Rule2024-29824
HOME Investment Partnerships Program: Program Updates and Streamlining
Primary source
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Published
January 6, 2025
Effective
February 5, 2025
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 final rule revises 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 final rule also includes minor revisions to the regulations for the Community Development Block Grant and Section 8 Housing Choice Voucher Programs consistent with the implementation of the changes to the HOME program. This final rule follows the publication of a proposed rule on May 29, 2024, and takes into consideration the comments received in response to that proposed rule.
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[Federal Register Volume 90, Number 3 (Monday, January 6, 2025)]
[Rules and Regulations]
[Pages 746-895]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-29824]
[[Page 745]]
Vol. 90
Monday,
No. 3
January 6, 2025
Part II
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;
Final Rule
Federal Register / Vol. 90, No. 3 / Monday, January 6, 2025 / Rules
and Regulations
[[Page 746]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 91, 92, 570, and 982
[Docket No. FR-6144-F-03]
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: Final 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
final rule revises 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 final rule also includes minor revisions to the regulations for
the Community Development Block Grant and Section 8 Housing Choice
Voucher Programs consistent with the implementation of the changes to
the HOME program. This final rule follows the publication of a proposed
rule on May 29, 2024, and takes into consideration the comments
received in response to that proposed rule.
DATES: Effective February 5, 2025.
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 is authorized by title II of the Cranston-Gonzalez
National Affordable Housing Act \1\ (``NAHA'' or the ``Act'') 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
PJs. After the Department obligates funds to a PJ, the Department
establishes a HOME Investment Trust Fund \3\ for each PJ, providing a
line of credit that a PJ 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 HOME program allocates
approximately $1.5 billion among States and approximately 600
localities nationwide. In fiscal year 2023, PJs 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 (LIHTC).\4\ As of
late 2024, there are 237,767 HOME-assisted rental units operating in
their periods of affordability (i.e., subject to ongoing HOME income
and rent requirements).
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\4\ See 26 U.S.C. 42.
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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 (CHDOs) help to
build the capacity of, and partnerships, with these community-based
nonprofit organizations. Fourth, the HOME program's requirement that
PJs match 25 cents of every dollar in program funds helps mobilize
community resources in support of affordable housing.
II. The Proposed Rule
On May 29, 2024, HUD published the ``HOME Investment Partnerships
Program: Program Updates and Streamlining'' proposed rule (the proposed
rule) in the Federal Register, available at 89 FR 46618. In the
proposed rule, HUD proposed numerous changes to 24 CFR part 92. The
proposed changes included significant revisions to the 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 also proposed to 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 proposed 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 proposed 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 also sought to clarify the resale requirements for
homeownership housing and proposed technical amendments and
simplifications to conform provisions to certain changes made in the
2013 HOME Final Rule.\5\
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\5\ HOME Investment Partnerships Program: Improving Performance
and Accountability; Updating Property Standards, (78 FR 44628, July
24, 2013).
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The proposed rule also included changes made by the Housing
Opportunity Through Modernization Act of 2016: Implementation of
Sections 102, 103, and 104 final rule, published in the Federal
Register on February 14, 2023 (88 FR 9600) (the HOTMA Final Rule) and
the Economic Growth Regulatory Relief and Consumer Protection Act:
Implementation of National Standards for the Physical Inspection of
Real Estate (NSPIRE) final rule, published in the Federal Register
[[Page 747]]
on May 11, 2023 (88 FR 30442) (the NSPIRE Final Rule). The proposed
rule also proposed further revisions to the changes made to 24 CFR part
92 by the HOTMA and NSPIRE Final Rules. In addition, the proposed rule
proposed updates to citations, in paragraphs where other changes are
being made, to conform with recent changes to the Office of Management
and Budget (OMB) regulations at 2 CFR part 200.
See the proposed rule for a full description of all the HOME
program proposed regulation changes associated with this rulemaking.
III. This Final Rule
HUD reviewed and considered all public comments submitted in
response to the proposed rule, which are summarized and addressed in
the next section of this final rule. After considering the public
comments received in response to the proposed rule, this final rule
incorporates a majority of the proposed regulatory changes described in
the proposed rule; however, in response to public comments received,
HUD is making certain revisions to the HOME program regulations from
those described in the proposed rule at this final rule stage. HUD is
also making certain non-substantive revisions to the proposed
regulatory text at this final rule stage.
In response to comments received during the proposed rule stage of
this rulemaking, HUD is making the following revisions to the final
rule:
24 CFR Part 91--Technical Revisions
HUD is making certain technical revisions in 24 CFR part 91 to
replace the term ``affordability period'' with ``period of
affordability.'' These revisions are consistent with the technical
revision proposed in 24 CFR part 92 to make the same terminology
replacement. Further, these revisions are consistent with public
comments HUD received noting that these revisions are appropriate.
24 CFR Part 92--Technical Revisions
HUD is making certain technical revisions in 24 CFR part 92 to
improve clarity and readability of certain language throughout the
part. While HUD is not summarizing each of these technical changes
because the changes are minor and non-substantive, a sampling of these
revisions are described in the paragraphs that follow.
The Department received comments indicating that it had not fully
revised all references from ``downpayment assistance'' to
``homeownership assistance.'' The Department is revising Sec. Sec.
92.203(d), 92.209(c)(2)(iv), 92.250(b)(4), 92.251(c)(3),
92.254(b)(1)(ii), 92.300(a)(6)(i), 92.351(a)(1), 92.504(c)(1)(i), and
92.504(c)(2)(i) accordingly. The Department declined to revise certain
references in the regulation that were specific to the downpayment
provided by a homebuyer (e.g., for purposes of the resale or recapture
methods used in Sec. 92.254).
Commenters noted that there were a number of areas where the term
``dwelling'' had not been replaced by ``housing.'' Accordingly, the
Department is revising Sec. Sec. 92.219(a)(4), 92.254(a)(5)(ii)(A),
and 92.258(a) to standardize the use of ``housing.''
The Department noted several instances where it had not corrected
the term ``single-family'' to read ``single family.'' Accordingly, the
Department is revising Sec. Sec. 92.220(a)(5)(ii), 92.254(a)(6),
92.504(c)(1)(i), and 92.504(c)(2)(i) to include the standardized term
``single family.''
Several commenters noted that the Department failed to change all
the references from ``affordability period'' to ``period of
affordability.'' The Department has further revised the term for
consistency in Sec. Sec. 92.251(f), 92.252(d)(3),
92.254(a)(5)(ii)(B)(2), 92.258(c) and (d)(3), 92.359(f), and
92.508(c)(1) and (2).
The Department is also revising the first sentence of Sec.
92.201(b)(3)(i) to clarify that States must require that State
recipients use HOME funds in accordance with 24 CFR part 92. This is
also stated in the written agreement section in Sec. 92.504 and is a
revision for consistency.
24 CFR 92.2 Definitions
A. Commitment
As explained in greater detail in the preamble describing the
revisions in Sec. 92.209, the rental assistance contract requirements
in the HOME tenant-based rental assistance program are being revised to
require that the PJ enter into a rental assistance contract with the
owner and the tenant, either as separate agreements or a single tri-
party agreement. The Department is therefore revising the definition of
Commit to a specific local project in paragraph (2)(iii) of the
definition of Commitment to accurately state that the rental assistance
contract, which is the committing document for HOME tenant-based rental
assistance, is the contract with the ``owner and the tenant'' instead
of the contract with the ``owner or the tenant.''
A new paragraph (2)(ii)(C) was added under Commit to a specific
local project in the definition of Commitment to provide the
requirements for commitments to a family to acquire single family
housing for homeownership that does not meet the PJ's property
standards, as described in Sec. 92.251(c)(3). The requirements include
the same requirements for standard housing, i.e., that the PJ (or State
recipient or subrecipient) and the family must have executed a written
agreement under which HOME assistance will be provided for the purchase
of the single family housing, which requires the property title to be
transferred to the family within six months of the agreement date. In
addition, the paragraph will also require that the written agreement
require the property to meet the standards in accordance with Sec.
92.251(c)(3). This revision is being made because the current
definition of Commit to a specific local project only contemplates that
the homebuyer will be purchasing housing in standard condition and not
housing that requires rehabilitation. This allows the written agreement
to count as a commitment when it complies with the requirements in
Sec. 92.251(c)(3), thereby providing consistent application of the new
rules permitting homebuyers to rehabilitate their units to meet
property standards post-acquisition.
B. Community Housing Development Organizations
In response to public comments received, HUD is making multiple
changes to paragraph (8)(i) of the definition of community housing
development organization in Sec. 92.2. Paragraph (8)(i) of the CHDO
definition describes board membership requirements to maintain
accountability to low-income community residents. Many commenters were
concerned that the language of the proposed rule would reduce the
accountability of CHDO boards. As described further in the following
paragraphs, HUD is addressing the concerns expressed in the comments by
strengthening the accountability structures.
HUD is revising paragraph (8)(i) of the CHDO definition to add
``low-income beneficiaries of HUD programs'' as an explicitly named
group of eligible board members to meet the accountability to low-
income community residents board requirement. HUD recognizes that 42
U.S.C. 12704(6)(B) requires that a CHDO ``maintain[], through
significant representation on the organization's governing board and
otherwise, accountability to low-income community residents and, to the
extent practicable, low-income beneficiaries with regard to decisions
on the design, siting, development, and management of
[[Page 748]]
affordable housing . . . .'' By adding ``low-income beneficiaries of
HUD programs'' to the regulation, HUD believes it is more closely
matching the intent of the statute and emphasizing that, whenever
possible, board members of CHDOs should include low-income
beneficiaries of HUD programs.
