all
steps permissible under the lease and State and local law to ensure the
deficiency is corrected. This is in response to commenters who pointed
out that in some cases the lease or local law may prevent the family
from undertaking the repairs itself.
The proposed rule used varying terminology to explain HQS
inspections throughout parts 982 and 983. To promote clarity, this
final rule replaces the varied terminology to explain HQS inspections
and consistently uses the inspection terms outlined in Sec. 982.405.
This rule specifically names each type of inspection that exists within
its respective section and specifies when actions or provisions apply
to specific inspections. As such, this final rule also removes
references to ``regular inspection'' since it was undefined in the
proposed rule, and this final rule clarifies that Sec. 982.404(d)
applies to every inspection type other than initial inspections. This
final rule also adds the requirement at paragraph (d)(1) that a PHA's
Administrative Plan contains the conditions for withholding HAP from an
owner for such deficiencies, to align with Sec. 982.54.
In paragraph (d)(2)(i), this final rule clarifies that the
abatement requirement includes amounts that had previously been
withheld. To better protect families from homelessness, in paragraph
(d)(2)(ii), HUD outlines the timeframe in which a PHA must issue a
family its voucher to include at least 30 days prior to the termination
of the HAP contract. In paragraph (d)(3), this final rule specifies
that the family has discretion to terminate their lease and that the
termination will occur either immediately or when the family vacates
the unit, whichever is earlier. This final rule also includes the
requirement that PHAs promptly issue the family a voucher to move. In
paragraph (e)(3), HUD expands what is included in costs associated with
relocating to include temporary housing costs. The final rule further
provides that if the PHA uses the withheld and abated assistance
payments to assist with the family's relocation costs, the PHA must
provide security deposit assistance to the family as necessary, and
that PHAs must assist families with disabilities in locating available
accessible units in accordance with 24 CFR 8.28(a)(3).
Lastly, in paragraph (f), HUD provides that the revised Sec.
982.404 applies to HAP contracts that are executed on or after the
effective date of this final rule, as well as HAP contracts renewed
after the rule's effective date.
Sec. 982.405 PHA Initial and Periodic Unit Inspection
HUD has made technical organizational changes to Sec. 982.405 by
dividing paragraphs and changing the headers to consistently use
identifiable names for each inspection type. New paragraph (d) splits
up the proposed paragraph (g) to specifically outline the types of
interim inspections to include life-threatening, non-life-threatening,
and extraordinary circumstances.
Sec. 982.406 Use of Alternative Inspections
HUD revises Sec. 982.406 primarily to address issues with respect
to compatibility between parts 982 and 983. Paragraph (a) now applies
only to HCV, part 982 as HUD moved generally applicable language at
proposed paragraph (a)(2) to paragraph (d) and removed the language at
proposed paragraph (a)(3) applicable only to PBV. HUD also revises
paragraph (c)(2)(ii) to align with the renumbering in Sec. 982.405.
This final rule revises paragraph (d) regarding use of alternative
inspections to apply to both HCV and PBV, by removing specific
citations to Sec. 982.405.
[[Page 38229]]
These changes continue to require that any alternative inspection
standard be identified in the PHA Administrative Plan for both HCV and
PBV.
Sec. 982.451 Housing Assistance Payments Contract
In this final rule, the text from paragraph (c)(1)(i) has been
moved under paragraph (c)(1), resulting in a renumbering of paragraphs
(c)(1)(i)(A)-(E) from the proposed rule to (c)(1)(i)-(v) in the final
rule. Paragraph (c)(1) now expressly states the requirement that the
separate legal entity must execute the HAP contract with the PHA if it
chooses the option of establishing a separate legal entity to serve as
the owner. HUD deletes paragraph (c)(1)(ii) of the proposed rule and
moves the text of proposed (c)(2)(i) under paragraph (c)(2) in the
final rule. This final rule also revises paragraph (c)(2)(i) to clarify
that the PHA-owned certification obligates the PHA, as the owner, to
all of the requirements of the HAP contract. This revision prevents
confusion with other regulations that reference HAP contracts, but not
the PHA-owned certification. Finally, other minor changes were made in
paragraph (c) to align with corresponding requirements in Sec.
983.204(e).
Sec. 982.503 Payment Standard Areas, Schedule, and Amounts
HUD makes clarifying edits to paragraph (a)(1) to reflect HUD's
practice of setting SAFMRs for ZIP codes outside designated SAFMRs. HUD
also revises paragraph (d)(1) to explain the areas in which an
exception payment standard may be established. In addition, in response
to public comment, HUD revises paragraph (d)(2) to allow PHAs to set
SAFMR-based exception payment standards above 110 percent of the FMR
for non-metropolitan counties, just as they are currently permitted to
do for metropolitan areas. This ensures parity between metropolitan and
non-metro PHAs and provides non-metropolitan PHAs with the ability to
establish exception payment standards that better reflect actual market
conditions based on HUD's SAFMR determinations. In paragraph (d)(2),
this final rule also allows PHAs that qualify for exception payment
standards above 110 percent of the applicable FMR to set exception
payment standards up to the same percentage of the SAFMR for the
applicable ZIP code. HUD also divides proposed paragraph (d)(3) into
paragraphs (d)(3) and (4) and moves proposed paragraph (d)(4) to
(d)(5). In order to provide PHAs more flexibility to respond to rapidly
changing rental markets, paragraph (d)(3) now provides set situations
in which HUD will allow PHAs the discretion to establish an exception
payment standard amount between 110 percent and 120 percent of
applicable FMR upon notification to HUD that the PHA meets a specified
criterion instead of requiring prior HUD approval. The PHA must meet
one of three criteria: (i) Fewer than 75 percent of the families to
whom the PHA issued tenant-based rental vouchers during the most recent
12-month period for which there is success rate data available have
become participants in the voucher program; (ii) More than 40 percent
of families with tenant-based rental assistance administered by the
agency pay more than 30 percent of adjusted income as the family share;
or (iii) Such other criteria as the Secretary establishes by notice.
This change will allow PHAs to more quickly respond to changing rental
market conditions, which will help them better manage program
utilization, success rates, and rent burdens. New paragraph (d)(4)
outlines how the PHA must request approval from HUD to establish
payment standards above 110 percent of the applicable FMR except as
provided in paragraphs (d)(2), (d)(3), and (d)(5). This new paragraph
consolidates requirements related to exception payment standards for
PHAs in designated SAFMR areas and for PHAs subject to the metropolitan
area or non-metropolitan county FMRs. It also establishes criteria for
designated SAFMR PHAs to request an exception payment standard over 110
percent of the SAFMR, which the current regulation previously stated
would be provided in a separate Federal Register notice. Further, HUD
revises paragraph (d)(4) to explain the application of the exception
payment standard to the entire fair market rent area and the use of
rental market data, specifically allowing the use of local rental
market data. HUD provides clarifying changes to relocated paragraph
(d)(5), which now specifies existing policy that PHAs may establish an
exception payment standard of up to 120 percent of the applicable FMR
without prior notification to HUD if they are seeking a reasonable
accommodation for a person with a disability.
HUD also amends paragraph (e) by establishing a modified standard
for approving payment standards below the basic range which will
require a projection of rent burden based on the lower payment
standard, rather than measuring rent burden based on current program
participants prior to that reduction. The standard does allow HUD to
approve a payment standard below the basic range to help prevent
termination of assistance in the case of a PHA budget shortfall. In
this final rule, HUD does not adopt the proposed rule modification to
paragraph (e) and removes the PHA's option to go below the basic
payment standard range for Small Area FMR ZIP code areas without HUD
approval. In addition, HUD amends paragraph (f) to eliminate the option
to establish success rate payment standards. HUD determined that the
new flexibility provided in the rule to set payment standards up to 120
percent of the FMR makes this option unnecessary. In paragraph (h),
this final rule specifies that HUD will monitor rent burdens only of
families assisted with tenant-based rental assistance, because PBV
tenants are unlikely to have rent burdens above 30 percent.
Sec. 982.505 How To Calculate Housing Assistance Payment
In this final rule, HUD revises paragraph (c)(3)(iv) to eliminate
the option in the proposed rule for PHAs to adopt different policies
related to applying decreases in payment standards in different
geographic areas out of concern that this could result in
discriminatory policies. Additionally, in response to public comment,
HUD revises paragraph (c)(4)(ii) to require PHAs to apply payment
standard increases at the family's next regular reexamination or the
next interim recertification (in addition to the other events listed)
and adds paragraph (c)(5) to give PHAs the flexibility to adopt
policies to apply increases in the payment standard earlier than
required. HUD also revised paragraph (c)(6), which was previously
paragraph (c)(5), to clarify that while the new family unit size must
be used in the recalculation by the first regular reexamination
following the change, it may be used immediately.
Sec. 982.517 Utility Allowance Schedule
In response to public comments HUD is not going forward with the
proposed Sec. 982.517(a)(2), which would have required PHAs to provide
the utility allowance schedule to HUD only when HUD requests it, and
instead maintains the current requirement that the PHA provide HUD with
the utility allowance schedule regardless of whether HUD requests it,
and to only require the PHA to provide information or procedures used
in preparation of the schedule when HUD requests it. HUD also revises
paragraph (b)(1)(i) to allow for the possibility of an expansion of
utility allowances in the future through a Federal Register notice.
Additionally, in
[[Page 38230]]
paragraph (b)(1)(ii), this final rule expands the category of utilities
and services to include applicable surcharges. In paragraph (b)(1)(iv),
HUD removed wireless internet from the list of non-essential utility
costs so that HUD could consider such inclusion of wireless internet as
essential in a Federal Register notice under paragraph (b)(1)(i).
In paragraph (b)(2)(ii), HUD expands the utility allowance
standards to include criteria for applying utility allowance to
retrofitted units. The revised paragraph (b)(2)(ii) clarifies that
while the entire building must meet Leadership in Energy and
Environmental Design (LEED) or Energy Star standards, in the future HUD
may provide by notice, when an energy-efficient utility allowance
(EEUA) may be used for retrofitted units even if the entire building
does not meet the standard. The revisions notes that there are only two
design standards that can be used for energy-efficient utility
allowance (EEUA) to prevent EEUAs from being applied broadly. HUD also
moves paragraph (b)(2)(iv) to paragraph (b)(2)(v) and adds a new
paragraph (b)(2)(iv) to state that the PHA must use the project-
specific utility allowance schedule for tenant-based participants in
projects that have an approved project-specific utility allowance under
Sec. 983.301(f)(4). This requirement was previously in Sec.
983.301(f)(4) of the proposed rule and Sec. 983.301(f)(2)(ii) of the
previous regulatory text but has been moved from part 983. The
Administrative Plan requirements to include PHAs state their policy for
utility allowance payments are consistent with Sec. 982.54.
Sec. 982.552 PHA Denial or Termination of Assistance for Family
This final rule makes a conforming change to remove Sec.
982.552(c)(1)(viii), which denies housing assistance for a family's
failure to comply with the FSS contract of participation, to align with
a statutory amendment to the Family Self-Sufficiency (FSS) program
authorizing language and the program's regulations, which amended 24
CFR 984.303(b)(5) through a final rule effective on June 16, 2022 (87
FR 30020). This change is in accordance with the Economic Growth,
Regulatory Relief, and Consumer Protection Act (``the Economic Growth
Act'') (Pub. L. 115-174) \6\ which states that, ``Housing assistance
may not be terminated as a consequence of either successful completion
of the contract of participation or failure to complete such
contract.''
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\6\ See The Economic Growth, Regulatory Relief, and Consumer
Protection Act (``the Economic Growth Act'') (Pub. L. 115-174).
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Sec. Sec. 982.605; 982.609; 982.614; 982.618; 982.621
The final rule makes a conforming change to Sec. Sec. 982.605;
982.609; 982.614; 982.618; and 982.621 to align the text with the
revised definition of HQS discussed previously in the description of
the changes to Sec. 982.4.
Sec. 983.2 When the Tenant-Based Voucher Rule (24 CFR Part 982)
Applies
HUD revises Sec. 983.2(c) to outline the specific part 982
provisions that do not apply to PBV assistance and revises paragraphs
(c)(1) and (2) to specify that the HAP contract retention provisions at
Sec. 983.158(e)(2) do not apply to PBV assistance. HUD also clarifies
in paragraph (c)(5) which provisions of part 982, subpart I do not
apply to PBV assistance and in paragraph (c)(7)(i) which provisions of
Sec. 982.503 do not apply.
Sec. 982.641 Homeownership Option: Applicability of Other Requirements
The final rule amends paragraph (d) to clarify that Sec. 982.406
(Use of alternative inspections), along with Sec. 982.405 (PHA unit
inspection) as the CFR previously provided, does not apply to the
homeownership option. Because no HAP or downpayment assistance may be
paid until the PHA inspects a family's homeownership unit and
determines it passes HQS (see 24 CFR 982.631(a)), Sec. Sec. 982.405
and 982.406 describing inspection requirements particular to rental
assistance are incompatible with the homeownership option. HUD notes
that this is not a substantive change.
Sec. 983.3 PBV Definitions
In response to public comment about the utility of establishing
SAFMRs in some non-metropolitan counties, this final rule revises the
definition of ``area where vouchers are difficult to use'' to include
areas where 90 percent of the SAFMR exceeds 110 percent of FMR not just
for metropolitan areas, but also for non-metropolitan counties. HUD
determines that, when used in a non-metropolitan context, the
difference between the SAFMR and FMR remains an easily identifiable and
consistent data point for determining if an area is one in which
vouchers are difficult to use.
This final rule also revises the definition of an ``area where
vouchers are difficult to use'' to include a census tract with a
poverty rate of 20 percent or less. This is not a substantive change,
but rather a reorganization of the rule text for streamlining. In the
proposed rule, Sec. 983.54(b), regarding the project cap (income-
mixing requirement), contained two separate categories of projects that
were subject to a higher project cap: these categories were projects
``located in a census tract with a poverty rate of 20 percent or less''
and projects ``located in an area where vouchers are difficult to
use.'' Similarly, Sec. 983.6(d), regarding the program cap (percentage
limitation), included both units ``located in a census tract with a
poverty rate of 20 percent or less'' and units ``located in an area
where vouchers are difficult to use'' as two separate categories of
units eligible for an increased cap. For both the program cap and
project cap, there was no difference between the requirements
applicable to the two categories of projects and units. To simplify
Sec. Sec. 983.54(b) and 983.6(d), HUD examined whether the 1937 Act
permitted the PBV regulatory definitions to consider a project or unit
``located in a census tract with a poverty rate of 20 percent or less''
to be a type of project or unit ``located in an area where vouchers are
difficult to use.'' In the case of the program cap, section
8(o)(13)(B)(ii) of the 1937 Act provides for a specific 10 percent
authority category for areas where vouchers are difficult to use ``as
specified in subparagraph (D)(ii)(II),'' which is the subparagraph
applying an exception to the project cap for areas where vouchers are
difficult to use and for census tracts with a poverty rate of 20
percent or less. As a result, HUD determines that the authority for an
exception to the program cap for census tracts with a poverty rate of
20 percent or less derives from the program cap exception for areas
where vouchers are difficult to use, and therefore it would be more
appropriate to include census tracts with a poverty rate of 20 percent
or less within the definition of ``areas where vouchers are difficult
to use.'' While the project cap exceptions for census tracts with a
poverty rate of 20 percent or less and areas where vouchers are
difficult to use are both mandated by section 8(o)(13)(D)(ii)(II) of
the 1937 Act, given that the exception is identical for each category
HUD determines the streamlining benefit makes placing census tracts
with a poverty rate of 20 percent or less in the definition of ``areas
where vouchers are difficult to use'' appropriate for purposes of
codification of the project cap categories in the CFR.
Also, in response to public comment, HUD in this final rule changes
the term ``comparable rental assistance'' to
[[Page 38231]]
``comparable tenant-based rental assistance,'' amends the definition
consistent with section 8(o)(13)(E) of the 1937 Act, and outlines the
minimum requirements for assistance to qualify as comparable tenant-
based rental assistance. HUD also finds that the proposed definition of
``development activity,'' in referring to both rehabilitation and new
construction done for the project to receive PBV assistance and for
other work occurring later during the term of the PBV HAP contract,
produced significant confusion. As a result, HUD removes work occurring
later during the term of the HAP contract from the proposed definition
of ``development activity'' in this final rule and instead covers this
work under a definition of ``substantial improvement.'' HUD revises the
content of the term ``substantial improvement'' for additional clarity.
This final rule also revises the definition of ``excepted units'' to
clarify that excepted units exclusively serve certain families in
accordance with Sec. 983.54(c)(2) and to distinguish its definition
from ``excluded units,'' which is a newly added definition that
excludes units that meet certain requirements from the program and
project cap.
