Proposed Rule2024-10975
HOME Investment Partnerships Program: Program Updates and Streamlining
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Published
May 29, 2024
Issuing agencies
Housing and Urban Development Department
Abstract
HUD's HOME Investment Partnerships Program (HOME program or HOME) provides formula grants to States and units of general local government to fund a wide range of activities to produce and maintain affordable rental and homeownership housing and provides tenant-based rental assistance for low-income and very low-income households. This proposed rule would revise the current HOME regulations to update, simplify, or streamline requirements, better align the program with other Federal housing programs, and implement recent amendments to the HOME statute. This rule also includes minor revisions to the regulations for the Community Development Block Grant and Section 8 Housing Choice Voucher (HCV) Programs consistent with the implementation of proposed changes to the HOME program.
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[Federal Register Volume 89, Number 104 (Wednesday, May 29, 2024)]
[Proposed Rules]
[Pages 46618-46680]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-10975]
[[Page 46617]]
Vol. 89
Wednesday,
No. 104
May 29, 2024
Part III
Department of Housing and Urban Development
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24 CFR Parts 91, 92, 570, et al.
HOME Investment Partnerships Program: Program Updates and Streamlining;
Proposed Rule
Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 /
Proposed Rules
[[Page 46618]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 91, 92, 570, and 982
[Docket No. FR-6144-P-01]
RIN 2506-AC50
HOME Investment Partnerships Program: Program Updates and
Streamlining
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, Department of Housing and Urban Development, HUD.
ACTION: Proposed rule.
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SUMMARY: HUD's HOME Investment Partnerships Program (HOME program or
HOME) provides formula grants to States and units of general local
government to fund a wide range of activities to produce and maintain
affordable rental and homeownership housing and provides tenant-based
rental assistance for low-income and very low-income households. This
proposed rule would revise the current HOME regulations to update,
simplify, or streamline requirements, better align the program with
other Federal housing programs, and implement recent amendments to the
HOME statute. This rule also includes minor revisions to the
regulations for the Community Development Block Grant and Section 8
Housing Choice Voucher (HCV) Programs consistent with the
implementation of proposed changes to the HOME program.
DATES: Comment Due Date: July 29, 2024.
ADDRESSES: There are two methods for submitting public comments. All
submissions must refer to the above docket number and title.
1. Electronic Submission of Comments. Comments may be submitted
electronically through the Federal eRulemaking Portal at
<a href="http://www.regulations.gov">www.regulations.gov</a>. HUD strongly encourages commenters to submit
comments electronically. Electronic submission of comments allows the
commenter maximum time to prepare and submit a comment, ensures timely
receipt by HUD, and enables HUD to make comments immediately available
to the public. Comments submitted electronically through
<a href="http://www.regulations.gov">www.regulations.gov</a> can be viewed by other commenters and interested
members of the public. Commenters should follow the instructions
provided on that website to submit comments electronically.
2. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street SW, Room 10276,
Washington, DC 20410-0500.
Note: To receive consideration as a public comment, comments
must be submitted through one of the two methods specified above.
Public Inspection of Public Comments. HUD will make all properly
submitted comments and communications available for public inspection
and copying during regular business hours at the above address. Due to
security measures at the HUD Headquarters building, you must schedule
an appointment in advance to review the public comments by calling the
Regulations Division at 202-708-3055 (this is not a toll-free number).
HUD welcomes and is prepared to receive calls from individuals who are
deaf or hard of hearing, as well as 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>. Copies of all comments
submitted are available for inspection and downloading at
<a href="http://www.regulations.gov">www.regulations.gov</a>.
In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed
rule may be found at <a href="http://www.regulations.gov">www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Virginia Sardone, Director, Office of
Affordable Housing Programs, Office of Community Planning and
Development, Department of Housing and Urban Development, 451 7th
Street SW, Room 7160, Washington, DC 20410; telephone number (202) 708-
2684 (this is not a toll-free number). HUD welcomes and is prepared to
receive calls from individuals who are deaf or hard of hearing, as well
as 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 HOME Program
The HOME program is authorized by title II of the Cranston-Gonzalez
National Affordable Housing Act \1\ (``NAHA'') and has been in
operation since 1992. The HOME program provides grants to States, local
jurisdictions, and consortia of local jurisdictions (collectively,
participating jurisdictions or PJs) and is used, often in partnership
with local nonprofit groups, to fund a wide range of activities to
build, buy, or rehabilitate affordable housing for rent or
homeownership or to fund direct rental assistance to low-income
people.\2\ HOME program funds are awarded annually as formula grants to
participating jurisdictions. After the Department obligates funds to a
participating jurisdiction, the Department establishes a HOME
Investment Trust Fund \3\ for each participating jurisdiction,
providing a line of credit that a participating jurisdiction may draw
upon as needed.
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\1\ 42 U.S.C. 12721 et seq.
\2\ See HUD's HOME Investment Partnerships Program web page at
<a href="https://www.hud.gov/program_offices/comm_planning/home">https://www.hud.gov/program_offices/comm_planning/home</a>.
\3\ HUD's regulations for the HOME Investment Trust Fund can be
found at 24 CFR 92.500.
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The HOME program is the largest Federal block grant to States and
local governments designed exclusively to create affordable housing for
low-income households. Each year, the program allocates approximately
$1.5 billion among States and approximately 600 localities nationwide.
In fiscal year 2023, participating jurisdictions completed 6,848 rental
housing units and 4,051 homebuyer units, assisted 2,717 low-income
homeowners to repair their homes, and provided tenant-based rental
assistance to 13,016 low-income households. HOME funds are most often
used as gap financing for rental projects, particularly for projects
that have been awarded Low-Income Housing Credits (26 U.S.C. 42)
(``LIHTC''). Currently, there are 245,122 HOME-assisted rental units
operating in their periods of affordability (i.e., subject to ongoing
HOME income and rent requirements). The HOME program is designed to
reinforce several important values and principles of community
development. First, the HOME program's flexibility empowers people and
communities to design and implement strategies tailored to their own
needs and priorities. Second, the HOME program's emphasis on
consolidated planning expands and strengthens partnerships among all
levels of government and the relationship with the private sector in
the development of affordable housing. Third, the HOME program's
technical assistance activities and set-aside for qualified community
housing development organizations help to build the capacity of and
partnerships with these community-based nonprofit organizations.
Fourth, the HOME program's requirement that participating jurisdictions
match 25 cents of every dollar in program funds helps to mobilize
community resources in support of affordable housing.
[[Page 46619]]
While participating jurisdictions may undertake housing development
activities directly, they also may provide HOME funds to for profit
developers, public agencies, or private non-profit organizations to
develop affordable housing for rent or sale to income-eligible
households. Participating jurisdictions may provide HOME funds for
affordable housing as grants, direct loans, loan guarantees, or other
forms of credit enhancement, or for rental assistance or security
deposits. Non-development activities such as tenant-based rental
assistance or downpayment assistance for homeownership are generally
administered by the participating jurisdiction, another public agency,
or a non-profit organization as subrecipients acting on behalf of the
participating jurisdiction.
The participating jurisdiction ensures compliance with HOME
affordability requirements during the required period of affordability
through the execution and recording of regulatory agreements on HOME-
assisted housing and other enforceable measures such as deed
restrictions or similar instruments. All HOME-assisted units must be
occupied by income-eligible households. HOME-assisted rental units must
have their rents approved by the participating jurisdiction and require
owners to restrict the rent paid by tenants to amounts at or below the
HUD-published maximum HOME rent limits. Owners of HOME-assisted rental
housing must follow their adopted written tenant selection policies and
criteria and select tenants from a written waiting list in
chronological order of their application, insofar as practicable.
Owners of HOME-assisted rental housing must also affirmatively market
the availability of units in a manner likely to reach eligible tenants.
Generally, participating jurisdictions maintain information on HOME-
assisted rental housing (e.g., websites, brochures, fliers) that
prospective tenants may access to identify housing opportunities. HOME-
assisted housing for homebuyers is also subject to a period of
affordability. If the HOME-assisted homeownership housing is sold
during the period of affordability, either the property must be sold at
an affordable price to another low-income homebuyer or all or a portion
of any purchase assistance provided to the seller must be recaptured
from the net proceeds of the sale.
The HOME program regulations are codified in 24 CFR part 92 and
were last substantively revised on July 24, 2013 (the 2013 HOME Final
Rule).\4\ The 2013 HOME Final Rule focused on improving a participating
jurisdiction's performance and accountability to HOME grant funds and
addressing a participating jurisdiction's operational challenges as it
adopted more complex program designs and its portfolio of existing
projects grew. In 2016, the Department issued an interim regulation,\5\
finalized on September 22, 2022 (``the 2022 HOME Final Rule''),\6\ that
implemented a grant-specific method for determining compliance with the
24-month commitment and CHDO set-aside commitment deadlines. The 2022
HOME Final Rule also eliminated the use of first-in-first-out
accounting for fiscal year 2015 and later HOME grants.
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\4\ 78 FR 44627.
\5\ 81 FR 86947 (Dec. 2, 2016).
\6\ 87 FR 57821.
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The HOME program provisions contained in title II of NAHA are
prescriptive and the statute has not been significantly revised since
the HOME program was last reauthorized by Congress in 1992. The
constraints of prescriptive statutory authority that have not been
significantly revised in over 30 years limits the scope of changes that
the Department can propose to the HOME program regulations. Working
within these limitations, the Department conducted a comprehensive
review of title II of NAHA and current HOME program regulations to
determine whether previously unrecognized opportunities might exist to
revise current regulatory provisions. In creating this proposed rule,
the Department focused on its commitment to equity and wealth-building
and considered input from stakeholders throughout the years on the most
challenging aspects of administering and using HOME funds to provide
affordable housing. Through this proposed rule, the Department seeks to
reduce burden and increase flexibility for participating jurisdictions
and other program participants, while adhering to statutory intent and
requiring responsible management of State and local HOME programs.
II. This Proposed Rule
HUD proposes to make multiple changes to 24 CFR part 92. The
proposed changes include significant revisions to the community housing
development organization (CHDO) requirements, a change in the approach
to HOME rents, simplified requirements for small-scale rental projects,
enhanced flexibility in HOME tenant-based rental assistance (``TBRA'')
programs, and simplified provisions and new flexibilities for community
land trusts (CLTs). The proposed rule would significantly strengthen
and expand tenant protections by requiring that a HOME tenancy addendum
with a set of uniform tenant protections be appended to the leases of
all tenants of HOME-assisted rental housing units. HUD also proposes
requiring that a HOME tenancy addendum with a streamlined set of
uniform tenant protections be appended to the leases of all tenants
receiving TBRA. Additionally, HUD proposes to create incentives for
meeting a more advanced property standard that incorporates green
building standards, higher levels of energy efficiency, and innovative
building techniques in new construction, reconstruction, and
rehabilitation of housing. The proposed rule would also clarify the
resale requirements for homeownership housing and would make technical
amendments and simplifications to conform provisions to certain changes
made in the 2013 HOME Final Rule. HUD's proposed changes are described
more fully in each of the sections below.
This proposed rule incorporates changes made by the Housing
Opportunity Through Modernization Act of 2016 (HOTMA), published in the
Federal Register on February 14, 2023 (88 FR 9600) (``HOTMA Final
Rule''), Economic Growth Regulatory Relief and Consumer Protection Act:
Implementation of National Standards for the Physical Inspection of
Real Estate (NSPIRE), published in the Federal Register on May 11, 2023
(88 FR 30442) (``NSPIRE Final Rule''). This proposed rule also updates
citations, in paragraphs where other changes are being made, to
citations to conform with recent changes to the Office of Management
and Budget (OMB) regulations at 2 CFR part 200. HUD intends to publish
a future rulemaking to ensure that all citations throughout HUD's
regulations are consistent with these changes. This proposed rule also
proposes further revisions to the changes made to 24 CFR part 92 by the
HOTMA Final Rule, and the NSPIRE Final Rule.
A. Changes to the HOME Program Regulations (24 CFR Part 92)
1. Definitions (24 CFR 92.2)
Removal of definitions related to 24 CFR part 92, subpart M. HUD
proposes to remove the definition of ``ADDI Funds,'' ``Displaced
homemaker,'' and ``First-Time Homebuyer'' because the Department
proposes to delete 24 CFR part 92, subpart M, which implemented
[[Page 46620]]
the American Dream Downpayment Initiative (ADDI) and associated
definitions.
Commitment. HUD proposes to make two minor changes to the
definition of ``commitment.'' This term is currently defined to
generally mean that a participating jurisdiction has executed a legally
binding agreement with a State recipient, a subrecipient, or a
contractor to use a specific amount of HOME funds for a specified use
or for a specified local project. The proposed rule would make a
technical correction in paragraph (1) of the definition to change the
word ``official'' to ``officials'' in the description of an agreement
between the participating jurisdiction and a subrecipient that is
controlled by the participating jurisdiction. The proposed rule would
also replace the term ``downpayment assistance'' with ``homeownership
assistance.'' The use of the term ``downpayment assistance'' was a
drafting error which unintentionally implied that written agreements
with State recipients or subrecipients to provide other forms of
homeownership assistance (i.e., direct financial assistance to
homebuyers or rehabilitation assistance to low-income homeowners) do
not constitute commitments. The proposed rule would also remove ``or
subrecipient'' from paragraph (2)(ii)(A) of the definition because a
subrecipient, unlike a State recipient, is not permitted to acquire or
assist standard housing with HOME funds it administers. This change
would conform to proposed clarifications in the definitions of ``State
recipient'' and ``subrecipient.''
Community housing development organization. HUD proposes to revise
paragraph (4) of the ``community housing development organization''
(CHDO) definition to clarify the three options for meeting the
requirement that the CHDO be a private nonprofit organization that is
tax exempt. The proposed rule would insert the language ``Is tax exempt
as follows:'' and add paragraphs (i), (ii), and (iii) to paragraph (4)
to distinguish the three options to meet the tax exempt requirement.
The first option is a tax exemption ruling from the Internal Revenue
Service (IRS) under section 501(c)(3) or (4) of the Internal Revenue
Code of 1986 and would be paragraph (4)(i). The second option's current
language ``is classified as a subordinate of a central organization
non-profit under section 905 of the Internal Revenue Code of 1986''
reflects the Department's decision in the 2013 HOME Final Rule to
accommodate the IRS's recognition of a group of subordinate
organizations as tax exempt if they are affiliated with a central
organization.\7\ To avoid the need for each of the subordinate
organizations to apply for an exemption individually, the IRS provides
the central organization with a group exemption letter which is a
ruling or determination issued to the central organization (generally,
a State, regional, or national organization) which holds that one or
more subordinate organizations (usually a post, unit, chapter, or
local) are exempt from Federal income tax by virtue of being
subordinate organizations of the central organization. In order to
benefit from a group exemption letter, the subordinate organization
must be listed in the 501(c)(3) or (4) central organization's group
exemption letter. Rather than the general reference to section 905 of
the Internal Revenue Code (IRC) in the current language, the proposed
language in paragraph (4)(ii) of the CHDO definition would describe the
applicable IRS requirement. The third option in paragraph (4) has also
been revised in proposed paragraph (4)(iii) to clarify that a private
nonprofit organization is tax exempt if it is wholly owned by a
community housing development organization that meets the requirement
of the definition in Sec. 92.2, including either paragraph (4)(i) or
(ii), and is disregarded as an entity separate from its owner
organization for federal tax purposes. The 2013 HOME Final Rule
included this option to permit private nonprofit organizations that
were wholly owned by a CHDO to meet the tax exempt requirement in
paragraph (4). However, the language for this third option in the 2013
HOME Final Rule was confusing. The proposed paragraph (4)(iii) would
clarify that a private nonprofit organization may also meet the tax
exempt requirement because its owner organization (that qualifies as a
CHDO) has a 501(c)(3) or (4) ruling or is a subordinate organization
included in a 501(c)(3) or (4) central organization's group exemption
letter by the IRS.
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\7\ See 26 CFR 1.6033-2(a)(2)(ii)(I); Rev. Proc. 80-27, 1980-1
C.B. 677, available at <a href="https://www.irs.gov/pub/irs-tege/rp1980-27.pdf">https://www.irs.gov/pub/irs-tege/rp1980-27.pdf</a>.
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As part of the Department's effort to provide more community-based
nonprofit organizations access to the HOME CHDO set-aside within the
constraints of NAHA, the proposed rule would revise several provisions
of the CHDO definition to make it easier for these organizations to
meet the low-income board representation and staff capacity
requirements in Sec. 92.2. These proposed changes, when combined with
the proposed revisions to the required role of the CHDO as owner,
developer, or sponsor of housing at Sec. 92.300, would enable more
community-based housing organizations to qualify as CHDOs and access
the CHDO set-side.
The first proposed change would revise paragraph (5) of the CHDO
definition to make the limitation on public officials and employees of
a governmental entity on the CHDO governing board less restrictive. The
regulations currently require an individual who is an employee or
public official of any governmental entity to be limited to one-third
of the CHDO board members. The proposed rule would revise paragraph (5)
of the definition to apply this requirement only to officials and
employees of the participating jurisdiction designating the CHDO and,
if the CHDO was created by a governmental entity (e.g., public housing
agency), to officials and employees of the governmental entity. This
change would mean that officials or employees of other governmental
entities besides the participating jurisdiction designating the CHDO or
governmental entity that created the CHDO (e.g., employees of other
units of general local government, public school teachers, university
professors) would not be required to be counted toward the one-third
board membership limitation on officials or employees. The proposed
requirements would also clarify that no governmental entity (which
includes the participating jurisdiction) may appoint more than one-
third of the organization's board members and that those board members
are not permitted to appoint any of the remaining members of the board.
In addition, paragraph (8)(i) of the current definition of CHDO
requires a CHDO to reserve at least one-third of the membership of its
governing board for residents of low-income neighborhood organizations,
other low-income community residents, or elected representatives of
low-income neighborhood organizations. The proposed rule would broaden
eligible low-income representatives required in paragraph (8)(i) by
permitting (1) an individual designated by a low-income neighborhood
organization to qualify as a low-income representative, rather than
only elected leadership of these organizations and (2) an authorized
representative of a nonprofit organizations in the community that
addresses the housing or supportive service needs of residents of low-
income neighborhoods to qualify as a low-income representative.
Examples of ``nonprofit organizations in the community'' include
homeless providers, Community Action Agencies, Fair Housing Initiatives
Program
[[Page 46621]]
providers, Legal Aid, disability rights organizations, and victim
service providers. These proposed changes would facilitate State and
local participating jurisdiction efforts to identify more organizations
that can undertake activities using CHDO set-aside funds.
Further, State and consortia participating jurisdictions located in
rural areas face unique challenges in identifying organizations that
can meet the governing board and capacity requirements to become CHDOs.
To help address these challenges, the Department also proposes to
revise the provision in paragraph 8(i) of the CHDO definition that
defines the term ``community'' for rural areas as ``a neighborhood or
neighborhoods, town, village, county, or multi-county area (but not the
entire State)'' to remove the text in parentheses. This change would
permit CHDOs operating in rural areas to count qualified low-income
representatives from anywhere in the State toward the low-income board
representation requirement. This change to the definition of
``community'' for rural areas would also apply to paragraph (10) of the
CHDO definition, effectively permitting an organization that wishes to
operate as a CHDO in a rural area to meet the requirement that it have
at least a one-year history serving the community with a service
history anywhere in the State. This change would make it possible for
nonprofits with statewide service areas to qualify as CHDOs and
increase the use of CHDO set-aside funds in rural areas.
HUD proposes to make numerous revisions to paragraph (9) of the
CHDO definition, which includes the statutory requirement that an
organization have demonstrated staff capacity to qualify as a CHDO. The
proposed rule would broaden the requirement that an organization have
demonstrated capacity for carrying out projects assisted with HOME
funds to also include housing projects assisted with other Federal
funds, LIHTC, or local and State affordable housing funds. In addition,
the proposed rule would improve the clarity of paragraph (9) by adding
paragraphs (i), (ii), and (iii) to separately address the requirements
for developer, owner, and sponsor.