HUD is also revising paragraph (8)(i) of the CHDO definition to use
the term ``designees of nonprofit organizations'' instead of
``authorized representatives of nonprofit organizations.'' This
revision of the term ``designee'' is being made because of confusion
expressed by commenters regarding when a person is considered an
``authorized representative.'' HUD recognizes that the inconsistent
terminology is confusing and believes that using a consistent term to
describe individuals representing ``low-income neighborhood
organizations'' and the ``nonprofit organizations'' described in
paragraph (8)(i) brings additional clarity to paragraph (8)(i) of the
CHDO definition.
HUD is further revising paragraph (8)(i) of the CHDO definition to
specifically reference the designees of nonprofit organizations in the
community that address the housing or supportive service needs of
``low-income residents or residents of low-income neighborhoods.'' This
revision is in response to commenters who stated that HUD had not
sufficiently connected the term ``nonprofit organizations'' to low-
income residents of the community in paragraph (8)(i) of the CHDO
definition. The commenters urged HUD to use clearer language to show
that individuals representing organizations serving low-income persons,
even if those persons do not live in low-income neighborhoods, should
be able to meet the requirement that the CHDO board is accountable to
low-income community residents. HUD believes this revision will better
enable designees that directly serve low-income residents to be CHDO
board members. In response to significant comment from the public, the
Department is revising paragraph (8)(i) to prohibit an organization
from being considered a CHDO if its service area is the entire State.
Though the Department had proposed removing this restriction from the
current regulation to better enable rural PJs and states to use their
CHDO set-aside funds, the public comments were quite clear that
allowing an organization to have a statewide service area was not the
solution to addressing the shortage of CHDOs with capacity in rural
areas.
In response to public comments received, HUD is also making
multiple changes to paragraph (9) of the definition of community
housing development organization in Sec. 92.2. These specific changes
are described in the paragraphs that follow.
HUD is revising the introductory text of paragraph (9) of the CHDO
definition to add ``Federal Home Loan Bank Affordable Housing Program
(12 U.S.C. 1430) funds'' to the list of housing programs that
demonstrate a CHDO's capacity to carry out a housing project. This
change is made in response to public comments to provide clarity
because these grant funds are frequently layered with HOME funds in
housing development projects.
HUD is revising paragraph (9)(i) of the CHDO definition by changing
the first sentence of the paragraph to require that a CHDO have ``paid
employees'' with housing development experience who will work directly
on the HOME-assisted project. HUD is making this revision in response
to public comments that correctly noted that the way the proposed rule
phrased this portion of paragraph (9)(i) of the CHDO definition allowed
a CHDO to have no paid employees at all and still meet the capacity
requirement. HUD's intent with the proposed rule was to allow
volunteers to supplement the capacity of paid employees, not to allow a
CHDO to meet the capacity requirements while having no paid employees.
HUD is making a similar revision in the last sentence of paragraph
(9)(i) of the CHDO definition to read as ``key, paid staff of the
organization'' for the same reasons.
HUD is further revising paragraph (9)(i) of the CHDO definition to
add an additional sentence to clarify that where the paid employees of
a CHDO alone do not demonstrate capacity, that experience can be
supplemented with volunteer board members or officers. For additional
clarity, HUD is also making minor revisions to paragraph (9)(i) of the
CHDO definition to more directly state the requirement that a volunteer
board member or officer may not be compensated by or have their
services donated by another organization.
C. Community Land Trust
In response to public comments received, HUD is making multiple
changes from the proposed rule to the definition of CLT in Sec. 92.2.
These specific changes are described in the paragraphs that follow.
HUD is revising paragraph (1) of the CLT definition to read ``[h]as
as its primary purposes acquiring, developing, or holding land to
provide housing that is permanently affordable to low-income persons.''
Commenters noted that CLT ownership models vary nationwide and, while
some CLTs do develop and maintain their properties, other CLTs acquire
and hold properties as affordable housing in perpetuity but are not
otherwise involved in maintenance or development work. HUD recognizes
that its proposed definition was too narrow to consider many of these
organizations as CLTs and is revising it accordingly. In addition,
HUD's proposed rule stated that a CLT must have a primary purpose of
serving both low- and moderate-income persons. After reviewing the
comments and the various CLT models provided by commenters, HUD is
revising the CLT definition to recognize that the primary purpose of a
CLT participating in the HOME program must be to serve low-income
persons. HUD is also making a similar change to remove ``moderate-
income'' from paragraph (3) of the CLT definition.
D. Homeownership
In response to public comments received, HUD is making certain
changes to the definition of homeownership in Sec. 92.2. Public
commenters noted that the Department had not changed the term
``dwelling'' in the definition of homeownership in Sec. 92.2. After
considering the best way to clarify the requirement, the Department
determined that it would be easier to replace to term ``1-4 unit
dwelling or in a condominium unit'' with the term ``single family
housing,'' which is defined as ``a one-to four- unit residence,
condominium unit, cooperative unit, combination of manufactured housing
and lot, or manufactured housing lot.'' The final rule text is clearer
and uses a common term that is also defined in the regulation. It also
provides additional clarity for homeownership projects involving
manufactured homes, which are more explicitly referenced in the
definition of single family housing. HUD believes that this clarifying
change is therefore also responsive to comments requesting that HUD
clarify the treatment of manufactured homes in HOME homeownership
projects.
HUD notes that in its review of the public comments, the Department
identified significant confusion by some commenters about the time
periods in the definition of CLT and homeownership in Sec. 92.2 and
the housing education and organizational support requirements in Sec.
92.302. HUD is committed to better addressing the needs of CLTs and its
revisions to the homeownership definition in Sec. 92.2 clarify the
intent of the definition and how it is meant to apply to HOME
homeownership projects. The specific changes to the definition of
[[Page 749]]
homeownership are described in the paragraphs that follow.
HUD is revising paragraph (1) of the definition of homeownership to
further clarify the explanatory text to state that the land upon which
housing is located may be owned in fee simple or through a ground lease
if the housing was owned in fee simple. The paragraph was also revised
to give a rule of construction so that PJs and homeowners understand
that the minimum term of a ground lease is the lowest time period if
more than one condition applies. For example, if a ground lease was
part of a CLT-developed project, the minimum term for the ground lease
to be considered homeownership is 50 years, but if that CLT-developed
project was in an insular area, the minimum term for the ground lease
to be considered homeownership would be 40 years because the minimum
term for a ground lease to be considered homeownership in insular areas
is 40 years (See Sec. 92.2(1)(ii)).
HUD is further revising paragraph (1) of the definition of
homeownership to remove the latter portion of the introductory text of
paragraph (1) that addressed 99-year ground leases. Paragraph (1) is
instead being revised to create a new paragraph (1)(i) to make clear
that a 99-year ground lease is one of multiple options for ground lease
length. The original paragraphs (1)(i), (1)(ii), and (1)(iii) are being
redesignated as (1)(ii), (1)(iii), (1)(iv), respectively.
HUD is also making other minor, non-substantive revisions to the
introductory text and paragraph (1) to the definition of homeownership
to improve the readability of the text.
E. Housing
HUD is revising the definition of housing in Sec. 92.2 to replace
the term ``dwellings'' with ``housing units.'' Commenters noted that
there were certain areas in the proposed rule where ``dwelling'' had
not been replaced with the updated term. HUD is updating the housing
definition to correct this issue.
F. Single Room Occupancy (SRO) Housing
HUD is revising the definition of single room occupancy (SRO)
housing in Sec. 92.2 to replace the term ``dwelling'' with
``housing.'' Commenters noted that there were certain areas in the
proposed rule where ``dwelling'' had not been replaced with the updated
term. HUD is updating the SRO housing definition to correct this issue.
G. American Dream Downpayment Initiative References
The Department intended to remove all American Dream Downpayment
Initiative (ADDI) regulations as part of this rulemaking.
Unfortunately, the Department inadvertently retained language in the
definition of ``State'' that described deviations between the term
``State'' in the HOME program and in the ADDI program. The Department
is revising the definition of ``State'' to remove all ADDI-related
language in this final rule.
24 CFR 92.3--Applicability of 2025 Regulatory Changes
In response to the proposed rule, HUD received comments requesting
that the Department specify the effective date of the regulatory
changes associated with this final rule. To address these comments, HUD
is revising Sec. 92.3 to provide the applicable effective dates for
the regulatory changes associated with this final rule instead of the
applicable effective dates associated with the 2013 regulatory
revisions. The header is being revised to describe the applicability of
2025 regulatory changes.
The introductory language of Sec. 92.3 is being replaced by a
provision explaining that the regulations in 24 CFR part 92 apply based
on when an income determination is made or when the HOME funds for the
project were committed. The provision goes on to explain that projects
where the HOME funds were committed before a certain date may be
subject to previous versions of these regulations. The provision also
explains that the intent of Sec. 92.3 is to provide instruction
regarding which version of these regulations applies to which project
based on when the funds were committed.
Paragraph Sec. 92.3(a) is being replaced with a new paragraph (a).
Paragraph (a) establishes the effective date for the 2025 final rule.
The paragraph explains that the final rule is applicable to projects
for which HOME funds are committed on or after February 5, 2025. The
paragraph goes on to state that a PJ must perform income determinations
in accordance with Sec. 92.203 after February 5, 2025.
Paragraph Sec. 92.3(b) is being revised to explain that while the
effective date of the rule is 30 days after publication, PJs are
permitted to continue to comply with the HOME regulations as they
existed immediately before the effective date for commitments made up
to one year after the rule's effective date. This allows PJs time to
change their policies and procedures, forms, and systems, so that they
can effectively implement the provisions of the final rule.
Paragraph (c) describes how the income regulations will be
implemented for existing tenants and new projects that are coming
online. This is because the income requirements of Sec. 92.203 are
applied to tenants of existing projects pursuant to their written
agreements. The Department wants to clarify that for up to one year
after the effective date of the rule, PJs may calculate income in
accordance the income requirements that the PJs was implementing
immediately prior to the publication of the final rule. This allows PJs
to transition to determining income in accordance with the new
requirements, as many income reexaminations may be underway when the
rule becomes effective.