As suggested by commenters, HUD revises the definition of
``existing housing'' to mean housing that meets or substantially
complies with HQS, which housing is distinct from housing that will
soon undergo development activity. ``Substantial compliance'' in this
definition provides specific limitations to ensure the deficiencies in
the project require minor work that can reasonably be completed within
a 30-day period of time. These revisions reflect the need to better
distinguish rehabilitated housing from existing housing so PHAs can
comply with the distinct program requirements applicable to each
housing type while also recognizing that HQS corrections may take a
longer time than the period noted in the proposed rule. HUD changes the
relevant time period in which existing housing is not expected to
undergo or need substantial improvement from five years to two years
after the HAP contract effective date in response to public comment.
HUD also revises the definitions of ``newly constructed housing'' and
``rehabilitated housing'' by establishing a standard determined on a
project-basis, rather than the prior unit-basis which was in the
proposed rule, consistent with prior HUD guidance that a project can
only be one type overall, and therefore specifying between the two
types on a per-unit basis was impractical. HUD further amends the
definition of ``rehabilitated housing'' to more directly note the
difference between such projects and ``existing housing.'' HUD also
clarifies the definition of ``independent entity'' to specify how it
relates to the PBV program and revises the definition of ``waiting list
admission'' to include owner-maintained waiting lists.
This final rule added to the definition of ``project'' to more
clearly describe the discretion PHAs already have to modify the
definition of project in their Administrative Plans. This final rule
adds a definition of ``tenant rent'' as applicable to the PBV program.
This final rule also adds the definitions for building, gross rent,
manufactured home, PHA Plan, program receipts, total tenant payment,
utility allowance, and utility reimbursement to clarify that these
terms apply to the PBV program.
This final rule removes the term ``eligible'' from the definition
of ``in-place family,'' and instead discusses the eligibility of an in-
place family in Sec. 983.251. HUD also changes ``proposal selection
date'' to ``proposal or project selection date'' to align with changes
made to Sec. 983.51 (described below).
This final rule makes a conforming change to align the PBV program
definition of ``housing quality standards'' with the revised HCV
program definition discussed previously in the description of the
changes to Sec. 982.4.
In addition, this final rule removes the definition of ``project-
based certificate (PBC) program'' because it is no longer in existence.
Finally, this final rule removes the definition of ``request for
release of funds and certification'' and moves the relevant information
that was contained in the proposed rule to a more appropriate location,
Sec. 983.56.
Sec. 983.4 Cross-Reference to Other Federal Requirements
HUD proposed to revise HUD's labor standards cross-reference
regarding applicability of regulations implementing the Davis-Bacon
Act, but HUD at this final rule removes this change. As explained in
the summary of changes to Sec. 983.153, HUD requires Davis-Bacon
compliance regardless of whether an Agreement (referring to an
Agreement to enter into a HAP contract) is used in this final rule so
the change to this section is no longer necessary. HUD notes that under
section 12(a) of the 1937 Act, the labor standards provisions cross-
referenced in Sec. 983.4 only apply where there is an agreement for
section 8 use before construction or rehabilitation is commenced. As
discussed in reference to the changes to Sec. 983.153, the PHA's pre-
construction offer and owner's acceptance of PBV assistance to be
provided once the units are constructed or rehabilitated constitutes an
agreement triggering Davis-Bacon requirements on projects with 9 or
more assisted units, in accordance with section 12(a) of the 1937 Act,
regardless of whether an Agreement is used.
Finally, as a technical matter, HUD has revised Sec. 983.4 to
remove the reference to the definitions in 24 CFR part 5, subpart D.
Because HUD has revised Sec. 982.4(a)(2) to properly incorporate the
relevant definitions in 24 CFR part 5, subpart D, and because Sec.
983.4 incorporates 982.4, this incorporation is not necessary.
Sec. 983.5 Description of the PBV Program
HUD makes a minor revision to the proposed Sec. 983.5(a)(1) to
include the citation to the consolidated annual contributions contract
(ACC). This final rule also revises paragraph (a)(3) to better describe
the options available for development of newly constructed and
rehabilitated housing, including adding reference to the option added
in this final rule to Sec. 983.157 (which is described in greater
detail below). HUD revises paragraph (c) to require PHAs to provide
notice to HUD when the PHA executes, amends,\7\ or extends a HAP
contract, to align with system development already in progress,\8\ and
makes changes to align with the language in Sec. 983.10, to require
the PHA to address all PBV related matters over which the PHA has
policymaking discretion.
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\7\ Amendments in this context refers to changes such as those
that add or substitute contract units, rather than substantive
revisions to contractual text. The general requirement per 24 CFR
982.162 to use HUD-prescribed forms, including PBV HAP contracts,
without modification remains in place.
\8\ See 84 FR 70986 (Dec. 26, 2019); 85 FR 60249 (Sep. 24,
2020); 88 FR 28594 (May 4, 2023).
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Sec. 983.6 Maximum Amount of PBV Assistance (Percentage Limitation)
This final rule revises paragraphs (a) and (e) to explain how to
calculate the maximum number of PBV units to prevent the possibility of
the PHA miscalculating the cap and project-basing more units than it
should. This change reflects that the cap is 20 percent as adjusted,
and not a flat 20 percent of all Annual Contributions Contract (ACC)
units because the PHA must remove excluded units when calculating the
cap. This final rule also corrects the date in paragraph (a)(2), and in
paragraph (a)(3) expands the conditions under which the PHA may not add
units to PBV HAP contracts to include
[[Page 38232]]
paragraph (e). In paragraph (b), HUD clarifies that the PBV assistance
percentage limitation applies to all PBV units which the PHA has
selected, and that selection takes place from the time of the proposal
or project selection date.
This final rule also revises language in paragraph (d)(1)(iii) to
require that the Administrative Plan describe the availability of
supportive services in alignment with the language in Sec. 983.10. HUD
amends paragraph (d)(1)(iv) to remove the separate exception category
for census tracts with a poverty rate of 20 percent or less, given the
revised definition of an ``area where vouchers are difficult to use''
now includes a census tract with a poverty rate of 20 percent or less,
as explained further in the discussion of Sec. 983.3 above, and moves
the proposed paragraph (d)(1)(v) to (d)(1)(iv). HUD adds a new
exception in response to public comment to paragraph (d)(1)(v) for
units that replace, on a different site, the units removed from the
housing types listed in Sec. 983.59(b)(1)-(2) (see discussion of
comments received regarding Sec. 983.59). HUD revises paragraph (d)(2)
to increase the program cap and project cap for PBV units to include
the Fostering Stable Housing Opportunity (FSHO) authority enacted in
section 103 of division Q of the Consolidated Appropriations Act, 2021
(Pub. L. 116-260, 134 Stat. 1182).\9\ Pursuant to section 103(c)(1) of
FSHO, the percentage limitation (i.e., the program cap) now includes
units that are exclusively made available to eligible youth receiving
FUP/FYI assistance under the 10 percent increased cap. This final rule
adds a new paragraph (d)(3) to clarify requirements to fill units under
certain 10 percent increased cap categories with the appropriate
families.
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\9\ See 87 FR 3570 (Jan. 24, 2022).
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This final rule also revises paragraph (e) by explaining that units
previously subject to federally required rent restrictions or that
received long-term rental assistance from HUD are removed for purposes
of calculating the percentages under paragraphs (a) and (d) of this
section.
This final rule also revises paragraph (1)(ii) by adding ``space
service'' to the definition of ``veteran'' to accurately include types
of service encompassed within the current statutory definition of
``veteran'' found in the Department of Veterans Affairs governing
statutes (i.e., 38 U.S.C. 101(2)). By adding ``space service,'' it will
ensure that no type of service for a veteran or veteran family goes
unaccounted for.
Sec. 983.10 PBV Provisions in the Administrative Plan
HUD revises the structure of Sec. 983.10 to outline the areas in
which PHAs have policymaking discretion specific to the PBV program and
requires these policies be included in the PHA Administrative plan. The
PHAs' policymaking discretion is noted throughout part 983 consistent
with this section. Section 983.10 includes a brief description of the
provisions that must be in the Administrative Plan for a PHA that
operates a PBV program and a citation in each provision to the
regulation that provides complete details about the requirement.
However, HUD notes that the policies listed in Sec. 983.10 are the
minimum that the PHA must include in its Administrative Plan. There are
additional areas, beyond those listed in Sec. 983.10, where a PHA may
properly exercise policy-making discretion consistent with language in
other sections in this part. In cases where a PHA exercises this
discretion, these additional policies must be included in the PHA's
Administrative Plan.
Sec. 983.11 Project-Based Certificate (PBC) Program
In the proposed rule, HUD proposed to move Sec. 983.10, dealing
with Project-Based Certificates (PBC), to Sec. 983.11. However, the
PBC program was replaced by the PBV program in 2001 and no units remain
in the PBC program.\10\ Therefore, in this final rule, references to
the PBC program have instead been removed. The currently codified Sec.
983.10, dealing with PBC, is instead being removed entirely. Because
the previous Sec. 983.10 is not being moved to Sec. 983.11, the
proposed Sec. 983.12 is, in this final rule, moved up to Sec. 983.11.
Section 983.12 of this final rule is new to this final rule and
discussed further below.
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\10\ Units under a PBC Agreement executed by the PHA and Owner
prior to January 16, 2001, remained in the PBC program. The maximum
term for PBCs under standard-form PBC HAP contracts was an aggregate
15 years (generally, three 5-year terms). Therefore, no more valid
PBC HAP contracts should exist. Upon expiration of a PBC HAP
contract, a PHA and Owner could agree to renew the PBC contract as a
PBV contract, consistent with section 6904 of the Troop Readiness,
Veterans' Care, Katrina Recovery, and Iraq Accountability
Appropriations Act, 2007, Public Law 110-28, and the now repealed 24
CFR 983.310(b)(1)(ii).
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Sec. 983.11 Prohibition of Excess Public Assistance
In response to public comments, HUD revises paragraph (d)(2)
dealing with subsidy layering review. Instead of requiring Subsidy
Layering Review (SLR) any time new funding of any amount or percentage
is added to the project during the term of the HAP contract, HUD will
specify when a new SLR is required via a Federal Register notice,
consistent with current practice. HUD concluded that finalizing
paragraph (d)(2) as proposed would be administratively burdensome.
Sec. 983.12 Project Record Retention
This final rule adds a new Sec. 983.12 to cover program accounts
and records for the PBV program (Sec. 982.158 continues to apply to
records applicable to both the tenant-based and project-based programs,
except as now specified in Sec. 983.2). While these documents should
already be maintained for compliance with HUD's regulations, this
section provides a specific list of documents, location, and time
period for retention of the PBV HAP contract and any PBV-specific
documents (e.g., Agreement to enter into HAP contract (Agreement),
completion documents, SLR, environmental review, selection materials),
including records demonstrating the independent entity's review of a
PHA-owned project selection. This section includes retention provisions
for records newly required under new PBV program components of this
final rule.
Sec. 983.51 Proposal and Project Selection Procedures
This final rule amends Sec. 983.51 throughout to clarify the
distinction between competitive selection of proposals versus
noncompetitive selection of projects since selection without
competition does not entail solicitation or selection of competing
proposals. As recommended by commenters, this final rule revises
paragraph (a) by allowing entities that have site control to submit PBV
proposals. HUD intends to provide further guidance on what HUD
considers to be ``site control'' through PIH notice.
Paragraph (a) also specifies that an owner may submit PBV proposals
to cover multiple projects where each consists of a single-family
building. Consistent with Sec. 983.10, HUD clarifies the requirement
that the PHA Administrative Plan must describe the procedures for
submission and selection of PBV proposals under the methods of
competitive selection in paragraph (b) and selection of projects under
an exception to competitive selection under paragraph (c), including
under what circumstances the PHA will use the selection methods
described in paragraphs (b) and (c).
HUD amends paragraph (b)(1) to address the methods the PHA must use
for competitive selection of PBV
[[Page 38233]]
proposals. This change clarifies that the PHA request for proposal
(RFP) selection method can be a part of another competition or run
simultaneously with another competition. This change also addresses
public concerns about the inability or difficulty of awarding PBVs to
projects that also compete and receive other funds, specifically
development dollars through Low-Income Housing Tax Credits (LIHTC),
Housing Trust Fund (HTF), and HOME investment partnerships program. HUD
also makes clarifying changes to paragraph (b)(2) to remove the
language concerning LIHTC and HOME to avoid confusion because, in
practice, LIHTC and HOME almost always require the PBVs to be awarded
prior to receiving applications.
HUD clarifies in paragraph (c) that prior to a PHA selecting one or
more projects for PBV assistance without competition, the PHA must
notify the public of its intent to do so in its 5-Year Plan. HUD also
reorganizes paragraph (c)(1) in the proposed rule by moving applicable
requirements to new paragraphs (c)(1)(i)-(ii). Further, in response to
public comments, HUD adds clarifying language to paragraphs (c)(1) and
(c)(2) to better align with the statutory language in section
8(o)(13)(N) of the 1937 Act as amended by HOTMA, including a
clarification under (c)(1)(i) and a new paragraph at (c)(2)(iv)
regarding the number of units permitted to be replaced.
This final rule also adds a new paragraph (c)(3), which provides
increased flexibility for PHAs to noncompetitively select a project
comprised of PHA-owned units. HOTMA expressly allows PHAs to attach
PBVs to projects in which the PHA has an ownership interest without
following a competitive process in cases where the PHA is engaged in an
initiative to improve, develop, or replace a public housing property or
site. HUD implemented this provision in 2017. Based on HUD's experience
with these noncompetitive selections and after careful consideration,
HUD believes that it is advisable to extend the exception to PHA-owned
units in general. The main benefit of this final rule change is to
strengthen the PHA's ability to preserve and expand affordable housing
by increasing the viable options and paths available to the PHA through
strategies such as acquisition followed by rehabilitation. HUD further
adds paragraph (c)(4) to streamline the process of project-basing units
when a family chooses to relinquish their enhanced voucher for PBV
assistance. The new paragraph extends the types of housing that can be
selected without going through a competition. HUD also notes that PIH
Notice 2013-27 provides essential background on the voluntary
relinquishment of enhanced voucher assistance (and regular housing
choice voucher assistance) in exchange for PBV assistance.
HUD clarifies paragraph (e)(2)(i) to state that all contract units
must fully or substantially comply with HQS on the proposal or project
selection date. HUD also restructures and amends paragraph (f) of the
proposed rule to add new paragraphs (1) through (5) to address the
separate notice requirements depending upon whether a proposal is
selected competitively, or a project is selected without competition
and to provide a cross-reference to applicable language that must be in
the notice for certain projects. Finally, HUD clarifies in paragraph
(h) that under no circumstances may a HAP contract be effective for any
of the subsidized housing types set forth in Sec. 983.53(a).
Sec. 983.52 Prohibition of Assistance for Ineligible Units
HUD clarifies the meaning of paragraphs (a), (a)(3), (b), and (d)
by replacing the term ``attach'' with clearer statements of the
prohibited actions for the listed units, to align with the changes to
Sec. 983.53 described below. This final rule creates an exception to
the total prohibition in the original PBV rule on project-basing for
manufactured homes under paragraph (a)(5) where both the manufactured
home is permanently attached to the ground and the owner owns both the
manufactured home and the land. Allowing PBVs for manufactured homes
will likely decrease the cost to build, allow PBVs to be in areas where
traditional building would be difficult, and avoid requiring changes to
construction plans solely for the purpose of compliance.
Paragraph (c) provides that a PHA may attach assistance to an
occupied unit only if the occupant is eligible. HUD amends paragraph
(c) to specify what ``eligible'' means in this context, and to clarify
when eligibility is determined. Eligibility of the family is determined
in accordance with Sec. 982.201 prior to attaching assistance to the
unit (i.e., executing a HAP contract or amending a HAP contract by
adding or substituting a unit). For the unit to be eligible, the unit
must be appropriate for the size of the family and the tenant's total
tenant payment (TTP) must be lower than the gross rent. These changes
in paragraph (c) ensure PHAs are aware of existing requirements,
including that the family's TTP cannot be so high as to eliminate the
need for assistance (commonly calling being ``zero-HAP'') at admission.
HUD updates the exceptions applicable to paragraph (d), adding that
the requirements are not applicable if the PHA is undertaking
rehabilitation after HAP contract execution per Sec. 983.157 of this
final rule. Also, because an Agreement may be executed prior to its
effective date, HUD revises paragraph (d) to be clear that the
construction or rehabilitation is prohibited prior to the Agreement's
effective date rather than the execution date. HUD also modifies
paragraph (d) to allow PHAs to approve exceptions, in recognition that
there may be circumstances in which the prohibition is inappropriate.