The proposed rule would ease the current prohibition in paragraph
(9) of the CHDO definition against using the capacity or experience of
volunteers to meet the demonstrated capacity requirement. The
Department made this prohibition more explicit in the 2013 HOME Final
Rule to implement the staff capacity provision contained in the
Consolidated and Further Continuing Appropriations Act of 2012 (Pub. L.
112-55) and the Consolidated and Further Continuing Appropriations Act
of 2013 (Pub. L. 113-6), which required CHDOs to have staff with
demonstrated development experience. Because the connection of
volunteers to an organization may be tenuous or temporary, using the
capacity of volunteers to meet demonstrated staff capacity is
inconsistent with both NAHA and with the provisions in the Consolidated
and Further Continuing Appropriations Acts. The proposed rule would,
however, permit participating jurisdictions to consider the capacity
and experience of volunteers who are board members or officers of the
organization in determining whether an organization meets the CHDO
capacity requirements, provided that the volunteer is not compensated
by or their services are not donated by another organization.
Specific solicitation of comment #1. The Department specifically
solicits public comment about any additional changes it should
consider, within statutory constraints, that will improve CHDO
availability and capacity in rural areas.
Community land trust. HUD proposes to add the definition of
``community land trust'' (CLT) to Sec. 92.2. Section 233(f) of NAHA
(42 U.S.C. 12773(f)) contains a definition of community land trust
which the statute expressly states is only for the purposes of
establishing the specific characteristics of CLTs that qualify to
receive CHDO technical assistance funding. This statutory definition in
section 233(f) of NAHA, which was developed in 1990, is not reflective
of actual CLTs operating in participating jurisdictions. However, in
the absence of a separate regulatory definition or any other definition
of CLT in another Federal program, the Department applied the statutory
definition in section 233(f) in the implementation of the amendment to
NAHA in the Consolidated Appropriations Act, 2016 (Pub. L. 114-113).
The amendment permitted CLTs to hold and exercise purchase options,
rights of first refusal, or other preemptive rights to preserve the
affordability of the housing developed by the CLT.
Recognizing the problems in applying a CLT definition for HOME that
the statute expressly states is only for the purpose of allowing
qualifying CLTs to receive CHDO technical assistance funding, the
Department proposes a regulatory definition of CLT that encompasses the
purposes for which CLTs are formed and which would generally apply in
the HOME program, except where stated otherwise in the proposed rule.
The proposed regulatory definition would require a community land trust
to be a nonprofit organization that has the development and maintenance
of housing that is permanently affordable to low and moderate-income
persons as its primary purposes, uses enforceable mechanisms to require
housing and related improvements on land held by the CLT to be
affordable to low- and moderate-income persons for at least 30 years,
and retains a right of first refusal or preemptive right to purchase
the affordable housing on land held by the CLT to maintain long-term
affordability. Adoption of the proposed regulatory definition for CLT
would allow the Department to discontinue application of the CLT
definition expressly specified only for CHDO technical assistance in
all other uses of HOME funds.
Homeownership. The proposed rule would make a technical correction
to the definition of ``homeownership'' in Sec. 92.2, striking the
words ``in a'' from the phrase ``1- to 4-unit dwelling or in a
condominium unit . . . .'' The proposed rule would also revise
paragraph (4) of the definition by deleting ``Tax'' from the referenced
term ``Low-Income Housing Tax Credits'' and adding the IRC statutory
citation for the term. The changed term ``Low-Income Housing Credits''
would match the title of section 42 of the IRC.
Period of Affordability. HUD proposes to add the definition of
``period of affordability,'' which is used throughout 24 CFR part 92.
The definition would (1) clarify that the term means the required
period specified in Sec. 92.252 and Sec. 92.254 during which the
requirements of part 92 apply to HOME-assisted housing and (2)
distinguish the required period specified in Sec. 92.252 and Sec.
92.254 from an extended period of affordability or additional
compliance period that a participating jurisdiction may impose on HOME-
assisted housing. The proposed rule would also make technical
corrections in numerous sections of part 92 by replacing
``affordability period'' with ``period of affordability.''
Program Income. HUD proposes to make minor changes to the
definition of ``program income.'' First, the phrase ``at any time'' is
added to the definition to clarify that program income is gross income
received by the participating jurisdiction, State recipient, or a
subrecipient directly generated from the use of HOME funds or matching
contributions ``at any time'' and is not bound by a specific timeframe
such as
[[Page 46622]]
the period of affordability or closeout of the HOME grant.
The proposed rule would also remove the term ``subrecipient'' from
the beginning of paragraph (2) of the ``program income'' definition
that refers to ownership of rental property. This change would clarify
that a subrecipient, by definition, is a governmental entity or
nonprofit organization selected by the participating jurisdiction to
administer all or some of the participating jurisdiction's HOME program
to produce affordable housing, provide homeownership assistance, or
provide TBRA and cannot, in that capacity, also receive HOME funds to
be an owner or developer of affordable housing. The proposed rule would
also remove ``sponsor'' from the parenthetical in paragraph (2) of the
``program income'' definition because only a CHDO may be a ``sponsor''
and, pursuant to Sec. 92.300(a)(4), a ``sponsor'' must be a project
``owner'' or ``developer.'' Therefore, the inclusion of ``sponsor'' in
paragraph (2) of the definition is duplicative and would be deleted in
the definition for clarity. The proposed definition of ``program
income'' would also clarify that the amount of gross income from the
use, rental, or sale of real property received by the project owner or
developer that must be paid to the participating jurisdiction,
subrecipient or State recipient is program income. Finally, the
proposed rule would further clarify in paragraph (3) that program
income includes payments and repayments of grants, loans, or
investments made using HOME funds or matching contributions, including
such payments and repayments made after the period of affordability,
and is not limited to the payment of loans made using HOME funds or
matching contributions.
Reconstruction. HUD proposes to revise the definition of
``reconstruction'' to clarify that, although reconstruction is
considered rehabilitation for purposes of the HOME program, the
property standards for new construction in Sec. 92.251 apply to all
HOME-assisted reconstruction projects.
Single family housing. HUD proposes to revise the definition of
``single family housing'' to improve the clarity of the term. The
current definition states that single family housing is a one-to-four
family residence, condominium unit, combination of manufactured housing
unit and lot, or manufactured housing lot. The proposed change would
revise ``family'' to ``unit'' to reflect current program practice and
guidance, changing the definition to a one-to-four- ``unit'' residence,
condominium unit, cooperative unit, combination of manufactured housing
and lot, or manufactured housing lot. The proposed change would clarify
that the defined term is based on units and not occupancy.
Small-scale housing. HUD proposes to add the definition of ``small-
scale housing,'' which would be defined as a rental housing project
containing no more than four units or a homeownership project with no
more than three rental units on the same site. HUD is proposing this
definition to permit these types of projects to follow streamlined
procedures for income determinations, ongoing physical inspections, and
written tenant waiting lists. The definition and the streamlined
provisions would facilitate participation of owners of small rental
properties (e.g., accessory dwelling units, duplexes, triplexes, or
other small rental projects) in the HOME program.
State recipient. The current definition of ``State recipient''
consists of a cross reference to Sec. 92.201(b)(2). The proposed rule
would eliminate the cross reference and instead list the definition
directly in Sec. 92.2. States are not required to use State
recipients, but if a State distributes HOME funds to one or more
unit(s) of general local government to carry out HOME programs, the
unit(s) of general local government is a ``State recipient.'' The
proposed definition would also clarify that, unlike a ``subrecipient,''
a ``State recipient'' is permitted to own or develop affordable housing
as well as administer all or some of the participating jurisdiction's
HOME programs, provide homeownership assistance, or provide TBRA. This
change further distinguishes a ``State recipient'' from a
``subrecipient.''.
Subrecipient. HUD proposes to make changes to the definition of
``subrecipient.'' To be consistent with the proposed change to the
definition of ``commitment,'' the term ``downpayment assistance'' as it
is used in the current definition of ``subrecipient'' would be revised
to ``homeownership assistance.'' Also, the term ``public agency'' as it
is used in the current definition of ``subrecipient'' would be revised
to ``governmental entity'' because ``governmental entity'' is used
throughout part 92, whereas ``public agency'' is only used in the
current ``subrecipient'' definition. These proposed changes would also
reflect the current practice to permit entities such as a public
housing authority, housing finance agency, or redevelopment authority
to be subrecipients.
The proposed rule would also remove the word ``solely'' to clarify
that a governmental entity or nonprofit organization that receives HOME
funds as a developer or owner of a housing project is not acting as a
``subrecipient,'' even if it also receives funds from the participating
jurisdiction to administer other HOME-funded activities as a
``subrecipient.'' Subject to the requirements of part 92, a
governmental entity or nonprofit organization may be an owner or
developer of a housing project under a written agreement to acquire,
rehabilitate, or construct the housing, while also operating as a
``subrecipient'' of other HOME programs or activities (i.e., not the
housing program in which it is an owner or developer) under a separate
written agreement with the participating jurisdiction.
Tenant-based rental assistance. The proposed rule would revise the
definition of ``tenant-based rental assistance'' to replace the use of
the term ``dwelling'' with ``housing'' to align with the requirements
for TBRA in Sec. 92.209 which applies to ``housing.''
2. Formula Allocation (24 CFR 92.50)
The proposed rule would remove the use of the term ``poor
household'' in the formula allocation section and replace it with
``households below the poverty line.'' The proposed term reflects the
actual data that HUD uses for this formula factor when determining
annual HOME allocations.
3. Consortia (24 CFR 92.101)
The proposed rule would revise Sec. 92.101(a) to permit, under
certain conditions, a unit of general local government that is
separated by a body of water from the other units of general local
government belonging to a consortium and only accessible to the public
through a permanent means other than a connecting road, bridge,
railway, or highway to be considered geographically contiguous for
purposes of inclusion in a HOME consortium. The consortium would be
required to demonstrate that the unit of general local government
separated by the body of water is part of the same housing market and
local commuting area as one or more members of the consortium. This
change would allow a unit of general local government that is separated
from one or more other consortium members by a body of water but that
is accessible by ferry, for example, to become a member of the
consortium. In the past, the Department had no regulatory basis for
approving these units of general local government to be consortium
members. HUD anticipates this change would allow
[[Page 46623]]
some consortia to increase members or new consortia to form.
The proposed rule would add language to Sec. 92.101(d) to clarify
the relationship between a representative unit of general local
government (frequently referred to as the lead entity) and member units
of general local government in a consortium. The proposed revision
explains that, while member units of general local government in a
consortium are not subrecipients, the requirements for subrecipients,
including the written agreement requirements at Sec. 92.504(c)(2),
apply when the representative unit of general local government
distributes HOME funds to member units of general local government in a
consortium. This change would not affect the requirement in Sec.
92.101(a)(2)(ii) for a legally binding cooperation agreement between
all members of a consortium.
The proposed rule would add language that describes the effect of a
change to the representative unit of general local government of a
consortium. If a consortium changes the representative unit of general
local government but the membership of the consortium does not change,
the consortium is considered to be the same unit of general local
government. However, the proposed rule states that if a representative
unit of general local government of a consortium changes, and the
composition of the consortium also changes because one or more members
have been added or removed from the consortium, then the consortium is
considered a new unit of general local government and must comply with
all applicable consolidated plan requirements in 24 CFR part 91. The
Department already treats a consortium as the same unit of general
local government if only the representative unit of general local
government changes. With this proposed rule change, HUD would codify
this approach. This change is proposed to help consortia that are
contemplating a change to the representative unit of general local
government or other membership to understand the programmatic
consequences of those decisions.
4. Distribution of Assistance (24 CFR 92.201)
The proposed rule would add a sentence to the end of Sec.
92.201(a)(2) clarifying that a participating jurisdiction may not
commit funds to a project within the boundaries of a contiguous local
jurisdiction until it has secured the required financial contribution
of the jurisdiction in which the project is located. The sentence would
clarify the necessary preconditions for using HOME funds outside of a
participating jurisdiction's geographic boundaries and would prevent a
participating jurisdiction from providing HOME funds to a project that
does not have the support of the jurisdiction or community where it is
located.
The proposed rule would also remove the definition of State
recipient from Sec. 92.201(b)(2) and add it to the definitions section
of Sec. 92.2 where it will be easier for practitioners to locate.
Other proposed changes to clarify the definition are discussed in the
preamble for Sec. 92.2.
5. Income Determinations (24 CFR 92.203)
In the HOTMA Final Rule, published on February 14, 2023,\8\ the
Department revised the income regulations for the Public Housing,
Section 8, Community Development Block Grant (CDBG), HOME, Housing
Trust Fund, Housing Opportunities for Persons With AIDS, Supportive
Housing for the Elderly, and Supportive Housing for Persons with
Disabilities programs. The effective date of the regulatory changes
made through the HOTMA Final Rule is January 1, 2024.\9\
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\8\ 88 FR 9600.
\9\ For clarity, the revisions HUD is proposing in this section
of this proposed rule are revisions to the regulations as they will
exist after the effective date of the HOTMA Final Rule on January 1,
2024.
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As part of the HOTMA Final Rule, the Department comprehensively
revised the HOME regulation (effective January 1, 2024) at Sec. 92.203
to align the HOME income regulations with income regulations from other
HUD and Federal programs that HOME funds were most likely to be used
with, most notably the Section 8 program. To that end, the Department
required that participating jurisdictions use income determinations
made by owners and program administrators in section 8 project-based
voucher and rental assistance programs instead of requiring the
participating jurisdiction to engage in a separate, duplicative income
review. The Department also allowed participating jurisdictions to use
income determinations made by public housing agencies or other
providers of Federal tenant-based rental assistance instead of
requiring the participating jurisdiction to engage in a separate,
duplicative income review.
As the Department was preparing guidance and training participating
jurisdictions and others on how to implement the requirements of the
HOTMA Final Rule, the Department determined there were still ways to be
clearer about a participating jurisdiction's responsibilities regarding
income determinations, including when HOME funds are used in a project
with either Federal project-based or tenant-based rental assistance or
subsidy programs.
HUD is proposing to revise the paragraph heading of Sec. 92.203(a)
to read ``Income eligibility'' to more closely align with the purpose
of the paragraph. The Department is also proposing to remove the first
sentence of Sec. 92.203(a) because it is confusing and is not
necessary to the requirements in Sec. 92.203. The first sentence of
the current Sec. 92.203(a) states that income targeting requirements
apply to both a participating jurisdiction's HOME program and to its
HOME projects. While the statement is true, Sec. 92.203 does not
establish the HOME income targeting requirements which are contained in
Sec. 92.216. By removing the first sentence of the current Sec.
92.203(a), the second sentence of the current Sec. 92.203(a) would be
revised to make it the lead-in sentence to the three options of
determining income eligibility for HOME under Sec. 92.203(a). HUD
believes this elimination of unnecessary and confusing verbiage would
better allow participating jurisdictions to understand HOME income
requirements.
The proposed rule would revise the paragraph heading of Sec.
92.203(b) from ``Required documentation for annual income
calculations'' to ``Determining and documenting annual income'' and the
paragraph heading of Sec. 92.203(c) from ``Defining income for
eligibility'' to ``Definitions of annual income'' to reflect the
requirements more accurately in each paragraph. The citation to Sec.
92.252 in Sec. 92.203(b)(1) would also be revised to conform to the
renumbering of paragraph (h) to (g) in Sec. 92.252 and the citation to
Sec. 92.252(b)(2)(i) in Sec. 92.203(f)(1)(ii) would also be revised
to ``Sec. 92.252(a)(2)(ii) or (iii)'' to conform to the revisions in
Sec. 92.252. The proposed rule would also revise the second sentence
of Sec. 92.203(b)(1)(ii) to add ``by the participating jurisdiction or
owner'' at the end. The proposed rule would also add the requirement
currently in Sec. 92.252(g) to the end of paragraph (ii) of Sec.
92.203(b)(1) that if there is evidence that a tenant's statement and
certification failed to completely and accurately state information
about the family's size or income, a tenant's income must be re-
examined in accordance with Sec. 92.203(b)(1)(i).
The proposed rule would revise Sec. 92.203(b)(1)(iii) to clarify
that the method requires the government
[[Page 46624]]
program to examine the annual income of the family each year and to be
a program that provides government benefits to the family. The proposed
rule would also revise Sec. 92.203(d) to clarify when the
participating jurisdiction is permitted to use the definitions of
``annual income'' in Sec. 92.203(c). Specifically, the proposed rule
would further clarify that when the participating jurisdiction is
accepting a public housing agency, owner, or rental assistance
provider's determination of annual and adjusted income for units
assisted by a Federal or State project-based rental subsidy program or
tenants receiving Federal tenant-based rental assistance in a rental
housing project, the participating jurisdiction must calculate annual
income in accordance with Sec. 92.203(c)(1) for the rental housing
project so there is consistency in the definition of annual income
throughout the project.
The proposed rule would revise the heading of paragraph (d) of this
section from ``Using income definitions'' to ``Use of income
definitions'' and would remove the third sentence of paragraph (d)
because it may be read to either conflict with or duplicate
requirements in paragraph (c) of this section. In addition, the
proposed rule would make other minor revisions to paragraph (d) for
clarity. The proposed rule would also make several technical
corrections to Sec. 92.203(d). The last sentence of paragraph (d)
cites to ``paragraph (c)(i) of this section.'' This is a drafting
error, and the citation should be corrected to ``paragraph (c)(1) of
this section.''
The citations to 24 CFR part 5 requirements in the section would
also be revised for consistency with the format of citations to 24 CFR
part 5 in other sections of the current regulation.
6. Eligible Activities: General (24 CFR 92.205)
The proposed rule would revise Sec. 92.205(a)(2) to clarify that
acquisition of vacant land or demolition may only be undertaken for a
project that will provide affordable housing and meets the requirements
for a specific local project in paragraph (2)(i) of the definition of
``commitment'' in Sec. 92.2. Commitment of HOME funds to a specific
local project can only occur for an identifiable project for which all
necessary financing has been secured, a budget and schedule have been
established, and underwriting has been completed and under which
construction is scheduled to start within 12 months of the execution
date of the written agreement. Although the provision at Sec.
92.205(a)(2) has been in the HOME regulations since inception of the
HOME program, some participating jurisdictions continue to mistakenly
believe that HOME funds can be used to acquire land without the
development of affordable housing (e.g., ``land banking'') or to
demolish buildings with no intention to build new affordable housing
(e.g., elimination of slums or blight). This provision would be revised
to further clarify the requirement that an affordable housing project
must be completed when HOME funds are used for the acquisition of
vacant land or demolition.
The Department proposes to move the text at the end of paragraph
(b)(1) that states that a participating jurisdiction establishes the
terms of HOME assistance (e.g., loan terms) subject to the requirements
of the regulation to a new paragraph (b)(3) and would revise the
language to better emphasize and clarify that the terms of assistance
are established by the participating jurisdiction, subject to the
requirements of this part.
HUD is proposing to revise Sec. 92.205(e)(2) to clarify that if
project completion, as defined in Sec. 92.2, does not occur within 4
years from the date that the participating jurisdiction committed funds
to a specific local project, then the project is terminated and the
participating jurisdiction must repay all funds invested in the
project. There remains a great deal of confusion surrounding the 4-year
deadline, and the Department is again clarifying that a project must
meet the requirements of part 92 in order to be considered complete.
HUD already has a clear definition of project completion and hopes that
using the same terminology will better enable participating
jurisdictions to comply with the regulations.
7. Eligible Project Costs (24 CFR 92.206)
The proposed rule would make several technical corrections to Sec.
92.206. These corrections would update the citation in Sec.
92.206(a)(1) regarding new construction standards to Sec. 92.251(a),
update the citation in Sec. 92.206(a)(2) regarding rehabilitation
standards to Sec. 92.251(b), and revise Sec. 92.206(b) to change
``affordability period'' to ``period of affordability.''