In some cases, PJs may wish to amend existing written agreements to
take advantage of certain flexibilities or impose new requirements.
While most of the rule may be applied immediately on the effective
date, the Department is clarifying that certain provisions may not be
implemented when a commitment has already been issued for a project.
These relevant provisions are listed in Sec. 92.3(d)(1) through (5).
Section 92.3(d)(1) explains that the written agreement cannot be
revised to allow for certain predevelopment costs as well as certain
project related soft costs currently contained in Sec. 92.206(d)(2) to
be reimbursed in accordance with the newly revised Sec. 92.206(d)(1)
if the HOME funds were committed to the project prior to the effective
date of the final rule. Commitments were made after underwriting the
project with assumptions that these costs were not going to be paid
with HOME funds and the Department determined that the written
agreements should not be amended to include those costs as payable from
HOME when it was not the source that had already been identified to pay
for the cost.
Similarly, Sec. 92.3(d)(2) states that the new flexibility to
obtain a higher maximum per-unit subsidy increase should only be
included for projects where funds were committed to the project after
the effective date of the final rule. While the Department fully
supports green building requirements, the Department determined that
projects with current commitments should not undergo additional
underwriting and cost allocation. When a PJ committed HOME funds to
projects before the effective date of the rule, they underwrote and
sized the assistance based on the assumption that the maximum per-unit
subsidy was the
[[Page 750]]
limit in effect. The Department believes that this should continue to
be the case and that current projects should not be amended. If a PJ
were to amend its written agreement with an owner to add the new
requirements at a later time, it can be disruptive, cause delays in
production of badly needed affordable housing units and is not the
behavior that the Department is attempting to incentivize by providing
the increase in maximum per-unit subsidy.
Section 92.3(d)(3) states that the revised dollar thresholds for
periods of affordability in Sec. 92.252 and Sec. 92.254 will not
apply to projects where the PJs had already committed HOME funds.
Similar to paragraphs (d)(1) and (2), a PJ already agreed with an owner
on the applicable periods of affordability, just like they had agreed
to a maximum per-unit subsidy, or which type of funds were used to pay
which costs. To allow the owner and PJ the ability to reduce the period
of affordability for a project that has already been agreed upon
through amending the written agreement would be perverse and counter to
the purposes of the Act.
Section 92.3(d)(4) states that the new tenant protection provisions
cannot be imposed upon owners that are already under a current written
agreement or tenants and owners under a current rental assistance
contract or receiving security deposit assistance. Owners should have
appropriate notice before imposing substantial changes in landlord-
tenant relations. The HOME program provides development subsidies to
owners to build affordable housing but does not provide ongoing
operations assistance. Owners must consider the costs of compliance in
determining whether to participate in the HOME program. This includes
the costs of complying with tenant protections. Moreover, the
Department received numerous comments indicating that imposing the
tenant protections on current owners would amount to a regulatory
taking. While the Department does not believe that this is the case and
would strenuously object to any characterization of improving tenant
protections as a form of taking or violation of an owner's due process
rights, the Department does believe it is important to establish clear
compliance requirements within the written agreement between the PJ and
the owner, and to allow those requirements to remain consistent for the
life of the agreement. To prevent potential litigation and loss of
affordable housing, the Department is requiring that the new and
revised tenant protections provided in Sec. 92.253 only be effective
for projects with commitments of up to one year after the effective
date of the rule and not be applied to projects with commitments prior
to the effective date of the rule.
Finally, Sec. 92.3(d)(5) was added to state that the revisions to
the role of CHDOs in owning, developing, and sponsoring affordable
housing in Sec. 92.300 only apply to projects where the PJ committed
CHDO set-aside funds on or after the effective date of the final rule.
The new flexibilities in Sec. 92.300 should be used for new projects.
If a PJ has already entered into an agreement with a CHDO to own,
develop, or sponsor a project, then it is inappropriate for the PJ to
amend the agreement and enter into an agreement with a new party
because of the new flexibilities provided in Sec. 92.300. The
Department is expanding the way in which CHDOs can be involved in a
HOME project but is not encouraging PJs to terminate or significantly
restructure existing CHDO projects.
The Department also believes that it may be helpful to place the
date and the triggering action into a chart to better assist PJs,
owners, and the public in understanding when the 2025 final rule's
requirements are applicable.
24 CFR 92.201 Distribution of Assistance
The Department is also revising the first sentence of Sec.
92.201(b)(3)(i) to clarify that States must require State recipients
use HOME funds in accordance with part 92. This is also stated in the
written agreement section in Sec. 92.504 and is a revision for
consistency.
24 CFR 92.203 Income Determinations
The Department is making a technical revision to the first sentence
of Sec. 92.203(a) to remove the dash between ``income'' and
``eligible'' to maintain consistent usage of the term. The Department
is revising the ``must'' to a ``may'' in Sec. 92.203(a)(1) in response
to public comments recommending that HUD allow PJs to always retain the
right to determine annual income in accordance with the process
described in paragraphs (b)-(e). This change will allow PJs the choice
of accepting the income determinations made in Federal or State
project-based rental subsidy programs instead of requiring PJs to
accept those determinations.
In response to public comments, the Department is revising the
language in Sec. 92.203(a) to create a new paragraph (a)(3) and
redesignate the current paragraph (a)(3) as paragraph (a)(4). The new
paragraph (a)(3) provides additional burden relief for PJs and owners
by expanding a safe harbor that is currently located in Sec.
92.203(b)(1)(iii). The current safe harbor in Sec. 92.203(b)(1)(iii)
is limited to government programs and not forms of public assistance,
which is a broader term that encompasses tax credits and other forms of
assistance that are not ``programs.'' The Department uses this broader
term ``public assistance'' in the safe harbor provisions in 24 CFR
5.609(c)(3) for 1937 Act programs but does not use this term in the
current HOME regulations. The current safe harbor in HOME regulations
cannot be used for initial annual income and eligibility
determinations, or in calculating annual income for a family in years
6, 12, and 18 of a HOME rental housing project's period of
affordability. The safe harbor also cannot be used for individuals
applying for or renewing tenant-based rental assistance.
Public commenters recommended that PJs be able to accept income
determinations made under other forms of public assistance, including
LIHTC income determinations for families living in tax credit units.
The Department recognizes the utility in expanding the safe harbor to
include other forms of government assistance and allowing its use for
initial annual income determinations or annual income determinations
made in years 6, 12, and 18 of a HOME rental housing project's period
of affordability as well as for individuals entering into or renewing a
new rental assistance contract for tenant-based rental assistance.
Therefore, the Department is moving the safe harbor into paragraph (a)
as a new paragraph (a)(3) to enable a PJ to use the information for
initial annual income and subsequent income determinations for HOME
rental housing tenants as well as for tenant-based rental assistance.
The Department is also expanding the applicability of the safe harbor
to include an annual income determination made under another form of
Federal, State, or local public assistance. Accordingly, the Department
is also removing Sec. 92.203(b)(1)(iii) and revising the last sentence
in paragraph (b)(1) to indicate that there are only two methods of
determining income under paragraph (b)(1).
The Department provides several examples to enhance the public's
understanding of the types of assistance that could be accepted under
the new paragraph (a)(3). These examples include TANF, Medicaid, LIHTC,
and local rental subsidy programs. These programs all calculate annual
income but do not make the adjustments that are made in HUD programs
that are subject to 24 CFR 5.611.
[[Page 751]]
To obtain the relief of the safe harbor under new Sec.
92.203(a)(3), the PJ must be able to obtain a statement that indicates
the family size and income. This can be provided by an administrator of
a Federal, State, or local form of public assistance, even if that
administrator is not the administrator at the Federal or State level.
The Department considered whether to allow, as the current safe harbor
provision in Sec. 92.203(b)(1)(iii) does, a government administrator
to provide a PJ with a statement indicating that the family's income
does not exceed the current dollar limit for very low-income or low-
income families for the family size of the tenant. The Department
decided against including this language.
The Department drafted this safe harbor partly in response to
public comments requesting that the Department accept a statement made
by an administrator of public assistance without further review of
income documentation for the tenant. The Department agrees that it is
possible to use a statement from a government administrator to
determine income, though verification is left to PJ policies and
procedures. However, the Department decided that if it was expanding
the safe harbor to enable PJs to accept a statement, then the statement
must contain a statement of family size and income and not just a
statement that the family was below the applicable income limit for the
family's size. This is especially true because, in many cases, the PJ
must still calculate adjusted income in accordance with paragraph (f).
To provide the maximum amount of burden relief to both the PJs and
tenant, and best address the concerns of the commenter, the statement
must have the family's annual income on it so that the PJ need only
adjust the income (if applicable) from a known amount of annual income.
Accordingly, the Department is also removing Sec. 92.203(b)(1)(iii)
and revising the last sentence in paragraph (b)(1) to indicate that
there are only two methods of determining income under paragraph
(b)(1).
The Department is requiring in the new Sec. 92.203(a)(3) that the
statement accepted by the PJ must be for an income determination made
within the previous 12-month period. This aligns with how similar safe
harbor provisions are used in other HUD programs, such as the safe
harbor in 24 CFR 5.609(c)(3) that is used for certain programs governed
under the U.S. Housing Act of 1937. The Department considered whether
to provide a shorter period, such as the 6-month requirement under
Sec. 92.203(e)(2) for income determinations made prior to providing
homeownership or tenant-based rental assistance to a family. However,
after consideration of the comment and how to align this safe harbor
with other safe harbors in HUD regulations, HUD has determined that 6
months is inappropriate. When a family applies to a PJ for assistance
and the PJ determines the family's income, there is a reasonable
expectation that this income examination is close in time to when the
family will receive the HOME assistance from the PJ. When a person was
determined income eligible with these other forms of public assistance,
it may not be at the same time as when the PJ's tenant-based rental
assistance program waiting list opens up for the public to apply or
when a person is next up on an owner's waiting list. To establish a
shorter period in which the income determination will remain valid for
purposes of the new safe harbor would therefore disadvantage those
families and PJs and so the Department chose to allow income
determinations made within a 12-month period to qualify for purposes of
the safe harbor at Sec. 92.203(a)(3).
