Rule2024-28297
Updated Terminology for State Housing Agency Housing Assistance Payments Contracts
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 4, 2024
Effective
January 3, 2025
Issuing agencies
Housing and Urban Development Department
Abstract
This final rule revises HUD's regulations for Housing Assistance Payments contracts that were initially issued and administered by a State Housing Finance Agency. This final rule clarifies the meaning of the terms "HFA (Housing Finance Agency)" and "State Agency (Agency)" when HUD either assumes contract administration responsibilities or assigns the contract administration responsibilities to a Performance-Based Contract Administrator. This final rule also clarifies how reserve accounts may be transferred following assumption of contract administration duties by a new party. These regulatory changes conform with longstanding HUD policy and practice. This final rule adopts HUD's July 17, 2024, proposed rule without change.
Full Text
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<title>Federal Register, Volume 89 Issue 233 (Wednesday, December 4, 2024)</title>
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[Federal Register Volume 89, Number 233 (Wednesday, December 4, 2024)]
[Rules and Regulations]
[Pages 96096-96098]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-28297]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 883
[Docket No. FR-6378-F-02]
RIN 2502-AJ68
Updated Terminology for State Housing Agency Housing Assistance
Payments Contracts
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, Department of Housing and Urban Development (HUD).
ACTION: Final rule.
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SUMMARY: This final rule revises HUD's regulations for Housing
Assistance Payments contracts that were initially issued and
administered by a State Housing Finance Agency. This final rule
clarifies the meaning of the terms ``HFA (Housing Finance Agency)'' and
``State Agency (Agency)'' when HUD either assumes contract
administration responsibilities or assigns the contract administration
responsibilities to a Performance-Based Contract Administrator. This
final rule also clarifies how reserve accounts may be transferred
following assumption of contract administration duties by a new party.
These regulatory changes conform with longstanding HUD policy and
practice. This final rule adopts HUD's July 17, 2024, proposed rule
without change.
DATES: Effective January 3, 2025.
FOR FURTHER INFORMATION CONTACT: Jennifer Larson, Director, Office of
Asset Management and Portfolio Oversight, U.S. Department of Housing
and Urban Development, 451 7th Street SW, Washington, DC 20410,
telephone number 202-402-3823 (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
A. Section 8 Project-Based Rental Assistance Program
The Section 8 Project-Based Rental Assistance (Section 8 PBRA)
program was enacted as part of the Housing and Community Development
Act of 1974,\1\ which amended the United States Housing Act of 1937.\2\
Under the Section 8 PBRA program, either HUD or a public housing agency
(PHA) acting pursuant to an annual contributions contract (ACC) with
HUD provides rental assistance payments via a Housing Assistance
Payments (HAP) Contract to project owners who, in turn, rent units
covered by the HAP Contract to families who meet program eligibility
rules. Either HUD or a PHA acting pursuant to an ACC serves as the
contract administrator, which is responsible for performing multiple
functions, from maintaining a reserve for replacement account and a
residual receipts account to processing annual rent adjustments and
periodic contract renewals. Pursuant to the United States Housing Act
of 1937 and HUD regulations, a housing finance agency (HFA) meets the
definition of a PHA and, as such, may serve as a Performance-Based
Contract Administrator (PBCA).
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\1\ Public Law 93-383, 88 Stat. 633 (1974).
\2\ 42 U.S.C. 1437f.
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B. Regulatory and Operational History of the 24 CFR Part 883 Section 8
PBRA Program
On April 15, 1975, HUD published 24 CFR part 883, establishing
policies and procedures under which HFAs could select proposals for
funding under the Section 8 New Construction and Substantial
Rehabilitation Programs.\3\ Pursuant to 24 CFR part 883, HFAs provided
permanent financing and assumed the risk of default and foreclosure on
selected project proposals. In selecting a project for permanent
financing, HFAs and project owners could enter into HAP Contracts with
initial mortgage terms of up to 40 years,\4\ with the HFA serving as
the HAP Contract administrator. Significantly for purposes of this
rulemaking, in January of 1980, HUD issued a new regulation under 24
CFR part 883 that introduced a limit on annual distributions of project
surplus cash for some project owners, a requirement for such owners to
establish a residual receipts account, and a requirement to maintain a
reserve for replacement account to address physical condition
issues.\5\ As HAP Contract administrators, the HFAs controlled the
residual receipts and reserve for replacement accounts required by 24
CFR part 883.