The proposed rule would revise Sec. 92.206(b)(2)(ii) to change
``over an extended affordability period'' to ``over the minimum period
of affordability of 15 years.'' The proposed rule would also revise
paragraph (c) to clarify that the costs of securing a long-term ground
lease are eligible acquisition costs and permitted in the development
of HOME-assisted housing. HUD also proposes to revise paragraph (d)(1)
to add the costs of conducting environmental assessments and reviews to
the list of permissible development costs that could be reimbursed with
HOME funds if the cost is incurred not more than 24 months before the
date that HOME funds are committed to the project and the participating
jurisdiction expressly permits HOME funds to be used to pay the costs
in the written agreement committing the funds. Lack of funding for
necessary environmental studies of sites proposed for development can
be an obstacle to the provision of affordable housing. The proposed
rule would also remove the current Sec. 92.206(d)(8) because the costs
of environment reviews and assessments have been added to paragraph
(d)(1) and replace it with the cost of property insurance during
development as one of the eligible related soft costs in paragraph (d).
8. Eligible Administrative and Planning Costs (24 CFR 92.207)
The Department proposes to revise Sec. 92.207(e) to remove the
term ``under a cost allocation plan prepared'' from the regulation.
This is an oversimplification of the underlying requirements in 2 CFR
part 200, subpart E and HUD is proposing the removal of the language to
reduce confusion and improve clarity.
9. Eligible Community Housing Development Organization (CHDO) Operating
Expense and Capacity Building Costs (24 CFR 92.208)
Through this proposed rule, the Department seeks to correct a
drafting error made in the 2013 HOME Final Rule that created an
unintended barrier to using CHDO operating expense and capacity
building funding provided through HOME to assist organizations to meet
the requirements for CHDO designation. Paragraph (9) of the definition
of CHDO in Sec. 92.2 requires that a CHDO have demonstrated capacity
to be designated as a CHDO, while the current Sec. 92.208 limits
operating and capacity building assistance to organizations that are
CHDOs. These provisions inadvertently prohibit the use of CHDO
operating or capacity building funds to assist an organization that
meets all other provisions of the CHDO definition except the
demonstrated capacity requirement. The proposed rule would add a new
paragraph (c) to Sec. 92.208 stating that an organization that meets
the definition of ``community housing development organization'' in
Sec. 92.2 except for the capacity requirement in paragraph (9) may
receive HOME funds
[[Page 46625]]
for operating expenses and capacity building costs in order to develop
demonstrated capacity and qualify as a CHDO. This change would make it
possible for a nonprofit organization to receive the necessary
financial assistance to attain CHDO designation. Pursuant to Sec.
92.300(e), a participating jurisdiction may only provide operating or
capacity building funds to an organization to which it expects to
commit CHDO set-aside funds for a project within 24 months.
10. Tenant-Based Rental Assistance: Eligible Costs and Requirements (24
CFR 92.209)
The proposed rule would revise Sec. 92.209(c)(1) to eliminate the
requirement that adjusted income be determined annually for families
receiving TBRA. Because TBRA contracts are limited by statute to two
years and must be executed every time a tenant enters into a new lease,
the proposed rule would permit a participating jurisdiction to provide
TBRA to a family and not redetermine adjusted income during the
contract's period of assistance. Rather, proposed Sec. 92.209(c)(1)
would only require the participating jurisdiction to determine adjusted
income before execution of a new contract or renewal of an existing
rental assistance contract. A family receiving TBRA whose income
decreases during the term of the contract is still permitted to request
an income redetermination by the participating jurisdiction during the
term of the rental assistance contract so the family's subsidy can be
recalculated. However, as is the case under the current regulations,
the choice to redetermine adjusted income of a family that experienced
a change in income during the term of the contract is a participating
jurisdiction's program design decision and would be based upon the
participating jurisdiction's policies and procedures. This means that
unless the participating jurisdiction has a written policy and a rental
assistance contract that requires a family's subsidy be redetermined
based upon changes in income during the period of assistance, the
family's payment toward rent will not change due to changes in income
during the contract term.
Consistent with HUD's Plan for Bridging the Wealth Gap: An Agenda
for Economic Justice and Asset Building for Renters,\10\ biennial
income redeterminations would facilitate family savings and improve
housing stability by facilitating longer stays in housing and avoiding
evictions or economic displacement from housing. Reducing the frequency
of income determinations would also significantly reduce administrative
burden on participating jurisdiction staff and on participating
landlords, potentially expanding units available to families receiving
TBRA.
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\10\ See <a href="https://www.hud.gov/sites/dfiles/PIH/documents/Bridging_Wealth_Gap.pdf">https://www.hud.gov/sites/dfiles/PIH/documents/Bridging_Wealth_Gap.pdf</a>.
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The proposed rule would revise the first sentence of Sec.
92.209(c)(2)(iv) by adding the word ``assistance'' to ``rental
payments'' to further clarify that this is describing TBRA payments.
The proposed rule also clarifies that when all or a portion of the
homebuyer-tenant's monthly contribution toward rent is set aside for
closing costs or a downpayment, it must be set aside in accordance with
the lease-purchase agreement. These clarifications are required because
the Department determined that some participating jurisdictions were
not explicitly stating that all or a portion of a tenant's contribution
to rent was being set aside for closing costs or a downpayment on the
housing in the lease-purchase agreement or providing for how the set
aside would occur.
The proposed rule would revise Sec. 92.209(c)(3) to clarify that a
participating jurisdiction may select and provide TBRA to low-income
families currently residing in housing units that will be rehabilitated
or acquired with HOME funds. The low-income family may choose to use
the TBRA in a unit rehabilitated or acquired with HOME funds or in
other qualified housing. Using TBRA funds in this manner may reduce
displacement or assist in decreasing the cost of compliance with the
Uniform Relocation Assistance and Real Property Acquisition Policies
Act (42 U.S.C. 4601 et seq.) (URA), which applies to the use of HOME
funds for a project involving acquisition, rehabilitation, or
demolition.
The proposed rule would revise Sec. 92.209(g) to update the
reference to Sec. 92.253 to specify Sec. 92.253(a)-(c) and (d)(2).
The proposed rule would revise Sec. 92.209(h)(2) to permit
participating jurisdictions to establish hardship policies that provide
exceptions to the requirement that families receiving TBRA contribute a
minimum amount toward rent. Some families receiving TBRA have little or
no income. Due to this, some families may be unable to comply with the
requirement for a minimum tenant contribution toward rent or compliance
with the requirement may be detrimental to the family (e.g., use
limited financial resources that are needed for medical care and other
necessities). This revision would align HOME with other Federal tenant-
based rental assistance programs in permitting a participating
jurisdiction to provide relief to a family from a minimum tenant
contribution in its TBRA program by increasing the assistance in
accordance with the participating jurisdiction's written policies.
The Department proposes to further clarify the basis of the rent
standard that a participating jurisdiction may use for its TBRA program
by adding the specific regulatory citation of 24 CFR 982.503 for the
Section 8 HCV payment standard to Sec. 92.209(h)(3)(ii). With the
inclusion of the specific regulatory citation, a participating
jurisdiction that chooses to use the Section 8 HCV program payment
standard as its TBRA payment standard will be able to quickly locate
the referenced requirements.
The proposed rule would revise Sec. 92.209(i) to clarify the
requirement that the participating jurisdiction must inspect the
housing initially to mean that the participating jurisdiction must
determine compliance with the property standards at Sec. 92.251 at the
time of entering into a rental assistance contract. The proposed rule
would require that initially and annually thereafter, the participating
jurisdiction must determine that the housing complies with its property
standards and is decent, safe, sanitary, and in good repair in
accordance with Sec. 92.251(f).
Currently, program participants are required to inspect housing
annually. Under Sec. 92.251(f)(4)(ii) of this proposed rule, HUD would
allow program participants to forego their own inspection and instead
rely on an inspection conducted for another HUD program under 24 CFR
part 5, subpart G. Section 92.251(f)(4)(ii) would also allow HUD to
identify other alternative inspection standards through Federal
Register notice which may count for the annual inspection. This
proposed change would reduce administrative burden on the participating
jurisdiction for performing inspections and the burden on property
owners from undergoing multiple inspections by multiple parties using
the same inspection standards, while posing minimal risk of substandard
units being occupied by tenants assisted with TBRA. The requirement
that the participating jurisdiction must reinspect annually for
compliance with the property standards at Sec. 92.251 after
determining initial compliance is not proposed to be changed. The
participating jurisdiction may determine compliance with the property
standards at Sec. 92.251 annually, under the same methods available to
the participating jurisdiction in the initial determination.
[[Page 46626]]
The proposed rule would make several revisions to Sec. 92.209(j).
First, the use of ``dwelling'' would be replaced with ``housing'' in
paragraph (j)(1) to specify that the use of TBRA is for housing and not
``dwelling units'' which part 92 does not define. Second, Sec.
92.209(j)(5) would be revised to remove ``Housing Quality Standard'' to
align with the proposed changes in Sec. 92.209(i). Third, as further
discussed below, the proposed rule would also add a new Sec.
92.209(j)(6) to prohibit the use of surety bonds or security deposit
insurance as a form of security deposit in units occupied by families
receiving TBRA.
Some participating jurisdictions have asked about the use of surety
bonds and security deposit insurance in their TBRA programs while
others have requested that the Department provide them with an
interpretation that surety bonds or security deposit insurance
constituted a security deposit. In response, the Department
investigated the nature of surety bonds and security deposit insurance
and determined as a matter of law that they are not security deposits
within the meaning of NAHA nor are they treated as such under state
statutes. Moreover, surety bonds or security deposit insurance may
disadvantage tenants without necessarily benefitting landlords.
Generally, tenants pay the cost of purchasing the surety bond or
security deposit insurance in lieu of a security deposit. The surety
bond obligates the bond issuer to repair all covered damage to the unit
attributed to the tenant but may have coverage limits and is dependent
upon the financial sufficiency of the issuer's fund. For security
deposit insurance, a tenant pays a premium to purchase a policy from an
insurance company that provides coverage to the landlord, as insured
party, for most claims for damages to a unit. Even if there is no
damage to the unit, the premium for the surety bond or security deposit
insurance is not refundable to the tenant. However, if the bond issuer
or the insurance company refuses to cover the damages, the landlord may
be forced to litigate against both the bond issuer or insurer and the
tenant for damages under the terms of the lease and may be left with
little or no recourse beyond obtaining judgment liens against each,
potentially damaging the tenant's credit and forcing a tenant to obtain
legal counsel. The proposed prohibition on the use of surety bonds and
security deposit insurance as a form of security deposit is a change
made throughout the proposed rule. HUD does not believe that
prohibiting the use of surety bonds and security deposit insurance will
impact a family's access to the rental housing market. Section 92.209
continues to allow participating jurisdictions to use HOME funds as
loans or grants for security deposits.
The proposed rule would also remove Sec. 92.209(l) because
paragraph (l) implements section 212(a)(3)(D) of NAHA which is an
outdated provision that applies only when the participating
jurisdiction receives Federal assistance under section 1437f of the
U.S. Housing Act of 1937 (the ``1937 Act'') (42 U.S.C. 1437f) (i.e.,
section 8 program) to be used for TBRA.
11. Troubled HOME-Assisted Rental Housing Projects (24 CFR 92.210)
The proposed rule would amend Sec. 92.210(a) to clarify that HUD
may consider the physical condition of the housing or financial
viability when preserving HOME-assisted units at risk of failure or
foreclosure. The use of the term ``Headquarters'' is proposed to be
removed in Sec. 92.210(c) for phrasing consistency with other parts of
the proposed rule; however, all approvals under Sec. 92.210 must still
be made by HUD Headquarters.
The Department has provided technical assistance for workouts to
several participating jurisdictions with troubled projects, and
physical viability is as much a consideration as financial viability
when determining whether to permit additional flexibilities to preserve
the affordability of a project. The physical viability of a property
may be negatively impacted due to unanticipated extreme weather
conditions or emergencies such as fire, flooding, and earthquakes.
Changes to physical characteristics and factors may substantively
impact the physical viability of a project, including unexpected
structural or design issues, deferred maintenance due to unanticipated
financial limitations, or unforeseen capital needs. Further, in
determining the long-term viability of a project, the Department must
consider the property's physical condition and needs in its review.
Therefore, the proposed rule would revise the provisions of Sec.
92.210 to permit HUD to consider preservation of a project based on the
substantive deterioration of a project's physical viability due to
unforeseen circumstances. It would also allow HUD to consider the
future physical viability of a project in determining whether a project
may access the flexibilities under Sec. 92.210.
The proposed rule would also clarify in Sec. 92.210(a) that a
HOME-assisted rental project is no longer financially viable if its
operating costs significantly exceed its operating revenue and reserves
and if it has insufficient resources to cover necessary capital repair
costs. The proposed rule would revise the current requirement that the
Department consider the likelihood of ``long-term viability'' to
include physical viability and replace with the likelihood of the
project's ``long-term physical and financial viability to preserve
affordability.'' The Department's consideration of a project's ``long-
term'' physical and financial viability does not mean that the
Department will not consider projects that are near the end of their
HOME periods of affordability nor does it mean that the Department's
considerations of viability will be limited to a project's ``long-
term'' performance.
The proposed rule would revise Sec. 92.210(b) to change the amount
of additional HOME funds a participating jurisdiction may invest in a
troubled HOME-assisted rental project to make it financially and
physically viable during the period of affordability. The total
investment (original investment plus additional investment) must be the
amount needed to address the physical and financial viability of the
project and may not exceed the HOME per-unit subsidy limit in effect at
the time of the additional investment. The use of HOME funds may
include, but is not limited to, rehabilitation of the HOME units and
recapitalization of project reserves to fund capital costs. The
Department also proposes to clarify that it may impose conditions on
the investment of additional HOME funds, including requiring the
participating jurisdiction to extend the period of affordability,
increase the number of HOME-assisted units, and/or change the number or
designation of Low HOME rent and High HOME rent units.
The proposed rule would revise Sec. 92.210(c) to clarify that even
if there are no additional HOME funds invested in the troubled HOME-
assisted rental project, the Department may, through written approval,
permit participating jurisdictions to not only reduce the total number
of HOME units but change the designation of units from Low HOME rent
units to High HOME rent units in troubled projects with more than the
minimum number of Low HOME rent units. Pursuant to 42 U.S.C. 12745 and
24 CFR 92.252, HOME requires at least 20 percent of HOME-assisted units
in a project be restricted as Low HOME rent units with the other HOME-
assisted units restricted as High HOME rent units. Low HOME rent units
must be occupied by those at 50 percent of the
[[Page 46627]]
Area Median Income (``AMI'') and below, while High HOME rent units must
be occupied by those at 80 percent AMI and below. Further, in
accordance with the requirements for HOME rent limits set forth in
Sec. 92.252, the Low HOME rent units are restricted at lower rent
levels than High HOME rent units. The Department has reviewed several
troubled project requests in which converting Low HOME rent units to
High HOME rent units (when there are more than the required minimum 20
percent Low HOME rent units) is sufficient to preserve the project by
increasing the ongoing rental revenue to the project to cover project
expenses and financially stabilize the property. Permitting
participating jurisdictions to undertake such actions for troubled
HOME-assisted rental projects will support and preserve HOME units
through the required period of affordability.
12. Pre-Award Costs (24 CFR 92.212)
The proposed rule would add a new paragraph (b)(2) to address pre-
award costs in a fiscal year when there is not a timely appropriation
by Congress for the HOME program. The proposed rule would permit a
participating jurisdiction, in a year when there is not a timely
appropriation, to incur eligible administrative and planning costs as
of the beginning of its program year or the date that the Department
receives the consolidated plan describing the HOME allocation to which
the costs will be charged, whichever is earlier. The proposed rule
would also establish that an appropriation is not timely if the
appropriation to the HOME program was signed into law less than 90 days
before a participating jurisdiction's program year start date. The
Department has waived the current Sec. 92.212(b) to permit pre-award
costs under these conditions for many of the past fiscal years. The
delay in the receipt of annual appropriations by the Department may
have negative consequences for participating jurisdictions, including
interruption of activities. Adding this new language to Sec. 92.212(b)
would avoid the need for approvals of a waiver of this requirement each
year that there is a delayed appropriation and would assist
participating jurisdictions to better plan for such years to minimize
their impact.
13. Prohibited Activities and Fees (24 CFR 92.214)
The proposed rule would make several revisions to Sec. 92.214 to
expand, revise, and clarify the prohibited activities and fees for
which HOME funds cannot be used. The proposed revisions to Sec. 92.214
are described more thoroughly in the text that follows.
The proposed rule would revise Sec. 92.214(a)(6) to add that
investing additional HOME funds in a troubled project in accordance
with Sec. 92.210 is an exception to the requirement that a
participating jurisdiction cannot provide additional HOME funds to a
previously assisted project. Section 92.214(a)(6) would also be amended
to explicitly state that the maximum per-unit subsidy applicable to a
project receiving additional HOME funds within one year of project
completion is the maximum per-unit subsidy applicable at the time of
project underwriting. The proposed rule would further revise Sec.
92.214(a)(6) to align with the new definition of period of
affordability added as a defined term to Sec. 92.2.
The proposed rule would make minor revisions to Sec. 92.214(a)(7)
to improve clarity and readability.
The proposed rule would add a new paragraph (10) to Sec.
92.214(a). As noted in the TBRA preamble discussion on Sec. 92.209(j),
the Department is concerned that surety bonds, security deposit
insurance, and similar instruments disadvantage tenants as the tenant
pays the cost of purchasing the bond or insurance in lieu of a security
deposit but does not recoup any of the cost of the bond or security
deposit policy upon vacating the unit. In addition, if there is damage
to the unit, the bond issuer or insurer may pursue the tenant to cover
any costs incurred to repair damage, negatively affecting the tenant's
credit or forcing the tenant to secure legal counsel. In response to
these concerns, the proposed rule would prohibit the use of HOME funds
for surety bonds, security deposit insurance, or similar instruments in
lieu of or in addition to a security deposit in units occupied by TBRA
by adding a new paragraph (10) to Sec. 92.214(a).
The proposed rule would add language similar to that in the
proposed Sec. 92.214(a)(10) in a new paragraph (i) of Sec.
92.214(b)(3) to prohibit project owners from charging for surety bonds,
security deposit insurance, or similar instruments in lieu of or in
addition to a security deposit in units. The proposed rule would also
add a new paragraph (iii) to Sec. 92.214(b)(3) to explicitly prohibit
project owners from charging fees to inspect units or correct
deficiencies in the property condition of units or common areas of the
project that were not caused by the tenant. The costs associated with
normal wear and tear or damage to a unit or common areas of a project
that are not the result of negligence, recklessness, or intentional
acts by the tenant, must be paid from project operations and not passed
on to the tenant.
Finally, to accommodate the proposed revisions to Sec.
92.214(b)(3), the proposed rule would add a new paragraph (4) to Sec.
92.214(b), which would detail the fees that owners are permitted to
charge tenants.
14. Income Targeting: Tenant-Based Rental Assistance and Rental Units
(24 CFR 92.216)
HUD proposes to revise Sec. 92.216(a)(2) and (b)(2) to replace the
use of the term ``dwelling'' with ``housing'' which is the accurate
term for application of the requirement. While part 92 uses ``housing''
and ``dwelling'' interchangeably, these terms have been revised over
the years to have separate definitions in other programs. Therefore, to
avoid confusion, HUD would revise part 92 to replace ``dwelling'' with
``housing,'' where appropriate.
15. Income Targeting: Homeownership (24 CFR 92.217)
HUD proposes to revise Sec. 92.217 to replace the use of the term
``dwelling'' with ``housing.''
16. Recognition of Matching Contribution (24 CFR 92.219)
The proposed rule would add the term ``tenant protection
requirements'' in Sec. 92.219(a)(2)(ii) to clarify the substance of
the requirements at Sec. 92.253(a)-(c) and (d)(2) that are cited to in
the regulation. The regulatory citations for Sec. 92.253 would also be
updated to reflect the changes to this section.