As part of the revisions made to lift and expand the safe harbor in
Sec. 92.203(a)(3), the Department is making conforming changes to
paragraph (b)(2) and adding paragraph (b)(3) to explain that only
families applying for homeownership activities must calculate income
using 2 months of source documents. Before paragraph (a)(3) was added,
both families applying for homeownership assistance and families
applying for or receiving tenant-based rental assistance were required
to solely use source documents. However, with the expansion of the safe
harbor to tenants applying for, renewing, or for assisted families
required to enter into a new rental assistance contract, the Department
had to make conforming changes to explain how income is calculated for
tenant-based rental assistance. The new paragraph (b)(3) does this by
explaining that, for families applying for or receiving tenant-based
rental assistance, the PJ may determine annual income in accordance
with the new safe harbor provision or through the use of source
documents. The paragraph also clarifies that income will be calculated
at the times specified in Sec. 92.209(e)(3), which provides explicit
instructions on when income must be determined for a family applying
for or receiving tenant-based rental assistance.
The Department received negative comments on Sec. 92.203(e)(2).
While the Department is declining to revise the six-month limit on when
income is valid, the Department recognizes that the provision itself
could be clearer. The Department is therefore clarifying that a PJ is
not required to redetermine income for a family unless 6 months have
elapsed since the PJ determined the family is income eligible. The term
``re-examine'' is confusing given that the provision is about
determining a family's income eligibility in advance of being provided
assistance. This is different than when income is reexamined for
families living in a rental housing project or families entering into
or renewing a rental assistance contract. As the Department is revising
income reexamination provisions for small-scale rental housing and in
the context of tenant-based rental assistance, the Department believes
it is important to remain consistent and is therefore revising this
provision as well.
Paragraph 92.203(e)(2) is also being clarified to explain that when
the regulation refers to ``HOME assistance,'' the regulation means
homeownership assistance and tenant-based rental assistance. In the
HOME regulations, the term ``HOME assistance'' is used in a variety of
contexts. The term means the assistance provided to a subrecipient,
State recipient, or contractor to run all or a portion of a PJ's HOME
program; the assistance provided to a developer, owner, or sponsor to
develop a HOME rental or homeownership project; assistance provided to
a family for tenant-based rental assistance; homeownership assistance
provided to a family to purchase and/or rehabilitate a home; or
assistance provided to a CHDO. The Department believed it was important
to clarify which type of assistance is meant in the provision given the
various ways in which the term is used. Paragraph (e)(2) was also
revised with a clarifying edit to say that a family ``is income
eligible'' instead of ``qualifying as income eligible.'' This is a non-
substantive revision for readability.
The Department is revising Sec. 92.203(f)(1)(ii) to remove two
references to Sec. 92.252(a)(2)(iii), which is being removed by this
rulemaking. The Department is also revising Sec. 92.203(f)(2) to make
corresponding revisions now that PJs are given the option of accepting
a public housing agency, owner, or rental subsidy provider's
determination of the family's adjusted income under that program's
rules instead of being required to do so under Sec. 92.203(a)(1). This
change is in response to public comments, as described earlier in this
preamble.
[[Page 752]]
24 CFR 92.206 Eligible Project Costs
In response to public comments, HUD is making certain changes to
Sec. 92.206(d) regarding related soft costs that may be considered
eligible project costs. The Department proposed and received comments
requesting that HUD allow environmental reviews or other environmental
studies or assessments to be reimbursable costs incurred prior to the
commitment of funds to a project. Commenters requested that the
provision be expanded to also include environmental fees, which the
Department agrees can be included in the provision. The comments urged
the Department to also consider expanding the types of costs that would
be allowed to be incurred to include ``pre-development'' and other
related soft costs.
In response to the comments, HUD is making changes to paragraph
(d)(1) to expand the project soft costs that may be incurred prior to a
commitment. The final rule moves certain soft costs from paragraph
(d)(2) into paragraph (d)(1), including costs to process and settle
financing for the project, such as private lender origination fees,
credit reports, fees for title evidence, legal fees, private appraisal
fees, and fees for independent cost estimates. By moving these soft
costs into paragraph (d)(1), HUD is allowing the costs to be paid so
long as they were incurred no more than 24 months before the date of
commitment and included in the written agreement committing the funds.
Note that ``legal fees'' is a more expansive term than the current term
``attorney's fees'' and the Department is intentionally expanding the
term to be more inclusive of the different legal costs that are
associated with a project in response to public comment.
The Department determined that soft costs contained in the other
provisions in paragraph (d) could not be moved into paragraph (d)(1) as
there is no reasonable expectation that such costs would occur prior to
commitment of HOME funds. Those provisions include building permits,
which can only be obtained after completion of the HUD environmental
review; fees for recordation and filing of legal documents, as
recordation of documents related to an acquisition, rehabilitation, or
new construction contract should occur after commitment of HOME funds;
and building or developer fees, as those fees should not be earned or
chargeable to the HOME grant for work performed prior to the
environmental review and commitment of the HOME funds to a project.
In response to public comment, HUD is also revising Sec. 92.206 to
add ``accounting fees'', ``filing fees for zoning or planning review
and approval'', and ``other lender-required third-party reporting
fees'' to paragraph (d)(1). The Department added these fees, as
recommended by the commenter, because the Department agrees that these
fees, which are generally incurred prior to applying to a PJ for HOME
assistance, are directly related to meeting underwriting and
construction feasibility criteria that are required in the definition
of Sec. 92.2 Commitment. They may be payable with HOME funds if a PJ
agrees to pay these costs in the written agreement.
24 CFR 92.208 Eligible Community Housing Development Organization
(CHDO) Operating Expense and Capacity Building Costs
The public comments indicated confusion over the proposed use of
capacity building funds for CHDOs. The new Sec. 92.208(c) describes
how PJs may provide HOME assistance to CHDOs for operating costs under
Sec. 92.300(a). The paragraph is not intended to describe the use of
capacity building funds, which is described in the previous paragraph
at Sec. 92.208(b). HUD inadvertently included reference to ``capacity
building costs'' in the proposed Sec. 92.208(c) and understands that
this may have led to confusion for commenters. Consequently, HUD is
removing the reference to ``capacity building costs'' in Sec.
92.208(c) to eliminate this confusion.
24 CFR 92.209 Tenant-Based Rental Assistance: Eligible Costs and
Requirements
The Department revised Sec. 92.209(c)(3) to correct the term
``tenant-based rental assistance'' in the third sentence of the
paragraph. The regulation had previously read ``tenant-based
assistance.'' This is a non-substantive change.
The Department made several revisions to Sec. 92.209(e) in
response to public comment. The Department redesignated Sec. 92.209(e)
as Sec. 92.209(e)(2) and revised the provision as described below. The
Department also revised the header for paragraph (e) to describe the
rental assistance contract more broadly and not just the term rental
assistance contract. The Department then made four new subsections.
The first subsection, Sec. 92.209(e)(1), defines the parties to
the rental assistance contract, which is also the header for this
provision. Based on public comment to specific solicitation of comment
#10, the Department is requiring the PJ to have a rental assistance
contract with both the owner and the tenant. This can take the form of
a single tri-party agreement or two separate agreements. There is
precedent for this model in HUD programs. In the Housing Choice Voucher
program, the tenant has an agreement with the public housing agency
where the tenant agrees to the rules of the program (See Form HUD-
52646), and the owner has an agreement with the public housing where
the owner agrees to the terms of the housing assistance payments agency
(See Form HUD-52641). The Department also believes that this is the
best method for the PJ to enforce HOME requirements on tenant and owner
alike.
The Department revised the redesignated Sec. 92.209(e)(2) to
provide that a rental assistance contract does not need to start on the
first day of the lease so long as the contract commences at the
beginning of the first month in which tenant-based rental assistance is
provided. The Department revised the provision to decouple the
execution of the rental assistance contract from the tenant lease
because with the imposition of the tenancy addendum, which must be
executed and attached to the tenant lease, the need for the rental
assistance contract to begin on the first day of the lease is
significantly lessened. This is because the terms of the HOME tenant-
based rental assistance tenancy addendum will control in the event of a
conflict between the preexisting lease and the tenancy addendum, and
therefore the risk that the lease would contain prohibited lease terms
or would otherwise not comply with the HOME program requirements is
eliminated. The Department is also revising this requirement in
response to public comments that stated that it disadvantages families
to require that the rental assistance contract begin on the first day
of the lease because current very low-income tenants would have to
break their lease to obtain rental assistance, which is not always
possible. The Department does not wish to disadvantage tenants that are
housing insecure or rent burdened by requiring they enter a new lease
in order to receive tenant-based rental assistance under HOME.
The Department also revised the redesignated Sec. 92.209(e)(2) to
explain that a rental assistance contract can be amended subject to the
availability of funds. This revision is made in response to a public
commenter that requested HUD explain whether an amendment to a rental
assistance contract would require a new income determination. The
Department is drawing a distinction
[[Page 753]]
between new contracts, amendments, and renewals of rental assistance
contracts first in paragraph (e)(2) and then further in the new
paragraphs (e)(3) and (e)(4).
The new Sec. 92.209(e)(3) explains under what conditions a
contract may be amended or renewed. The new Sec. 92.209(e)(3)(i)
explains that all parties must consent to an amendment to the rental
assistance contract. The new Sec. 92.209(e)(3)(i)(A) explains that a
rental assistance contract may be amended because the lease between the
family and owner has been amended or renewed, as long as the lease term
or amount charged under the lease are the only terms of the contract
being changed. The new Sec. 92.209(e)(3)(i)(B) explains that
amendments to the rental assistance contract may extend the original
term of the rental assistance contract up to 24 months from the
original date of execution, which is the maximum term allowable under
Sec. 92.209(e)(2). The new Sec. 92.209(e)(3)(i)(C) also allows for
the amendment of the rental assistance contract when a family is moving
within the same building or development, but the parties to the lease,
family size, and the number of bedrooms are all the same. With respect
to Sec. 92.209(e)(3)(i)(C), the Department believes these are
reasonable restrictions on tenants and owners, as changes to the
parties to a lease, family size, and the number of bedrooms in a unit
are all significant enough such that allowing a PJ to amend an existing
rental assistance contract is not appropriate, and the PJ should
instead be required to enter into a new rental assistance contract with
the family and owner.