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\3\ 40 FR 16934.
\4\ The terms ``HFA'' and ``State Agency'' appear in both part
883 and corresponding HAP Contracts.
\5\ 45 FR 6889 (Jan. 30, 1980).
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In the 1990s, HAP Contracts between HFAs and project owners began
to reach the end of the contracted term and expire. Where a HAP
Contract expires and is not renewed, families eligible for Section 8
PBRA are at risk of displacement from their housing because there is no
longer an agreement in place that allows project owners to receive
Section 8 PBRA rental assistance for the applicable units. To authorize
the renewal of expiring HAP Contracts, including HAP Contracts issued
pursuant to 24 CFR part 883 (Part 883 HAP Contracts), Congress enacted
the Multifamily Assisted Housing Reform and Affordability Act of 1997
(MAHRA).\6\ As implemented by HUD, MAHRA allows the issuance of HAP
Contracts that incorporate and renew nearly all provisions of an
expired, original HAP Contract. Relevant to the purposes of this final
rule, the provisions incorporated into renewed Part 883 HAP Contracts
include references to the terms ``HFA'' and ``State Agency.''
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\6\ 42 U.S.C. 1437f.
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Beginning in May of 1999, HUD began using PBCAs to streamline the
renewal and administration of expiring HAP Contracts, including Part
883 HAP Contracts, by assigning administration and servicing tasks to
PBCAs, which qualify as PHAs under the United States Housing Act of
1937 and act in accordance with an ACC that sets forth requirements and
performance-based incentive standards. As Part 883 HAP Contracts
expired, HUD began terminating ACCs with the HFAs of the expiring Part
883 HAP Contracts, with HUD then either taking over administration of
the Part 883 HAP Contracts itself or assigning administration of the
contracts to PBCAs. Relevant to the purpose of this final rule,
references to the terms ``HFA'' and ``State Agency'' remained in both
24 CFR part 883 and the renewed Part 883 HAP Contracts that were now
administered by either HUD or a PBCA.
As of the second quarter of 2023, there were approximately 2,690
Part 883 HAP Contracts in effect throughout the country. Of these
contracts, the vast majority are now administered either by a PBCA or
HUD, with only sixty-five (65) Part 883 HAP Contracts still being
administered by an HFA. For the Part 883 HAP Contracts that were
previously administered by an HFA but that are now administered by a
PBCA or HUD, the terms ``HFA'' and ``State Agency'' still appear in the
Part 883 HAP Contracts, along with references to the same terms in 24
CFR part 883. The references to these terms in the contracts and part
883 create confusion because HUD or a PBCA now administers these Part
883 HAP Contracts rather than an HFA or State
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Agency. This confusion is especially problematic with regard to the
administration of project owners' restricted financial accounts (i.e.,
the residual receipts and reserve for replacement accounts) because of
unclear expectations regarding which entity must issue approvals to
withdraw funds. HUD issues this final rule to eliminate this confusion.
C. Residual Receipts and Reserve for Replacement Project Accounts
Both the residual receipts account and the reserve for replacement
account are project accounts. The project owner must make deposits to
the residual receipts account and the reserve for replacement accounts,
consistent with HUD requirements, and must receive prior approval
before withdrawing funds from either account. When a HAP Contract
associated with the project is administered by an HFA, the project
owner requests fund withdrawal approval from the HFA. Once an ACC
between the HFA and HUD expires, HUD must review such fund withdrawal
requests; therefore, the HFA must release the funds in the accounts
upon the request of the project owner. The project owner, in turn, must
ensure that the residual receipts and reserve for replacement accounts
funds are placed in accounts that meet HUD requirements, after which
time any fund withdrawals will be made only with HUD approval.