Sec. 983.53 Prohibition of Assistance for Units in Subsidized Housing
For better readability, in this final rule, HUD restructures the
list of subsidized housing that is prevented from receiving PBV
assistance. In paragraph (a), HUD replaces the introductory text with
``A HAP contract may not be effective and no PBV assistance may be
provided for any of the following:'' for several reasons. First, HUD
determines that PBV program requirements should not prevent execution
of an Agreement for the listed subsidized housing types, as this
reduces administrative flexibility even though no HAP is paid when an
Agreement is executed. HUD notes that this is a change from the prior
regulatory requirement and use of this flexibility will be subject to
any requirements of the relevant non-PBV subsidy program. Second,
because a HAP contract must be executed prior to the effective date of
the contract (when HAPs may begin), there was no need to separately
specify that the HAPs cannot be made for the subsidized housing types.
Finally, HUD believes the wording changes improve readability. This
final rule also removes proposed rule paragraphs (e) and (j) concerning
rental assistance payments (RAP) and rent supplement projects (Rent
Supp) because the Rent Supp and RAP programs have ended. However,
unlike the Rent Supp program, there were some RAP projects remaining
less than five years prior to the effective date of this final rule.
Consequently, units in a few former RAP projects may still qualify for
a limited period of time as excepted units from the program cap and
project cap under the requirements at Sec. 983.59. Please see the
related discussion in the description of Sec. 983.59 below regarding
the reference to units in former RAP projects in that section.
[[Page 38234]]
Sec. 983.54 Cap on Number of PBV Units in Each Project (Income-Mixing
Requirement)
In this final rule, HUD clarifies in Sec. 983.54(a) that a PHA
cannot select a proposal where the project cap is not being met, in
addition to the prohibition on entering the Agreement or HAP contract.
HUD amends paragraph (b) to remove the separate exception categories,
given the revision of the definition of an ``area where vouchers are
difficult to use'' to include a census tract with a poverty rate of 20
percent or less, as explained previously in the discussion of Sec.
983.3 above. HUD further clarifies in paragraph (c) that exception
categories in a project may be combined; expands the exception
categories to include eligible youth using Family Unification Program
(FUP) assistance in paragraph (c)(2)(ii); and provides that supportive
services must be made available in a reasonable period of time not to
exceed 120 calendar days in paragraph (c)(2)(iii). Additionally, in
paragraph (c)(2)(iii), which was paragraph (c)(2)(ii) in the proposed
rule, this final rule does not include a requirement that a PHA
offering FSS must not solely rely on FSS to meet the exception to the
project cap. HUD revises paragraph (c)(3) to specify that units covered
by a PBV HAP contract under Sec. 983.59 will not count towards the
project cap and that these units are removed to ensure accuracy when
calculating the percentages of dwelling units. In paragraph (d), HUD
updates and expands provisions applicable to HAP contracts already in
effect to include HAP contracts in effect prior to December 27, 2020,
when the FUP exception became available.
Sec. 983.55 Site Selection Standards
HUD revises paragraph (b)(3) to include the site selection
standards that were formerly found in Sec. 982.401(l) and were removed
in the NSPIRE final rule (88 FR 30442 (May 11, 2023)). HUD also takes
this opportunity to amend the standards to add a specific reference to
contamination, which is particularly important to the health of
occupants, and to add a qualification that the serious adverse
environmental conditions at issue are those that could affect the
health or safety of the project occupants. As recommended by
commenters, use of these standards provides an important protection for
families, especially in cases in which an environmental review is not
performed. HUD also revises paragraph (e)(7) to remove a typo
concerning ``new construction,'' which appears in the current
regulations and the proposed rule.
Sec. 983.56 Environmental Review
In the proposed rule, HUD proposed to revise the environmental
review requirements for existing housing in accordance with section
106(a)(8) of HOTMA to exempt existing housing from further
environmental review if an existing housing project has ever undergone
an earlier environmental review pursuant to receiving any form of
Federal assistance. In other words, if a project that meets the
definition of ``existing housing'' as defined in the PBV regulations
for program purposes has not previously undergone a Federal
environmental review because it did not receive Federal assistance,
then the project would not be exempt from an environmental review.
In endeavoring to give full effect to the words of section
8(o)(13)(M)(ii) of the 1937 Act, HUD recognizes the statute provides
only a partial exemption to environmental reviews. Specifically, the
applicability of the provision is limited to ``existing projects.''
Environmental reviews continue to be applicable to PBV rehabilitation
and new construction projects. The limited scope of the proposed
exemption from environmental reviews reflects Congress's continuing
emphasis on the importance of Federal assistance being used in an
environmentally sound manner.
Upon consideration of comments, HUD revises paragraph (a)(2) to
better balance the words of the amended section 8(o)(13)(M)(ii) of the
1937 Act with Congress's continued environmental emphasis by excusing
existing housing from undertaking an environmental review before
entering into a HAP contract, except where a Federal environmental
review is required by law or regulation relating to funding other than
PBV housing assistance payments. This paragraph (a)(2) applies to
projects selected using the site selection standards applicable upon
the effective date of this final rule. In paragraph (a)(2), HUD changes
the characterization of the exception for existing housing so as not to
imply that the project has been determined to be ``exempt'' pursuant to
an environmental review.
HUD makes minor technical revisions throughout the section, such as
to consistently use the phrasing of paragraph (a) of the proposed rule
that environmental reviews apply to ``activities'' (see responses to
comment on Sec. 983.56 for further discussion of technical changes).
HUD amends the description of the ``responsible entity'' in paragraph
(b) to explain more clearly which unit of general local government
serves as the responsible entity. HUD also removes the final sentence
of paragraph (b) of the proposed rule, as it was duplicative of text
that appeared later in the regulation. HUD also removes the proposed
rule's reference in paragraph (d) to amending a HAP contract, to
conform to changes described below relating to Sec. 983.207. Further,
HUD clarifies in (d)(2) that HUD will approve the Request for Release
of Funds and Certification by issuing a Letter to Proceed or form HUD-
7015.16 when a responsible entity must complete an environmental
review. In paragraph (e), HUD clarifies that the reference to the
prohibited activities refers only to the listed actions by the PHA, the
owner, or its contractors, rather than the actions by described in
paragraphs (d)(1)-(3) that are taken by the responsible entity or HUD.
Lastly, HUD revises paragraph (f) to require PHAs to document
mitigating measures in accordance with part 50 or 58 of title 24, as
applicable, and to complete or require the owner to carry out such
measures and conditions.
Sec. 983.57 PHA-Owned Units
This final rule makes an edit to paragraph (b) to remove
superfluous words. HUD also revises paragraph (b)(1) to clarify that
the independent entity calculates the amount of reasonable rent and any
rent adjustments by an OCAF, due to confusion the wording in the
proposed rule raised given that HUD determines the OCAF. In response to
comments received, HUD removes paragraph (b)(2) from the proposed rule,
which results in a renumbering of paragraphs (b)(3) and (b)(4) to
paragraphs (b)(2) and (b)(3) in this final rule. HUD also revises
redesignated paragraph (b)(3) to clarify that the independent entity is
responsible for not only reviewing the work completion certification,
but also determining if the units are compliant with Sec. 983.156.
This final rule also makes this change to align redesignated paragraph
(b)(3) with corresponding Sec. 983.212 (which was Sec. 983.157 in the
proposed rule), per changes to Sec. 983.212 described below. This
final rule adds paragraph (b)(4) to expand the independent entity
functions to include determining whether to approve substantial
improvement to units under a HAP contract, since PHAs are required to
perform this function for substantial improvement on units under a HAP
contract for non-PHA-owned units.
Finally, HUD reorganizes and slightly modifies the language at
paragraph (c) to
[[Page 38235]]
achieve consistency with a similar provision at 982.352(b)(1)(v)(B)
regarding compensation of independent entities.
Sec. 983.58 PHA Determination Prior to Selection
In this final rule, HUD revises proposed Sec. 983.58 for clarity
purposes, to avoid any misinterpretation that budget authority is
intertwined with the program cap. HUD also adds a new paragraph (b) to
require that PHAs analyze the impact of having a high percentage of
vouchers committed as PBVs. The PHA should consider the needs of the
community, including families on the waiting list and eligible PBV
families that wish to move under Sec. 983.261. The analysis performed
by the PHA must be available as part of the public record.
Sec. 983.59 Units Excepted From Program Cap and Project Cap
HUD clarifies in paragraph (b) that excluded units must fall into
one of the outlined categories provided that the units are removed from
all categories by the time of execution of the Agreement or HAP
contract. This clarification aligns with the statutory language
stating, ``units previously subject to federally required rent
restrictions or receiving another type of long-term subsidy'' and means
that the units must no longer be subject to the rent restriction or
receiving subsidy.
This final rule removes paragraph (b)(1)(v), because the Rent
Supplement Program ended more than five years ago and no longer exists.
HUD notes that the Rental Assistance Program (RAP) (section 236(f)(2)
of National Housing Act of 1965) also expired, but, unlike the Rent
Supplement Program, the RAP expired at the end of 2019, less than 5
years ago. Because paragraph (b) of Sec. 983.59 allows project-basing
of units that were removed from the listed programs up to 5 years prior
to the request for proposals (RFP) or the proposal or project selection
date, RAP units may still be eligible for project-basing under
paragraph (b).
HUD has amended Sec. 983.59(b)(2) and included two additional
types of units in the list of units ``previously subject to federally
required rent restrictions'' that were not included in the list of
excepted units implemented under the HOTMA Implementation Notices \11\
in the Federal Register: (1) units financed with Low-Income Housing Tax
Credits (26 U.S.C. 42) and (2) units subsidized with Section 515 Rural
Rental Housing Loans (42 U.S.C. 1485). The final rule also amends Sec.
983.59(b)(2) to provide that the list of excepted units ``previously
subject to federally required rent restrictions'' shall also include
any other program subsequently identified by HUD through a Federal
Register notice that is subject to public comment.
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\11\ See 81 FR 73030 (Oct. 24, 2016); 82 FR 5458 (Jan. 18,
2017); 82 FR 32461 (Jul. 14, 2017).
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Further, to provide regulatory streamlining, this final rule
removes proposed rule paragraph (c) which provided that other excluded
units include both HUD's Rental Assistance Demonstration (RAD) program
and HUD VASH set-aside vouchers from the PBV program and project caps
(these programs continue to be governed by the applicable notices and
waivers therein). Instead, HUD redesignates proposed rule paragraph (d)
as paragraph (c), which discusses replacement units. In redesignated
paragraph (c), HUD clarifies that replacement units can be built on the
original project site, instead of the ``public housing development.''
This clarification removes the limitation of ``public housing
development'' and expands the qualification of an original project site
to include all of the formerly assisted or restricted projects covered
by this section. In new paragraph (e), this final rule clarifies that
the 10 percent exception under Sec. 983.6 and the project cap
exception under Sec. 983.54(c)(2) are inapplicable to units excluded
under this section.
Sec. 983.101 Housing Quality Standards
This final rule makes a conforming change to align paragraph (a)
with the revised PBV program definition of HQS at Sec. 983.3.
Sec. 983.103 Inspecting Units
HUD revises Sec. 983.103(a) to clarify that the regulatory
inspection provisions of paragraph (c) of this section apply only when
the pre-selection inspection determines the project meets the
definition of existing housing.
HUD amends paragraph (b) to specify the times at which an initial
inspection is required for newly constructed or rehabilitated housing
or for units that underwent substantial improvement prior to being
added to the HAP contract. The times at which an initial inspection is
required, and the specific units which are to be inspected, depend on
whether the work was development activity or substantial improvement,
and, in the case of rehabilitation, whether the development activity
occurs before or after HAP contract execution. HUD believes separating
the requirements in this final rule will improve readability. HUD also
revises paragraph (c)(1) to better explain the Administrative Plan
provisions that are applicable.
Paragraph (c)(2)(ii) of the proposed rule provided that the PHA
must give a notice to families offered a unit with non-life-threatening
deficiencies that explains, among other things, that the owner's
failure to correct the deficiencies within the cure period will result
in removal of the unit from the HAP contract. This final rule revises
paragraph (c)(2)(ii) to also require the PHA to provide a similar
notice to families offered units without deficiencies, if some units in
the project have non-life-threatening deficiencies and the PHA's
Administrative Plan provides that the PHA will terminate the entire PBV
HAP contract if the owner fails to correct the deficiencies within the
cure period.
In paragraph (c)(2)(iv), HUD revises the regulatory language to be
clear that PHAs must release the withheld payment to the owner once the
deficiencies are corrected within the cure period, as required by
section 8(o)(8)(G)(ii) the 1937 Act. This statutory requirement
provides that the PHA must resume assistance payments and must cover
the withheld period if the owner made the repairs before the cure
period ends. This change to align the regulations with the statute is
also reflected in paragraphs (c)(3)(vii), (c)(4)(iv), and (c)(4)(v).
This final rule also modifies paragraph (c)(2)(v) (which was
mistakenly labeled as paragraph (c)(2)(iv) in the proposed rule) by
requiring PHAs to provide any affected family tenant-based assistance
when the PHA terminates the PBV HAP contract or removes the unit from
the HAP contract due to the owner's failure to correct deficiencies.
The provision of tenant-based assistance in this circumstance is
required by section 8(o)(13)(F)(iv) of the 1937 Act and was
inadvertently omitted from the proposed rule's description of the
process. This final rule makes the same modification to paragraphs
(c)(3)(viii) and (c)(4)(vi).
HUD revises paragraphs (c)(3) and (c)(4) to align with changes in
Sec. 982.406 that apply to PBV. This final rule subjects the PHA's
adoption of an alternative inspection option to the procedures and
requirements outlined in Sec. 982.406(b), (c), (d), and (g). The
changes in paragraph (c)(3)(v) provide clarifying changes to existing
established policy. To ensure that the PHA is transparent to families
that are referred to and provided a unit with non-life-threatening
deficiencies, this final rule revises paragraph (c)(4)(i) to require
that PHAs provide these families
[[Page 38236]]
a list of those deficiencies and inform them of the option to decline
the unit without losing their place on the PBV waiting list.
In paragraph (c)(4)(v), HUD clarifies that PHAs make retroactive
payments upon correction of deficiencies beginning at the later of the
effective date of the HAP contract or the PBV lease effective dates.
This final rule revises paragraph (c)(4)(v) and (c)(4)(vi) explaining
the PHA's requirements when the owner fails to make repairs within the
applicable time periods. For the safety of the family, this final rule
adds a requirement to paragraph (c)(4)(v) that explicitly prohibits
PHAs from referring families from the PBV waiting list to occupy units
with life-threatening deficiencies. In alignment with Sec. 983.10,
paragraph (c)(4)(vi)(B) clarifies that the PHA's Administrative Plan
must specify whether the PHA will remove only a unit with deficiencies
from the HAP contract for the owner's failure to correct the
deficiencies, as opposed to terminating the entire HAP contract (only
the latter, terminating the contract, had been included in paragraph
(c)(4)(vi)(B) of the proposed rule).
This final rule also amends paragraph (e) concerning periodic
inspections, to provide that the alternative inspection option is
available for periodic inspections and to specify which provisions of
Sec. 982.406 apply. HUD makes changes to paragraph (e) to specify how
to comply with the sampling requirement in the event that fewer than 20
percent of contract units are available for occupancy in accordance
with development activity occurring under Sec. 983.157. HUD also makes
changes to align with the NSPIRE final rule (88 FR 30442 (May 11,
2023)) in paragraph (e), which incorporates the requirement that small
rural PHAs inspect random sample units at least once every three years.
This final rule makes changes to paragraph (f), which specifies the
PHAs' timing and inspection requirements for life-threatening
deficiencies, non-life-threatening deficiencies, and extraordinary
circumstances, to align with Sec. 982.405, which covers PHA
inspections. The changes in paragraph (i) are a change in terminology
to avoid conflict with the term ``mixed finance'' as used in public
housing projects.
Sec. 983.152 Nature of Development Activity
This final rule revises Sec. 983.152(a)(2) to remove discussion of
substantial improvement to add previously unassisted units and instead
provide reference to the development activity applicable to a
rehabilitated project undergoing work after HAP contract execution per
Sec. 983.157 of this final rule. As discussed in the description of
changes to Sec. 983.3 above, HUD determines that ``development
activity'' should be clearly distinguished from ``substantial
improvement.'' As a result, HUD removes the corresponding reference to
activities now classified as ``substantial improvement'' in (a)(2) and
deletes paragraph (b)(2), moving pertinent requirements applicable to
substantial improvement to add or substitute units to Sec. 983.207(d)
of this final rule. The new language of paragraph (a)(2) is added to
clearly describe the nature of the development activity under Sec.