The new Sec. 92.209(e)(3)(ii) explains that, subject to the
availability of HOME funds, a rental assistance contract may be renewed
after the expiration of its initial term. The new Sec.
92.209(e)(3)(iii) explains that in all other instances, the PJ must
enter a new rental assistance contract with the family and owner in
accordance with Sec. 92.209(e). This includes when family size
changes, when the family moves to a different address with a different
owner, or when the number of bedrooms in the unit changes.
The Department explains the differences between when a new contract
must be entered, when a contract can be amended, or when a contract can
be renewed primarily to provide greater clarity in tenant-based rental
assistance requirements as well as to explain when an income
determination must be performed. The new paragraph (e)(4) whose header
is ``initial and subsequent income determinations'' explains that a PJ
must perform an income examination each time a new rental assistance
contract is entered into (see Sec. 92.209(e)(4)(i)) or renewed (see
Sec. 92.209(e)(4)(iii)). The Department believes that this change is
appropriate because it permits PJs to amend current rental assistance
contracts to extend their term to the maximum 24-month period without
requiring additional income examination, providing burden relief to
tenants receiving tenant-based rental assistance. The Department
declines to extend this burden relief to new rental assistance
contracts or renewals as material terms of the lease or the number of
persons in the housing are changing (in the case of new rental
assistance contracts) or the rental assistance contract is being
extended for more than twenty-four months (in the case of renewals). In
these situations, income should be redetermined because it factors so
heavily into the sizing of the rental assistance.
The Department is adding a new Sec. 92.209(e)(4)(iv) to explain
that if a family is participating in a HOME lease-purchase program and
receiving tenant-based rental assistance, then the family's income will
only be determined at the time of execution of the lease purchase
agreement. This is because the statute states that a family must be
income-eligible at the time the lease-purchase agreement is signed,\6\
and because this will better enable tenants to save up for the purchase
of the housing in accordance with the lease-purchase agreement and the
HOME lease-purchase program. This type of treatment is only when the
family is participating in a HOME lease-purchase program and not for
other non-HOME lease-purchase programs because those programs may have
different rules and restrictions, and their program design may vary
significantly from HOME requirements. In those instances where a family
is receiving tenant-based rental assistance and participating in a
lease-purchase program, the family's income will be examined when the
family enters into the rental assistance contract and again if the
family's assistance is renewed.
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\6\ See 42 U.S.C. 12745(b)(2)(B).
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The Department is revising Sec. 92.209(g) to refer to Sec. 92.253
instead of specific paragraphs within Sec. 92.253. This is because
Sec. 92.253 has been revised to directly state its applicability to
tenant-based rental assistance and the requirements of the HOME tenant-
based rental assistance tenancy addendum. The Department is also
revising Sec. 92.209(h)(3)(ii) to better identify the Section 8
Housing Choice Voucher Program payment standard that may be used by a
PJ, which is the payment standard established in 24 CFR 982.503(a)
through (c) and not the exception payment standard established in 24
CFR 982.503(d). The exception payment standard is, by its nature, an
exception to the rule and the Department has not allowed its use in
HOME in the past. This change is therefore just a clarification of
HUD's existing interpretation of the HOME and Section 8 regulations.
The Department also made clarifying revisions to Sec. 92.209(j)(6)
to use the language ``[s]urety bonds, security deposit insurance, or
instruments similar to surety bonds or security deposit insurance . .
.'' instead of the proposed phrasing of ``[s]urety bonds or security
deposit insurance and similar instruments . . . .'' HUD believes that
this revision improves the clarity and readability of the paragraph.
Consistent with changes made throughout the section, the Department
is revising the last two sentences of paragraph (k) to reference
paragraph (e) and making technical revisions. The current provision
requires that a PJ enter into an agreement with either the owner or the
family. The final rule will require that the PJ enter into an agreement
with the owner and the family.
24 CFR 92.210 Troubled HOME-Assisted Rental Housing Projects
In response to public comment that suggested the Department was
establishing an unreasonably high bar to evidence that a HOME project
is no longer financially viable and able to obtain the relief in Sec.
92.210, the Department has revised and reorganized Sec. 92.210(a).
The first sentence in the paragraph remains unchanged from the
proposed rule. Revised Sec. 92.210(a)(1) now states that a project is
not financially viable through the period of affordability if one of
the conditions in Sec. 92.210(a)(1)(i)-(iii) exists.
In response to public comments, the Department provides in Sec.
92.210(a)(1)(i) that a project is no longer financially viable through
the period of affordability if the project's operating costs exceed its
operating revenue considering project reserves. The Department has
revised this sentence to remove the term ``significantly'' and to make
this and the other conditions listed in Sec. 92.210(a)(1)(i)-(iii) be
independent conditions. In Sec. 92.210(a)(1)(ii), the Department is
creating a new condition that the project is no longer financially
viable through the period of affordability if an owner is
[[Page 754]]
unable to pay for necessary capital repair costs or ongoing expenses
for the project. In the proposed rule, the owner being unable to pay
for necessary capital repair costs was another condition that needed to
be satisfied instead of an independent condition. However, given the
comments, the Department believed it was best to expand the ground to
include inability to pay operating expenses and to make the ground an
independent ground for demonstrating that a project is no longer
financially viable through the period of affordability.
Lastly, if project reserves are insufficient to operate the
project, then the Department also believes that the project is no
longer financially viable through the period of affordability and is
therefore making that a separate ground for relief under Sec.
92.210(a)(1)(iii). The Department also revised Sec. 92.210(a)(3) to
clarify that HUD may approve the actions in Sec. 92.210(b) and (c) to
``strategically preserve the affordability of a rental project.'' The
Department had proposed to add the modifier ``in preserving
affordability'' at the end of the sentence in the proposed rule but
believes it is better for readability to move the language to describe
the type of preservation action that is occurring for troubled housing
rental housing projects under Sec. 92.210. Similarly, the Department
is revising Sec. 92.210 to explain that the PJ may be permitted to
reduce the ``total'' number of HOME-assisted units or change the
designation of the units. This is a non-substantive clarifying change.
24 CFR 92.212 Pre-Award Costs
The Department revised Sec. 92.212(b)(2) to clarify the provision.
The provision, as proposed, had initially stated that, if a given
year's appropriation were not timely, then a PJ may incur
administrative and planning costs as of the earlier of the beginning of
their program year or the date that HUD receives the PJ's consolidated
plan. The provision then defined when an appropriation was not timely
as when it occurs less than ninety days before a PJ's program year
start date.
After further consideration, the Department decided that it is
inappropriate to characterize appropriations as timely or not timely in
a regulation. The Department also believed this language detracted from
the overall clarity of the provision. Instead, the last sentence is
being deleted and the first sentence is being revised to state that in
any year in which an appropriation is less than 90 days from a PJ's
program start date, the PJ may incur administrative and planning costs
as of the earlier of the beginning of their program year or the date
that HUD receives the PJ's consolidated plan. This is a clearer
sentence that doesn't characterize the timeliness of appropriations and
it aligns with the related final rule text in Sec. 570.200(h)(3).
24 CFR 92.214 Prohibited Activities and Fees
For certain paragraphs in Sec. 92.214, HUD made clarifying
revisions to use the language ``[s]urety bonds, security deposit
insurance, or instruments similar to surety bonds or security deposit
insurance . . .'' instead of the proposed phrasing of ``[s]urety bonds
or security deposit insurance and similar instruments . . . .'' HUD
believes that this revision improves the clarity and readability of the
paragraph. In response to public comment, HUD also clarified that HOME
rental housing project owners may not charge tenants fees for normal
wear and tear.
24 CFR 92.219 Recognition of Matching Contribution
HUD is revising Sec. 92.219(a)(4) to replace the term ``dwelling''
with the term ``housing.'' HUD is making this revision to standardize
the use of the term ``housing'' in part 92 and in response to
commenters that noted that the Department failed to make this
terminology replacement in the proposed rule. The Department also made
technical revisions to Sec. 92.221(b)(1) to remove a dash, add section
symbols, and add the word ``through'' when citing Sec. Sec. 92.218
through 92.221.
The Department is making conforming regulatory revisions to Sec.
92.219(b)(2)(ii) and (iii) to remove the pinpoint citations to Sec.
92.253(a)-(c) and (d)(2) and replace them with more general citations
to the tenant protection provisions, as the provisions have moved and
are now contained in the applicable tenancy addendum (HOME rental
housing tenancy addendum, HOME TBRA tenancy addendum, and HOME security
deposit assistance tenancy addendum). The Department also made non-
substantive revisions to Sec. 92.253(b)(2)(ii) for readability and to
reduce confusion. The revised provision explains that the written
agreement must impose and enumerate all requirements applicable to the
project, including affordability requirements in Sec. Sec. 92.252 or
92.254 (as applicable based on the type of project being carried out),
any applicable tenant protections due to operation of a rental housing
project (or lease-purchase project), any applicable property standards
based on the type of project (e.g., new construction, rehabilitation,
acquisition, etc.), and income determination requirements that apply to
the family through Sec. 92.203. The revisions of the section should
make it easier for PJs to know what items are necessary for the written
agreement, but no substantive changes were made from the current
requirements.