17. Match Credit (24 CFR 92.221)
The proposed rule would revise Sec. 92.221(b) to clarify the
requirements a participating jurisdiction must meet when using excess
match contributions earned in a previous year, also referred to as
``carry-over'' or ``carried over'' match to meet a later year's HOME
match obligation. In 2015, HUD's Office of Inspector General issued an
audit report on HOME matching contributions that found widespread
problems with participating jurisdictions not adequately documenting
the validity and eligibility of match contributions.\11\ Specifically,
the HUD Inspector General found that many participating jurisdictions
did not maintain required match logs or that logs were insufficient,
did not identify all contributions in their carry-over match balances,
[[Page 46628]]
included nonexistent contributions in their carry-over balances, and
did not fully support matching contributions they credited toward
meeting their 25 percent match obligation.
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\11\ See HUD OIG Audit Report Number: 2015-KC-0002, available at
<a href="https://www.hudoig.gov/sites/default/files/documents/2015-KC-0002.pdf">https://www.hudoig.gov/sites/default/files/documents/2015-KC-0002.pdf</a>.
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To ensure that these deficiencies do not continue, the Department
proposes to add a new paragraph (1) to Sec. 92.221(b) to explicitly
require a participating jurisdiction to have documentation supporting
the source, eligibility, and value of match contributions that have
been carried over from previous years at the time that they apply the
contribution toward their match obligation. The proposed rule would
also add a new paragraph (2) to Sec. 92.221(b) to require
participating jurisdictions to maintain records related to the source
(i.e., the project to which the contribution was made), eligibility,
and amount of match contributions for 5 years from the date that they
apply the match credit toward their match liability. The proposed rule
would include conforming changes to the recordkeeping provisions at
Sec. 92.508(a)(2)(ix) to describe the scope and retention period that
would apply for records of carried over match contributions.
18. Maximum Per-Unit Subsidy Amount, Underwriting, and Subsidy Layering
(24 CFR 92.250)
The proposed rule would make several revisions to the HOME
program's maximum per-unit subsidy limits regulations at Sec. 92.250.
Section 212(e) of NAHA (42 U.S.C. 12742(e)) requires the Department to
establish limits on the amount of HOME funds that may be invested on a
per-unit basis. For multifamily housing, NAHA requires that such
maximum per-unit subsidy limits not be less than the per-unit
limitations set forth in the mortgage insurance program authorized in
section 221(d)(3) of the National Housing Act (12 U.S.C. 1715l)
(``section 221(d)(3) limitations''), as adjusted by HUD to reflect the
costs of land and construction in the area that exceeds the national
average of such costs, up to 240 percent of the base mortgage limits.
The Department has additional authority to adjust the 240 percent
limits further based on the market area, number of bedrooms, eligible
activity type (e.g., homeownership, rental), and work performed (e.g.,
rehabilitation, new construction). Notwithstanding the statutory
language, the Department has historically implemented a maximum cap on
the amount of HOME funds that may be used for the subsidy. However,
after further review of the statutory language and Congressional record
of the amendments made to title II of NAHA by section 206 of the
Housing and Community Development Act of 1992 (Pub. L. 102-550), the
Department has determined that Congress intended the adjusted 221(d)(3)
limitations to establish a floor, rather than a cap, for the maximum
subsidy amount.
Due to the discontinuation of the section 221(d)(3) mortgage
insurance program, the Department must establish an alternate benchmark
as the maximum subsidy limit for the HOME program. The Department is
currently operating under an interim policy that directs participating
jurisdictions to use the basic mortgage limitations for section 234 of
the National Housing Act's Condominium Housing, for elevator-type
projects (``section 234 limitations''), in place of the discontinued
section 221(d)(3) limitations.\12\ The Department is currently
adjusting the section 234 limitations using the High Cost Percentages
that the Department calculates for its mortgage insurance programs. The
Department chose this policy because it determined in 2015 that
``[o]ver time, the limits issued by HUD for the Section 234 program
have been identical to the 221(d)(3) limits.'' \13\ As the section 234
limitations were identical to the section 221(d)(3) limitations prior
to the discontinuation of the section 221(d)(3) limitations, the
Department still believes that the section 234 limitations are a
reasonable alternative to the section 221(d)(3) limitations and
consistent with section 212(e) of NAHA. However, due to HUD's
determination that Congress intended the adjusted 221(d)(3) limitations
to establish a floor, rather than a cap, for the maximum subsidy
amount, HUD proposes to codify that the total amount of HOME funds that
a participating jurisdiction may invest on a per-unit basis may not
exceed the per unit dollar limits established by HUD in accordance with
the requirements in section 212(e) of NAHA rather than codify the
section 234 limitations. At Sec. 92.250(a), HUD proposes to publish
the methodology for determining maximum per-unit subsidy amounts in
accordance with section 212(e) through a notice published in the
Federal Register with the opportunity for comment. The proposed rule
would also clarify Sec. 92.250(a) by stating that HUD will use that
methodology to publish the maximum per-unit subsidy limits for the area
in which the housing is located annually, in accordance with the
published methodology, and will make adjustments annually. HUD intends
to publish these limits on HUD's website.
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\12\ See Notice CPD-15-003, ``Interim Policy on Maximum Per-Unit
Subsidy Limits for the HOME Program,'' available at <a href="https://www.hud.gov/sites/documents/15-03CPDN.PDF">https://www.hud.gov/sites/documents/15-03CPDN.PDF</a>.
\13\ Id. at 2.
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Section 212(e) of NAHA requires that the Department consider on a
market-per-market basis the cost of multifamily construction that meets
State and local housing and building codes and the costs of land, with
inflationary adjustments. HUD declines to maintain its use of the
section 234 limitations for HOME because the section 234 limitations
may not align with section 212(e) in the future, such as if the cost of
multifamily construction or market conditions of the participating
jurisdiction require a higher limit under section 212(e). Therefore,
revising Sec. 92.250 to refer to the statutory requirements and the
process for publishing a methodology in accordance with the statutory
requirements would avoid the need to waive or change HOME regulations
to align with section 212(e) in the future.
The proposed rule would revise Sec. 92.250(a) to require HUD to
determine maximum per-unit subsidy limits for HOME on an annual basis
in accordance with the statute and publish those limits (i.e., on the
HUD website or by notice).\14\ Based on the Congressional record
clarifying the intent of section 212(e) of NAHA,\15\ the Department has
determined that the statutory requirement provides much greater
direction on the use of the section 221(d)(3) limitations as a floor
while allowing for adjustments to the limitations based on specific
criteria that affect project costs. To implement a revised methodology
for the annual determination of the maximum per unit subsidy limit, HUD
intends to issue a Federal Register notice in conjunction with this
HOME rulemaking process. The notice for the revised methodology would
identify an existing limit (e.g., mortgage insurance limit) or outline
a proposed method for establishing a limit in accordance with section
212(e) and request comments from industry stakeholders and the public.
This would provide HUD with the opportunity to perform a higher level
of review of current development and construction costs, evaluate
ongoing changes in costs due to changes in building codes and industry
practices, determine whether different eligible activities (i.e.,
[[Page 46629]]
homeownership vs. rental) should have different methodologies, and to
consider and respond to comments in the implementation of the revised
methodology. Until a revised methodology is finalized, HUD would
establish the maximum per unit subsidy limit as 270 percent of the
section 234 limitations.
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\14\ See 42 U.S.C. 12742(e)(1)-(3).
\15\ See House Report 102-760, 1992 U.S.C.C.A.N. 3281 at Page
3301, which clarified that Public Law 102-550 amending Section 212
of NAHA, ``[a]mends cost limits requirements to establish minimum
cost limits equal to the per unit dollar limitation for the section
221(d)(3) program, as adjusted . . .''
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The proposed rule would also add a new paragraph (c) to Sec.
92.250 to permit a participating jurisdiction to exceed the maximum
per-unit subsidy described in Sec. 92.250(a) by 5 percent for a
project that meets one of the acceptable Green Building standards
enumerated by the Department. HUD shall allow participating
jurisdictions and developers this flexibility because the Department is
pursuing groundbreaking and innovative program designs in addressing
the ambitious climate and green energy goals set by HUD leadership. By
providing the flexibility to participating jurisdictions to exceed the
per unit maximum subsidy limit by up to 5 percent to cover increased
costs, HUD would be incentivizing participating jurisdictions and
owners to create projects that meet a physical condition standard that
involves the use of durable green building materials, innovative
building methods, and renewable energy systems. The Department
recognizes that the development of affordable housing that meets a
green building standard and is more resilient to extreme weather events
and climate change will result in increases to the costs of production.
The Department believes that permitting a participating jurisdiction to
exceed the maximum per-unit subsidy described in Sec. 92.250(a) by up
to 5 percent will sufficiently enable the participating jurisdiction
and developer to absorb the higher costs associated with complying with
a higher standard as well as some additional development costs
unrelated to meeting the green building standard. The qualifying
standards will be published in the Federal Register or HUD website.
Specific solicitation of comment #2: The Department specifically
requests public comment from participating jurisdictions, developers,
and other affected members of the public about the green building
standards that the Department should establish in the Federal Register.
In addition, the Department seeks public comment about stakeholder
experiences regarding the percentage increase in the cost of
constructing or rehabilitating affordable housing to a green building
standard and whether a 5 percent increase in the maximum per unit
subsidy limit is sufficient. Finally, the Department requests public
comment on whether permitting participating jurisdictions to exceed the
maximum per unit subsidy limit by an amount in excess of the additional
costs of green building measures (i.e., to provide additional HOME
funds to cover a larger portion of other HOME-eligible development
costs),would create a sufficient incentive to developers and owners to
meet green building standards in projects that would otherwise not be
designed to meet those standards.
In addition, the proposed rule would amend the language at Sec.
92.250(b)(3)(i) to clarify that a participating jurisdiction must
underwrite a homeowner's ability to repay the HOME-assistance for a
homeowner rehabilitation project only if the assistance is provided as
an amortizing loan.
19. Property Standards (24 CFR 92.251)
Changes to Sec. 92.251 Generally
The proposed rule would retitle Sec. 92.251 as ``Property
standards and inspections.'' The proposed rule would move the
inspection and financial oversight requirements currently at Sec.
92.504(d) to the applicable paragraphs in Sec. 92.251 to consolidate
the property standards and inspection requirements in one section of
the regulation. In addition, the Department proposes several revisions
to the property standards applicable to HOME-assisted properties to
implement statutory energy efficiency requirements; impose carbon
monoxide detector requirements; incorporate green building standards
when a participating jurisdiction elects to exceed the maximum per unit
subsidy limit for a project pursuant to proposed Sec. 92.250(c);
provide administrative relief to reduce duplicative physical
inspections and provide additional flexibility for small-scale housing;
and correct an inadvertent limitation on homebuyer acquisition
programs. Finally, the proposed rule also incorporates further
conforming regulatory changes to the NSPIRE Final Rule.\16\ The
specifics of these changes are described in further detail below.
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\16\ 88 FR 30442 (May 11, 2023).
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Changes to Paragraph (a)
The proposed rule would reorganize Sec. 92.251(a) by creating a
new paragraph (a)(2) which would contain and expand upon the
requirements for construction progress inspections currently in Sec.
92.251(a)(2)(v). The rest of the current paragraph (a)(2) would be
moved to a new paragraph (a)(3). In addition, the completion inspection
requirements currently imposed at Sec. 92.504(d)(1)(i) would be added
to the proposed paragraph (a)(2) (for new construction) and paragraph
(b)(3) (for rehabilitation). Redesignated paragraph (a)(3) would also
be revised to clarify that the listed requirements in paragraphs
(a)(3)(i) through (vii) must be met by projects upon project
completion, unless an earlier deadline is otherwise specified by the
applicable statute, regulation, or standard. For example, the
accessibility requirement in paragraph (a)(3)(i) of Sec. 92.251 must
be met prior to project completion, and the project must comply with
the required deadline under the applicable statute or regulation.
The proposed rule at Sec. 92.251(a)(3)(ii) would codify the
statutory requirement that all HOME-assisted rental and homebuyer new
construction projects meet the energy efficiency standards promulgated
by HUD in accordance with section 109 of NAHA,\17\ including any
revisions adopted by HUD and the U.S. Department of Agriculture (USDA).
The 2013 HOME Final Rule did not include energy efficiency standards in
Sec. 92.251 because HUD intended to propose new standards for energy
and water efficiency in a separate proposed rule. Pursuant to sections
215(a)(1)(F) and (b)(4) of NAHA (42 U.S.C. 12745(a)(1)(F) and (b)(4)),
all newly constructed HOME-assisted housing must meet the energy
efficiency codes promulgated by the Secretary in accordance with
section 109 of NAHA (42 U.S.C. 12709). In addition, the Energy
Independence and Security Act of 2007 (EISA) (Pub. L. 110-140)
established procedures for HUD and the USDA to adopt periodic revisions
to the International Energy Conservation Code (IECC) and to ANSI/
ASHRAE/IES Standard 90.1: Energy Standard for Buildings, Except Low-
Rise Residential Buildings (ASHRAE 90.1), subject to a determination by
HUD and USDA that the revised energy codes do not negatively affect the
availability or affordability of new construction of single and
multifamily housing covered by EISA, and a determination by the
Secretary of Energy that the revised codes ``would improve energy
efficiency.''
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\17\ 42 U.S.C. 12709.
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Carbon Monoxide Detector Requirements
In the NSPIRE Final Rule, the Department codified carbon monoxide
detection requirements in Public Law 116-20 for certain covered
programs at
[[Page 46630]]
24 CFR 5.703(d)(6).\18\ Because HOME is not a covered program subject
to these statutory carbon monoxide detection requirements, the
Department determined that rulemaking is necessary to implement these
changes for the HOME program. Consequently, the proposed rule would add
new paragraphs at Sec. 92.251(a)(3)(vi) (for new construction) and
Sec. 92.251(b)(1)(xi) (for rehabilitation) and amends Sec.
92.251(c)(3) (for acquisition of standard housing for homeownership) to
impose carbon monoxide detection requirements for all HOME-assisted
projects which will be adopted by HUD through a notice published in the
Federal Register. The Department intends to evaluate the specific
standards for installation of carbon monoxide alarms or detectors at 24
CFR 5.703(d)(6) for feasibility in new construction, rehabilitation,
and homebuyer acquisition projects, respectively.
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\18\ See section 101, ``Carbon Monoxide Alarms or Detectors in
Federally Insured Housing'' of Title I of Division Q, Financial
Services Provisions and Intellectual Property, of the Consolidated
Appropriations Act, 2021 (Pub. L. 116-260), 134 Stat. 2162 (2020),
which included amendments to section 3(a) and 8 of the United States
Housing Act of 1937 (42 U.S.C. 1437a(a) and 42 U.S.C. 1437(f) (the
``1937 Act''), section 202(j) of the Housing Act of 1959 (12 U.S.C.
1701q(j)), and sections 811(j) and 856 of the NAHA (42 U.S.C.
8013(j) and 42 U.S.C. 12905).
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Smoke Detector Requirements
Similar to the carbon monoxide detector requirements implemented
through the 2021 Consolidated Appropriations Act, described above, the
2023 Consolidated Appropriations Act \19\ created additional smoke
alarm requirements in federally assisted housing. These requirements
apply to several HUD programs but not HOME. These requirements include
that federally assisted housing comply with National Fire Protection
Association Standard (NFPA) 72, or any successor standard, to use
hardwired smoke alarms or sealed and tamper resistant smoke alarms with
ten-year non rechargeable, nonreplaceable batteries, that provide
notification for persons with hearing loss. These requirements take
effect December 29, 2024. HUD believes that in most jurisdictions
similar requirements already exist, as many jurisdictions already align
with NFPA 72.
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\19\ See section 601, ``Smoke Alarms in Federally Assisted
Housing'' of Title VI of Division AA, Financial Services Matters, of
the Consolidated Appropriations Act, 2023 (Pub. L. 117-328), 136
Stat. 4459 (2022), which included amendments to section 3(a) and 8
of the 1937 Act, section 202(j) of the Housing Act of 1959 (12
U.S.C. 1701q(j)), and sections 811(j) and 856 of the NAHA (42 U.S.C.
8013(j) and 42 U.S.C. 12905).
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HUD is still working to provide guidance on these requirements for
covered programs. This proposed rule does not include proposed
regulatory text to align with the 2023 Consolidated Appropriations
Act's smoke alarm requirements. However, HUD requests public comment on
how such requirements would impact participating jurisdictions, owners,
and developers of HOME-assisted housing. HUD is particularly interested
in public comment on the feasibility of these requirements in HOME-
funded homeownership programs that do not include rehabilitation or
construction of housing (e.g., downpayment assistance programs). HUD is
considering, at the final rule stage, revising the HOME regulations
consistent with the forthcoming HUD guidance on these statutory
requirements.
Specific solicitation of comment #3: The Department specifically
seeks public comment on the proposal to require HOME-assisted units
comply with NFPA 72, or any successor standard, to use hardwired smoke
alarms or sealed or tamper resistant smoke alarms with ten-year non
rechargeable, nonreplaceable batteries, that provide notification for
persons with hearing loss. The Department is particularly interested in
public comment on the feasibility of these requirements in HOME-funded
homeownership programs that do not include rehabilitation or
construction of housing (e.g., downpayment assistance programs).
Green Building Standard
HUD proposes to add paragraphs (a)(3)(vii) (for new construction)
and (b)(1)(xii) (for rehabilitation) to Sec. 92.251 to correspond with
HUD's proposal at Sec. 92.250(c) to require the housing meet one of
the qualifying green building standards published in the Federal
Register or HUD website when a participating jurisdiction exceeds the
maximum per-unit subsidy limit pursuant to the proposed Sec.
92.250(c), upon completion of the project.
Changes to Paragraph (f)
The proposed rule would require participating jurisdictions to
establish written property standards that meet the minimum requirements
at Sec. 92.251(f)(1) for housing occupied by tenants assisted with
TBRA, including compliance with State and local codes and ordinances,
health and safety, and lead-based paint requirements. The proposed rule
would also retitle Sec. 92.251(f) as ``Ongoing property condition
standards and inspections: Rental housing and housing occupied by
tenants receiving HOME tenant-based rental assistance.''
The Department also proposes to make a minor amendment to paragraph
(f)(1)(i) to add the term ``HOME'' before ``rental housing'' to clarify
that the Federal Register notice which HUD will publish will be
specific to the HOME program.
Project Inspections
Through the NSPIRE Final Rule, the Department improved alignment of
the HOME inspection standards with the standards of other HUD-assisted
housing programs. The Department understands that HOME is frequently
one of many financing sources in a multifamily rental development
project and, therefore, HOME projects are often subject to the
requirements of many other public and private funding sources.
Consequently, HUD is proposing to provide administrative relief in this
proposed rule by adding to Sec. 92.251 paragraphs (b)(1)(viii)(A) (for
rehabilitation projects), (f)(3)(i)(B) (for ongoing inspections of
rental housing), and (f)(4)(ii) (for housing occupied by tenants
receiving TBRA) to permit a participating jurisdiction to accept the
completion or ongoing inspection, as applicable, conducted for another
funding source in accordance with the National Standards for the
Condition of HUD housing (24 CFR part 5, subpart G) or an alternative
inspection standard, which HUD may establish through Federal Register
notice to determine that the project and units are decent, safe,
sanitary, and in good repair. The participating jurisdiction must still
conduct initial and progress inspections of rehabilitation projects and
determine compliance with the participating jurisdiction's HOME
rehabilitation standards, State and local codes, ordinances, and zoning
requirements. Under this proposed rule, a participating jurisdiction
may accept an inspection performed under the Uniform Physical Condition
Standards prior to the NSPIRE effective date. Inspections that occur
after the effective date of NSPIRE for HOME and used by the
participating jurisdiction to verify the housing is decent, safe,
sanitary, and in good repair must be conducted under NSPIRE or an
alternative inspection standard, as described in the proposed Sec.
92.251.