983.157, which is completed following HAP contract execution instead of
beforehand. HUD also updates paragraph (b) to appropriately reference
the new requirements applicable to Sec. 983.157.
Sec. 983.153 Development Requirements
This final rule makes several minor revisions to citations in Sec.
983.153 for consistency with the changes to Sec. 983.152 described
above. Also, this final rule makes a minor clarifying revision to the
first sentence in paragraph (b)(2), by requiring subsidy layering
review before a PHA attaches assistance to a project, instead of
subsidy layering review occurring before a PHA commits to provide
assistance to a project. This clarifying change is to prevent any
possible ambiguity about whether the subsidy layering review is
required before the proposal or project selection date; in other words,
HUD makes clear that the rule only requires that the subsidy layering
review occur no later than execution of an Agreement or HAP contract.
This final rule requires in Sec. 983.153(b)(4) that the owner
disclose changes to the information provided for the subsidy layering
review, to ensure that the change(s) may be reviewed and that it does
not result in excessive public assistance to the project.
This final rule revises paragraph (c) of the proposed rule to
require Davis-Bacon compliance regardless of whether an Agreement is
used. The PBV program is subject to statutory labor standards
provisions in section 12(a) of the 1937 Act. Section 12(a) of the 1937
Act requires the applicability of Davis-Bacon prevailing wages to the
development of low-income housing projects containing nine or more
section 8-assisted units, where there is an agreement for section 8 use
before construction or rehabilitation is commenced. In reconsidering
both HUD's current position and the alternative suggested in the
proposed rule with respect to the meaning of ``agreement'' in section
12(a), HUD has determined that an ``agreement'' under section 12(a)
encompasses more than the PBV Agreement (i.e., Form HUD-52531) and
includes the agreement that consists of the PHA's project selection and
resulting offer of assistance to the owner, and the acceptance of PBV
assistance by the owner. HUD also recognizes the importance of Davis-
Bacon prevailing wage requirements to the workers in the community
where the owner has sought a commitment of PBVs in advance of
development, as commenters suggested. Consequently, HUD will require
the notice of proposal selection to require payment of Davis-Bacon
prevailing wages for development of newly constructed or rehabilitated
projects containing nine or more section 8-assisted units regardless of
whether the PHA and owner will be using an Agreement. This final rule
also makes a slight modification to paragraph (c)(1) to correct the
citation in paragraph (c)(1). HUD also consolidates paragraphs (c)(2)
and (c)(3) of the proposed rule into a single paragraph (c)(2), to
better reflect that the labor requirements at issue apply in the case
of development involving nine or more contract units. This final rule
adds a citation to Sec. 983.51(f) in paragraph (c)(3) (which had been
paragraph (c)(4) in the proposed rule) and makes paragraph (c)(3)
consistent with Sec. 983.51(f), which discusses a PHA's written notice
of proposal selection.
This final rule revises the development requirements that apply to
PBV development activity by removing the reference that section 3 of
the HUD Act of 1968 \12\ applies (proposed rule paragraph (d)), since
section 3 no longer applies to PBV per the final rule on Enhancing and
Streamlining the Implementation of Section 3 Requirements for Creating
Economic Opportunities for Low- and Very Low-Income Persons and
Eligible Businesses (85 FR 61524 (Sep. 29, 2020)). As a result of this
removal, this final rule also redesignates proposed rule paragraphs (e)
through (g) as final rule paragraphs (d) through (g). Additional
citation corrections occur in redesignated paragraphs (d), (e), and
(f). Further, consistent with Sec. 983.51(k), this final rule expands
paragraph (g) to include in the list of participants ineligible to
participate in Federal programs and activities those who are debarred,
suspended subject to a limited denial of participation, or otherwise
excluded
[[Page 38237]]
under 2 CFR part 2424. Finally, HUD adds a cross-reference Sec.
982.161 to paragraph (g)(2) of this final rule, to clarify the existing
requirement of the conflict of interest provision.
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\12\ 12 U.S.C. 1701u.
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Sec. 983.154 Development Agreement
This final rule amends paragraph (a) to clarify project-basing of
single-family scattered sites. As commenters suggested, paragraph (a)
allows one Agreement to cover multiple projects that each consist of a
single-family building. Finally, this final rule makes minor amendments
to paragraph (a) to remove reference to Sec. 983.152, consistent with
changes to that section as described above, and to add reference to the
new paragraph (g).
This final rule specifies in paragraph (b) that paragraph (f),
concerning PHA discretion to execute an Agreement after construction or
rehabilitation in compliance with Sec. 983.153, is an exception for
the timing of the Agreement. HUD also adds clarification that the
Agreement must be executed on the same day as or in advance of its
effective date.
This final rule inserts a new paragraph (c) to specify that the PHA
and owner may agree to amend the Agreement per paragraph (e). In
paragraph (d), this final rule clarifies that paragraphs (f) and (g)
provide exceptions to the prohibition on entering into an Agreement if
development activity has commenced. HUD also makes additional changes
in paragraph (d) to clarify the timing of the Agreement that correspond
to the change to paragraph (b) described above. This final rule revises
paragraph (e) to expand the content of the agreement to include a
description of any rehabilitation work agreed to, a deadline for the
completion of work, and any additional design, architecture or quality
requirements placed on the owner by the PHA. The addition of a deadline
for completion of work addresses the oversight in the proposed rule
wherein Sec. 983.155(a) of the existing regulation was removed rather
than relocated.
This final rule clarifies in paragraph (f) when the PHA may execute
an Agreement later than the timing provided in paragraph (b) and
corrects the applicability of requirements in the case of a project
that is noncompetitively selected. The changes in paragraph (f) also
provide PHAs with discretion to not use an Agreement or execute an
Agreement after construction or rehabilitation for development activity
in compliance with the requirements under Sec. 983.153. Paragraph (f)
also requires that the PHA explain the circumstances under which the
PHA will enter a PBV HAP contract without first entering into an
Agreement and the circumstances the PHA will enter into an Agreement
after construction or rehabilitation in the Administrative Plan. This
paragraph also requires that the PHA comply with the new requirement at
Sec. 983.153(c)(3) and confirm owner compliance with the owner's
requirements under Sec. 983.153. Finally, this final rule makes a
minor amendment to paragraph (f) to remove reference to Sec. 983.152,
consistent with changes to that section as described above.
This final rule adds paragraph (g) to explain the exception to the
requirement to enter into an Agreement established in Sec. 983.157.
Paragraph (g) also explains the relationship between the Agreement and
the HAP contract in the event that some work occurs under an Agreement
before the PHA exercises the option at Sec. 983.157.
Lastly, this final rule adds paragraph (h) explaining the PHA's
options when the units are PHA-owned with no separate legal entity to
serve as the owner. A PHA cannot execute an Agreement with itself. In
the proposed rule, HUD stated that a PHA-owned agreement certification
is not needed as an alternative to an Agreement because projects may
now be developed without an Agreement. Upon further review, HUD
determined that there may be situations in which development without an
Agreement is not feasible, such as when a lender requires use of an
Agreement or equivalent commitment prior to development. Therefore,
this final rule provides that unless a PHA is exercising its discretion
not to use an Agreement, the PHA will need to follow a process similar
to the process adopted in this final rule for executing the HAP
contract or an equivalent certification (see Sec. 983.204). For
consistency with Sec. 983.204 of this final rule, HUD provides that
PHAs have the option to either establish a separate legal entity to
execute the Agreement or use a PHA-owned agreement certification in
this final Sec. 983.154(h).
Sec. 983.155 Completion of Work
In tandem with requiring the owner to submit evidence and certify
to the PHA that development activity or substantial improvement is
completed, this final rule adds that a PHA must review the owner's
completion evidence and determine whether development activity or
substantial improvement was completed. This final rule also adds a new
paragraph (b) for consistency throughout part 983 and to specifically
address completion of work for PHA-owned units. Paragraph (b) provides
in the case of a PHA-owned unit, the PHA must submit that evidence to
the independent entity and the review is the responsibility of the
independent entity. Finally, HUD clarifies that the form and manner of
the submission and certification is specified in the PHA's
Administrative Plan.
Sec. 983.156 PHA Acceptance of Completed Units
This final rule makes a minor revision to paragraph (a) to clarify
that the PHA inspection is to determine whether the units comply with
HQS and additional PHA requirements. HUD revises paragraph (b) to
provide specific instruction with regard to completion of units,
depending on whether the units are completed prior to HAP contract
execution, following HAP contract execution, or in order to be added to
the HAP contract. These changes to paragraph (b) accommodate changes to
Sec. Sec. 983.152 and 983.157, as discussed further in the description
of changes to those sections. In response to public comments, this
final rule adds a new paragraph (c) to provide that HAP contracts for
projects that are not subject to Sec. 983.157 may be executed in
stages, as units in a newly constructed or rehabilitated project are
completed. This final rule also adds paragraph (d) for consistency
throughout part 983, to separate PHA-owned units from other units.
Under new paragraph (d), this final rule requires that independent
entities inspect units and determine whether those units are HQS-
compliant.
Sec. 983.157 Rehabilitated Housing: Option for Development Activity
After HAP Contract Execution
In the proposed rule, HUD proposed to include provisions on
substantial improvements (previously termed ``development activity,''
as explained in the discussion of Sec. 983.3 above) to units under a
HAP contract in Sec. 983.157. However, HUD determines that such
provisions are inappropriate under subpart D of part 983 (Requirements
for Rehabilitated and Newly Constructed Units), as placing the
provision there produced confusion about the distinction between
development activity for newly constructed and rehabilitated projects
and work to improve units well after a HAP contract is in effect (which
could be performed in any type of project). Therefore, in this final
rule, the provisions proposed to be in Sec. 983.157 have been moved to
Sec. 983.212 and are discussed in that section below. Section Sec.
983.157, as codified in this final rule, instead is new
[[Page 38238]]
to this final rule and discussed further here.
This final rule adds the new provisions of Sec. 983.157 in
response to public comment. Commenters described situations in which
development activity would be undertaken in rehabilitated projects that
are already occupied and may meet HQS. HUD determined that occupants of
such projects, if they qualify for PBV assistance, would benefit from
receipt of assistance as soon as possible. Accordingly, and in addition
to the options already available to the PHA under current regulations
and in this final rule, Sec. 983.157 of this final rule provides that
the PHA may allow an owner of a rehabilitated housing project to
conduct some or all of the development activity during the term of the
HAP contract. Under this option, the PHA and owner place all proposed
PBV units under the HAP contract before the owner completes development
activity, subject to the limitations established in Sec. 983.157 of
this final rule. During the period of development activity, the PHA
makes assistance payments to the owner for the contract units that are
occupied and meet HQS. HUD determines this option is permissible in
accordance with section 106(a)(4) of HOTMA.
Section 983.157 of this final rule provides for the PHA to exercise
its discretion to use this option in accordance with the PHA's
Administrative Plan. It establishes conditions that must be met to use
this option and a contract framework, which applies a contract rider
during the development period. Section 983.157 of this final rule also
establishes requirements applicable to the occupancy of units during
the rehabilitation period, completing the rehabilitation, and PHA-owned
units. Under this option, the owner agrees to develop the contract
units to comply with HQS, and the PHA agrees that, upon timely
completion of such development activity in accordance with the terms of
the rider, the rider will terminate and the HAP contract will remain in
effect. HUD makes conforming changes throughout part 983 to accommodate
this option (discussed further in the review of general technical
changes below). The final rule clarifies that existing households be
given an absolute selection preference to return to the project when a
household needed to vacate for development activity. HUD notes that the
leasing of units in a PBV project must comply with federal fair housing
and related requirements, including ensuring that any designated
accessible units are occupied by households who need the accessibility
features, and that emergency transfers under VAWA are provided.
Sec. 983.202 Purpose of HAP Contract
In response to public comments, HUD revises paragraph (a) to better
clarify the existing flexibility that allows PHAs and owners to place
multiple projects that each consist of a single-family building under
one HAP contract.
Sec. 983.203 HAP Contract Information
HUD in this final rule revises Sec. 983.203(h) to require that the
HAP contract include units that are restricted to certain occupants via
the project cap or program cap. The purpose of the change is in hopes
of minimizing the possibility of PHAs losing track of what units must
be set aside by ensuring that the HAP contract clearly specifies units
that are restricted to certain occupants by virtue of the project cap
or program cap. The changes in this section are consistent with the
Fostering Stable Housing Opportunities (FSHO) notice,\13\ which notes
that the increased program cap applies only if a family eligible for
that 10 percent authority resides in the unit--this means PHAs need to
keep track of the units that are under the increased program cap that
must be set aside for occupancy by qualifying families (as was already
required for the project cap).
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\13\ See 87 FR 3570 (Jan. 24, 2022).
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Sec. 983.204 Execution of HAP Contract or PHA-Owned Certification
This final rule amends Sec. 983.204(b) and (c) to clarify that HAP
contracts must be promptly executed and effective as described. This
final rule also amends paragraph (c) to specify requirements applicable
to projects undergoing development activity after HAP contract
execution, as described further above in the discussion of changes to
Sec. 983.157. This final rule inserts a new paragraph (d) to clarify
that the effective date of a PBV HAP contract must be on or after the
execution date of the PBV HAP contract. HUD also amends and reorganizes
paragraph (e), which was paragraph (d) in the proposed rule, to align
with corresponding requirements in Sec. 982.451(c). Redesignated
paragraph (e)(1) now expressly states the requirement that the separate
legal entity must execute the HAP contract with the PHA, and HUD
deletes paragraph (d)(1)(ii) from the proposed rule. HUD has revised
paragraph (e)(2)(i) of this final rule to clarify that the PHA-owned
Certification obligates the PHA, as owner, to all of the requirements
of the HAP contract. This revision prevents ambiguity with other
regulations that reference HAP contracts but not the PHA
certifications.
Sec. 983.205 Term of HAP Contract
HUD amends the extension of term provision in Sec. 983.205(b) to
clarify the process for HAP contract term extensions and, while it
retained the maximum extension term of 20 years that was in the
proposed rule, provides a mechanism to execute multiple extensions
concurrently as supported by commenters. Also, HUD removes the proposed
paragraph (c) concerning independent entity oversight of the contract
term and extensions for PHA-owned units, in response to public
comments.
Sec. 983.206 Contract Termination or Expiration and Statutory Notice
Requirements
HUD makes changes in this final rule to clarify the process for
when a PHA manages the issuance of tenant-based vouchers to tenants at
PBV contract termination, and related issues. Specifically, for Sec.
983.206(a)(3), this final rule expands the definition of the term
``termination'' to include termination of the HAP contract by agreement
of PHA and owner. As a necessary precondition of the statutory right to
remain, in paragraph (b), this final rule also adds provisions
specifying that the right to remain in a unit depends on the unit
continuing to be used for rental housing and clarifies procedures for
voucher issuance. As suggested by public comments, HUD provides
additional clarification in paragraph (b) to specify that the PHA must
issue vouchers, provide a timeframe for issuance, and require units to
be removed from the contract if the family moves. HUD also moved the
language in proposed paragraphs (b)(4) and (b)(5) into paragraph (b) to
cover all families that are issued a voucher as the result of a PBV
contract termination or expiration. This final rule made this change
because the language in paragraphs (b)(4) and (b)(5) are applicable
regardless of whether the family uses the voucher in the same project
or in other housing.
After consideration of public comments, this final rule revises
paragraph (b)(4) (proposed paragraph (b)(6)) to expand upon the
exceptions in which an owner may refuse to initially lease and to limit
``other good cause'' to tenant misconduct and where the owner uses the
unit for a non-residential purpose or renovates the unit. However, HUD
provides a process by which families must be permitted to remain in
[[Page 38239]]
or return to the project, if possible, when a renovation occurs, to
best fulfill the PBV statutory requirement allowing the family to
remain, as provided by HOTMA section 106(a)(4). This final rule also
changes paragraph (c) to clarify that expiring funding increments,
which are a normal part of PHA operations, do not constitute
insufficient funding. Paragraph (c)(2) includes a change specifying the
respective section and paragraph that applies for HAP contract breaches
involving failure to comply with HQS and other contract breaches.
Lastly, this final rule adds paragraph (e), which provides the PHA and
owner the discretion to terminate and how the owner and PHA can
terminate their HAP contract.