II. The Proposed Rule
On July 17, 2024, HUD published for public comment a proposed rule
entitled ``Updated Terminology for State Housing Agency Housing
Assistance Payments Contracts.'' \7\ The proposed rule proposed to
amend the definitions of two terms defined in 24 CFR 883.302: ``HFA
(Housing Finance Agency)'' and ``State Agency (Agency).'' In the
proposed rule, HUD proposed that the definitions found in 24 CFR
883.302 for these terms continue to apply while an ACC between HUD and
an HFA is in effect. When an ACC between HUD and the HFA expires and is
not renewed, HUD proposed that the definitions of the terms ``HFA
(Housing Finance Agency)'' and ``State Agency (Agency)'' then be
defined the same as ``Contract Administrator'' is defined at 24 CFR
880.201. In addition to the proposed definition changes to 24 CFR
883.302, HUD also proposed to make a conforming change to 24 CFR
883.701. In the proposed rule, HUD also proposed to amend 24 CFR
883.306 and add a new Sec. 883.702 to make clear that project owners
are required to request the withdrawal of funds from residual receipts
and reserve for replacement accounts administered by HFAs when the ACC
between HUD and the HFA is terminated or expires.
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\7\ 89 FR 58092.
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III. This Final Rule
HUD is publishing this final rule without change from the proposed
rule. HUD received a single public comment in response to the proposed
rule that noted that the commenter has had no problem with PHFA. HUD
appreciates the comment. As noted, HUD is revising the referenced
terminology for clarity and accuracy.
HUD believes that the revision in 24 CFR 883.302 to the definitions
of ``HFA (Housing Finance Agency)'' and ``State Agency (Agency)'' is
necessary to eliminate the confusion that results when a renewed Part
883 HAP Contract is administered by HUD or a PBCA, rather than the
former HFA. In addition, the conforming change to 24 CFR 883.701 makes
clear that, for the purposes of 24 CFR part 883, subpart G, all
references to ``contract administrator'' in 24 CFR part 880, subpart F,
shall be construed to refer to ``Agency'' only while the ACC between
the State Agency and HUD is in effect. The changes to 24 CFR 883.306
and the addition of a new Sec. 883.702 are necessary to clarify that
project owners are required to request the withdrawal of funds from
residual receipts and reserve for replacement accounts administered by
HFAs when the ACC between HUD and the HFA is terminated or expires.
V. Findings and Certifications
Regulatory Review--Executive Orders 12866, 13563, and 14094
Pursuant to Executive Order 12866 (Regulatory Planning and Review),
a determination must be made whether a regulatory action is significant
and, therefore, subject to review by the Office of Management and
Budget (OMB) in accordance with the requirements of the order.
Executive Order 13563 (Improving Regulations and Regulatory Review)
emphasizes the importance of quantifying both costs and benefits,
reducing costs, harmonizing rules, and promoting flexibility. The order
also directs Executive agencies to analyze regulations that are
``outmoded, ineffective, insufficient, or excessively burdensome, and
to modify, streamline, expand, or repeal them in accordance with what
has been learned.'' Executive Order 13563 further directs that, where
relevant, feasible, and consistent with regulatory objectives, and to
the extent permitted by law, agencies are to identify and consider
regulatory approaches that reduce burdens and maintain flexibility and
freedom of choice for the public. Executive Order 14094 (Modernizing
Regulatory Review) amends section 3(f) of Executive Order 12866, among
other things.
This final rule clarifies that HUD or a PBCA may assume the HAP
Contract administrator responsibilities when the ACC between HUD and an
HFA expires. This final rule also clarifies how residual receipts and
reserve for replacement accounts may be transferred following
assumption of contract administration duties by a new party. These
regulatory changes conform with longstanding HUD policy and practice.
This rulemaking was determined to not be a ``significant regulatory
action'' as defined in section 3(f) of Executive Order 12866, as
amended by Executive Order 14094, and is not an economically
significant regulatory action and therefore was not subject to OMB
review.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for Federal agencies to
assess the effects of their regulatory actions on State, local, and
Tribal governments, and on the private sector. This final rule does not
impose any Federal mandates on any State, local, or Tribal government,
or on the private sector, within the meaning of the UMRA.
Environmental Impact
A Finding of No Significant Impact (FONSI) with respect to the
environment has been made in accordance with HUD regulations at 24 CFR
part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is
available through the Federal eRulemaking Portal at <a href="http://www.regulations.gov">http://www.regulations.gov</a>. The FONSI is also available for public inspection
during regular business hours in the Regulations Division, Office of
General Counsel, Department of Housing and Urban Development, 451 7th
Street SW, Room 10276, Washington, DC 20410-0500. Due to security
measures at the HUD Headquarters building, you must schedule an
appointment in advance to review the FONSI 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
[[Page 96098]]
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>.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
As discussed above, the changes in this final rule are limited to
clarifying that HUD or a PBCA may assume the HAP Contract administrator
responsibilities when the ACC between HUD or an HFA expires. The
rulemaking also clarifies how residual receipts and reserve for
replacement accounts may be transferred following assumption of
contract administration duties by a new party. These regulatory changes
conform with longstanding HUD policy and practice. Accordingly, the
undersigned certifies that this final rule will not have a significant
economic impact on a substantial number of small entities.