For ongoing inspections of rental housing, HUD proposes to amend
paragraph (f)(3) to permit a participating jurisdiction to accept an
inspection that occurred within the past 12 months. However, the
Department encourages participating jurisdictions to align the
[[Page 46631]]
project's ongoing inspection schedule with the schedule of inspections
of other HUD programs or funders. The proposed rule would require that
a participating jurisdiction perform an on-site inspection within 12
months after project completion and every three years during the period
of affordability. The participating jurisdiction may not accept the
determination of another funder under Sec. 92.251 for the first
ongoing inspection occurring 12 months after project completion but may
accept the determination of another funder in accordance with Sec.
92.251 every three years thereafter.
For ongoing annual inspections for housing with tenants receiving
TBRA, HUD proposes to insert a new paragraph (f)(4) for TBRA to state
that a participating jurisdiction may accept an inspection performed
for another funding source in accordance with Sec. 92.251 that
occurred within the past three months. The Department proposes a
shorter timeframe for accepting inspections of TBRA units performed by
other funders under Sec. 92.251 because TBRA ongoing inspections are
required annually after initial occupancy while inspections of HOME-
assisted rental projects may be conducted every three years during the
period of affordability.
The proposed rule would also add Sec. 92.251(b)(1)(viii)(B) (for
rehabilitation projects) and includes language at Sec.
92.251(f)(3)(i)(B) (for ongoing inspections of rental housing) and
Sec. 92.251(f)(4)(ii) (for housing occupied by tenants receiving TBRA)
to require that the participating jurisdiction document a determination
by another funder that the project and unit(s) are decent, safe,
sanitary, and in good repair. To document a determination means that
the participating jurisdiction must obtain the inspection report that
indicates that all deficiencies have been corrected. These paragraphs
would also clarify that when the participating jurisdiction documents a
determination by another funder under Sec. 92.251, it is not required
to conduct a duplicative HOME on-site inspection.
The proposed rule would restructure paragraph (c)(3) and add
paragraph (c)(3)(ii) to eliminate the requirement at Sec. 92.251(c)(3)
that a homebuyer acquisition project (e.g., downpayment assistance)
that does not meet HOME property standards must be rehabilitated or it
cannot be acquired with HOME funds. This requirement was added in the
2013 HOME Final Rule and the Department is concerned that it had the
unintended impact of reducing the supply of housing available for
purchase by HOME-assisted homebuyers by prohibiting rehabilitation
after the HOME-assisted acquisition to meet required property
standards. Currently, a home that does not meet property standards
cannot be purchased with HOME funds. Also, the Department understands
that sellers are often unwilling to perform rehabilitation to a home
prior to its acquisition by a HOME-assisted homebuyer, making many
properties ineligible for purchase with HOME funds. The proposed rule
would add paragraph (c)(3)(ii) to Sec. 92.251 to permit housing to be
purchased by a homebuyer prior to compliance with HOME property
standards if the homebuyer written agreement with the participating
jurisdiction requires the project to meet HOME property standards
within six months of acquisition and determines that funds are secured
for rehabilitation. The participating jurisdiction would be required to
conduct a final inspection within six months of the title transfer to
determine compliance with the required property standards.
Through this proposed rule, the inspection standards for periodic
on-site inspections of HOME-assisted rental housing including frequency
of inspections, inspection samples, and annual certifications by owners
at Sec. 92.504(d)(1)(ii) would be moved to a new paragraph (f)(3). The
inspection sample requirements in the proposed rule at Sec.
92.251(f)(3)(iii) would require that the sample of units for an onsite
inspection be a random sample rather than a statistically valid sample.
While the Department's software creates a statistically valid sample of
units for its inspection of HUD-assisted housing conducted using the
NSPIRE Standards, HUD is proposing this change because it is concerned
that participating jurisdictions do not have software capability to
develop a statistically valid sample of units. In addition,
participating jurisdictions have sought guidance about the requirement
currently at Sec. 92.504(d)(1)(ii)(D) regarding what constitutes a
sample size appropriate for the size of the HOME-assisted project.
Consequently, in the proposed Sec. 92.251(f)(3)(iii) the Department
would require inspection of a sample size of 20% of the HOME-assisted
units in a project, except for a project with one to four HOME-assisted
units where the requirement that 100% of the units be inspected remains
unchanged.
When conducting inspections, the jurisdiction should consider the
project's compliance with accessibility requirements as determined by
24 CFR part 8, which implements Section 504 of the Rehabilitation Act
of 1973 (29 U.S.C. 794), Titles II and III of the Americans with
Disabilities Act (42 U.S.C. 12131-12189) implemented at 28 CFR parts 35
and 36, and the Fair Housing Act (42 U.S.C. 3601-19) implemented at 24
CFR part 100, as applicable. These accessibility requirements apply to
a project as a whole, including both HOME and non-HOME-assisted units.
Where practicable, HUD recommends a participating jurisdiction select a
random sample of units using a methodology that captures different unit
types, features, and accessibility designations, and to the extent
feasible, that the same units are not inspected in every inspection.
Specific solicitation of comment #4: The Department specifically
seeks public comment on the proposal to require that a participating
jurisdiction inspect at least 20% of the HOME-assisted units during its
ongoing on-site inspections of rental housing.
In addition, the proposed rule would move the requirements Sec.
92.504(d)(1)(iii) for annual on-site inspections of HOME-assisted
housing occupied by tenants receiving TBRA to a new paragraph (f)(4)
and clarify that inspections must determine whether the housing meets
the property standards in Sec. 92.251(f)(1).
The proposed rule would move the financial oversight requirements
for HOME-assisted rental projects currently at Sec. 92.504(d)(2) to
Sec. 92.251(f)(3)(iv). This change is proposed to consolidate the
other periodic review requirements for rental housing during the period
of affordability into one section of the regulation. In addition, the
proposed rule would clarify the Department's intent that the financial
oversight requirements apply to rental projects with 10 or more HOME-
assisted units, which was discussed in the preamble to the 2013 HOME
Final Rule but has remained a source of confusion for participating
jurisdictions.
HUD proposes to move the requirements for re-inspections and the
requirement to adopt a more frequent inspection schedule as the result
of health and safety deficiencies currently at Sec.
92.504(d)(1)(ii)(B) to the corrective and remedial action requirements
of Sec. 92.251, which HUD proposes to move to paragraph (f)(5).
Relatedly, pursuant to section 226(c) of NAHA.\20\ the proposed rule
would provide an exception for small-scale housing from the requirement
that a participating jurisdiction must adopt a more frequent inspection
schedule for properties that have been found to have health and safety
deficiencies. If all health and safety deficiencies are corrected, the
[[Page 46632]]
proposed rule would permit but not require a participating jurisdiction
to adopt a more frequent inspection schedule for small-scale housing.
In the future, the Department hopes to simplify ongoing inspections for
small-scale rental housing projects by developing a streamlined list of
specific deficiencies for which participating jurisdictions would
inspect. The changes described in this paragraph correspond to the
administrative relief provided for small-scale housing at Sec. 92.252.
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\20\ 42 U.S.C. 12756(c).
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The Department also proposes to move the requirements currently at
Sec. 92.251(f)(5) to paragraph (g) of Sec. 92.251 and revise the new
Sec. 92.251(g) to add further clarity to the requirements for
inspection procedures.
Specific solicitation of comment #5: The Department specifically
requests public comment from participating jurisdictions and program
participants regarding the challenges they have encountered in using
HOME funds to assist small-scale housing, as defined in this proposed
rule. The Department also requests public comment regarding the costs
and benefits of the changes that HUD is proposing for small-scale
housing in requirements for the frequency of income determinations and
inspections and the use of alternative waiting lists.
20. Qualification as Affordable Housing: Rental Housing (24 CFR 92.252)
The Department most recently revised Sec. 92.252 in the HOTMA
Final Rule.\21\ Those changes become effective on January 1, 2024. The
changes made to Sec. 92.252(b)(2) in the HOTMA Final Rule divided the
Low HOME Rent limit provision in Sec. 92.252(b)(2) into paragraphs
(b)(2)(i) and (b)(2)(ii) to separate the conditions that a HOME-
assisted unit that also receives Federal or State project-based rental
subsidy must meet in order for a project owner to charge the maximum
rent allowable under the Federal or State project-based rental subsidy
program.
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\21\ 88 FR 9600 at 9612, 9614-9615.
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The HOTMA Final Rule also revised Sec. 92.252(h). These provisions
are being renumbered, reorganized, and revised in the proposed Sec.
92.252(g).
The proposed rule would amend the introductory text of Sec. 92.252
to eliminate the requirement that a participating jurisdiction must
submit a marketing plan to HUD for any HOME-assisted rental units that
have not achieved initial occupancy within six months of project
completion in IDIS. The participating jurisdiction would still be
required to take action to ensure the unit is rented if the unit is not
occupied within six months and repay the HOME investment if the unit
does not achieve initial occupancy within 18 months. The Department
does not currently approve marketing plans, so this change would
provide administrative relief to participating jurisdictions without
eliminating the requirement that participating jurisdictions work with
the project owner to develop and implement a marketing plan to meet the
deadline for initial occupancy. This change does not revise any
affirmative marketing requirements in Sec. 92.351.
The proposed rule would also implement several changes to the rent
limits at Sec. 92.252 for HOME-assisted rental housing. The proposed
rule would reorganize the general requirements that are currently in
effect and apply to all rent limits by moving these requirements to the
introductory text of Sec. 92.252(a) rather than repeating the
requirements in each paragraph. These general requirements include that
the rent for a HOME-assisted unit must not exceed the rent limits, the
Department will publish the HOME rent limits on an annual basis, with
adjustments for number of bedrooms in the unit, the participating
jurisdiction may designate (in its written agreement with the owner)
more than the minimum HOME units (both High HOME and Low HOME rent
units) in a rental housing project, and the rent limits apply to the
rent plus the utilities or utility allowance. The proposed rule would
also remove several duplicative requirements in Sec. 92.252 to improve
clarity and readability.
The proposed rule would reorganize Sec. 92.252 by moving the
requirements for High HOME Rent limits in Sec. 92.252(a), Low HOME
Rent limits in Sec. 92.252(b), and SRO Housing rent limits in Sec.
92.252(c) to the proposed Sec. 92.252(a)(1), (a)(2), and (a)(3),
respectively. The proposed rule would title the proposed Sec.
92.252(a) as ``HOME Rent Limits,'' title the proposed Sec.
92.252(a)(1) as ``High HOME Rent Limits,'' title the proposed Sec.
92.252(a)(2) as ``Low HOME Rent Limits,'' and title the proposed Sec.
92.252(a)(3) as ``HOME Rent Limits for SRO Projects.''
The Housing and Economic Recovery Act of 2008 (HERA) (Pub. L. 110-
289, 122 Stat. 2654, approved July 30, 2008) amended the 1937 Act and
made comprehensive and significant reforms to HUD's Section 8 Tenant-
Based Voucher and Project-Based Voucher programs. Many of the required
regulatory changes at 24 CFR parts 982 were implemented through ``The
Housing and Economic Recovery Act of 2008 (HERA): Changes to the
Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher
Programs,'' final rule (79 FR 36146), published on June 25, 2014 (the
``HERA Final Rule''). One of the changes required by section 2835(a)(2)
of HERA added section 8(o)(10)(F) to the 1937 Act (42 U.S.C.
1437f(o)(10)(F)) which streamlined the procedure for determining the
rent reasonableness standard for assistance under the section 8 tenant-
based voucher program in units receiving LIHTC or HOME funds. HUD fully
implemented this streamlined process for LIHTC units in the HERA Final
Rule. However, the HERA Final Rule did not fully implement the
streamlined process for HOME-assisted units. Instead, as explained in
the HERA Final Rule, the rent reasonableness requirements at Sec.
982.507 for HOME-assisted units included a placeholder pending a future
HOME rulemaking (which had just been completed in 2013) to revise
conflicting HOME regulations. HUD anticipated that the future HOME
rulemaking would revise the HOME regulations at 24 CFR part 92 to
prevent participating jurisdictions and owners of HOME-assisted
projects from being in non-compliance with HOME rent limits when
receiving the rent amount determined by a public housing authority
(PHA), pursuant to the rent reasonableness process established by HERA
for a tenant with a section 8 housing choice voucher (HCV). As
described in detail in this section, HUD is now proposing to make the
required revisions to Sec. 92.252 to align HOME rent limit
requirements with the rent reasonableness requirements for HOME-
assisted units in the proposed Sec. 982.507(c)(3). The proposed
changes would prevent the participating jurisdiction and an owner of
HOME-assisted units from being in noncompliance with HOME rent limits
when a PHA complies with the 1937 Act, as amended by HERA, in its HCV
rent payments to owners. Section D. of the proposed rule discusses the
proposed changes to Sec. 982.507(c)(3) to fully implement the HERA
section 8 HCV rent reasonableness process for HOME-assisted units.
The proposed rule would implement the following changes to remove
conflicts with the proposed rent requirements for the section 8 HCV
program at Sec. 982.507(c)(3). HUD proposes to remove the
applicability of the HOME rent limits in Sec. 92.252 to payments
provided under a Federal or State rental assistance or subsidy program.
This change in proposed Sec. 92.252(a) would revise current
[[Page 46633]]
program requirements in Sec. 92.252 by permitting an owner to receive
the rent determined by a PHA, in accordance with proposed Sec.
982.507(c)(3), or under another Federal or State rental assistance or
subsidy program even though the rent for HCV or another Federal or
State rental assistance or subsidy program exceeds the HOME rent
limits. HUD would still implement the requirements for rents in section
215(a) of NAHA (42 U.S.C. 12745(a)) by continuing to apply the HOME
rent limits to the rent and utilities required to be paid by the
tenant. This change would align the HOME program with the changes to
the 1937 Act required by HERA for the PHA's determination of rent for
HCV in HOME units. As the PHA must determine the HCV rent in compliance
with sections 8(o)(10)(A) and (F) of the 1937 Act (42 U.S.C.
1437f(o)(10)(A) and (F)) as proposed in Sec. 982.507(c)(3), the
proposed changes to Sec. 92.252 would prevent an owner from being in
noncompliance with HOME rent limit requirements when receiving the
required rent from a PHA on behalf of a tenant with HCV. Additionally,
the existing rent limit requirements in Sec. 92.252 can be confusing
for owners and these revisions would provide additional clarity so that
participating jurisdictions and owners understand that the HOME rent
limit requirements do not conflict with the rent requirements for
Federal rental assistance or subsidy programs or LIHTC.\22\ These
proposed changes also align with the LIHTC requirements for rent,
including when there is section 8 HCV assistance and other comparable
forms of rental assistance applicable to the unit or household.\23\
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\22\ The rent limits under the Low-Income Housing Credits or
LIHTC are governed by 26 U.S.C. 42(g)(2)(A).
\23\ Under 26 U.S.C. 42(g)(2)(B)(i), LIHTC gross rent does not
include any payment under section 8 of the United States Housing Act
of 1937 (42 USCS Sec. 1437f) or any comparable rental assistance
program applicable to either the rental unit or the household
occupying the unit.
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As discussed in further detail in the Regulatory Impact Assessment,
estimates of increased potential annual gross rent collection arising
from the proposed changes to HOME rent limits would only be fully
realized if all HOME units have tenants that receive rental assistance.
Precise data on how many tenants in HOME units that also receive
tenant-based rental assistance like HCV does not exist, but it is
unlikely that a majority of HOME units without a project-based subsidy
are occupied by tenants with a tenant-based subsidy. Data reported to
HUD at the time of initial HOME rental project lease-up suggests that
24 to 30 percent of tenants in units without project-based subsidies
receive HCVs. HUD anticipates that the changes in the proposed rule to
conform to the changes by HERA, will result in an annual increase in
payments to property owners of roughly $78-$125 million, which is
approximately 0.3 to 0.5 percent of HCV's budget authority for rental
assistance in FY 2023. The proposed changes therefore may potentially
leave PHAs unable to provide rental assistance to 6,000-11,000
households that they otherwise would have if the PHAs had provided
rental assistance payments up to the current HOME rent limits rather
than the reasonable rent determined by a PHA. It is also possible that
future Congressional appropriations would cover the same number of
vouchers regardless of relatively small changes in per voucher costs,
in which case the number of assisted households would not be affected.
Nonetheless, Congress specifically provided for these proposed changes
for HOME units in HERA and under the proposed rule, HOME rent limits
would still apply to the rent and utilities paid by the tenant. The
only impacts on tenants and prospective tenants are that tenants with
HCVs or other tenant-based rental assistance would become more
desirable to owners, and that residents of HOME-assisted projects could
experience improved housing conditions (since some projects would see
improved cash flow).
The proposed revisions would make the treatment of payments
consistent under Federal or State project-based and tenant-based rental
assistance programs for both High HOME and Low HOME rent units. As a
result, the proposed revisions would also decrease administrative
burden for participating jurisdictions and owners. Consequently, a
participating jurisdiction may focus its monitoring and enforcement of
HOME rent limit requirements on the amount that is required to be paid
by the tenant to an owner rather than on whether payments for rent
under a Federal or State tenant-based or project-based rental
assistance or subsidy program meet the Low HOME and High HOME rent
limit requirements.
The Department also proposes to move the requirement that
subsequent rents for a project are not required to be lower than the
HOME rent limits for the project in effect at the time of project
commitment from Sec. 92.252(f) to the proposed Sec. 92.252(a). The
proposed revision would clarify that the rent floor for a project is
established at the time of commitment of HOME funds to the project and
may apply to rents at the time of initial occupancy as well as
subsequent rents.
The proposed Sec. 92.252(a)(2)(i) would clarify that the maximum
rent is 30 percent of the annual income of a family whose income equals
50 percent of AMI, as determined by HUD, except when 30 percent of the
annual income of a family with income at 50 percent AMI is higher than
the fair market rent under the proposed Sec. 92.252(a)(1)(i). This
change would clarify that the only circumstance in which the High HOME
Rent would be lower than the Low HOME Rent is if the fair market rent
permitted in Sec. 92.252(a)(1)(i) is lower than 30 percent of the
annual income of a family whose income equals 50 percent AMI, as
described in the proposed Sec. 92.252(a)(2)(i). This proposed change
is appropriate because the Department does not establish the 65 percent
AMI rent limit, as permitted under Sec. 92.252(a)(1)(ii), to be lower
than the 50 percent AMI rent limit in Sec. 92.252(a)(2)(i). As a
result, there is no need to continue using ``applicable rent'' in the
proposed Sec. 92.252(a)(2)(i). The proposed revisions would clarify
that if the fair market rent, as permitted under Sec. 92.252(a)(1)(i),
is lower than the rent limit of 30 percent of the annual income of a
family whose income equals 50 percent AMI, as determined by HUD, the
Low HOME rent limit in Sec. 92.252(a)(2)(i) is the fair market rent
permitted under the High HOME rent limit at Sec. 92.252(a)(1)(i).
HUD is also proposing other changes to remove conflicts with the
changes implemented by HERA in the proposed Sec. 92.252(a)(2)(ii). The
proposed rule would revise the current requirements at Sec.
92.252(b)(2)(i) and (ii) by removing Sec. 92.252(b)(2)(i) which
currently applies to Low HOME rent units with tenant-based rental
assistance and revising Sec. 92.252(b)(2)(ii) to be the proposed Sec.
92.252(a)(2)(ii). The proposed Sec. 92.252(a)(2)(ii) would conform the
requirement on rent contribution by the family to the proposed change
that the HOME rent limits do not apply to payments provided under a
Federal or State rental assistance or subsidy program by removing
references to ``Federal or State project-based rental subsidy'' and
``Federal or State project-based rental subsidy program.''
In the 2013 HOME Final Rule, the Department removed the discretion
for a participating jurisdiction to use the local PHA utility allowance
and required the use of the HUD Utility Model or a project-specific
utility allowance based on the utilities used in the project. The
Department identified and explained the permissible methods
[[Page 46634]]
of determining the utility allowance for a HOME-assisted rental project
that align with LIHTC.\24\ The purpose of the change in the 2013 HOME
Final Rule was to require more accurate utility allowances and reward
energy efficiency measures with the possibility of higher rental
revenue to the owner. In doing so, the Department unintentionally
created a conflict between the HOME program and the Section 8 project-
based voucher (PBV) and HUD Veterans Affairs Supportive Housing (HUD-
VASH) PBV programs, which require the use of a local PHA's utility
allowance. Due to these conflicting requirements, the Department has
approved numerous waivers of this requirement in Sec. 92.252 when HOME
and PBVs or HUD-VASH PBVs are combined in the same projects.