Sec. 983.207 HAP Contract Amendments (To Add or Substitute Contract
Units)
This final rule clarifies in paragraph (a) that substituted units
may be vacant or, subject to paragraph (c), occupied. The final rule
also removes the phrase ``and subject to all PBV requirements'' from
paragraph (a) since the phrase is unnecessary and created confusion as
to what requirements were at issue. HUD notes that this textual change
is made for clarity only, and substitutions under paragraph (a) remain
subject to all PBV requirements. HUD also clarifies the HQS and
reasonable rent requirements to affirm that the unit must meet HQS and
the rent must be reasonable in order to substitute the unit. Finally,
the final rule includes in paragraph (a) a cross-reference to the
requirements regarding units undergoing repairs or renovation before
substitution (paragraph (d) in this final rule) and units that are
newly built (paragraph (e) in this final rule).
HUD adds a requirement in paragraph (b), which provides that prior
to adding a unit, the PHA must inspect the unit to determine that it
complies with HQS, and the PHA must determine the reasonable rent for
the unit. These additional requirements correspond to the same
requirements that apply when substituting a unit. This final rule
removes from paragraph (b)(1), which covers excluded and excepted units
to the program or project cap, the citation to Sec. 983.6, which
discusses the percentage limitation for PBV units and discusses the
types of units that will count toward the program cap.
HUD also revises paragraph (b)(3), moving the content of the
proposed paragraph (b)(3) to a new paragraph (d) and including in
paragraph (b)(3) only a cross-reference to paragraph (d). Paragraph (d)
also contains significantly different text than that which appeared in
proposed paragraph (b)(3). In accordance with the change to the
definition of ``development activity'' described above in the
discussion of changes to Sec. Sec. 983.3 and 983.152, HUD replaces
reference to ``development activity'' with reference to ``substantial
improvement.'' Because projects containing units needing substantial
improvement within the first two years must be categorized as
rehabilitated housing (per discussion of changes to Sec. 983.3 above),
this final rule establishes that units may not undergo substantial
improvement to be added to the project during this timeframe, barring
extraordinary circumstances. For units that will undergo substantial
improvement, HUD adds explanation of applicable requirements within
paragraph (d), rather than referencing Sec. 983.152 as proposed.
HUD similarly revises paragraph (b)(4) by moving the content of the
proposed paragraph (b)(4) to a new paragraph (e) and instead including
in paragraph (b)(4) only a cross-reference to paragraph (e). Paragraph
(e) of this final rule also contains additional criteria beyond those
that appeared in paragraph (b)(4) of the proposed rule. This final rule
adds, in paragraph (e)(2), an amendment to the proposed requirement to
address instances in which contract units are completed in stages.
Further, the rule adds, in paragraph (e)(3), that a unit can be added
to a HAP contract under certain situations in which part of the
building is reconfigured into additional units. This latter addition
expands the type of units that may be added to a HAP contract.
To clarify the requirements for adding units that are occupied,
this final rule adds paragraph (b)(5), which cross-references the
requirements regarding occupied units found in paragraph (c) of this
final rule. This final rule moves paragraph (c) of the proposed rule to
paragraph (g) and adds new paragraph (c) to address the requirements
for substituting or adding occupied units and provide PHAs with the
flexibility to place occupied units on the HAP contract.
In alignment with the requirements under Sec. 983.10, HUD adds
paragraph (f) requiring that PHAs describe in their Administrative Plan
under what circumstances they will add or substitute contract units.
Finally, this final rule adds a new paragraph (h) explaining that
HUD may establish procedures via Federal Register notice for a PHA and
owner to merge two or more HAP contracts or bifurcate a single HAP
contract. Allowing merger would facilitate administrative efficiency,
to avoid a PHA having to repeat the same administrative actions for
multiple contracts with the owner of a single project. It also follows
from the HOTMA provision allowing units to be added to a contract at
any time. Under the prior policy, HUD is aware that there may be
projects for which the PHA and owner were unable to add units to a HAP
contract due to the three-year limitation and therefore selected the
project again for a separate HAP contract. This change would enable the
contracts to be aligned going forward. Allowing bifurcation would
provide administrative relief in other scenarios, such as if there is
cause to establish separate ownership or management of two or more
portions of a project.
Sec. 983.208 Condition of Contract Units
HUD revises Sec. 983.208(a)(3) to require that the PHA specify
conditions under which it will require additional housing quality
requirements in its Administrative Plan consistent with Sec. 983.10.
To ensure that housing is decent, safe, and sanitary, this final rule
requires in paragraph (b)(1) that the PHA take enforcement action
against owners who fail to maintain a dwelling unit in accordance with
HQS. HUD revises paragraph (b)(2) to align with Sec. 982.404, and to
remove the unclear phrasing ``considered to be.'' This final rule also
specifies in paragraph (b)(2)(i) that ``other inspector'' is a person
who is authorized by the State or local government. The proposed rule
cross-referenced to Sec. Sec. 982.401(a)(5) and 982.401(o) to cover
the timeframes for units in noncompliance with HQS; however, in this
final rule HUD outlines the timeframes for noncompliant units in
paragraphs (b)(2)(iii)(A) and (B) in place of the cross-references. HUD
clarifies in paragraph (b)(3) that the HAP is not withheld or abated in
cases where the PHA waives the owner's responsibility for repairs, and
revises the paragraph to better align with HOTMA in terms of when the
waiver may be applied, namely for an HQS deficiency that the PHA
determines is caused by the tenant, any member of the household, or any
guest or other person under the tenant's control, other than damage
resulting from ordinary use. HUD adds paragraphs (b)(4) and (5) to
provide flexibility for PHAs to conduct substantial improvement in the
case of an HQS deficiency caused by an extraordinary circumstance or to
conduct development activity after HAP contract execution,
respectively, and requires that the PHA withhold or abate HAP and
remove or terminate HAP as long as the contract unit with deficiencies
is occupied by an assisted family.
[[Page 38240]]
HUD also inserts a new paragraph (c) addressing family obligation.
The addition of paragraph (c) reflects the contents of Sec. 982.404,
as Sec. 982.404 is no longer applicable to PBVs in accordance with
Sec. 983.2 of this final rule. The changes in paragraph (c) outline
how a family may be held responsible for a breach of the HQS, the
family's required actions to cure the deficiency if the HQS breach is
life-threatening, and the actions that the PHA must take in case of a
breach of the HQS.
In revised paragraph (d), proposed paragraph (c), HUD replaces the
use of the undefined term ``regular inspections'' with the specific
inspections referred to, consistent with changes throughout this final
rule. Consistent with Sec. 983.10, revised paragraph (d) also requires
that the PHA specify the conditions under which it will withhold HAP
and abate HAP or terminate the contract for units other than the unit
with HQS deficiencies in its Administrative Plan. Revised paragraph (d)
also outlines the PHA's remedies when HQS deficiencies are identified
in an inspection, excluding pre-selection, initial, or turnover
inspections. In accordance with the 1937 Act as amended by HOTMA, this
final rule revises paragraph (f) discussing the applicability of Sec.
983.208 to HAP contracts. Per the statute, HUD determines that
paragraph (f) applies to any dwelling unit for which a HAP contract is
entered into or renewed after the effective date of this final rule,
with ``renew'' under the statute meaning the earlier of agreement to
extend or effective date of extension in the case of PBV.
Sec. 983.210 Owner Certification
To clarify the meaning of the certification in paragraph (a), given
that compliance with HQS can include complying with requirements under
part 983 to take specific actions in certain circumstances in which
units do not fully meet HQS, HUD amends paragraph (a) to specify that
the owner's compliance with HQS is subject to the requirements of part
983. To prevent a possible conflict with Sec. Sec. 983.157 and
983.212, which allow the family to be temporarily housed while
development activity or substantial improvement occurs, this final rule
revises Sec. 983.210(d) to specifically provide Sec. Sec.
983.157(g)(6)(ii) and 983.212(a)(3)(ii) as an exception to the
requirement that the unit be the family's only residence.
Sec. 983.211 Removal of Unit From HAP Contract
HUD moves from Sec. 983.211(c) to paragraph (b) the requirement
that reinstatement or substitution must be permissible under Sec.
983.207. For clarification, HUD revises this requirement to reference
Sec. 983.207(a) and (b) specifically. This final rule also adds
clarifying changes to paragraph (c) to require that the anniversary and
expiration dates match all other units under the HAP contract. This
clarification prevents the PHA and owner from matching the dates on the
HAP contract for all other units with the dates for the reinstated or
substituted units.
Sec. 983.212 Substantial Improvement to Units Under a HAP Contract
In this final rule, HUD moves the proposed Sec. 983.157 to Sec.
983.212 (as discussed further in the description of changes to Sec.
983.157). HUD revises this section to address commenters' concerns over
the timing of substantial improvement under a HAP contract.
Specifically, HUD is breaking paragraph (a) into its components and
revises paragraph (a) to outline the conditions under which the PHA may
approve substantial improvement. The changes in paragraph (a)(1) set a
reasonable expectation that the condition of housing placed under a PBV
HAP contract should not need substantial improvement within the first
two years of the HAP contract, barring the extraordinary circumstances
subject to the exception in paragraph (a)(1)(i). To prevent tenants
from being permanently displaced, paragraph (a)(1)(i) allows the PHA to
approve the owner to undergo substantial improvement after a natural
disaster or other ``extraordinary circumstances'' on a previously
compliant unit and clarifies that ``extraordinary circumstances'' are
unforeseen events that are not the fault of the owner. In paragraph
(a)(1)(ii), HUD changes the relevant time period from five years to two
years in response to public comment. Under paragraph (a)(2), HUD
expands the description of the expected HQS deficiencies that must be
reported to include the items at Sec. 5.703(a)(2): components within
the primary and secondary means of egress, common areas, and systems
equipment. Further, HUD clarifies in paragraph (a)(2) the substantial
improvement at issue must not include demolition and new construction
of replacement units.
The changes in paragraph (a)(3) allow HUD to provide families with
greater protection against being moved from the unit or project
unnecessarily and against being required to remain in unsafe
conditions. For paragraph (a)(3), this final rule adds several
subsections to instruct the PHA and owner on what to do when families
occupy units that will not comply with HQS during the substantial
improvement. Paragraph (a)(3) also clarifies under what circumstances
the family has to entirely vacate a unit during substantial
improvement, which would only be when both in-place substantial
improvement and temporary relocation cannot be achieved. HUD, in this
final rule, explains whether families remain PBV participants or
tenants under lease during re-housing and provides sufficient
procedural information for a PHA and owner to carry out the moves.
Paragraph (a)(3)(iii)(A) adds a requirement that a family that must be
re-housed be offered an available vacant contract unit if there is one.
In the case that the PHA issues the family a tenant-based voucher,
paragraph (a)(3)(iii)(B) provides that the PHA must, either through
voucher issuance based on family eligibility and willingness to request
a voucher pursuant to Sec. 983.261 or through removal of the unit from
the HAP contract, issue the family its voucher to move. Finally,
paragraph (a)(3)(iii)(C) requires that families that vacate the project
be offered an opportunity to return. HUD notes that the leasing of
units in a PBV project must comply with federal fair housing and
related requirements, including ensuring that any designated accessible
units are occupied by households who need the accessibility features,
and that emergency transfers under VAWA are provided.
HUD clarifies that HAP and vacancy payments must be abated once the
unit has any HQS deficiency during substantial improvement under
paragraph (a)(4). This final rule adds paragraph (a)(5) to specify that
vacant units are the units that may be temporarily removed from the
contract and that failure to complete the substantial improvement as
approved is a cause for a breach subject to Sec. 983.206(c)(2).
Paragraph (a)(5) also requires that the contract specify the terms of
the PHA approval, to facilitate the PHA options for breach if the owner
fails to comply.
This final rule amends the proposed paragraphs (b) and does not
finalize the proposed paragraph (c) to conform to changes made across
part 983 to separately characterize ``development activity'' and
``substantial improvement'' and remove descriptions of requirements
applicable to substantial improvement from subpart D of part 983.
Accordingly, paragraph (b) describes requirements that apply to
substantial improvement. This final rule also adds a new paragraph (c)
to require that for PHA-owned units an independent entity must make the
[[Page 38241]]
determinations otherwise made by the PHA in this section, to avoid a
conflict.
Sec. 983.251 How Participants Are Selected
In this final rule, HUD clarifies in paragraph (a)(2) that the PHA
determination of eligibility for a particular family must use
information received and verified by the PHA. This is not a change to
existing requirements, but the addition is necessary to ensure there is
no confusion as a result of the explicit reference in Sec. 983.2 that
Sec. 982.201(e) is inapplicable to the PBV program. This final rule
also revises paragraphs (a)(2) and (b)(2) to clarify an existing
requirement that the family cannot be zero-HAP at admission to the
unit, and clarifies under paragraph (b)(1) that the eligibility of an
in-place family is determined prior to attaching assistance to the unit
(i.e., executing a HAP contract or amending a HAP contract by adding or
substituting units), not at the time the project or unit is initially
selected to receive PBV assistance. This final rule clarifies paragraph
(b)(3)(ii) regarding when an owner chooses to terminate or not to renew
the tenant-based lease to remove language that may have implied the
tenant-based voucher rules on termination or non-renewal function
differently in the case of a unit proposed to be project-based.
Consistent with Sec. 983.10, this final rule also made changes to
require that the PHA identify in the Administrative Plan details about
how it structures the waiting list for the PBV program throughout
paragraph (c). HUD also revises paragraph (c)(7)(x) for consistency and
comprehensiveness with respect to the Department's nondiscrimination
and equal opportunity regulations. Additionally, for organizational
reasons, HUD relocates the requirement for PHAs to have some mechanism
for referring to accessible PBV units a family that includes a person
with a mobility or sensory impairment from Sec. 983.252(c)(2) to Sec.
983.251(c)(9).
To prevent the tenant from being subject to an impermissible
requirement to accept services involuntarily, this final rule revises
paragraph (d)(2) to state that the PHA must not require families to
show they participate in their own equivalent services if they decline
voluntary services. Consistent with Sec. 983.10, in added paragraph
(e)(2)(iii), HUD requires the PHA define ``good cause'' in the
Administrative Plan, which, at a minimum, must include HQS
deficiencies; a unit that is inaccessible or otherwise does not meet
the disability-related needs of a household member with disabilities;
circumstances beyond the family's control; and health or safety risk
due to being a victim of domestic violence, dating violence, sexual
assault, or stalking covered by 24 CFR part 5, subpart L. To benefit
the tenants and based on public comments, HUD determines that PHAs
cannot remove families from the waiting list when they reject units for
any reason but must allow families to reject units for ``good cause''
without losing their place on the waiting list. This protects families
from being penalized when a unit is not truly available to the family
because the unit does not meet the family's needs.
Sec. 983.252 PHA Information for Accepted Family
HUD restructures proposed Sec. 983.252(a), and moves the
requirements previously at paragraph (c)(1) to paragraph (a)(2) so that
the requirements that PHAs take appropriate steps to ensure effective
communication in accordance with 24 CFR 8.6 and 28 CFR part 35, subpart
E, and provide information on the reasonable accommodation process,
applies for all families, and not only where the family head or spouse
is a person with a disability. HUD further revises proposed Sec.
983.252 to add the requirement that the PHA include in the family
information packet information about the family's right to move in a
new paragraph (b)(5). HUD has also moved the requirement at paragraph
(c)(2) regarding accessible PBV units to Sec. 983.251(c)(9), as
discussed in the previous section. HUD also adds a new paragraph (c) to
clarify the requirement that the PHA and family sign the statement of
family responsibility. In accordance with Title VI of the Civil Rights
Act of 1964 and HUD's implementing regulation at 24 CFR part 1, this
final rule clarifies in redesignated paragraph (e) that it is a
requirement that PHAs take reasonable steps to ensure meaningful access
by persons with limited English proficiency. PHA's may reference HUD's
Final Guidance to Federal Financial Assistance Recipients Regarding
Title VI Prohibition Against National Origin Discrimination Affecting
Limited English Proficient Persons (72 FR 2732) for additional
information about how to ensure meaningful access to persons with
limited English proficiency.
Sec. 983.254 Vacancies
HUD aligns Sec. 983.254(a)(1) with the new requirements of Sec.
983.157, as described in the discussion of changes to that section. HUD
also makes minor changes to paragraphs (a)(1)(i) and (ii) of this
section to specify that PHAs should make every reasonable effort to
make eligibility determinations and refer sufficient numbers of
families to owners within thirty days.
Sec. 983.255 Tenant Screening
For consistency purposes and to align this section with Sec.
983.10, HUD revises Sec. 983.255(a)(2) and (c)(4) to require that the
PHA's tenant screening policies are in accordance with the policies in
the PHA's Administrative Plan.
Sec. 983.257 Owner Termination of Tenancy and Eviction
This final rule revises Sec. 983.257 to add that the owner may
terminate the tenancy in accordance with Sec. Sec. 983.157(g)(6)(iii)
and 983.212(a)(3)(iii).