24 CFR 92.250 Maximum Per-Unit Subsidy Amount, Underwriting, and
Subsidy Layering
The Department received comments stating that a five percent
increase in the maximum per-unit subsidy was insufficient to cover the
associated costs with meeting nationally recognized green building
standards. In response, the Department is increasing the percentage in
the final rule up to ten percent in Sec. 92.250(c). The Department
understands that many commenters requested increases that were
significantly higher, especially in the context of rehabilitation. The
estimates provided by commenters ranged significantly from ten percent
to well over twenty-five percent depending upon the market, the
standard the project owner is attempting to meet, and whether the
project was new construction or rehabilitation. The Department
understands that rehabilitation of existing housing units and meeting
significantly higher energy efficiency thresholds than what is required
under section 212(e) of the Act can add significantly higher costs.
However, the Department must balance the benefits from more
sustainable, energy-efficient housing against the potential that fewer
units will be created or fewer families served if the subsidy increased
beyond ten percent. Given the level of annual appropriations that the
HOME program receives, the Department believes it can only move to ten
percent at this time but will reevaluate in the future.
24 CFR 92.251 Property Standards and Inspections
A. Carbon Monoxide and Smoke Detection
In response to public comments on carbon monoxide and smoke
detection, including comments received in response to specific
solicitation of comment #3, which requested comment from the public on
new requirements for smoke alarms, the Department is making revisions
to Sec. 92.251(a)(3)(vi), Sec. 92.251(b)(1)(xi), Sec. 92.251(c)(3),
and Sec. 92.251(f)(1)(iv).
[[Page 755]]
First, the Department is adding the carbon monoxide requirement
applicable to the Section 8 voucher program as a new requirement for
the HOME program at Sec. 92.251(a)(3)(vi)(A), Sec.
92.251(b)(1)(xi)(A), and Sec. 92.251(f)(1)(iv)(A), which HUD will more
fully describe through a publication in the Federal Register. The
Department is also revising Sec. 92.251(c)(3) to reference the
requirement at Sec. 92.251(b)(1)(xi)(A) and revising Sec.
92.251(f)(1)(i) to clarify that the carbon monoxide requirements in 24
CFR 5.703 do not apply because the ones in Sec. 92.251(f)(1)(iv)(A)
apply instead.
Second, the Department is adding smoke detection requirements to
Sec. 92.251(a)(3)(vi)(B), Sec. 92.251(b)(1)(xi)(B), and Sec.
92.251(f)(1)(iv)(B). The Department is also revising Sec. 92.251(c)(3)
to reference the requirement in Sec. 92.251(b)(1)(xi)(B). The revised
smoke detection requirements are tailored to the type of HOME activity
and work being performed, based on public comments and informed by
implementation considerations.
For new construction projects under Sec. 92.251(a)(3)(vi)(B)(1), a
hardwired smoke detector must be installed on each level of each
housing unit, in or near each sleeping area in each housing unit, in
the basement of each housing unit, and in each common area of a
project. However, a hardwired smoke alarm is not required in crawl
spaces or unfinished attics of housing units. In addition, a hardwired
smoke detector must also be installed within 21 feet of any door to a
sleeping area measured along a path of travel and, where a smoke alarm
installed outside a sleeping area is separated from an adjacent living
area by a door, a smoke alarm must also be installed on the living area
side of the door. The Department believes that it is appropriate to
require that the smoke alarm be hardwired, as HOME funds are being used
in the new construction of the projects and therefore the building
designs and electrical systems can be tailored to meet the HOME
requirements.
In response to HUD's consideration of public comments, the
Department added Sec. 92.251(a)(3)(vi)(B)(4) to establish that
following the relevant specifications of either the International Code
Council (ICC) or the National Fire Protection Association (NFPA)
Standard 72 satisfies the requirements of Sec. 92.251(a)(3)(vi)(B).
Originally, the Department considered only codifying installation in
accordance with the NFPA Standard 72 but received comments urging the
Department to make its revisions consistent with the U.S. Housing Act
of 1937, as amended by the Consolidated Appropriations Act, 2023 (Pub.
L. 117-328, div. AA, title VI, Sec. 601)). The Consolidated
Appropriations Act, 2023 requires that units occupied by tenants living
in public housing, living in units and receiving Section 8 Housing
Choice Vouchers, or living in unit that receives project-based
assistance comply with the applicable codes and standards published by
the International Code Council or the National Fire Protection
Association and the requirements of the National Fire Protection
Association Standard 72 or any successor standard. Therefore, the
Department is codifying Sec. 92.251(a)(3)(vi)(B)(4) to allow property
compliance with either standard for new construction in the HOME
program which is consistent with other HUD programs.
The Department also added paragraph (a)(3)(vi)(B)(2) to require
that smoke alarms have an alarm system designed for hearing-impaired
persons. The Department is adding this language to ensure that
individuals with hearing impairments are adequately warned in the event
of smoke or a fire. The addition of this paragraph also makes the
requirements of this section more consistent with the requirements
contained in the Consolidated Appropriations Act, 2023.
The Department also added paragraph (a)(3)(vi)(B)(3) to describe
that the Secretary may establish additional standards related to Sec.
92.251(a)(3)(vi)(B) through a publication in the Federal Register.
Additionally, the Department considered requiring hardwired smoke
detectors for rehabilitation projects but understood that
rehabilitation projects may require different considerations. As a
result, while the Department is adopting the same requirements from
Sec. 92.251(a)(3)(vi)(B) for Sec. 92.251(b)(1)(xi)(B). In addition,
the Department is also adding Sec. 92.251(b)(1)(xi)(B)(4), which will
allow a PJ to provide a written exception to an owner to allow the
owner to install a smoke detector that uses 10-year non rechargeable,
nonreplaceable primary batteries as long as the smoke detector is
sealed, tamper-resistant, contains a means to silence the alarm, and
otherwise complies with the requirements of this section. This relief
may only be provided where the use of hardwired smoke detectors places
an undue financial burden on the owner or is infeasible. It is the PJ's
responsibility for making and documenting this determination for their
records. The Department is declining to define the terms ``undue
financial burden'' or ``infeasible'' because it believes that PJs
should have the flexibility to develop their own standards and to make
their own determinations based on the fact-specific circumstances.
For homeownership activities, the Department is revising Sec.
92.251(c)(3) to require that housing acquired for homeownership meet
the same carbon monoxide and smoke detection requirements required
under Sec. 92.251(b)(1)(xi). And, similar to the exception that the
Department is allowing at Sec. 92.251(b)(1)(xi)(B), the Department is
allowing a PJ to provide a written exception to an owner to allow the
owner to install a smoke detector that uses 10-year non rechargeable,
nonreplaceable primary batteries as long as the smoke detector is
sealed, tamper-resistant, contains a means to silence the alarm, and
otherwise complies with the requirements of this section. The
Department is also requiring that the same grounds which justify an
exemption from being required to use hardwired smoke detectors, i.e.,
undue financial burden, be the applicable grounds in Sec.
92.251(c)(3).
Finally, as for the ongoing property standards for existing rental
housing projects and the property standards for tenant-based rental
assistance, the Department is creating new requirements in Sec.
92.251(f)(1)(iv)(B), which will mandate that smoke detectors meet the
standards in 24 CFR 5.703(b) and (d). These are the NSPIRE smoke
detection standards that apply to the Section 8 program and elsewhere.
The Department believes it is appropriate to treat existing rental
housing and units with tenants receiving tenant-based rental assistance
the same as those receiving Section 8 HCV assistance or project-based
Section 8 assistance, as these programs are sufficiently similar.
For these existing rental housing units and units with tenants
receiving tenant-based rental assistance, the inside area must include
at least one battery-operated or hard-wired smoke detector, in proper
working condition, on each level of the property. For the unit, there
must be at least one battery-operated or hard-wired smoke detector, in
proper working condition on each level of the unit, inside each
bedroom, within 21 feet of any door to a bedroom measured along a path
of travel, and where a smoke detector installed outside a bedroom is
separated from an adjacent living area by a door, a smoke detector must
also be installed on the living area side of the door. Additionally, if
the unit is occupied by any hearing-
[[Page 756]]
impaired person, the smoke detectors must have an alarm system designed
for hearing-impaired persons. For both the inside area of the building
and the unit, the Secretary is able to establish additional standards
through Federal Register publication.
B. Accepting NSPIRE Inspections
The Department is revising Sec. 92.251(b)(1)(viii)(A), Sec.
92.251(f)(3)(i)(B), and Sec. 92.251(f)(4)(ii) in response to
commenters that stated HUD should not restrict the acceptance of NSPIRE
inspections to only those made under another HUD program. The
Department understands that there are other projects using non-HUD
funding, such as LIHTC projects, that may use inspections to the NSPIRE
standards to demonstrate compliance with the requirements for those
funding sources. The Department will allow a PJ to accept inspections
to the NSPIRE standards or another alternative inspection standard HUD
may establish through Federal Register publication. The inspections
must be in satisfaction of another funding source's requirements and
conducted within the timeframes established for the applicable
regulations.
C. Meeting Property Standards After Acquisition of Homeownership
Housing
In response to comment, the Department is revising Sec.
92.251(c)(3)(ii)(C) and adding Sec. 92.251(c)(3)(ii)(D) to give PJs
the ability to provide homebuyers an extension of the six-month
deadline for bringing a substandard homeownership unit into compliance
with the PJ's property standards.
While the Department strongly encourages PJs to provide
homeownership assistance to homebuyers purchasing housing that already
meets their property standards, this is not always possible. Because
there will be times where homebuyers wish to purchase properties that
do not meet the PJ's property standards, the Department is revising its
regulations to be flexible enough to allow PJs and homebuyers to bring
a unit up to the PJ's property standards after purchase.