Consequently, the proposed rule at Sec. 92.252(b) would restore the
option to use the local PHA's utility allowance for HOME-assisted
rental projects to realign utility allowance requirements in HOME and
PBVs.
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\24\ HOMEfires Vol. 13, No. 2 Guidance on How to Establish
Utility Allowances for HOME-Assisted Rental Units, available at
<a href="https://www.hudexchange.info/resource/5034/homefires-vol-13-no-2-guidance-on-how-to-establish-utility-allowances-for-home-assisted-rental-units/">https://www.hudexchange.info/resource/5034/homefires-vol-13-no-2-guidance-on-how-to-establish-utility-allowances-for-home-assisted-rental-units/</a>.
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Specific solicitation of comment #6: Rather than permitting all
HOME-assisted projects to use the local PHA's utility allowance, should
HUD limit the use of the PHA utility allowance to only HOME-assisted
projects which also receive PBV or HUD-VASH PBV assistance?
The proposed rule would clarify the period of affordability
requirements in proposed Sec. 92.252(d) by removing ``not less than''
to require that HOME-assisted units meet the program requirements for
the required period of affordability, beginning from the date of
project completion, to prevent further confusion that the period of
affordability must be more than the required period in the table in
Sec. 92.252 and to specify that the period of affordability starts at
project completion. The proposed rule would also clarify in proposed
Sec. 92.252(d) that the affordability requirements for HOME rental
housing include the applicable rent limits, period of affordability,
and income requirements. The Department would also clarify that the
means of enforcement for the affordability requirements include deed or
use restrictions, liens on real property, a covenant running with the
land, a recorded agreement restricting the use of the property, or any
other mechanism approved in writing by HUD, under which the
participating jurisdiction has the right to require specific
performance. The Department also proposes to revise Sec. 92.252, as
well as Sec. Sec. 92.254 and 92.504, to make the means of enforcement
for affordability requirements consistent throughout the proposed rule.
The proposed Sec. 92.252(e)(3) would also increase the minimum number
of days for prior written notice of any increase in rents for HOME-
assisted units from not less than 30 days to not less than 60 days.
Due to changes to the rent limit requirements in Sec. 92.252(a),
this proposed rule would renumber Sec. 92.252(a) through (i).
The proposed rule would also update terminology to be consistent
throughout the section. This includes revising the use of the term
``maximum rent limit'' to ``rent limit'' in paragraphs (a), (c), and
(e) because the applicable rent limit is the maximum rent and the use
of the term ``maximum rent limit'' in some places is confusing. In
addition, the proposed rule would update any references to the
renumbered paragraphs throughout the rule.
While the proposed rule in paragraph (b) would realign utility
allowance requirements in HOME and PBVs, the proposed rule would still
require that the utility allowance account for energy efficiency
measures of the project. Despite this requirement, the Department
recognizes that certain Federal or State tax credits and other
incentives are available to owners of affordable housing projects in
order to encourage energy retrofits and the installation of solar and/
or wind facilities. Often these types of incentive programs require
that the low-income tenants of the affordable rental housing receive
financial benefit from the energy efficiency measures. Because the
participating jurisdiction is required to update the project's utility
allowance annually and must account for any energy efficiency measure
of the project, the utility allowance provided to the tenant would
likely decrease following any energy efficiency upgrades. This decrease
in the utility allowance could therefore result in a financial benefit
to the owner rather than the tenant. In addition, because the tenant
may receive no financial benefit, the owner may not receive the tax
credit or other incentives. Ultimately, as proposed, the HOME utility
allowance requirements may disincentivize energy efficiency upgrades.
As described below, HUD seeks public comment on how to avoid
disincentivizing energy efficiency upgrades.
Specific solicitation of comment #7: The Department seeks input on
whether and how the rule should facilitate the conveyance of a
financial benefit to low-income tenants when the project owner makes
energy efficiency upgrades such as the installation of small-scale wind
or solar facilities in connection with an eligible Federal or State
program. HUD has issued guidance that currently describes how certain
utility discounts or rebates can be treated under HUD income and
utility allowance regulations.\25\ HOME is subject to the same income
requirements under 24 CFR 5.609 as other program areas issuing guidance
on the treatment of these discounts and rebates. The Department
therefore also requests comment from the public on whether to go
farther than this guidance for HOME projects through this HOME
rulemaking. For example, should HUD maintain the same utility allowance
for the project following energy efficiency upgrades to allow the
tenant to realize the benefit of decreased utility costs? Both the
current income regulations at 24 CFR 5.609 and 24 CFR 5.609 as revised
in the HOTMA Final Rule exclude lump-sum additions to assets, as well
as non-recurring income. However, if a HUD program provided a recurring
financial benefit directly to a low-income tenant, should the rule
exclude this income from the HOME income determinations?
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\25\ See <a href="https://www.hud.gov/sites/dfiles/Housing/documents/MF_Memo_Community_Solar_Credits_signed.pdf">https://www.hud.gov/sites/dfiles/Housing/documents/MF_Memo_Community_Solar_Credits_signed.pdf</a>; <a href="https://www.hud.gov/sites/dfiles/Housing/documents/MF_Memo_re_Community_Solar_Credits_in_MM_Buildings.pdf">https://www.hud.gov/sites/dfiles/Housing/documents/MF_Memo_re_Community_Solar_Credits_in_MM_Buildings.pdf</a>; and <a href="https://www.hud.gov/sites/dfiles/PIH/documents/Community%20Solar%20Credits%20in%20PIH%20Programs.pdf">https://www.hud.gov/sites/dfiles/PIH/documents/Community%20Solar%20Credits%20in%20PIH%20Programs.pdf</a>.
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Specific solicitation of comment #8: The Department specifically
requests public comment from participating jurisdictions, developers,
and other affected members of the public about the appropriateness of
the length of the HUD-required periods of affordability for HOME-
assisted rental housing. The current regulation at 24 CFR 92.252(e)
establishes periods of 5 years for a per-unit HOME investment of under
$15,000, 10 years for a per-unit investment between $15,000 and
$40,000, and 15 years for a per-unit investment of more than $40,000,
15 years for any unit involving refinancing of existing debt, and 20
years for any unit involving new construction. Section 215(a)(1)(E) of
NAHA (42 U.S.C. 12745(a)(1)(E)) requires that the period of
affordability be for the remaining useful life of the HOME-assisted
property, as determined by HUD, without regard to the term of the
mortgage or to transfer of ownership, or for such other period that HUD
determines is the longest feasible period of time consistent with sound
economics
[[Page 46635]]
and the purposes of NAHA. Since the Department established these
periods of affordability in 1991, costs have increased significantly,
LIHTCs have become the primary funding mechanism for rental housing,
and the housing affordability crisis in the country has worsened
significantly. The Department seeks input about whether the length of
the periods of affordability and the dollar thresholds and activity
thresholds that are the basis of the current periods of affordability
remain appropriate. In addition, the Department seeks input about any
project feasibility challenges of the current HOME periods of
affordability and factors that the HUD should consider in contemplating
changes to the current periods of affordability.
Through this rule, the Department proposes to streamline procedures
and simplify requirements in proposed Sec. Sec. 92.252(g)(1),
92.253(e)(5), and 92.251(f)(5)(i) for small-scale rental housing
projects (one to four total units) for reexamination of annual income,
tenant selection, and ongoing physical inspections. Section 226(c) of
NAHA permits HUD to provide streamlined procedures in monitoring
compliance with HOME requirements for small-scale housing when HUD
determines it is appropriate. While current HOME requirements may be
standard for larger rental projects managed by professional landlords
or property management companies, the requirements can be a significant
disincentive to participation in the program for landlords or would-be
landlords of small-scale properties such as homeowners adding an
accessory dwelling unit (ADU) or HOME-assisted homebuyers purchasing
duplexes or triplexes. Such small-scale projects may be an attainable
method for participating jurisdictions with less resources to address
their rental housing needs while generating income or supporting owner-
occupants (irrespective of whether their own unit is HOME-assisted).
Reducing administrative burden would make HOME a viable funding option
for such programs that create ADUs or provide financing for resident
landlords.
The proposed rule would revise Sec. 92.252 to clarify requirements
for tenant income re-examination, align with the requirements in Sec.
92.203(a) and (b), and to provide flexibilities for small-scale
housing, multifamily projects with a period of affordability of ten
years or more, and for units with Federal or State project-based
subsidy or tenant-based rental assistance. The proposed rule would
revise the first paragraph of proposed Sec. 92.252(g) to recognize the
exceptions from Sec. 92.203(b)(1)(i) for a participating jurisdiction
that accepts an annual income determination in accordance with Sec.
92.203(a)(1) or (2) or determines income in accordance with Sec.
92.203(b)(2). Currently, Sec. 92.203(a)(1) requires a participating
jurisdiction to accept a Federal or state project-based subsidy
provider's determination of a family's annual income if a family is
applying for a HOME unit assisted by a Federal or state project-based
subsidy program. Similarly, pursuant to Sec. 92.203(a)(2), a
participating jurisdiction has the option to accept a rental assistance
provider's determination of a family's annual income if the family is
applying for a HOME unit and is receiving tenant-based rental
assistance (e.g., a Housing Choice Voucher). This rule's revision to
proposed Sec. 92.252(g) would make the regulations at Sec. 92.203
consistent with proposed Sec. 92.252(g). The proposed rule would also
revise the first paragraph in proposed Sec. 92.252(g) to require the
participating jurisdiction to require the owner to re-examine each
tenant's annual income in accordance with the option in Sec.
92.203(b)(1) that the participating jurisdiction selects and includes
in the written agreement. The proposed rule would add paragraphs (1)
through (3) to proposed Sec. 92.252(g) to establish exceptions to this
general re-examination requirement.
The proposed rule would reduce burdens on landlords of small-scale
housing by adding paragraph (g)(1) to Sec. 92.252 to permit a
participating jurisdiction to permit an owner of small-scale housing to
reexamine each tenant's annual income every three years rather than
annually. For owners of small-scale housing that select the option at
Sec. 92.203(b)(1)(ii) and are located in participating jurisdictions
which permit owners of small-scale housing to reexamine a tenant's
annual income every three years, the proposed rule would except these
owners of small-scale housing from the requirement to obtain annual
self-certifications from their tenants within the three-year period
following completion of these tenants' income examinations. This
proposed change to the schedule of reexamining tenant annual income for
small-scale housing would have a minimal effect on the landlord's
rental income because the rent limit would not change until the
tenant's income increased above 80 percent of AMI. In addition, this
proposed change aligns with the other proposed changes for small-scale
housing in Sec. 92.251 to permit a three-year physical inspection
requirement schedule rather than a risk-based schedule and Sec. 92.253
to permit the participating jurisdiction, upon request by an owner of
small-scale housing, to establish alternative procedures to a written
waiting list for small-scale housing, subject to HUD's written approval
of the procedures and determination that the selection of a tenants
from a waiting list in chronological order by the owner is
impracticable.
The proposed rule would add paragraph (g)(2) to Sec. 92.252 to
impose and further clarify the existing requirement for owners of a
multifamily project with a period of affordability of 10 years or more.
Currently, during the period of affordability, an owner may re-examine
tenant income annually using a statement and certification, in
accordance with Sec. 92.203(b)(1)(ii). The proposed rule would clarify
that if a participating jurisdiction permits the owner to re-examine
income using a statement and certification, the participating
jurisdiction must require the owner to re-examine the income of each
tenant using source documentation, at minimum, every six years, in
accordance with Sec. 92.203(b)(1)(i). This reflects the same
requirement currently in Sec. 92.252(g), but the language has been
revised to clarify that the participating jurisdiction must enforce
compliance by the owner with this requirement.
To align with the requirements in Sec. 92.203(a), the proposed
rule would also include an exception for units with Federal or State
project-based subsidy or tenant-based rental assistance by adding
paragraph (3) to 92.252(g). The proposed 92.252(g)(3) would except an
owner from re-examining a tenant's annual income in accordance with
Sec. 92.203(b) for HOME when a participating jurisdiction accepts an
annual income determination under Sec. 92.203(a)(1) or (2).
The proposed rule would renumber the existing Sec. 92.252(i)(2) to
Sec. 92.252(h)(2) and makes several changes to the proposed Sec.
92.252(h)(2) to improve readability and clarity regarding over-income
tenant requirements. In addition to creating new paragraphs (h)(2)(i)
and (ii), the proposed rule would clarify in the proposed Sec.
92.252(h)(2)(i) that the participating jurisdiction may permit tenants
of HOME-assisted units subject to rent restrictions under LIHTC to pay
the rent amount required under LIHTC requirements. In the proposed
Sec. 92.252(h)(2)(ii), HUD would further clarify that an over-income
tenant in a floating HOME-assisted unit must pay a rent amount no
greater than the fair
[[Page 46636]]
market rent for comparable, non-HOME-assisted units in the
neighborhood.
In proposed Sec. 92.252(i), the proposed rule would also
explicitly prohibit the use of surety bonds, security deposit
insurance, or similar instruments to be used in lieu of or in addition
to a security deposit in HOME-assisted units.
The proposed revisions to Sec. 92.252(j) and (k) update citations
to conform with the redesignation of the current Sec. 92.253(d) as
Sec. 92.253(e) and the Department's proposal to move the requirements
for on-site inspections and financial oversight of rental projects from
Sec. 92.504(d) to Sec. 92.251(f) respectively.
21. Tenant Protections and Selection (24 CFR 92.253)
The Department is proposing significant revisions to the tenant
protections and selection provisions in Sec. 92.253, consistent with
the priorities set out in the Administration's Renters' Bill of
Rights.\26\ HUD's proposed revisions to the HOME program in Sec.
92.253 would provide a robust set of tenant protections appropriate to
the HOME program. These tenant protections are based on the
Department's review of existing HUD programs (e.g., the Section 8 PBV
program \27\ and the public housing program \28\), a number of State
statutes and local ordinances (e.g., Virginia,\29\ Washington, DC,\30\
California,\31\ Texas,\32\ and Florida \33\), and the Military Housing
Privatization Initiative \34\). To implement the new tenant
protections, HUD is proposing in Sec. 92.253(a)(4) to require that all
tenants in HOME-assisted rental housing units or receiving TBRA have a
new HOME tenancy addendum appended to their lease. This HOME tenancy
addendum would include the new tenant protections listed in Sec.
92.253(b). Through this proposed rule, the Department would replace the
list of prohibited lease terms currently in Sec. 92.253(b) with a
description of the provisions that HUD will include in the HOME tenancy
addendum.
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\26\ Available at <a href="https://www.whitehouse.gov/wp-content/uploads/2023/01/White-House-Blueprint-for-a-Renters-Bill-of-Rights.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/01/White-House-Blueprint-for-a-Renters-Bill-of-Rights.pdf</a>.
\27\ See HUD's Tenancy Addendum Section 8 Project-Based Voucher
Program, available at <a href="https://www.hud.gov/sites/dfiles/OCHCO/documents/52530C.pdf">https://www.hud.gov/sites/dfiles/OCHCO/documents/52530C.pdf</a>; 24 CFR 983.256.
\28\ 24 CFR part 966.
\29\ Va. Code Ann. Sec. Sec. 55.1-1200 through 1262.
\30\ D.C. Official Code, Title. 42, Ch. 35.
\31\ Cal. Civ. Code, D. 2; Cal Civ. Code, D. 3, Pt. 4, T. 5.
\32\ Tex. Prop. Code Title 8, Ch. 92.
\33\ Fla. Stat. Title VI, Ch. 83.l.
\34\ 10 U.S.C. 2890 and the Military Housing Privatization
Initiative Tenant Bill of Rights, available at <a href="https://media.defense.gov/2020/May/18/2002302053/-1/-1/1/TENANT_BILLOFRIGHTS.PDF">https://media.defense.gov/2020/May/18/2002302053/-1/-1/1/TENANT_BILLOFRIGHTS.PDF</a>.
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The proposed rule at Sec. 92.253(a) would revise the heading of
paragraph (a) to ``Lease Contents'' to more accurately describe the
requirements within the paragraph, as proposed. The introductory text
clarifies that the protections apply to both tenants of HOME-assisted
rental housing as well as tenants receiving TBRA. The paragraph also
clarifies an existing requirement that the tenant lease be in writing
and adds a new requirement that the owner provide the participating
jurisdiction a copy of the written lease before it is executed and when
the written lease is revised. This new requirement gives the
participating jurisdiction the ability to verify that the owner's lease
includes the HOME tenancy addendum and otherwise complies with the
revised requirements of this section.
The proposed rule at Sec. 92.253(a)(1) would require that a
tenant's lease contain more than one convenient method to communicate
directly with the owner or the property management staff, including in
person, by telephone, email, or through a web portal. This provision
would provide tenants with a reasonable way to contact an owner's
property management staff to request any repairs or maintenance that is
necessary for the unit or the common areas of the project. Similarly,
the proposed rule at Sec. 92.253(a)(2) would require that a lease
provide the participating jurisdiction's HOME program contact
information so that a tenant can contact the participating
jurisdiction. The proposed rule at Sec. 92.253(a)(3) maintains the
requirement that the Violence Against Women Act (VAWA) lease
requirements contained in Sec. 92.359(e) be included in a HOME
tenant's lease, except as otherwise provided in Sec. 92.359(b). The
proposed rule at Sec. 92.253(a)(4) would establish the requirement
that a HOME tenancy addendum, as further described below, is contained
in the lease.
The introductory text to proposed Sec. 92.253(b) would establish
that the HOME tenancy addendum shall prevail over any conflicting
provisions of the lease. The introductory text would also explain that
the lease, the HOME tenancy addendum, the VAWA addendum, and any
addenda required by a Federal or State affordable housing program shall
constitute the sole agreement between the owner and the tenant.
Specific solicitation of comment #9: The Department currently
applies only the tenant protections contained in the current Sec.
92.253(a) and (b) to tenants receiving TBRA. The proposed rule would
apply proposed paragraphs (a)-(c) and (d)(2) to tenants receiving TBRA,
including tenants that only receive HOME security deposit assistance.
The Department is seeking public comment on whether the requirements at
Sec. 92.253(b) and (d)(2) should be required for tenants that receive
TBRA. If not, what tenant protection requirements should apply to
tenants that receive TBRA?
The proposed rule at Sec. 92.253(b)(1) would describe tenant
protections surrounding the physical condition of the tenant's unit and
the project. Section 92.253(b)(1)(i) describes the requirement that the
owner maintain the physical condition of the unit and the project in
accordance with the participating jurisdiction's ongoing physical
condition standards in Sec. 92.251(f).
The proposed rule at Sec. 92.253(b)(1)(i) would establish that an
owner shall repair and maintain the unit and the common areas in
accordance with Sec. 92.253(b)(1)(i). The proposed rule at Sec.
92.253(b)(1)(ii)(A) would require that owners, as soon as practicable,
provide tenants with expected time frames for maintaining and repairing
units. The Department believes that this requirement is necessary to
ensure transparent communications regarding when units will be
repaired. The proposed rule at Sec. 92.253(b)(1)(ii)(B) would require
that owners, as soon as practicable, make repairs and perform
maintenance on units and common areas in a professional manner and in
accordance with the participating jurisdiction's property standards.
The Department recognizes that repairs cannot always be performed
immediately but seeks to clarify that the owner is still under an
obligation to perform required repairs and to do so as soon as
practicable. The proposed rule at Sec. 92.253(b)(1)(ii)(C) would
prohibit owners from charging tenants for the costs of addressing
normal wear and tear or damage to a unit or common areas other than
that caused by the tenant's negligence, recklessness, or intentional
acts.