Sec. 983.260 Overcrowded, Under-Occupied, and Accessible Units
After considering public comments, HUD creates additional
flexibilities as requested, while ensuring units do not continue to
remain overcrowded, underoccupied, or, in the case of accessible units,
occupied by families that do not require accessibility features.
Accordingly, in paragraph (a)(2)(ii), HUD provides PHAs with 60 days
(an additional 30 days) to make an offer of continued housing
assistance once a determination has been made that a family is
occupying a wrong-size unit, or a unit with accessibility features that
the family does not require and the unit is needed by a family that
requires the accessibility features. HUD also reorganizes paragraph (b)
and adds paragraphs (b)(2) to provide that the PHA must remove the
wrong-size or accessible unit from the HAP contract to make voucher
assistance available to issue the family a tenant-based voucher if
continued housing assistance under paragraph (b)(1) is unavailable. HUD
determined this policy change was necessary to ensure the family living
in a wrong-size or accessible unit would be able to obtain voucher
assistance when no options under paragraph (b)(1) were available.
HUD revises paragraphs (c)(2)(i) and (ii) to clarify the
requirements when the PHA's offer of assistance is project-based. HUD
also adds paragraph (c)(2)(iii) to address the requirements when the
PHA's offer of assistance is other comparable tenant-based rental
assistance. In response to requests for additional flexibility, HUD
creates under (c)(2)(i) and (c)(2)(iii) an opportunity for a family to
request and a PHA to grant one extension not to exceed 90 days in
circumstances where a family either declines project-based assistance
or accepts or declines other
[[Page 38242]]
comparable tenant-based assistance in order to accommodate a family's
efforts to locate affordable, safe, and geographically proximate
replacement housing.
Finally, HUD adds paragraph (d) to state that if units are removed
under this section they can be reinstated later. This final rule also
revises paragraph (b)(1)(iv) to align with the revised definition for
the term ``comparable tenant-based rental assistance'' in Sec. 983.3.
Sec. 983.261 Family Right To Move
In response to public comments, HUD at this final rule reorganizes,
adds headings to, and revises Sec. 983.261. Paragraph (a) is revised
to clarify that the family may terminate its lease at any time after
one year of PBV assistance. To ensure PHAs properly manage voucher
turnover, paragraph (b) requires that if the search term of a family
that requested to move expires, the PHA must first issue a voucher to
the next eligible family before issuing another voucher to the family
that requested to move. This final rule moves the discussion in
paragraphs (c)(1) and (2) of the rights of a family or a member of a
family who has been the victim of domestic violence, dating violence,
sexual assault, and stalking under the PBV program, to new paragraphs
(e) through (g), and expands on these provisions. Paragraph (d)
clarifies that if the family terminates its lease before one year of
PBV assistance, the family relinquishes the opportunity for continued
tenant-based assistance under this right to move section. Lastly,
consistent with Sec. 983.10, this final rule requires PHAs to have a
policy on the family's right to move in the Administrative Plan in
paragraph (b) and (c).
Sec. 983.262 Occupancy of Units Under the Increased Program Cap and
Project Cap Excepted Units
This final rule makes overall changes to Sec. 983.262, to align
the PBV rules with the Fostering Stable Housing Opportunities (FSHO)
notice,\14\ and to specify the occupancy requirements under the 10
percent cap. Additionally, for ease of reading, this final rule moves
and revises paragraph (f) to paragraph (b)(4) and distinguishes
paragraphs (c) and (d), the requirements for excepted units and units
under an increased program cap. This final rule makes clarifying
changes to paragraph (b) by explaining the requirements applicable to
both excepted units and units under an increased program cap. For
clarity, this final rule amends paragraph (b)(4)(ii) to provide PHAs
with discretion on whether to reinstate a unit from the PBV HAP
contract. The changes in paragraph (c) explain the requirements solely
for units under the increased program cap, which includes homeless
family, veteran family, supportive housing for persons with
disabilities or elderly persons, and units for Family Unification
Program (FUP) youth. This final rule requires at paragraph (c)(3)(ii)
that PHAs include policies on supportive housing for persons with
disabilities or elderly persons in their Administrative Plan
requirement in alignment with Sec. 983.10. Revised paragraph (d)
outlines the requirements solely for project cap excepted units.
---------------------------------------------------------------------------
\14\ See 87 FR 3570 (Jan. 24, 2022).
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Paragraph (e) of this final rule specifically outlines the
requirements for units for FUP youth under the increased program cap
and project cap exceptions. This revision is made for better
readability and to distinguish FUP youth requirements from other
categories of excepted units and units under an increased program cap.
Sec. 983.301 Determining the Rent to Owner
This final rule revises paragraphs (b)(1) and (c)(2)(i) to align
with Sec. 983.10. This final rule changes (f)(3) to align with the
changes made to the exception payment standard regulation in Sec.
982.503. Paragraph (f)(3) is also amended to clarify the criteria for
whether an exception payment standard applies. Finally, HUD amends
paragraph (f)(3) to clarify the purpose for which an exception payment
standard applies to PBV projects, which is as a factor for determining
rent to owner under paragraph (a)(2) or a factor for determining if the
unit is a qualifying tax credit unit for purposes of setting the rent
to owner under paragraph (c), as applicable.
HUD revises paragraph (f)(4) to provide HUD with the flexibility to
develop a process to approve project-specific utility allowances. This
final rule also adds paragraph (f)(5) to state that the PHA must use
the applicable utility allowance schedule for the purpose of
determining rent to owner and does not use a higher utility allowance
from a reasonable accommodation for a person with a disability. This
clarifies the existing requirement that a higher utility allowance as a
reasonable accommodation is applied only to the particular family's
tenant rent (or utility reimbursement) (see 24 CFR 983.353), rather
than being used to determine the amount of the rent to owner per 24 CFR
983.301(b)(1) or (c)(2)(i). This final rule removes the proposed rule
requirement in paragraph (g) that independent entities determine
project-specific utility allowance, with the purpose that HUD will
ensure sufficient oversight through the Federal Register process to
approve project-specific utility allowances.
Sec. 983.302 Redetermination of Rent to Owner
This final rule revises paragraph (a)(2) to state that the PHA
Administrative Plan must specify any advance notice the owner must give
the PHA to request a redetermination of rent and the form of such
request. This final rule revises paragraph (b)(2) to remove the term
``maximum rent,'' which was undefined, and state specifically how to
calculate the maximum adjustment by OCAF. Further, this final rule
moves information that was in paragraph (b)(2) in the proposed rule to
new paragraphs (b)(3), (b)(4), and (b)(5) with simplified language for
readability. HUD amends paragraph (b)(6) to conform to applicable HQS
provisions of Sec. Sec. 983.157 and 983.212.
HUD also clarifies when the rent to owner must be decreased in the
case of adjustment by OCAF in revised paragraph (c)(1), to include when
there is a decrease in the fair market rent, tax credit rent, or
reasonable rent, as applicable, that requires a decrease to the rent to
owner. In response to public comments on the proposed changes to rent
floors, HUD determined that PHAs should have discretion whether to
elect at any time, within the HAP contract, to not reduce rents below
the initial rent to owner, as reflected in revised paragraph (c)(2).
This revision reflects HUD's opinion that PHAs are in the best position
to balance local considerations in making such a determination. To
accomplish this change, HUD removed from paragraph (c)(2) the
limitation on establishing a rent floor, to account for circumstances
where the rent floor may need to be established after rents have fallen
beneath the initial rent to owner.
Sec. 983.303 Reasonable Rent
HUD amends paragraph (b) to add two new situations in which rent
reasonableness must be redetermined, which are when a unit is added to
the contract and when development activity is completed and accepted
for a unit subject to the new option in Sec. 983.157 of this final
rule (described in greater detail in the discussion of Sec. 983.157
above). This final rule adds paragraph (c)(3) to explain how to
calculate rent reasonableness, which must be based on actual and
documentable conditions
[[Page 38243]]
and not prospective information. HUD also deletes in paragraph (f)(2)
the phrase ``where the project is located,'' as this language modified
``the HUD field office'' which has been removed.
Sec. 983.352 Vacancy Payment
This final rule aligns this section with Sec. 983.10 by clarifying
that the Administrative Plan must contain the PHA policy on the
conditions which it will provide for vacancy payments in a HAP
contract, the duration and amount of any vacancy payments it will make
to an owner, and the required form and manner of requests for vacancy
payments.
Sec. 983.353 Tenant Rent; Payment to Owner
This final rule revises paragraph (d)(2) to align it with Sec.
983.10, requiring that the PHA describe its policies on paying the
utility reimbursement in the Administrative Plan.
Sec. 985.3 Indicators, HUD Verification Methods and Ratings
This final rule revises paragraphs (i)(1), (i)(3)(i), and
(i)(3)(ii) to align them with Sec. 982.503. Further, this final rule
clarifies paragraph (l)(1) to state that the initial unit inspection
indicator includes both initial and turnover inspections for the PBV
program. The purpose of this revision is to capture every time a family
moves in and not just capture when a family moves in before the HAP
contract. This final rule also revises the citation in paragraph (m)(1)
from Sec. 982.405(a) to Sec. Sec. 982.405 and 983.103(e) to reflect
changes made to those sections in this final rule.
This final rule also revises paragraph (c)(3)(i)(A) to reflect
changes made to self-certification of assets under 88 FR 9600 (Feb. 14,
2023), which implemented HOTMA sections 102, 103, and 104. A revision
has been made to the introductory text of this regulation to reflect
that the Federal award expenditure threshold is established by 2 CFR
subpart F and has changed from $300,000 to $750,000. The revision
reflects the regulatory citation for audit thresholds to ensure that
Sec. 985.3 is always aligned with Federal audit requirements.
This final rule revises paragraph (p)(1) and (3)(i)(B) to reflect
the renumbering of Sec. 982.503(e) to (f).
General Technical Changes
Throughout parts 5, 50, 92, 93, 982 and 983, HUD moved, corrected,
and removed outdated citations and revised headers for clarity
purposes. This final rule also revises terminology throughout this
final rule, including replacing all references to ``biennial
inspection'' with ``periodic inspection;'' ``tenant selection plan''
with ``owner waiting list;'' and ``defects'' with ``deficiencies.''
This final rule also replaces references to ``tenant's rent'' with
``total tenant payment'' and replaces references to ``rent to owner''
with ``gross rent.'' This final rule removes all references to the
Project-based certification (PBC) program as it is no longer in
existence. HUD also redesignated paragraphs for readability in
Sec. Sec. 982.54, 982.406, 983.53, 983.54, 983.59, 983.153, 983.204,
983.207, 983.211, 983.252 and 983.260. In addition, HUD moved the
definition of the term ``Request for Release of Funds and
Certification'' from Sec. 983.3 to Sec. 983.56(d)(2). HUD also
amended Sec. Sec. 985.1 and 985.3 to incorporate the PBV program in
SEMAP and to align with regulatory changes in Sec. 982.503 which
permits additional flexibilities for PHAs inspections and the NSPIRE
final rule.
HUD also makes changes throughout this final rule to correspond
with the changes described above adding an option to complete
rehabilitation after HAP contract execution in Sec. 983.157, moving
proposed Sec. 983.157 to Sec. 983.212 of this final rule, and
changing the term ``development activity'' to ``substantial
improvement'' for a portion of the work described as ``development
activity'' in the proposed rule. HUD adds cross-references to Sec.
983.157 in this final rule, and brief descriptions of conforming
changes, in appropriate sections of part 983. Also, HUD removes
citations to Sec. 983.157 that appeared in the proposed rule or
changes them to instead reference Sec. 983.212 throughout this final
rule. HUD changes ``development activity'' to ``substantial
improvement'' where appropriate throughout this final rule. Finally,
HUD removes references to activities that constitute substantial
improvements from subpart D of part 983 of this final rule where
appropriate and, accordingly, removes references to provisions of
subpart D from Sec. Sec. 983.207 and 983.212 where appropriate.
HUD is also revising the definition of ``household'' at 24 CFR
5.100, consistent with HUD's rule implementing HOTMA at 88 FR 9600
(Feb. 14, 2023), to include foster children and foster adults. This is
a technical change consistent with the definitions of ``foster
children'' and ``foster adults'' present in 24 CFR 5.100. For more
information, see HUD's discussion of foster children and adults at 88
FR 9600, 9602 (Feb. 14, 2023).
Finally, some technical changes throughout the proposed rule were
either made by the NSPIRE final rule or rendered moot by the NSPIRE
final rule. For example, HUD proposed to amend Sec. 985.1 to update a
reference to ``project-based component (PBC).'' This change was made in
NSPIRE, and therefore not made here.
IV. Effective and Compliance Dates
Effective Dates
Almost all changes in this final rule are effective thirty days
after the publication of this rule. However, HUD is delaying the
effective date for Sec. Sec. 982.451(c), 983.154(h), 983,154(g),
983,157, and 983.204(e) while HUD completes and publishes the PHA-owned
certification form and HAP contract rider that are necessary for PHAs
to implement these changes. HUD will publish a subsequent publication
establishing an effective date for these changes, once the form and
rider are ready for use.
Compliance Dates
Compliance with this final rule is required once the rule becomes
effective, with some exceptions.
Many changes require updates to PHAs' Administrative Plans. HUD
recommends that PHAs update their Administrative Plans at their
earliest convenience. However, to aid in providing a smooth transition,
PHAs are not required to update their Administrative Plans in response
to this rule until 365 days after the effective date of this rule. HUD
notes that PHAs wishing to take advantage of many of the changes in
this rule are required to update their Administrative Plan to
incorporate those changes.
Other sections have delayed compliance dates to provide PHAs with
adequate time to update their forms, procedures, and any other written
materials that reflect new requirements in accordance with this rule,
and to provide HUD with time to provide additional resources advising
PHAs. Also of note, Sec. Sec. 983.57 and 983.155(b) will require some
PHAs to either amend their independent entity contracts or select a new
independent entity, and HUD is therefore giving PHAs one year from the
effective date to make those changes.
V. Public Comments
HUD received 44 public comments from a wide range of commenters:
individuals; PHAs; public housing and tenant interest groups; and legal
services organizations. The public comments and responses to the
substantive comments are found below.
[[Page 38244]]
1. Definitions (Sec. 982.4)
Definition of Request for Tenancy Approval (RFTA)
One commenter stated that the definition of RFTA seems to imply a
requirement that the RFTA be submitted by the voucher holder and
suggested the definition be amended to clarify that either the family,
or the owner on behalf of the family, may submit the form.
HUD Response: In this final rule, HUD has amended the definition of
RFTA to clarify that the form can be submitted by the family, or on
behalf of the family to the PHA.
Definition of Tenant-Paid Utility
A commenter suggested that HUD include the definition of
``utility'' currently found in guidance to the regulation because the
definition is a critical part of the program.
HUD Response: The definition of tenant-paid utility has been added
to the definitions section at Sec. 982.4 and this definition is now
also referenced in the project-based voucher definition of tenant-paid
utility at Sec. 983.3. The new definition in Sec. 982.4 clarifies
that tenant-paid utilities are those services and utilities that are
not included in the rent. HUD modified the definition from the proposed
rule to remove the definition of which utilities may be considered as
tenant-paid utilities since this is covered in Sec. 982.517.
Definition of PHA-Owned Units
Commenters supported the proposed definition of a PHA-owned unit,
which matches the statutory definition offered by HOTMA. These
commenters stated this was clear and did not need expansion and
supported tracking the statutory definition and conforming definitions
across HCV and PBV regulations, notices, and guidance.
A commenter recommended that for a unit to be PHA-owned that HUD
not rely on a bright-line, percentage of ownership test to determine
control when a PHA owns more than 50 percent of the managing member or
general partner, and HUD should not find a unit to be PHA-owned when a
PHA controls less than 50 percent of a managing member or general
partner interest. Another commenter supported excluding units in
buildings owned by entities in which either a PHA is in the ownership
structure, and/or the entity is subject to a ground lease by a PHA. A
commenter recommended the definition of ``owned by a public housing
agency'' should allow the statutory text to stand on its own, so that
only units located in a project ``owned by the PHA, by an entity wholly
controlled by the PHA, or by a limited liability company (``LLC'') or
limited partnership (``LP'') where the PHA holds a controlling
interest'' will be considered ``owned by a public housing agency.'' The
same commenter opined that should HUD wish to clarify the control and
other factors it will evaluate when determining whether a unit will be
considered PHA-owned, HUD can do so through notice or other non-binding
guidance. This commenter further stated that the definition of
``controlling interest'' conflates control and ownership contrary to
Congressional intent, explaining that percentage of ownership does not
guarantee control over the owner entity and that HUD should confirm
whether the PHA exercises functional day-to-day control over the owner
entity.