Executive Order 13132, Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule
either: (1) imposes substantial direct compliance costs on State and
local governments and is not required by statute, or (2) the rule
preempts State law, unless the agency meets the consultation and
funding requirements of section 6 of the Executive order. This final
rule does not have federalism implications and does not impose
substantial direct compliance costs on State and local governments or
preempt State law within the meaning of the Executive order.
List of Subjects in 24 CFR Part 883
Accounting, Administrative practice and procedure, Government
contracts, Grant programs-housing and community development, Low and
moderate income housing, Public assistance programs, Public housing,
Rent subsidies, Reporting and recordkeeping requirements, State and
local governments.
For the reasons stated in the preamble, HUD amends 24 CFR part 883
as follows:
PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE
HOUSING AGENCIES
0
1. The authority citation for part 883 continues to read as follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.
0
2. In Sec. 883.302, redesignate the definition of ``HFA (Housing
Finance Agency)'' in alphabetical order and revise it, and revise the
definition of ``State Agency (Agency)''.
The revisions read as follows:
Sec. 883.302 Definitions.
* * * * *
HFA (Housing Finance Agency). While the Annual Contributions
Contract between the State Agency and HUD is in effect, ``Housing
Finance Agency'' and ``HFA'' means a State Agency that provided
permanent financing for newly constructed or substantially
rehabilitated housing processed under this part and financed without
Federal mortgage insurance or a Federal guarantee except coinsurance
under section 244 of the National Housing Act. When the Annual
Contributions Contract between the State Agency and HUD is no longer in
effect, ``Housing Finance Agency'' and ``HFA,'' as used in this part
and in the Housing Assistance Payments Contract, means ``Contract
Administrator,'' as defined in 24 CFR 880.201.
* * * * *
State Agency (Agency). While the Annual Contributions Contract
between the State Agency and HUD is in effect, ``State Agency'' and
``Agency'' means an agency that has been notified by HUD that it is
authorized to apply for a set-aside and/or to use the Fast Track
Procedures of this part. When the Annual Contributions Contract between
the State Agency and HUD is no longer in effect, ``State Agency'' and
``Agency,'' as used in this part and in the Housing Assistance Payments
Contract, mean ``Contract Administrator,'' as defined in 24 CFR
880.201.
* * * * *
0
3. In Sec. 883.306, add a sentence to the end of paragraph (e) to read
as follows:
Sec. 883.306 Limitation on distributions.
* * * * *
(e) * * * Upon termination of the Annual Contributions Contract
between HUD and the HFA, the Owner must request withdrawal of any funds
that were placed in such an account at the direction of the HFA and
immediately deposit such funds into an interest-bearing residual
receipts account that complies with the requirements of 24 CFR
880.601(e)(2)(i).
* * * * *
Sec. 883.701 [Amended]
0
4. In Sec. 883.701, add the words ``while the Annual Contributions
Contract between the State Agency and HUD is in effect'' to the end of
the second sentence following ``Agency''.
0
5. Add Sec. 883.702 to read as follows:
Sec. 883.702 Replacement reserve.
For projects that are required to maintain a replacement reserve
account to fund capital repairs and building system replacements, while
the Annual Contributions Contract (ACC) between the State Agency and
HUD is in effect, funds in that replacement reserve account may be
drawn and used only in accordance with State Agency guidelines and with
the approval of, or as directed by, the State Agency. Upon termination
of the ACC, the Owner must request withdrawal of any funds in the
replacement reserve account and immediately deposit such funds into an
interest-bearing replacement reserve account that complies with the
requirements of 24 CFR 880.602(a)(1)(iv).
Julia R. Gordon,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2024-28297 Filed 12-3-24; 8:45 am]
BILLING CODE 4210-67-P
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</html>Indexed from Federal Register on December 4, 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.