The proposed rule at Sec. 92.253(b)(1)(iii) would require that,
when a life-threatening deficiency in the physical condition of the
tenant's unit or project impacts the tenant, the tenant shall be
promptly relocated into either a housing unit that is decent, safe,
sanitary, and in good repair, or placed into physically suitable
lodging until repairs on the tenant's housing unit or project are
completed. The Department anticipates that tenant relocation would only
be necessary if repairs could not be completed on the day the life-
[[Page 46637]]
threatening deficiency is identified, in which case the proposed rule
would require that the housing unit or lodging used for tenant
relocation be provided at no additional cost to the tenant. The
proposed Sec. 92.253(b)(1)(iii) would be added because the Department
seeks to prevent HOME tenants from remaining in housing that poses a
threat to their physical safety and from being subjected to additional
costs as a result of physical housing conditions outside their control.
The proposed rule at Sec. 92.253(b)(1)(iv) would require that,
where the owner controls the utilities, owners provide tenants with
uninterrupted utility service in projects. The proposed rule at Sec.
92.253(b)(1)(iv) would provide an exception to the proposed requirement
for when utility services are interrupted for a reason that is beyond
the control of the owner. The Department is proposing this revision to
counteract a disturbing trend of so-called ``self-help'' evictions
where owners use their ability to control utilities in a manner that is
detrimental to tenants as a means to compel tenants to terminate their
tenancy. In many States this ``self-help'' eviction practice is already
illegal,\35\ but, by addressing this issue in the proposed HOME tenancy
addendum, the proposed rule would prohibit the practice throughout
HOME-assisted rental housing and TBRA.
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\35\ See, e.g., Fla. Stat. Sec. 83.67; Va. Code Ann. Sec.
55.1-1243.1; Cal. Civ. Code Sec. 789.3; Mont. Code Ann. Sec. 70-
24-411.
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The proposed rule at Sec. 92.253(b)(2)(i) would explain that a
family has the right to reside with a foster child, foster adult, or
live-in aide in the unit. The proposed requirement to allow foster
children and adults to reside in a unit with a family is similar to the
requirements contained in the Section 8 HCV program.\36\ The proposed
requirement to allow a live-in aide to reside in a unit with a family
is part of the nondiscrimination requirements contained in Sec.
92.350.
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\36\ 24 CFR 982.551(h)(4).
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The proposed rule at Sec. 92.253(b)(2)(ii) would explain that,
except for shared housing arrangements in TBRA, the tenant's household
shall have exclusive use and occupancy of their unit. One of the rights
of tenancy is the tenants' exclusive use of their unit. Similar rights
are contained in the HUD Section 8 project-based voucher program
tenancy addendum,\37\ in the lease requirements for public housing
tenants,\38\ and in other leases used by servicemembers.\39\
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\37\ Available at <a href="https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf">https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf</a>.
\38\ 24 CFR 966.4(d).
\39\ See 10 U.S.C. 2890.
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The proposed rule at Sec. 92.253(b)(2)(iii) would set out the
permitted situations where an owner may enter a tenant's unit. The
proposed rule at Sec. 92.253(b)(2)(iii)(A) would allow an owner to
enter a unit during reasonable hours when the owner is performing
routine inspections and maintenance, making repairs to the unit, or
showing the unit to prospective tenants. Before the owner may enter the
unit under proposed Sec. 92.253(b)(2)(iii)(A), the owner must give the
tenant at least 2 days' notice, which must include the purpose for
entering the unit. The proposed rule at Sec. 92.253(b)(2)(iii)(B)
would allow an owner to enter a unit at any time, without advance
notice, if the owner has a reasonable belief that an emergency requires
entry to the unit. The proposed rule at Sec. 92.253(b)(2)(iii)(C)
would require that an owner that enters a unit when the tenant and all
adult members of the household are absent from the unit must provide a
written statement to the tenant explaining the date, time, and purpose
of their entry of the unit.
The proposed rule at Sec. 92.253(b)(2)(iv) would describe a
tenant's rights to reasonable access and use of the common areas of the
project. This language is proposed to clarify HUD's existing policy and
explicitly prohibit owners from having separate amenities such as gyms,
pools, spas, elevators, rooftop gardens, storage areas, and playrooms
that only non-assisted tenants can access or use.
The proposed rule at Sec. 92.253(b)(2)(v) would provide tenants
the right to organize, create tenant associations, convene meetings,
distribute literature, and post information at a project. Tenants have
these explicit protections in other HUD programs, including HUD
Multifamily Housing programs.\40\ This is also a tenant right provided
in a number of jurisdictions.\41\ The Department proposes to add these
explicit protections to the HOME program because the Department has
found that tenant organizations are especially helpful in providing
tenants with representation in addressing community-wide issues and
that tenant organizations may provide a more sufficient counterweight
to owners of larger projects who are not compliant with lease
provisions or HUD requirements.
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\40\ See 24 CFR part 964 for tenant participation and tenant
opportunities in public housing; 24 CFR part 245 for tenant
participation in Multifamily Housing projects.
\41\ See D.C. Official Code Sec. 42-3505.06; New York
Consolidated Laws, Real Property Law--RPP Sec. 230; Cal. Civ Code
Sec. 1942.6.
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The proposed rule at Sec. 92.253(b)(2)(vi) would state that a
tenant may not be required to accept supportive services that are
offered at the housing unless the tenant is living in transitional
housing and such services are required in connection with that housing.
This language is proposed to clarify HUD's existing policy and is part
of the prohibited lease provisions in the current Sec. 92.253(b)(9).
The proposed rule at Sec. 92.253(b)(3) would describe certain
notices that must be provided to a tenant by an owner. The proposed
rule at Sec. 92.253(b)(3)(i) would require that an owner notify a
tenant in writing of the specific grounds for any proposed adverse
action by an owner. These actions can be a variety of different
actions, including charging a tenant for tenant-caused damages. This
proposed requirement is similar to requirements of other HUD programs
such as HUD's public housing program.\42\
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\42\ See 24 CFR 966.4(e)(8).
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The proposed rule at Sec. 92.253(b)(3)(ii) would require that a
tenant be notified within 5 business days of any changes in ownership
to the project, including through a foreclosure. The proposed rule at
Sec. 92.253(b)(3)(ii) would also require that owners provide tenants
with 30 days' notice of an impending sale or impending foreclosure of
the property. These proposed requirements are similar to requirements
contained in a variety of State statutes \43\ and the Department
proposes these policies so that tenants are informed about changes in
ownership in their projects. Requiring that tenants receive notice of
this potential change earlier in the process helps better prepare those
tenants for these and other disruptive impacts that occur when there is
a change of ownership at a project. Changes in ownership of a project
may lead to more extensive changes in properties, including
rehabilitation of units or termination of affordability restrictions.
As such, reasonable notification requirements would allow tenants to
better prepare for any future changes to their housing. Section
92.253(b)(3)(iii) clarifies the existing lease prohibition contained at
Sec. 92.253(b)(4), which prohibits an owner from instituting a lawsuit
against the tenant without providing the tenant with notice.
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\43\ See, e.g., Va. Code Ann. Sec. 55.1-1237; Md Code, Real
Property Sec. 7-105.11.
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[[Page 46638]]
The proposed rule at Sec. 92.253(b)(4) would describe and further
specify a tenant's rights to available legal proceedings and remedies.
Most of the proposed Sec. 92.253(b)(4) reflects tenant protections
that already exist in the existing HOME rule, which are proposed to be
revised for inclusion in the tenancy addendum or for clarification.
The proposed rule would renumber and slightly rephrase, for the
purposes of the HOME tenancy addendum, the prohibited lease terms from
the current Sec. 92.253(b)(1)-(3) to Sec. 92.253(b)(4)(i)-(iii),
respectively. The proposed rule at Sec. 92.253(b)(4)(iv) would provide
additional clarification that a tenant has the right to independent
legal representation in any legal proceedings in connection with the
lease. A tenant is not required to appoint the owner as attorney-in-
fact as part of the lease and has the right to independent counsel that
can assist the tenant in any dispute relating to their lease, including
non-binding arbitration or alternative dispute resolution processes
that can precede a civil court proceeding. Preliminary studies have
demonstrated that when a tenant has representation, a court is less
likely to execute a warrant of eviction or enter a decision in favor of
the owner.\44\ While the Department is not proposing to provide HOME
tenants with funds to obtain counsel, given the benefits that counsel
can provide, the Department believes it is necessary to clarify that
tenants always have the right to independent counsel.
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\44\ See Ellen, I.G., O'Regan, K., House, S. and Brenner, R.,
2021, Do lawyers matter? Early evidence on eviction patterns after
the rollout of universal access to Counsel in New York City, Housing
Policy Debate, 31(3-5), pp.540-561.
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The proposed rule at Sec. 92.253(b)(4)(iv)(B) and (C) reframes the
current regulatory requirements for prohibited lease terms contained in
Sec. 92.253(b)(4) and (5) into affirmative tenant protections for
inclusion in the HOME tenancy addendum. The proposed Sec.
92.253(b)(4)(iv)(B) and (C) explains that a tenant may not be required
to waive any right to a trial by jury or waive the tenant's right to
appeal or otherwise challenge a court decision in connection with a
lease. Similarly, the proposed rule at Sec. 92.253(b)(4)(v) would
reframe the current prohibited lease term contained in Sec.
92.253(b)(8) into a tenant protection. The proposed affirmative tenant
protection in Sec. 92.253(b)(4)(v) states that a tenant may only be
required through the lease to agree to pay the owner's attorney's fees
or other legal costs if the tenant loses the court proceeding with the
owner.
The proposed rule at Sec. 92.253(b)(5)(i) would state that an
owner may not unreasonably interfere with the tenant's comfort, safety,
or enjoyment of a rental unit or retaliate against a tenant. The
proposed rule at Sec. 92.253(b)(5)(i)(A)-(E) would provide that
retaliation includes, but is not limited to, an owner's attempts,
during a tenant's lease, to recover possession of the housing unit in a
way that is not consistent with HUD requirements, decrease the services
to be provided to the unit, interfere with a tenant's rights to privacy
under State or local law, harass a household or their lawful guests, or
refuse to honor the terms of the lease.
The proposed rule at Sec. 92.253(b)(5)(ii) would describe the
rights that a tenant may exercise without fear of retaliation by an
owner. These rights of tenancy that a tenant may exercise include, but
are not limited to, a tenant's rights to report inadequate housing
conditions of the housing unit or project to the owner, participating
jurisdiction, code enforcement officials, or HUD; the ability to
request enforcement of the lease or any protection guaranteed under 24
CFR part 92; and the ability to request or obtain enforcement of any
applicable protections under Federal, State, or local law. The
Department believes that tenants must be able to exercise their rights
under their lease and applicable law free from worry of reprisal or
coercion. Several States have also prohibited retaliation against
tenants when the tenant has complained to a governmental agency
responsible for code enforcement, made a complaint to or filed a legal
action against the owner, organized or has become a member of a
tenant's organization, or has testified in a court proceeding against
the owner.\45\ Moreover, the Department believes that establishing this
as a right within the lease itself will assist in addressing situations
where owners retaliate against persons with disabilities that request
reasonable accommodations in HUD-assisted housing units.
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\45\ See, e.g., Fla. Stat. Sec. 83.64; Tex. Prop Code Sec.
92.331; Mont. Code Sec. 70-24-431.
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The proposed rule at Sec. 92.253(b)(6) would establish
confidentiality requirements to safeguard a tenant or applicant's
personally identifiable information.
The proposed rule at Sec. 92.253(c) would establish new security
deposit requirements for HOME-assisted rental housing and TBRA. Under
these proposed requirements, security deposits must be refundable and
may be no greater than two months' rent. The proposed rule would also
prohibit the use of surety bonds or security deposit insurance to be
used in lieu of or in addition to security deposits. Additionally,
proposed Sec. 92.253(c) would also provide that if an owner charges
any amount against a tenant's security deposit, then the tenant must be
provided a list of all items charged against the security deposit and
be promptly refunded the remainder of the security deposit balance. The
proposed change to Sec. 92.253(c) is distinct from the current HOME
regulation, which does not require refundable security deposits or that
the owner identify the individual charges made against a security
deposit. This proposed change is consistent with various State statutes
\46\ and other HUD programs \47\ and provides another layer of
protection for tenants in HOME-assisted rental housing and with
TBRA.\48\
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\46\ See, e.g., Tex. Prop Code Sec. 92.104; SDCL Sec. 43-32-
24; Md. Code, Real. Prop. Sec. 8-203.
\47\ See HUD's Section 8 Project-Based Voucher Program Tenancy
Addendum, part B.12, available at <a href="https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf">https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf</a>. See also 24 CFR 960.509(b)(3)(v) for
public housing requirements related to security deposits.
\48\ Disputes surrounding the retention of a security deposit,
if they arise, would typically remain a matter of state or local
landlord-tenant law.
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The proposed rule at Sec. 92.253(d) would revise the termination
of tenancy provisions for both HOME-assisted rental housing and TBRA
currently found at Sec. 92.253(c). Currently, the rules are silent on
what protections apply to termination of tenancy for tenants with
tenant-based rental assistance, as tenant-based rental assistance is
not subject to the termination of tenancy provisions in the current
rule at Sec. 92.253(c).
The proposed rule at Sec. 92.253(d)(1)(i) would clarify that an
owner may not terminate the tenancy of any tenant or household member
or refuse to renew the lease of a tenant except for serious or repeated
violation of the terms and conditions of the lease; for violation of
applicable Federal, State, or local law; for completion of the tenancy
period for transitional housing or failure to follow any required
transitional housing supportive services plan; or for other good cause.
The Department is proposing this clarification to the language
currently found at Sec. 92.253(c) in response to questions about
situations where an owner wishes to evict a member of the household but
not the entire household. The Department recognizes that other HUD
programs are more specific about the requirements that apply when
expelling a single member of the household and is proposing these
revisions to clarify the
[[Page 46639]]
termination of tenancy requirements that apply to each household
member.
The proposed rule at Sec. 92.253(d)(1)(i)(A)-(D) would provide a
more detailed explanation of ``good cause'' to terminate or refuse to
renew a tenancy. The proposed rule at Sec. 92.253(d)(1)(i)(A) would
clarify that a tenant's assets or the type of income or assets that the
tenant possesses is not good cause to terminate or refuse to renew a
tenancy. This was clarified in the preamble to the HOTMA Final Rule. In
that rule, the Department stated that ``[a] HOME PJ may only terminate
the tenancy or refuse to renew the lease of a tenant of rental housing
assisted with HOME funds for good cause, as defined in Sec. 92.253(c),
which does not include having the type of assets or an amount of assets
in excess of the limitations in Sec. 5.618.'' \49\ Because Sec.
92.253 was not part of the HOTMA Final Rule, the Department proposes to
use this opportunity to codify the requirements in proposed Sec.
92.253(d)(1)(i)(A).
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\49\ 88 FR 9600, 9613 (Feb. 14, 2023).
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The proposed rule at Sec. 92.253(d)(1)(i)(B) would describe other
bases for other good cause, such as when a tenant creates a documented
nuisance under applicable state or local law or when a tenant
unreasonably refuses to provide the owner access to the unit to allow
the owner to repair the unit. The Department holds these to be
reasonable grounds for other good cause in other HUD programs, most
notably the Section 8 PBV program,\50\ and proposes to align HOME
requirements with these other programs.
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\50\ See PBV Tenancy Addendum, Part B, paragraph 8.d, available
at <a href="https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf">https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf</a>.
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The proposed rule at Sec. 92.253(d)(1)(i)(C) would establish that
other good cause can also include where an owner must terminate a
tenancy to comply with an order by a governmental entity or court that
requires the tenant vacate the project or unit or a local ordinance
that necessitates vacating the project or unit. In these instances, the
Department believes it is reasonable for an owner to terminate a
tenancy or refuse to renew a lease. Depending upon the nature of the
order, under the proposed rule, the owner may still be found in
violation of other HOME program requirements and their written
agreement with the participating jurisdiction. For instance, if a
governmental entity or court order to vacate was caused by the owner's
failure to maintain the property condition, then the owner of the HOME
rental housing may still be found in violation of the participating
jurisdiction's ongoing property condition standards.
The Department proposes to revise the notice requirements for
termination or refusal to renew tenancy, currently found in Sec.
92.253(c).
The proposed rule at Sec. 92.253(d)(1)(i)(D) would clarify that in
order for an owner to establish good cause for a violation of
applicable Federal, state, or local law, there must be a record of
conviction for a crime during the tenancy period that has a direct
bearing on the tenant's continued tenancy in the HOME rental housing
project, such as a violation of law that affects the safety of persons
or property. The proposed rule would also clarify that an owner shall
not use a record of arrest, parole or probation, or current indictment
to establish a violation of applicable Federal, state, or local law.
However, the proposed rule at Sec. 92.253(d)(1)(i)(D) would
further clarify that good cause based on a violation of applicable
Federal, state, or local law cannot be based on a violation that
occurred prior to tenancy, a violation that does not have a direct
bearing on a tenant's continued tenancy, or a basis other than a record
of conviction. An owner may consider any mitigating circumstances
relevant to whether the tenant will commit further violations of the
lease or applicable Federal, State, or local law.
The proposed rule at Sec. 92.253(d)(1)(ii) would require that
owners provide 60 days' notice instead of 30 days' notice before the
termination of tenancy. The Department recognizes that this proposed
60-day notice period extends beyond the 30-day notification requirement
for nonpayment of rent recently proposed in the proposed rule entitled
30-Day Notification Requirement Prior to Termination of Lease for
Nonpayment of Rent \51\ (``30-Day Notice Rule''). One of the proposed
changes in the 30-Day Notice Rule is to amend several program
regulations to align HUD programs to require written notification of at
least 30 days prior to lease termination resulting from nonpayment of
rent. However, the programs with regulations that would be amended
under the 30-Day Notice Rule do not have the same minimum 30-day
statutory notice period that HOME has in 42 U.S.C. 12755(b). Moreover,
the 30-Day Notice Rule was describing termination of tenancy for a
specific ground, nonpayment of rent, and not the HOME statutory
considerations in 42 U.S.C. 12755(b), which include good cause, as
discussed throughout this preamble. Recognizing the challenges of
obtaining new affordable housing and to reduce the probability that a
tenant will become homeless, the proposed rule's increase to the notice
period to 60 days would provide HOME tenants with a sufficient period
of time to locate and secure a new rental unit. This increased notice
period above the statutory minimum would also allow tenants to have
additional time to object to or cure violations in order to reverse the
termination. HUD believes that the public interest in avoiding
increased homelessness significantly outweighs the risk that this
proposed change to increase the notice period would disincentivize
developers and owners from participating in the HOME program.
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\51\ 88 FR 83877.
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The Department is also proposing to require that owners provide the
participating jurisdiction with a copy of the notice to vacate to
assist the participating jurisdiction with monitoring the HOME units or
units with TBRA as well as to help the participating jurisdiction
answer any questions it receives from the tenant. The proposed rule at
Sec. 92.253(d)(1)(ii) would also provide that the 60-day notice period
is not required if the termination of tenancy or refusal to renew is
due to a direct threat to the safety of the tenants or employees of the
housing or an imminent and serious threat to the property. This
proposal would codify section 235 of Division L of the Consolidated
Appropriations Act of 2016, Public Law 114-113, which revised section
225(b) of NAHA (42 U.S.C. 12755(b)) to specifically add, ``Such [60]-
day waiting period is not required if the grounds for the termination
or refusal to renew involve a direct threat to the safety of the
tenants or employees of the housing, or an imminent and serious threat
to the property (and the termination or refusal to renew is in
accordance with the requirements of State or local law).'' Determining
whether a person poses a direct threat to the safety of the tenants or
employees of the housing, or an imminent and serious threat to the
property is a fact-sensitive determination. There can be many different
factors that an owner may choose to consider when making that
determination, such as the nature of the conduct, the tenant's past
conduct, and the evidence that the owner has in their records.
Moreover, even if the proposed 60-day notice period is not required
pursuant to Sec. 92.253(d)(1)(ii), any termination of tenancy or
refusal to renew must comply with the requirements at Sec.
92.253(d)(1)(iii).