HUD Response: HUD appreciates there are many different preferences
regarding the level of ownership or control that rises to the level of
PHA-owned. In the interest of consistency, HUD agrees with the
commenters that supported a definition that follows the statutory
definition, and therefore declines to accept the suggestions that HUD
avoid a bright-line test or exclude units in buildings owned by
entities in which either a PHA is in the ownership structure, and/or
the entity is subject to a ground lease by a PHA. Additionally, HUD
believes that providing a distinction in the regulation of what
constitutes a controlling interest is important to clarify the nuances
in the statutory definition of PHA-owned units, and thus does not
accept the suggestion that any clarifications beyond the statute should
only be made through non-binding guidance. HUD disagrees that its
definition of the term controlling interest is contrary to
Congressional intent. The common definition of ``controlling interest''
recognizes a majority ownership interest that serves as the basis for
control; HUD's definition reflects the most basic and recognized
meaning of the term. Therefore, this final rule maintains the proposed
rule language without change.
Definition of Independent Entity
A commenter supported the modified definition of independent entity
in the proposed rule because it would provide relief to PHAs and
maintain a level of scrutiny and prevent the appearance of self-
dealing. Another commenter doubted whether there is any circumstance
under which a PHA and an independent entity should be connected
financially, in the interest of complete fairness and impartiality
under which an independent entity should be making decisions.
One commenter suggested that the proposed rule would increase the
shortage of vendors for PHAs, especially located in smaller areas, if
every vendor were disqualified based on prior contracts with the PHA
for services performed on non-PHA-owned units. The commenter viewed
HUD's current procedures in tandem with the PHAs' inability to exercise
control over the independent entity, as sufficient to ensure
independence.
The same commenter recommended that HUD revise the definition of
independent entity because it is unclear what it means for an
independent entity to ``be connected to'' a PHA, and the definition
would prohibit a PHA from using a company it already contracts with as
an independent entity. Another commenter stated the phrase ``or in any
other manner that could cause the PHA to improperly influence the
independent entity'' is vague and subjective, potentially leading to
confusion, disputes, and conflict, and should be deleted.
For clarity, a commenter suggested HUD revise the definition as
follows: ``HUD-approved independent entities and PHAs cannot have a
legal, financial (except regarding compensation for services performed
for the PHA), or other connection that could cause either party to be
improperly influenced by the other.'' The same commenter suggested that
this final rule specify the meaning of ``connected to'' because the
current meaning could prohibit a PHA from using an independent entity
it currently contracts with, even when these vendor contracts are
procured at arm's length.
Another commenter suggested HUD allow PHAs that may have an
allowable financial relationship with an independent entity to continue
to use that independent entity if there is no chance that the PHA will
``improperly influence'' the independent entity.
HUD Response: HUD appreciates the comments related to the
challenges of identifying independent entities in rural areas, as well
as the need to ensure impartiality. HUD revises the proposed definition
in an attempt to balance these competing interests and ensure that HUD-
approved independent entities are impartial and autonomous. HUD
believes it is important to provide a regulatory definition of the term
independent entity, and thus declines the request that the definition
is consistent with current requirements, which provide that the PHA
cannot perform any function that would present a clear conflict (e.g.,
conducting inspections and rent setting) for units it owns. In this
final rule, HUD explains when the unit of general local
[[Page 38245]]
government meets the definition of an independent entity without
requiring HUD approval. HUD believes keeping this option in this final
rule will reduce administrative burden and reporting requirements.
While HUD disagrees that there are financial connections where there is
no chance that the PHA will ``improperly influence'' the independent
entity, HUD further clarifies that for HUD-approved independent
entities, a financial connection would not include compensation for
services performed for PHA-owned units. HUD believes it is necessary to
maintain language regarding impartiality of HUD-approved independent
entities, which defines the types of relationships (e.g., financial
connections) that could interfere with the entity's exercise of
independent judgment in carrying out responsibilities with respect to
PHA-owned units.
2. Administrative Plan (Sec. 982.54)
Objections Generally
A commenter stated that HUD should not add items to the
Administrative Plan that are not necessary for the daily and core
operations of the PHA. Another comment stated that several of the
proposed additions would require frequent and burdensome changes for
otherwise insignificant policy changes.
HUD Response: HUD disagrees that the requirements should not be
added to the regulations. HOTMA offers significant flexibilities and
HUD proposes to offer additional flexibilities to PHAs to establish
discretionary policies through this rule. Therefore, it is critical
that discretionary policies be applied consistently and that such
policies are clearly and transparently published for the benefit of
participant families, owners, and the general public.
Inclusion of Tenant Selection Plan (TSP)
Another commenter suggested that the requirement that a TSP be
included in the Administrative Plan must be mentioned in Sec. 982.54.
HUD Response: In finalizing the rule, HUD replaced all references
of the ``tenant selection plan'' with ``owner waiting list policy.''
Question 2: Where could HUD provide greater discretion to PHAs to
support their efforts to operate their programs effectively?
A commenter stated that all PHAs should be allowed to be Moving to
Work (MTW) agencies to decrease regulatory burdens and provide
additional discretion for PHAs to control their local market. This
commenter also recommended that PHAs that have Affordable Housing
Accreditation Board (AHAB) accreditation and are high performing under
SEMAP and PHAS should be rewarded with more discretion because they
have shown their ability to properly operate their programs.
HUD Response: HUD appreciates the comments requesting that PHAs
should be afforded additional discretion to reduce regulatory burdens
and notes that HOTMA and HUD, in its implementation, has made
significant modifications and clarifications intended to reduce the
burden on PHAs where possible. HUD does not have the statutory
authority to allow all PHAs to be MTW agencies as suggested by the
commenter.
3. Information When Family Is Selected (Sec. 982.301)
Disability-Related Obligations in the Oral Briefing
Commenters supported HUD's requirements wherein PHAs must provide
families that include an individual with a disability a list of
accessible units known to the PHA and assistance in locating an
accessible unit. PHAs are already required to provide this information
in the information packet, and as required in compliance with HUD's
Section 504 requirements. One commenter suggested that PHAs be required
to collaborate with local organizations that can provide housing search
assistance to tenants with specific accommodation needs. Another
commenter suggested that HUD require PHAs to keep track of whether
tenants currently in accessible units require the accessible design
features and use a lease addendum stating that the family may be
required to move if they do not require the accessible design features.
The same commenter suggested that HUD provide guidance to PHAs to
proactively identify ways to make units accessible, including through
new construction or other substantial rehabilitation.
HUD Response: The HCV program allows families to choose any
eligible unit in the rental market. In the tenant-based voucher
context, an HCV family leaving a rental unit due to not needing its
features does not mean that unit is then leased to another HCV family.
In other contexts, such as public housing and project-based voucher
housing, the owner or manager may require the applicant to agree to
move to a non-accessible unit and may incorporate this agreement into
the lease, in accordance with HUD's Section 504 regulations. HUD
appreciates the comments and recommendations to provide guidance to
PHAs on ways to proactively identify units that meet a household's
disability-related needs and ways to make units accessible and will
consider these ideas in future guidance.
Exception Payment Standards
A commenter stated that HUD should include written and oral
briefings on exception payment standards as a reasonable accommodation,
and not solely include subsidy standards as required by regulations.
The commenter suggested that PHAs be required to inform families of the
availability of an exception payment standard, and particularly for
when a more expensive new construction unit is needed as an
accommodation for a family member's disability. Alternatively, another
commenter suggested that the regulation should not detail that there is
a reasonable accommodation possible for subsidy standards because
reasonable accommodations are available for all PHA policies.
HUD Response: HUD agrees with the commenters that PHAs must make
reasonable accommodations in rules, policies, practices, services, and
procedures to ensure persons with a disability have equal opportunity
to participate fully in all the PHA's programs, privileges, benefits,
and services. Therefore, the voucher briefing must include information
on the PHA's reasonable accommodation policies and procedures. In
addition, the PHA may not know or have reason to know if the family or
families attending the oral briefing includes a person with
disabilities. Similarly, a family member who is not disabled may
subsequently become disabled, so it is important that all families
receive information on the reasonable accommodation process.
Consequently, HUD is revising Sec. 982.301(a)(3) to require that
information on the reasonable accommodation process is provided at all
oral briefings and not limited only to briefings where the PHA knows
that a family in attendance includes a person with disabilities. While
HUD does not require in this final rule that the reasonable
accommodation exception payment standards must be covered in the oral
briefing, HUD is requiring that an explanation of reasonable
accommodation exception payment standards must be included in the
briefing packet. HUD believes providing written guidance in the
information packet will better address the commenter's concerns as the
family will have access to guidance on this subject throughout their
housing search.
[[Page 38246]]
Briefing Method
A commenter recommended that the regulation for the briefing packet
should outline the most critical information for families when they are
provided their initial voucher, because excessive amounts of
information can be overwhelming for families. The commenter also
recommended that PHAs should have the discretion to determine which
method of communication, including oral, print, and electronic
communications, is proper for the briefing packet, and the regulation
should explicitly state that the briefing can be provided in a manner
that is not oral, according to the PHA's discretion, while
acknowledging that accessibility and interaction between staff and
families are required.
Another commenter recommended referencing Sec. 982.301(a), the
right to meaningful language access for families whose members are
limited English proficient, and how to request and access meaningful
language assistance from the PHA. The commenter further stated that in
Sec. 982.301(b)(10), HUD should reference how tenants can request
language assistance, whether via written translation of documents or
oral interpretation, for the PHA; HUD should require that the PHA
identify staff members who will coordinate the PHA's language access
policies; and the tenant briefing should include translation and oral
interpretation for individuals who are limited English proficient in
Sec. 982.301(c).
HUD Response: HUD regulations require that the briefing packet
contain specific information that is important for families when they
are provided with their initial voucher. HUD does not agree that the
briefing packet should categorize which pieces of information are more
important than others, as all information is required and important for
voucher families. HUD does not agree that the regulation should allow
for other types of briefings and believes requiring an oral briefing
ensures that all families fully understand how the program works and
have the opportunity to ask questions and discuss information
presented. HUD notes that new paragraph (c) in Sec. 982.310 already
addresses providing information for persons with limited English
proficiency. HUD has also addressed access to translation in PIH Notice
2020-32 which provides for alternative briefing methods, as well as how
to ensure meaningful access for limited English proficient speakers and
believes no additional changes to Sec. 982.301 are warranted.
4. Approval of Assisted Tenancy (Sec. 982.305)
60-Day HAP Contract Execution in Sec. 982.305(c)(4)
A commenter disagreed with HUD's proposal to require a 60-day
period to execute a HAP contract and a lease term and noted that
requiring PHAs to get permission from HUD to execute a HAP contract in
cases exceeding the 60-day period is unnecessary because it is not in
the interest of the parties to unnecessarily delay the process. As an
alternative, the commenter suggested increasing the contract execution
time from 60 days to 90 days to eliminate the need for any additional
action from the PHA or HUD and require PHAs to notify HUD when the PHA
goes beyond the 60 days, so that HUD can track the prevalence of the
extensions requests and re-examine this policy in the future while
avoiding administratively burdening PHAs and landlords.
Another commenter did not support a maximum 60-day timeframe
between lease effective date and the date of HAP contract execution.
The commenter opined that many HCVs are lease-in-place vouchers in rent
stabilized units, so PHAs cannot request that the owner sign a new
lease at the start of the subsidy without violating local rent laws.
HUD Response: HUD appreciates the comments and clarifies that the
requirement to execute a HAP contract no later than 60 days from the
beginning of a lease term is already a requirement under current
regulations at Sec. 982.305(c)(4) and not newly proposed. HUD also
understands the concerns of commenters around extenuating circumstances
and believes that the proposed change to allow a PHA to request an
extension of HUD sufficiently addresses those concerns. Therefore, HUD
will finalize Sec. 982.305(c)(4) as proposed.
5. Eligible Housing (Sec. 982.352)--Independent Entity Functions and
Compensation
Questions 5 and 6: Functions, Other Than Those Identified in the
Proposed Rule, That an Independent Entity Should Perform in the Case of
PHA-Owned Units
Functions of Independent Entities
Commenters opposed adding duties to independent entities. One
commenter stated the functions identified in the proposed rule are the
same as the current regulation, and that no other functions should be
authorized to an independent entity. Another commenter stated that HUD
should not require independent entities to perform other functions
beyond those proposed because doing so would increase the costs as well
as decrease funding availability for other program functions. One
commenter stated that the independent entity requirements should be re-
examined so that PHAs are not burdened by the oversight of such
entities, and that PHAs should be entrusted to carry out the
activities, such as ensuring compliance with selection process,
inspections and rent setting--just as PHAs are under the public housing
program. The commenter suggested having the PHAs carry out these duties
with proper documentation and subject to review through the required
annual independent audit.
Another commenter disapproved of HUD requiring an independent
entity to conduct duties that the PHA can do itself, such as approve
contract renewals, conduct inspections, and conduct rent reasonableness
tests. The commenter further emphasized the burden of using independent
entities for activities, such as performing inspections because there
is a shortage of vendors trained in UPCS-V protocol, and many PHAs
conduct rent reasonableness tests through third-party software, making
the need for independent entities obsolete. The commenter recommended
that HUD require an independent entity to conduct inspections only for
special inspections or compliance to lessen the PHA's burden. While
another commenter noted that HUD's proposed list of activities to be
performed by an independent entity is too long, suggesting HUD
reconsider the requirement that an independent entity receive evidence
that the PHA is following regulations during the development activity
or rehabilitation. This commenter noted that there are already several
layers of review at local and Federal levels, and that, in the case of
mixed-finance, HUD may have already reviewed the transaction.
A commenter further suggested that independent entities not be
required to review awards of Low-Income Housing Tax Credits (LIHTC) or
HOME Investment Partnership Program (HOME) funds, as well as PHA-owned
project selections and stated that HUD should defer to the PHA to
determine when revitalization of a former public housing site is
needed. Additionally, the commenter objected to the requirement that
independent entities (rather than PHAs) must determine any rent
adjustments by an OCAF as part of their rent calculation
responsibilities for any PHA-owned units.
[[Page 38247]]
HUD Response: HUD agrees that no additional duties need to be added
to the independent entity functions but for the addition of one
function under Sec. 983.57 requiring the independent entity to approve
substantial improvement on units under a HAP contract in accordance
with Sec. 983.212 (see the discussion of Sec. 983.57 later in this
preamble). HUD has consistently maintained that PHAs cannot
appropriately perform any function that would present a clear conflict
for units they own. 42 U.S.C. 1437f(o)(11) reflects this view by
requiring that the unit of general local government or a HUD-approved
independent entity perform inspections and rent determinations. In
addition, while the PHA is generally responsible for selecting PBV
projects in accordance with Sec. 983.51, including developing the
procedures for submission and selection of PBV proposals, HUD believes
that, to ensure fairness and impartiality, it is necessary for an
independent entity or the HUD field office to review the selection
process the PHA undertook and determine that the PHA-owned units were
appropriately selected based on the selection procedures specified in
the PHA Administrative Plan. Finally, as previously noted, PHAs are
statutorily prohibited from determining rents for PHA-owned units;
calculating the amount of the reasonable rent and any rent adjustments
by an OCAF are integral parts of the process. Accordingly, HUD
maintains the requirement that the independent entity must calculate
any rent adjustments by an OCAF for PHA-owned units.
Independent Entity Compensation
A commenter suggested that HUD expressly permit a PHA to seek
reimbursement of independent entity expenses from project owners as
operating costs.
HUD Response: Independent entity functions are not a project
owner's responsibility. Tasks performed by the independent entity are
administrative functions that the PHA would otherwise be performing if
the units did not meet the definition of PHA-owned. PHAs may therefore
compensate the independent entity from PHA administrative fees
(including fees credited to the administrative fee reserve).
Support for PHAs Keeping Documents
Commenters supported PHAs keeping rent reasonableness and
inspection documents and providing copies to the field office only upon
request. A commenter noted that this is not required for non-PHA-owned
units, and the field offices lack capacity to review these reports.
HUD Response: HUD retains the language proposed at Sec.
982.352(b)(1)(v)(A) requiring rent reasonableness and HQS information
be communicated to the family and PHA, but not submitted to HUD unless
upon request. HUD agrees that this framework balances HUD's interest in
proper oversight and PHAs' administrative burden.
6. Establishment of Life-Threatening Conditions (Sec. 982.401(o))
Some commenters approved of the list of Life-Threatening Conditions
(LTCs). Other commenters suggested that the list should include other
items such as mold, due to its harmful impact on individuals with
respiratory and immune deficiencies; non-functioning locks; roaches;
asbestos; radon; rat infestations; non-functioning heating or hot water
systems; properties determined uninhabitable by a city agency;
inability of heating system to maintain a minimum of 55 degrees
Fahrenheit during cold season; utilities not in service; an absence of
a functioning toilet; and missing exterior doors or windows. Another
commenter stated that a missing lightbulb should not be an LTC.