The Department continues to believe that six months is the
appropriate amount of time to provide a homebuyer to comply with a PJ's
property standards. However, every construction project is different,
and each jurisdiction has local requirements for permitting. In the
past, due to national emergencies or disasters, homebuyers have also
been affected by materials shortages. Therefore, in light of the
variety of factors that can affect even minor repairs needed to bring a
unit up to a PJ's property standards, the Department's revisions to
Sec. 92.251(c)(3)(ii)(C) and addition of Sec. 92.251(c)(3)(ii)(D)
will allow PJs to provide homebuyers an extension lasting up to 12
months from the date of acquisition with HOME funds to bring their unit
up to the PJ's property standards. If an extension is granted, the PJ
must inspect the unit within 12 months of acquisition and determine
that it meets the PJ's property standards.
D. Clarifying the Application of Property Standards
In response to public comments requesting clear requirements for
when a unit must be inspected under the new construction property
standards and when a unit must be inspected under the PJ's
rehabilitation standards, the Department is adding a new Sec.
92.251(d) that explains that if a project includes both rehabilitation
of housing units and either new construction or reconstruction of
housing units, then the PJ must apply the rehabilitation standards to
the housing units that are rehabilitated and the new construction
requirements to housing that is either newly constructed or
reconstructed.
E. Sample Size for Property Inspections
The Department solicited comment on the correct sample size for
HOME project inspections in specific solicitation #4 of the proposed
rule. After considering the comments received in response to this
solicitation, the Department developed a chart that will provide
greater clarity on how many units must be inspected in a project based
on the number of HOME-assisted units within the project. Accordingly,
the Department is revising Sec. 92.251(f)(3)(iii) to require that
inspections be performed in accordance with the chart. The Department
is also adding clarifying text to indicate that the PJ must inspect the
inspectable areas for each building containing HOME-assisted units and
not just the units themselves.
To determine the appropriate sample size for each project, the
Department started with its minimum requirement that four units be
inspected for all projects that have up to twenty units. This is
because all units in small-scale housing (1-4 unit projects) must be
inspected once every three years, and projects of a larger size should
not be required to inspect fewer units than a small-scale housing
project. This is counter to the statutory intent of the monitoring
flexibilities provided for small-scale housing projects.\7\
Additionally, the Department examined other sampling techniques in
response to public comment, including the LIHTC and NSPIRE sampling
methods (see 26 CFR 1.42-5 for LIHTC and 88 FR 43379 and 43380 for
NSPIRE). The Department found that even with the four-unit minimum
sample size requirement for projects with up to twenty units, HOME was
still less burdensome than other programs and required fewer units to
be inspected than did other programs.
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\7\ See 42 U.S.C. 12756(c).
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The Department has therefore adopted its proposal for a 20 percent
sample for projects containing between twenty and one hundred and
thirty HOME units. Then, in response to comments requesting that the
Department provide burden relief similar to that provided in LIHTC or
HUD programs subject to NSPIRE, the Department adopted the sampling
method that it uses under NSPIRE for projects containing greater than
one hundred and thirty units. The Department believes that this
approach strikes the correct balance by providing burden relief for
smaller and larger projects while still requiring an appropriate amount
of unit inspections occur. It also provides a clearer standard for PJs
because the unit sampling for the inspection is not required to be
based on a statistically valid sample.
F. Miscellaneous Revisions to Sec. 92.251
The Department is adding State and local requirements back into
Sec. 92.251(a)(3)(iii), which lists the various standards that housing
must, where relevant, meet with respect to disaster mitigation. The
Department believed it had provided clarifying technical revisions to
this section, but did not mean to remove any additional requirements
not contained in State and local codes or ordinances from the list of
applicable standards. The Department also did not intend to change the
meaning of that provision in any other way.
The Department is revising paragraph (a)(3)(iv) to make the
requirement described in that paragraph more consistent with the
requirements in Sec. 92.504(c). Instead of requiring that a PJ ensure
construction contracts and documents describe the work to be
undertaken, the PJ must require this to be the case. This non-
substantive change will increase clarity and will make the language in
paragraph (a)(3)(iv) consistent with that of the monitoring
requirements provided in the written agreement provisions in
[[Page 757]]
Sec. 92.504 and of the cost principles contained in 2 CFR part 200,
subpart E.
The Department is revising Sec. 92.251(a)(3)(vii) to state that
the green building standards will be published through a Federal
Register publication.
Similar to how the Department is revising Sec. 92.251(a)(3)(iv) to
make the requirements in this section more consistent with the
requirements in Sec. 92.504(c), the Department is also revising Sec.
92.251(b)(2). Instead of requiring a PJ to ``ensure'' that construction
meet the PJ's rehabilitation standards, the PJ must ``require'' this to
be the case. This is already required in other regulations including
the monitoring requirements provided in the written agreement
provisions in Sec. 92.504 and the cost principles contained in 2 CFR
part 200, subpart E, and so is a non-substantive change made to
increase clarity. Sec. 92.251(b)(1)(vi) is being revised to align the
language with the same language contained in Sec. 92.251(a)(2)(iii).
24 CFR 92.252 Qualification as Affordable Housing: Rental Housing
In response to public comment, the Department has determined that
the rent limits do not apply to Federal, State, or local rental
assistance or subsidy payments and is revising the third sentence of
Sec. 92.252(a) accordingly. The Department also revised the first
sentence of Sec. 92.252(a)(1) to state that if a family is
participating in a program where the person pays thirty percent of
their monthly adjusted income or ten percent of their monthly income as
a contribution to rent, then the maximum rent due from the family is
the family's contribution under that program. Commenters requested
clarity on whether an owner could accept the full contract rent for a
tenant in a HOME-assisted rental housing unit that was also receiving
Section 8 or other forms of rental assistance even if the tenant was
low-income and governed by the High HOME Rent provisions of Sec.
92.252(a)(1).
After careful consideration, the Department determined that the
changes in the Housing and Economic Recovery Act of 2008 (HERA) (Pub.
L. 110-289, 122 Stat. 2654, approved July 30, 2008) not only revised
the Section 8 statute, but fundamentally changed the relationship
between the two programs. It is clear from HERA that the HOME Rent
Limits were not meant to apply to recipients of Section 8 assistance or
similar recipients of rental assistance or living in subsidized units.
Prior to the passage of HERA, the only way that the Secretary was
permitted to increase the rent limits was provided by 42 U.S.C.
12745(a)(1)(A). After passage of HERA, HUD determined the Secretary
could also make such determination based upon misalignment between HOME
rent requirements and the rent requirements of Section 8 and other
similar rental assistance or subsidy programs. The Secretary determined
that this change is appropriate and promotes greater alignment between
the HOME program and HUD's other rental assistance programs and is
revising Sec. 92.252(a)(1) and Sec. 92.252(a)(2) accordingly. Where a
family is participating in a program where the family pays as a
contribution toward rent no more than thirty percent of the family's
monthly adjusted income or ten percent of the family's monthly income,
then the maximum rent due from the family is the family's contribution,
regardless of whether the family is occupying a High or Low HOME Rent
unit. Thus, under the HOME program as changed by HERA, the HOME-
assisted rental housing project owner may now accept the rent due from
the tenant and the assistance or subsidy payment made under the
applicable assistance or subsidy program.
The Department is revising Sec. 92.252(a)(2)(i) to clearly
reference the fair market rent being described in Sec. 92.252(a)(1)(i)
and to revise the term ``fair market value'' to ``fair market rent'' to
more accurately describe the rent. Sec. 92.252(a)(2)(ii) is also being
revised to more accurately state that the rent contribution of the
family in a Low HOME rent unit is 30 percent of the family's adjusted
income. This is not a substantive change from the proposed rule or the
current regulatory text, but it is a more accurate description of the
Low HOME rent applicable to a family.
In response to comments about aligning with LIHTC on income and
rents, the Department is adding the statutory language contained in 42
U.S.C. 12745(a)(1)(B)(ii) into the new Sec. 92.252(a)(2)(iii). The
provision will state that if a HOME-assisted unit ``is a LIHTC unit and
has rents not greater than the gross rent for rent-restricted
residential units as determined under section 42(g)(2) of title 26''
then it shall be a Low HOME Rent unit.
The Department is revising Sec. 92.252(a)(3)(i) and (ii) to add
explicit reference to how the zero-bedroom fair market rent is
determined. This rent is established under 24 CFR part 888. In revising
the rent limits, the Department also realized the requirement in Sec.
92.252(a)(3)(ii), which currently requires that SRO units without
sanitary or food preparation facilities meet the occupancy requirements
of Low HOME rent units, could be identified in plain language. Instead
of referring to the occupancy requirements, the provision is being
revised to explain that the units are to be occupied by very low-income
tenants. This is a non-substantive change to provide a clearer
regulation.
In response to public comments received, HUD is clarifying in Sec.
92.252(b) that ``cable and broadband'' are not included in utility
allowances. Commentors asked for clarity regarding whether broadband is
a utility and whether tenants can be required to pay for cable and
broadband as a condition of occupying a HOME-assisted rental housing
unit. The Department agrees the regulation could be clearer and
included language in Sec. 92.252(b) to clarify that in addition to
telephone, ``cable and broadband'' are not included in utility
allowances.
Paragraph Sec. 92.252(b) was also revised to add the term
``applicable'' when describing local public housing authority utility
allowances. The Department understands multiple public housing
authorities may serve a particular geographic location (e.g., State,
county, city, etc.) and the Department believes that the public housing
authority providing Section 8 project-based voucher assistance (if the
project is assisted) or the one serving the jurisdiction that the PJ
believes is most reflective of the utility consumption in the community
in which the project is located should be the one used for the HOME
project.
The Department is making a non-substantive change to replace the
word ``ensure'' with ``require'' in Sec. 92.252(c). This change better
explains the requirement that PJs must not allow owners to charge
tenants in excess of the rents in Sec. 92.252.