The proposed rule at Sec. 92.253(d)(1)(iii) would clarify that
[[Page 46640]]
terminating or refusing to renew a tenancy must be in accordance with
Federal, State, local law, and the requirements of 24 CFR part 92,
including requirements related to fair housing, nondiscrimination, and
VAWA.
The proposed rule at Sec. 92.253(d)(1)(v) would clarify that an
owner may not perform a constructive or so-called ``self-help''
eviction where the owner takes actions such as locking a tenant out of
their unit or stopping utility services to a tenant's units. These
actions are already considered a violation of HUD's current rules at
Sec. 92.253(c) but the proposed Sec. 92.253(d)(1)(v) provides further
clarification. The proposed rule at Sec. 92.253(d)(1)(v) would also
clarify that an owner may not create a hostile living environment or
refuse to make reasonable accommodations in order to cause a tenant to
terminate their tenancy. This proposal is consistent with the
Department's policy of prohibiting retaliation, as previously
described. Additionally, an owner's refusal to provide a reasonable
accommodation in accordance with Federal requirements would also
constitute a violation of the current HOME nondiscrimination
requirements at Sec. 92.350, as well as Federal nondiscrimination
requirements under applicable Federal civil rights and fair housing
laws.\52\
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\52\ See e.g., 24 CFR 5.105(a).
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The proposed rule at Sec. 92.253(d)(2) would provide the
requirements for terminating or refusing to renew the tenancy of a
tenant assisted with TBRA. The proposed rule at the introductory text
to Sec. 92.253(d)(2)(i) would establish a requirement that the
participating jurisdiction must adopt written standards for termination
or refusal to renew a tenancy in the TBRA program. The Department
believes by codifying this requirement, it would provide both
participating jurisdictions and owners with more definitive
requirements on how to permissibly terminate or refuse to renew a
tenancy. To that end, the Department is also proposing to require that
the written standards for terminating or refusing to renew a tenancy
for a tenant assisted with TBRA be included in the lease or in the
rental assistance contract between the participating jurisdiction and
the tenant. As proposed, the written standards included in the lease or
rental assistance contract must provide a good cause standard for
terminating or refusing to renew a tenancy. The proposed rule does not
modify a participating jurisdiction's discretion to provide TBRA to a
tenant to lease a new unit even if an owner has terminated the family's
tenancy or refused to renew the lease under Sec. 92.253(d)(2).
The proposed rule at Sec. 92.253(d)(2)(i)(A)-(F) would include the
standard for termination or refusal to renew a tenancy for good cause
for TBRA. This proposed good cause standard includes many of the same
types of good cause justifications that are proposed for HOME rental
housing under Sec. 92.253(d)(1)(i), including serious or repeated
violation of the terms and conditions of the lease; violation of
applicable Federal, State, or local law through a record of conviction
of a crime that beards directly on continued tenancy; when a tenant
creates a documented nuisance under applicable state or local law or
when a tenant unreasonably refuses to provide the owner access to the
unit to allow the owner to repair the unit; when an owner must
terminate a tenancy to comply with an order issued by a governmental
entity or court that requires the tenant vacate the project or unit; or
a local ordinance that necessitates vacating the residential real
property. Similar to the proposed changes in Sec. 92.253(d)(1)(i)(D),
HUD's proposed language in Sec. 92.253(d)(2)(i)(B) would also clarify
that good cause based on a violation of applicable Federal, state, or
local law shall be based on a record of conviction of a crime that
bears directly on the tenant's continued tenancy and not a record of
arrest, parole or probation, or current indictment. This does not
affect good cause based on a direct threat to the safety of the tenants
or employees of the housing or an imminent and serious threat to the
property. The proposed rule would further clarify that good cause based
on a violation of applicable Federal, state, or local law must not be
based on a violation that occurred prior to tenancy, a violation that
does not have a direct bearing on one's continued tenancy, or a
violation that does not result in a record of conviction. An owner may
consider any mitigating circumstances relevant to whether the tenant
will commit further violations of the lease or applicable Federal,
State, or local law.
The proposed rule at Sec. 92.253(d)(2)(i)(D) would also include
reasons for good cause termination or refusal to renew a tenancy that
are common in private rental markets. These proposed good cause reasons
include when an owner intends to withdraw the unit from the rental
market so that the owner can occupy the unit; to allow an owner's
family member to occupy the unit; or to demolish or substantially
rehabilitate the unit. These circumstances are sufficient basis to
terminate or refuse to renew a tenancy under the Section 8 HCV program
and to take a unit off the rental market in most States. The Department
also believes that requiring a more onerous standard would negatively
impact the ability of tenants to utilize TBRA in privately held units.
The proposed rule at Sec. 92.253(d)(2)(i)(E) would also clarify
that an owner is not required to maintain tenancy after the termination
of the rental assistance contract. This proposed clarification mirrors
similar provisions in the project-based voucher program tenancy
addendum, where the lease automatically terminates if the Housing
Assistance Payments contract terminates or if the PHA terminates
assistance to the tenant.\53\
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\53\ See HUD's Section 8 Project-Based Voucher Program Tenancy
Addendum, part B.9 and 10, as applicable, available at <a href="https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf">https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf</a>.
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Specific solicitation of comment #10: Currently, a rental
assistance contract can be between a participating jurisdiction and
either an owner or a tenant. The Department is also aware of many
participating jurisdictions that have tri-party rental assistance
contracts where the owner, the tenant, and the participating
jurisdiction all sign the rental assistance contract. The Department is
seeking feedback on whether a rental assistance contract should always
be executed by an owner so that the participating jurisdiction can
require that the HOME-assisted tenant's lease contain the HOME tenancy
addendum and that the owner follow all applicable TBRA requirements.
The proposed rule at Sec. 92.253(d)(2)(ii) would require that an
owner provide a tenant assisted with TBRA with a written or otherwise
accessible notice to vacate the unit that specifies the grounds for the
action at least 30 days before termination of the tenancy. This
proposed requirement would codify the requirement contained in section
4024(c)(1) of the Coronavirus Aid, Relief, and Economic Security
(``CARES'') Act (15 U.S.C. 9508(c)(1)), which requires that the lessor
of a covered dwelling unit ``may not require the tenant to vacate the
covered dwelling unit before the date that is 30 days after the date on
which the lessor provides the tenant with a notice to vacate.'' In
previous guidance, the Department has determined that units receiving
TBRA are covered dwelling units as defined by the CARES Act.\54\ In
[[Page 46641]]
this proposed rule, the Department would specify that the minimum 30-
day notice period does not apply if the termination or refusal to renew
tenancy is due to a direct threat to the safety of the tenants or
employees of the housing or an imminent and serious threat to the
property, as specified in section 235 of Division L of the Consolidated
Appropriations Act of 2016 (Pub. L. 114-113), which revised section
225(b) of NAHA (42 U.S.C. 12755(b)). Even if the proposed 30-day notice
period is not required pursuant to Sec. 92.253(d)(2)(ii), any
termination of tenancy or refusal to renew must comply with the
requirements at Sec. 92.253(d)(2)(iii). The Department also proposes
that owners provide participating jurisdictions with a copy of the
notice to vacate within 5 business days of when the notice is served to
the tenant. This proposed change would allow a participating
jurisdiction to better monitor its TBRA program and enables the
participating jurisdiction to further assist the tenant in finding a
new unit to use their TBRA.
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\54\ See the HOME Investment Partnerships Program FAQs (May 1,
2020), available at <a href="https://www.hud.gov/sites/dfiles/CPD/documents/HOME-FAQs-COVID-19.pdf">https://www.hud.gov/sites/dfiles/CPD/documents/HOME-FAQs-COVID-19.pdf</a>.
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Similar to the HOME rental housing provisions in proposed Sec.
92.253(d)(1)(iii), the proposed rule at Sec. 92.253(d)(2)(iii) would
require a termination of or refusal to renew tenancy to be in
accordance with Federal, State, local law, and the requirements of part
92. The proposed rule would further clarify that this includes but is
not limited to complying with fair housing, nondiscrimination, and VAWA
requirements. HUD notes that in a forthcoming rulemaking, HUD will
propose changes related to VAWA requirements, including in part 92. HUD
will invite the public to comment on those proposed VAWA requirements
in its future VAWA rulemaking. The proposed rule at Sec. 92.253(d)(iv)
would also clarify that an owner may not perform a constructive or so-
called ``self-help'' eviction where the owner takes actions such as
locking a tenant out of their unit or stopping utilities services to a
tenant's unit.
The proposed rule would redesignate the current provisions on
tenant selection at Sec. 92.253(d) to Sec. 92.253(e). The current
Sec. 92.253(d)(4) states that owners of HOME rental housing may not
exclude an applicant on the basis of holding a housing choice voucher
or certificate. The proposed rule would broaden the current requirement
at Sec. 92.253(d)(4), which would be redesignated as Sec.
92.253(e)(4), to include an applicant with Federal or State tenant-
based rental assistance. This proposal is consistent with the intent of
NAHA and it better enables applicants to utilize their Federal or State
TBRA. The proposed rule also revises the language in current Sec.
92.253(d)(3)(ii), which is proposed to be redesignated as Sec.
92.253(e)(3)(ii), to further clarify that projects with preferences or
limitations for persons with disabilities must be open to all eligible
persons with disabilities. The Department also proposes to further
clarify that an owner may advertise the project as offering various
supportive services, including a description of the specific supportive
services available, which may aid persons with disabilities in
determining whether the supportive services may meet their needs.
The Department also proposes revisions to the HOME waiting list
requirements, currently at Sec. 92.253(d)(5) but proposed to be
redesignated to Sec. 92.253(e)(5). The proposed rule at Sec.
92.253(e)(5) would allow a participating jurisdiction, upon request by
an owner of a small-scale housing project, to establish alternative
waiting list procedures for the selection of tenants, subject to HUD's
written approval of the procedures and determination that the selection
of a tenants from a waiting list in chronological order by the owner is
impracticable. The proposed rule is providing this flexibility because
the use and maintenance of a waiting list for a small-scale housing
project is often impracticable as the lower availability and turnover
of such units in a project, particularly when there is only one rental
unit, may result in a list of applicants that are no longer interested
in the unit or are unreachable when the unit becomes available. Owners
of small-scale housing often do not have the same capacity as owners of
larger multifamily properties to continuously update a waiting list to
maintain an accurate list of applicants to enable leasing as soon as
the unit becomes available. The Department believes this proposed
change would better assist private owners of smaller rental properties
that wish to participate in the HOME program by reducing their
administrative burden and recognizing that the selection of a tenant
from a waiting list is not practicable for some small-scale projects.
The proposed rule at Sec. 92.253(f) would add a new provision
regarding health and safety, which would require that if a
participating jurisdiction has actual knowledge of an environmental,
health, or safety hazard affecting a project, unit, or HOME tenants,
that the participating jurisdiction inform the owner and tenants of the
nature, date, and scope of such hazards. The Department believes this
is a reasonable requirement in light of recent environmental hazards
like those in Jackson, Mississippi; Flint, Michigan; and East
Palestine, Ohio. Similarly, the proposed rule at Sec. 92.253(f) would
require that if an owner has actual knowledge of an environmental,
health, or safety hazard affecting a project, unit, or HOME tenants,
that the owner inform the participating jurisdiction. The proposed rule
would clarify that this notification requirement only applies for
hazards discovered after the environmental review process because all
hazards discovered during that process will have been corrected or
mitigated, or have a satisfactory mitigation plan in place, in
accordance with the requirements in 24 CFR part 50 or part 58.
22. Qualification as Affordable Housing: Homeownership (24 CFR 92.254)
The proposed rule would reformat Sec. 92.254(a)(2) to improve
clarity and readability. Specifically, the proposed rule would add a
new paragraph Sec. 92.254(a)(2)(iv) to clarify the process a
participating jurisdiction must follow if it chooses to determine its
own 95 percent of median purchase price for the area in lieu of using
limits provided by HUD. The proposed rule would make corresponding
changes to Sec. 92.254(a)(2)(iii), including moving portions of the
text from Sec. 92.254(a)(2)(iii) to the proposed Sec.
92.254(a)(2)(iv), which permits a participating jurisdiction to
determine the 95 percent of the median purchase price for the area,
consistent with the proposed Sec. 92.254(a)(2)(iv).
The proposed rule would move language in Sec. 92.254(a)(2)(iii) to
Sec. 92.254(a)(2)(iv)(A) and revise certain requirements.
Specifically, the current regulation at Sec. 92.254(a)(2)(iii) states
that a participating jurisdiction developing its own 95 percent of
median purchase price for the area must set forth the price for
``different types of single family housing.'' This language is vague
and confusing. The proposed rule at Sec. 92.254(a)(2)(iv)(A) would
clarify that the participating jurisdiction must set forth the 95
percent median price limits for the area on single family housing of
one, two, three, and four units. The proposed rule would also move
requirements from the current regulation at Sec. 92.254(a)(2)(iii) to
Sec. 92.254(a)(2)(iv)(B) and (C) and clarify that the requirements at
the proposed Sec. 92.254(a)(2)(iv)(B) apply to the 95 percent median
price limits for the area on housing located outside of metropolitan
areas. The proposed rule also reorganizes and lists the required
information in each action plan in proposed Sec. 92.254(a)(2)(iv)(C)
for clarity and readability.
[[Page 46642]]
HUD proposes to revise Sec. 92.254(a)(3) to extend the deadline
for the sale of a homebuyer unit acquired, rehabilitated, or
constructed with HOME funds from 9 to 12 months. If a HOME-assisted
homebuyer unit is not sold before the proposed 12-month sales deadline,
the unit must be restricted as an affordable rental unit under Sec.
92.252 and rented to an eligible tenant in accordance with the rental
housing requirements of Sec. 92.252. This means that any homebuyer
unit that is not sold to a qualified homebuyer by the deadline or
restricted as a HOME-assisted rental unit in accordance with Sec.
92.252 does not qualify as affordable housing under 24 CFR part 92 and
therefore, the participating jurisdiction must repay the HOME funds to
its local HOME account in accordance with Sec. 92.503(b)(1).
Specific solicitation of comment #11: The Department requests
public comment on whether the existing 9-month deadline for the sale of
homebuyer units acquired, rehabilitated, or constructed with HOME funds
is reasonable and whether extending the deadline to 12 months would
increase the use of HOME funds for homeownership programs.
The proposed rule at Sec. 92.254(a)(3) would also clarify that the
rental requirements at Sec. 92.252, including the period of
affordability in Sec. 92.252(d), apply to HOME-assisted homebuyer
housing that fails to sell by the proposed 12-month deadline. In
response to ongoing misunderstandings by participating jurisdictions of
this requirement, proposed revisions in Sec. 92.254(a)(3) would more
explicitly state that if a unit intended for homeownership has not been
sold to an eligible homebuyer by the proposed 12-month deadline, the
participating jurisdiction must immediately convert the unit to HOME-
assisted rental housing that meets the requirements in Sec. 92.252 and
impose the required affordability restrictions for the appropriate
rental housing period of affordability (which differs from the period
of affordability for homebuyer housing). If at some future time the
participating jurisdiction permits an owner to sell or otherwise convey
a unit that converted from a homebuyer activity to a rental activity
pursuant to Sec. 92.254(a)(3), the participating jurisdiction may
permit the sale in accordance with Sec. 92.255.
HUD proposes to revise Sec. 92.254(a)(5)(i) to address questions
regarding the appropriate process for determining the sale price of
housing at resale. When a HOME-assisted homebuyer sells a property
during the period of affordability, section 215(b)(3) of NAHA requires
a participating jurisdiction to sell the unit to another low-income
homebuyer at a price that is affordable to a reasonable range of low-
income homebuyers and that provides the original homeowner with a fair
return on their investment. The current HOME regulations do not clearly
define how a participating jurisdiction must set a resale price that
both provides for a fair return to the original homebuyer and is
affordable to a reasonable range of low-income homebuyers. The proposed
rule at Sec. 92.254(a)(5)(i) would clarify that the resale price,
subject to market conditions, is the homeowner's ``fair return on
investment'' added to the original purchase price of the housing.
Participating jurisdictions have communicated various challenges in
implementing the statutory requirements that a HOME-assisted unit at
resale must be sold to another low-income homebuyer at a price that is
(1) affordable to a reasonable range of low-income homebuyers and (2)
provides the original homebuyer with a fair return on their investment,
including the homeowner's investment and improvements made to the
property. It is difficult for participating jurisdictions to create a
resale formula that provides a fair return to the homeowner at a price
that is affordable to a range of low-income homebuyers, without
additional HOME assistance to the subsequent homebuyer. To assist
participating jurisdictions that choose to impose resale provisions,
HUD proposes to amend Sec. 92.254(a)(5)(i) to add four permissible
resale formulas that comply with these requirements in a new proposed
paragraph (A). The Department believes that providing compliant resale
formulas will help participating jurisdictions avoid noncompliance with
the resale requirements and provide clarity and fairness to homebuyers.
Specifically, the Department proposes to add paragraphs (A)(1)
through (4) to Sec. 92.254(a)(5)(i) to describe the four permissible
resale formulas: (1) itemized formula, (2) appraisal formula, (3) index
formula, and (4) fixed-rate formula. These proposed resale formulas
would be used to determine a HOME-assisted homebuyer's fair return on
investment and the resale price. Variations of the proposed itemized
formula are commonly used in State and local homebuyer programs not
funded by the HOME program, while the appraisal, indexed, and fixed-
rate formulas are commonly used by community land trusts and other
advocates of shared appreciation models.\55\ Though HUD is providing
these four different permissible resale formulas, the proposed rule
would not require participating jurisdictions to use any of the
formulas and participating jurisdictions may continue to design their
own resale provisions, subject to HUD review and approval. The four
resale formulas in the proposed rule are described below.
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\55\ Shared appreciation homeownership models create long-term,
affordable homeownership opportunities by imposing restrictions on
the resale of subsidized housing units. See HUD's Office of Policy
Development and Research Policy Matters (Fall 2012) for additional
information, available at <a href="https://www.huduser.gov/portal/periodicals/em/fall12/highlight3.html">https://www.huduser.gov/portal/periodicals/em/fall12/highlight3.html</a>.
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The proposed rule at Sec. 92.254(a)(5)(i)(A)(1) would establish an
itemized resale formula, which determines the homeowner's fair return
on investment by multiplying a clearly defined, publicly accessible
index or standard (e.g., change in consumer price index, median area
income, or median purchase price over the term of ownership) by the sum
of the homeowner's downpayment, equity from the payment of mortgage
principal, and the value of any capital improvements. This itemized
resale formula would permit a participating jurisdiction to decide
whether it will depreciate the value of the capital improvements and
whether the formula will take into consideration any reduction in value
due to damage or deferred maintenance of the property.
[[Page 46643]]
[GRAPHIC] [TIFF OMITTED] TP29MY24.006
The proposed rule at Sec. 92.254(a)(5)(i)(A)(2) would establish an
appraisal-based resale formula, which determines a homeowner's fair
return on investment based on the amount of market appreciation, if
any, realized over the term of ownership. The amount of market
appreciation over the term of ownership would be determined by
subtracting the appraised value of the property at the time of initial
purchase from the appraised value at the time of resale. The fair
return on investment would be determined by multiplying the amount of
market appreciation over the term of homeownership by a clearly
defined, publicly accessible standard or index. Given the complexity
and skill required to conduct an appraisal, the proposed rule would
require State-licensed or certified third-party appraisers to conduct
the appraisals.
[GRAPHIC] [TIFF OMITTED] TP29MY24.007
The proposed rule at Sec. 92.254(a)(5)(i)(A)(3) would establish an
index resale formula, which determines a homeowner's fair return based
on the value of the homeowner's investment adjusted in proportion to
changes in a specified index, such as the Consumer Price Index or U.S
Housing Price Index. Using the proposed index formula, the homeowner's
fair return on investment would be calculated by multiplying the change
in the index during the term of ownership by the sum of the original
purchase price and the value of any capital improvements. The proposed
rule would permit a participating jurisdiction to decide whether to
depreciate the value of any capital
[…truncated; see source link]Indexed from Federal Register on May 29, 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.