One commenter suggested condensing and summarizing the list, as a
high level of detail could lead to errors in inspections when multiple
criteria must be met to be considered an LTC. Another commenter
supported HOTMA's streamlining changes but stated that it is
unwarranted to find minor HQS violations as a safety hazard or a reason
to terminate HAP assistance. A separate commenter recommended that HUD
immediately update the HQS inspector checklists to accurately reflect
LTCs. Another commenter recommended that HUD only require the list for
initial inspection and not for regularly scheduled annual or biennial
inspections.
One commenter stated that HUD should clarify that a unit without a
carbon monoxide (CO) detector should not be considered an LTC if there
is no CO source in the unit. Another commenter urged HUD not to add CO
detectors to HQS through HOTMA and instead ensure consistency across
HUD programs by implementing statutory CO requirements through
standalone rulemaking. One commenter suggested that voucher applicants
and those moving with continued assistance should receive notice of
proximity to a Superfund site or contaminated sites on the National
Priorities List (NPL) at application, lease signing, and at
recertification. This commenter also recommended that HUD expand its
Memorandum of Understanding (MOU) with the EPA, which is currently
limited to Project-Based Rental Assistance (PBRA) and public housing,
to all forms of HUD assistance, and suggested HUD and EPA map all
assisted projects and their proximity to sites on the NPL.
Commenters also suggested that PHAs should be allowed to add other
conditions into their Administrative Plan. A commenter suggested that
HUD allow PHAs to continue using their own pre-existing definitions as
a replacement for HUD's NLT definitions. A commenter urged HUD not to
require PHAs to adopt the NLT provisions as a prerequisite for adopting
alternate inspections. One commenter stated that HUD should only
require PHAs to outline deviations from the definition of ``life-
threatening conditions'' in the Administrative Plan instead of
repeating HUD's regulations. Another commenter suggested HUD waive the
on-site inspection requirement when PHAs use alternative procedures to
correct NLT deficiencies.
One commenter suggested that HUD undertake a thorough and public
examination with significant stakeholder outreach and participation
before changing to the proposed list of LTCs, which is based on UPCS-V
and imposes a higher standard than is currently required.
Commenters opposed the expansion and addition of new HQS fail items
being categorized as life-threatening because it would limit the PHAs'
ability to consider local conditions and hinder applicants from quickly
accessing their units.
HUD Response: HUD has decided not to finalize the revisions in the
proposed rule to Sec. 982.401 through the HOTMA final rule. All
comments made through this HOTMA rulemaking process were taken into
consideration in the drafting of the NSPIRE Standards Notice.
Commenters had another opportunity to provide feedback through that
notice, published to the Federal Register (87 FR 36426) on June 17,
2022. All current LTCs are defined in the final NSPIRE Standards Notice
(88 FR 40832) published June 22, 2023. All future updates to the LTC
list will also be subject to notice and comment in the Federal
Register.
7. Enforcement of HQS (Sec. Sec. 982.404, 983.208)
Usage Suggestions for Abated Funds
Commenters suggested various usages for abated funds, such as
security
[[Page 38248]]
deposits, portion of rent, costs for families moving due to the
termination, application fees, and other mandatory expenses.
A commenter suggested relocation assistance for affected tenants
should be mandatory, using funds from the abated PBV HAP or TPVs.
Commenters also stated that the proposed rule is unclear as to whether
the security deposits and moving costs are the only eligible expenses
or if the PHA can determine additional expenses and suggested that the
PHAs should determine what comprises eligible assistance expenses and
refer to the URA cost schedule for moving costs.
HUD Response: HUD appreciates these comments on the use of TPVs and
abated funds. With respect to TPVs, these vouchers are not provided in
connection with PBV contract terminations or abatement of assistance.
In addition, HUD cannot mandate the use of abated funds for relocation
assistance to families. The statute does not require the PHA to use
abated funds for relocation assistance; instead, it provides the PHA
with discretion to use funds for this purpose. Specifically, section
8(G)(vii)(III) of the 1937 Act states: ``The [PHA] may provide
assistance to the family in finding a new residence, including use of
up to two months of any assistance amounts withheld or abated . . . for
costs directly associated with relocation of the family to a new
residence, which shall include security deposits as necessary and may
include reimbursements for reasonable moving expenses incurred by the
household, as established by the Secretary.''
Consistent with the statutory language, and in response to the
comments regarding the eligible expenses that may be covered, HUD has
provided additional language regarding the permitted uses of abated
funds for relocating tenants. Specifically, HUD has added that PHAs may
assist families in finding a new unit, including using up to two months
of the withheld and abated assistance payments for costs directly
associated with relocating to a new unit, including security deposits,
temporary housing costs, or other reasonable moving costs as determined
by the PHA based on their locality. HUD has further clarified that if
the PHA is using withheld or abated assistance payments to assist with
the family's relocation costs, the PHA must provide security deposit
assistance as necessary, as required by the statute.
Protection of Tenants
Many commenters suggested going further to protect tenants from
evictions and subsidy terminations in the event their unit fails an HQS
inspection. Commenters warned that the proposed rule would allow PHAs
to abate and terminate an entire HAP contract if a single unit fails
HQS and tenants may face higher rent under HCV rules or face an owner
that evicts them despite the regulatory language.
Commenters stated that withholding HAP during the cure period for
HQS violations may create an incentive to evict tenants. Commenters
recommended HUD require that tenants cannot be held liable for amounts
of HAP withheld or abated, such abatement is not grounds for eviction,
and tenants cannot be held liable for their own portion of the rent
during abatement. A commenter noted that, in some cases, the PHA
withholds HAP for HQS violations that are not an immediate threat to
health and safety and do not warrant a tenant to withhold rent under
State law and HUD should clearly state that when the PHA is relieved of
paying back rent, the tenant is as well, despite any State law
discrepancies regardless of State law unless the State law provides
stronger tenant protections. A commenter further expressed that when
HAP is abated, the tenants should be notified.
Commenters recommended that HUD explicitly state that if a PHA
terminates a PBV HAP contract based on a breach of conditions
requirements, any of the units that continue to meet or have been
brought into compliance with HQS requirements should be allowed to
continue under the program. Another commenter recommended that HUD
should specify in Sec. 982.404(d)(2)(ii) that the family's assistance
may only be terminated in accordance with Sec. 982.555 if a family
fails to move within the allotted time. A commenter also suggested that
HUD clarify Sec. 982.404(e)(1) to include that a PHA may extend the 90
days for families as needed based on individual circumstances, without
HUD approval, and state that for relocation protections, public housing
includes properties either pre- or post-conversion under RAD, section
18, or other provision of law, not to include section 9 public housing.
One commenter requested further clarity on whether the requirement
for families to be provided at least 90 days to find a new unit after
the HAP contract is terminated, refers to 90 calendar days or 90
``tolled'' days of voucher time, which is required under the Family
Move regulations.
A commenter also stated that a PHA must provide a preference to
families who relocated due to HQS deficiencies. This commenter sought
clarification from HUD on whether the preference for the public housing
waiting list would take precedence over other existing public housing
preferences. Another commenter stated that HUD's proposed language in
Sec. 982.404(e)(2) does not consider that PHAs need to manage limited
vacancies to best serve the residents already within the public housing
program, or for the many applicants on that program's waiting list.
This commenter recommended that HUD modify the proposed language within
Sec. 982.404(e)(2) to clarify that HCV family participants transfer
into public housing units shall not take preference over the PHA's
needs for a Section 504, VAWA, or other emergency need.
One commenter stated that HUD providing a public housing preference
for families affected by HCV abatements unable to find a new voucher
unit would potentially lead to decreased mobility for HCV participants.
The commenter suggested that it would be advantageous to allow payments
up to 120 percent of fair market rents for such families, which would
enable them to access higher rental markets within the spectrum of ZIP
codes served by the PHA. This commenter agreed with the HOTMA language,
permitting the PHA to use up to two months of the assistance payments
that were withheld or abated under the family's terminated HAP contract
for cost directly associated with the relocation of the family because
these provisions would provide greater mobility to HCV families.
HUD Response: The language giving PHAs the option to withhold HAP
during the cure period is required under HOTMA. In response to the
comment regarding procedures under Sec. 982.555, HUD cannot override
State and local law regarding enforcement of the lease agreement. HUD
has further clarified that tenants relocated due to an HQS deficiency
must be given a selection preference by the PHA for public housing,
where applicable. HUD has clarified that the PHA must issue the family
a voucher to move at least 30 days prior to termination of the HAP
contract.
HUD has clarified that the requirement for families to be provided
at least 90 days to find a new unit after the HAP contract is
terminated, refers to 90 calendar days.
HUD appreciates the suggestion to allow payment standards up to 120
percent of FMR. This change is not necessary as PHAs may currently
apply for 120 percent fair market rents and/or SAFMRs under 982.503,
which provides for expanded access to rental markets
[[Page 38249]]
for all families. FMRs are established for entire geographies, and not
on a case-by-case basis, except in the case of a reasonable
accommodation exception payment standard (RA EPS) for people with
disabilities.
HUD appreciates the recommendation that HCV participant transfers
should not take preference over Section 504, VAWA, or other emergency
transfers. HUD agrees and finds that 24 CFR 982.404(e)(2) as drafted in
this final rule is sufficient and notes that Section 504 transfers must
occur under the requirements of 24 CFR part 8, including 8.28, and VAWA
emergency transfers must occur in accordance with HUD's VAWA
regulations at 24 CFR part 5, subpart L, and program regulations.
Withholding HAP Harms Landlords
A commenter warned that withholding HAP during the 30-day
correction period would hurt smaller landlords and potentially
discourage them from future participation.
HUD Response: This language cannot be changed because the option
for PHAs to withhold HAP during the cure period is required under
HOTMA.
Mandatory Termination
A commenter opposed requiring a mandatory termination after 180
days of abatement because it would be an administrative burden and
decrease availability of subsidized housing. Another commenter
suggested clarification on whether the plural ``HAP contracts'' at
Sec. 982.404(a)(2) reflects other contracts for units besides
noncompliant contracts would be terminated due to the HQS noncompliance
of one unit. Another commenter suggested that the 180-day proposed
timeline for termination is a reasonable balance of interests, as
required by statute.
HUD Response: HUD has maintained the language around mandatory
termination because HUD finds it necessary given the importance of
assisted families' housing meeting quality standards. The 180 days
maximum is consistent with Sec. 982.455.
HUD has updated Sec. 982.404(a)(2) to read that if the owner fails
to maintain the dwelling unit in accordance with HQS, the PHA must take
enforcement action in accordance with this section.
Include Renewed Contracts or HAP Contracts Entered Into After the Rule
Implementation
A commenter stated that HUD should expand this rule to include
renewed HAP contracts or HAP contracts that are entered into after the
rule's implementation.
HUD Response: This final rule applies to both new HAP contracts and
HAP contracts renewed after this rule is implemented.
90-Day Voucher Terms
One commenter supported the 90-day voucher terms for contracts
cancelled due to abatement.
HUD Response: HUD appreciates the supportive comment.
PHA Discretion To Waive and Reimburse
A commenter also recommended clarifying in Sec. 982.404(a)(4) that
the PHA has discretion to waive the requirement making the owner
responsible for correcting deficiencies where the damage is not from
ordinary use, and that the waiver is not just the requirement to be
responsible for the deficiency, but the applicability of the entire
subparagraph including abatement and withholding provisions. This
commenter also urged HUD to clarify that PHAs have the discretionary
authority to reimburse the property owner either for a portion or all
HAP amounts withheld, which the commenter stated is clearly provided
within HOTMA.
HUD Response: HUD has clarified in this final rule that the PHA
must identify in its Administrative Plan both the conditions and
amounts for withholding HAP. This also includes the conditions and
amounts of payments made for the period HAP was withheld.
Monitoring
One commenter suggested that HUD monitor how many PHAs reimburse
funds and review their reimbursement policies.
HUD Response: HUD appreciates this suggestion and will consider
this outside of this rulemaking.
Tenant-Caused Damage
Commenters addressed whether the tenant or PHA should be
responsible for repairs to unit damages. One commenter suggested that
HUD provide an exception for Sec. 982.404(a)(4) to address damages
that have been caused by domestic abusers and obligate PHAs to require
the owner to make the repairs in instances of domestic abuse. This
commenter also suggested not using incidents of abuse as a means to
terminate a survivor's tenancy and to allow the PHA and owner to take
all legal action against the abuser for the damage.
Another commenter found the regulations to be confusing and
potentially in conflict with State laws and local practice because in
many states tenants are prohibited from carrying out their own repairs.
The commenter suggested that for HUD to shift responsibility to the
tenant to make the repairs, then HUD should place a higher burden on
the landlord. The commenter additionally recommended that, if the
landlord charges the tenants for repairs to tenant-caused damage, HUD
should require a reasonable repayment plan and that the PHA must
continue to pay the HAP during the term of the repayment agreement, so
long as the tenant continues to abide by the terms of the lease. This
commenter suggested the repayment plan allow landlords to charge an
initial fee, which must not exceed 40 percent of the tenant's income,
and then impose a reasonable period for the tenant to pay the remainder
to the landlord, with longer repayment periods for tenants facing
financial hardship. This commenter also recommended PHAs should
terminate a HAP contract due to tenant-caused damages only after
remedies, consistent with State landlord-tenant laws, have been
exhausted and HUD should encourage maintaining units as part of the
low-income housing stock.
Another commenter recommended that HUD revise Sec. 982.404(a)(4)
and (b)(2) as well as the procedure in the case of tenant-caused
damages, consistent with HOTMA section 101(a)(3). Another commenter
suggested waiving HQS deficiencies caused by tenants from the
landlord's responsibility.
HUD Response: HUD appreciates the comments around tenant-caused
damage to the unit. HUD has revised Sec. 982.404(b)(2) and Sec.
983.208(c)(2) to clarify that in cases of tenant-caused deficiencies,
the tenant is not necessarily required to physically correct the
deficiencies themselves. Rather, the tenant is responsible for ensuring
that the deficiencies are corrected by taking all steps permissible
under the lease and State and local law, which might include paying the
owner for the costs of the necessary repairs. HUD has not gone further
to require a PHA to establish a specific repayment plan. HUD has
further revised Sec. 982.404 at paragraph (a)(4) and Sec. 983.208 at
paragraph (b)(3) to better align with HOTMA section 101(a)(3) in terms
of when the PHA may waive the landlord responsibility for HQS
deficiencies that have been determined to have been caused by the
tenant, any member of the household, or any guest or other person
[[Page 38250]]
under the tenant's control, other than damage resulting from ordinary
use.
HUD has chosen not to add specific language around tenant damages
caused by domestic abusers in this section. However, all VAWA housing
protections under 24 CFR part 5, subpart L apply. HUD appreciates the
commentor's suggestion but has not added a regulatory requirement for a
repayment plan for owner correction of tenant-caused deficiencies. HUD
is concerned that imposing additional restrictions on the owner in
terms of how and when the owner can recover amounts owed under the
lease will discourage owner participation in the HCV program. Nothing
in the final rule would prevent the owner from choosing to offer a
repayment plan to the family. However, the manner in which the owner
may collect amounts owed under the lease for tenant-caused damages
should continue to rest with the owner, subject to the terms of the
owner's lease.
Remote Visual Inspections
Another commenter stated that Remote Visual Inspections (RVI)
should not be used to verify a HQS deficiency correction where there is
a life-threatening condition on the property. The commenter suggested
HUD should require PHAs to conduct in-person inspections prior to a
family moving into a unit that failed HQS for health and safety
reasons. This commenter expressed that PHAs should be required to
independently check for lead hazards in any Housing Choice Voucher
(HCV) home and warned that the proxy to test for lead-based paint after
watching a short video is insufficient. This commenter recommended a
select use of RVI to reduce administrative burdens for PHAs and
increase the speed at which voucher tenants can lease-up, without
impacting the family's health.
HUD Response: HUD appreciates this comment but is not addressing
the use of RVI in this rule.
8. PHA Initial Unit Inspection (Sec. 982.405)
Question 4. Are HUD's proposed deadlines by which the PHA must both
inspect the unit and notify the owner if the reported deficiency is
confirmed reasonable?
Commenters found HUD's proposed deadline reasonable because the
adoption of the Non-Life-Threatening (NLT) process is optional. A
commenter suggested that HUD include additional time i
[…truncated; see source link]Indexed from Federal Register on May 7, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.