The Department is revising the dollar thresholds that define the
periods of affordability in Sec. 92.252(d) in response to public
comments. Commenters stated that the thresholds had not been adjusted
for inflation and the increase in the cost of construction. The
Department agrees that the thresholds have not been revised since 1991
and must be revised to account for the increase in costs.\8\ See 42
U.S.C. 12745(a)(1)(E) of the Act. requires that HOME projects ``will
remain affordable, according to binding commitments satisfactory to the
Secretary, for the remaining useful life of the property, as determined
by the Secretary, without regard to the term of the mortgage or to
transfer of ownership, or for such other period that the Secretary
determines is the longest feasible period of time
[[Page 758]]
consistent with sound economics and the purposes of this Act . . .''
The Department cannot adjust the thresholds to fully account for the
differences in inflation \9\ because the Department must balance the
need for adjusting the periods of affordability to account for the
increase in costs (i.e., sound economics) with the purposes of the Act,
which are to produce and maintain affordable housing units.\10\ Given
the significant decrease in appropriations that the HOME program has
had in both real and inflation-adjusted dollars since the inception of
the current dollar thresholds, the Department can only revise the
thresholds to partially account for the increase of costs.\11\
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\8\ The HOME thresholds came into effect in 1991 (see 56 FR
65312-01).
\9\ By one measure, the Consumer Price Index, the dollar has
increased by over 200% since the establishment of the dollar
thresholds used to determine the period of affordability for the
HOME program. See the CPI Inflation Calculator at <a href="https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1%2C000%2C000.00&year1=199201&year2=202310">https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1%2C000%2C000.00&year1=199201&year2=202310</a>.
\10\ See 42 U.S.C. 12722(1) and (7).
\11\ In 1992, the Department was appropriated $1,500,000,000 for
HOME, the first year of annual appropriations for the program. (See
105 STAT. 744 for Pub. L. 102-139). For Fiscal Year 2024, the
Department received $1,250,000,000 for HOME. In current dollars,
this is a decrease in investment in affordable housing of only
$250,000,000 but when using the Consumer Price Index to calculate
the inflation-adjusted decrease, it is a decrease of over 50% of the
initial investment made in affordable housing.
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Accordingly, the Department will revise the initial threshold for
rehabilitation or acquisition of existing housing per-unit amount of
HOME funds from $15,000 to $25,000. If the per-unit cost of
rehabilitation and/or acquisition of existing housing is below $25,000,
then the minimum period of affordability for each HOME-assisted housing
unit is five years. The Department is revising the second threshold
from $40,000 to $50,000. If the per-unit cost of rehabilitation and/or
acquisition of existing housing is from $25,000 to $50,000, then the
minimum period of affordability shall be ten years for each HOME-
assisted rental housing unit. For rehabilitation and/or acquisition of
existing housing, if the per-unit cost is over $50,000 for each HOME-
assisted rental housing unit, then the minimum period of affordability
is fifteen years.
While the Department is revising the dollar thresholds for the
periods of affordability involving rehabilitation and/or acquisition,
the Department has chosen to maintain the period of affordability for
new construction and for rehabilitation involving refinancing. The
Department believes that the useful life of the property or the longest
feasible period of time is consistent with sound economics and the
purposes of this Act is still twenty years for HOME rental housing
projects involving new construction. Similarly, the Department believes
that properties where rehabilitation involves refinancing should also
continue to be subject to a period of affordability of fifteen years,
as the refinancing and rehabilitation of the property to the PJ's
rehabilitation standards should adequately extend its useful life to a
period of fifteen years. If the rehabilitation and refinancing action
cannot ensure that the property remains capable of operating as
affordable housing for a period of fifteen years, then the project is
not feasible or furthering the purposes of the Act.
The Department is revising the first sentence of Sec. 92.252(g)
and Sec. 92.252(g)(3) to include reference to the new safe harbor in
Sec. 92.203(a)(3). This revision allows a PJ to use the safe harbor in
Sec. 92.203(a)(3) in the calculation of both initial and annual income
determinations instead of using source documents, as required in Sec.
92.203(b)(1)(i). The Department is also revising the first sentence of
Sec. 92.252(g) to reference income provisions for HOME tenant-based
rental assistance tenants, which have been moved to Sec. 92.203(b)(3)
from Sec. 92.203(b)(2).
The Department is revising Sec. 92.252(g)(1) to provide a chart
clarifying the alternative income reexamination cycle for small-scale
rental projects that a PJ may permit. The Department is also revising
Sec. 92.252(g)(2) to specify that rental projects, including small-
scale projects, must reexamine tenant income using source documentation
every sixth year of the period of affordability.
The Department is revising Sec. 92.252(h)(2)(i) for readability by
striking ``section 42'' and instead stating that over-income tenants
subject to the rent restrictions under section 42 of the Internal
Revenue Code of 1986 must pay a rent that complies ``with that
section.'' This is clearer and less wordy. The Department is adding a
new paragraph Sec. 92.252(h)(2)(iii) that will explain that rent
limits do not apply to rental assistance or subsidy payments under any
Federal, State, or local rental assistance or subsidy program. This is
because when tenants become over-income in certain rental assistance
programs, such as the Housing Choice Voucher program, the tenant still
pays a percentage of their rent, such as thirty percent of their rent,
up to the contract rent for the housing unit. This means that there may
still be subsidy or assistance from the rental assistance provider
until the tenant is paying the full contract rent. If owners were
unable to accept this rent, then it would undermine the purposes of
HERA, as explained earlier for High and Low HOME Rents. As such, the
Department providing the same clarification it did in paragraph Sec.
92.252(a), which is that the rent does not include the rental
assistance provided by the rental assistance or subsidy provider.
Paragraph Sec. 92.252(i) was revised similar to other provisions
to state that surety bonds, security deposit insurance, or instruments
similar to surety bonds and security deposit insurance may not be used
in lieu of or in addition to a security deposit in HOME-assisted units.
This is a clarifying change for readability and not a substantive
change from the proposed rule.
24 CFR 92.253 Tenant Protections and Selection
The Department is making significant changes to its tenant
protection provisions in response to public comment. Based on comments
received as part of the specific solicitation of comment #10, the
Department has chosen to create three tenancy addenda for the HOME
program, one for each type of HOME rental activity (rental housing,
tenant-based rental assistance, security deposit assistance only). The
requirements for each addendum shall be provided in paragraphs (b)-(d)
accordingly. The Department is also reorganizing the tenant protections
regulations by removing the current security deposit and termination of
tenancy provisions found in paragraphs (c) and (d) and instead placing
them directly into the applicable tenancy addendum. The Department
believes these changes allow HUD to tailor the protections to the form
of assistance being received under the HOME program and should decrease
any potential chilling effects that an addendum may have on private
owners accepting tenants with HOME tenant-based rental or security
deposit assistance.
The Department also believes reorganizing the tenant protections to
include the security deposit requirements and termination of tenancy
provisions into the applicable tenancy addenda for rental housing and
tenant-based rental assistance is more legally supportable and
consistent with other HUD programs. Section 42 U.S.C. 12755(a)(1)
provides an explicit congressional delegation of authority to the
Secretary to determine the terms and conditions of leases in the HOME
program. Security deposit requirements and termination of tenancy
provisions are material terms to a lease and other
[[Page 759]]
HUD programs include specific provisions addressing each in their
tenancy addenda, including in the Section 8 voucher programs.\12\ The
Department believes this is the most legally sound way of requiring PJs
and owners to comply with the tenant protections and that it will
better enable beneficiaries of HUD programs to assert their legal
rights and defenses. Commenters had also specifically requested that
the Department add the security deposit provisions within the tenancy
addendum, as those are traditionally contained in a lease, and the
Department agrees.
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\12\ See HUD Form 52641A for the Housing Choice Voucher Program
Tenancy Addendum and Form HUD 52530.c for the Section 8 Project-
based Voucher Program Tenancy Addendum.
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Accordingly, the Department is revising paragraph Sec. 92.253(a)
by adding a ``(1)'' after lease contents and redesignating Sec.
92.253(a)(1)-(4) as Sec. 92.253(a)(1)(i)-(iv). Paragraph Sec.
92.253(a)(1)(iv)(A) shall also be revised to require that a lease of a
tenant in HOME rental housing include the HOME rental housing tenancy
addendum described in Sec. 92.253(b). Paragraph Sec.
92.253(a)(1)(iv)(B) is being added and shall require that a lease of a
tenant in HOME tenant-based rental assistance include the HOME tenant-
based rental assistance tenancy addendum described in paragraph Sec.
92.253(c).
A separate paragraph Sec. 92.253(a)(2) is being added and shall
provide the lease requirements for security deposit assistance only
recipients. After reviewing the comments received as part of the
solicitation of public comment, the Department determined that it was
not appropriate to require that tenants and owners use the HOME tenant-
based rental assistance tenancy addendum. Security deposit assistance
is fundamentally different than other forms of assistance under the
HOME program. It is a one-time form of assistance that is inherently
short-term in nature. The assistance is primarily intended as a form of
emergency assistance for families whose primary barrier to obtaining
housing is the security deposit. Many times, this assistance is also
paired with long-term assistance in other programs that comes with
their own protections. The HOME tenant-based rental assistance tenancy
addendum contemplates a contractual relationship between the PJ and the
owner because of the updated rental assistance contract requirements
contained in Sec. 92.209(e). Security deposit assistance, in contrast,
is of limited duration, lasting only the issuance of the initial
assistance.
Instead of requiring the HOME tenant-based rental assistance
tenancy addendum, the Department is requiring a security deposit
assistance tenancy addendum. Paragraph Sec. 92.253(a)(2) shall require
a written lease between the tenant and the owner that is for a period
of not less than 1 year, unless by mutual agreement between the tenant
and the owner, a shorter period is specified. This mirrors the
requirements for both rental housing and tenant-based rental
assistance. Likewise, to determine that the HOME security deposit
assistance tenancy addendum is included in the lease, the owner must
also provide the PJ with a written lease before security deposit
assistance is provided. This mirrors the new requirements for both
rental housing and tenant-based rental assistance. Then, the paragraph
requires that the lease contain the HOME security deposit assistance
tenancy addendum in paragraph (d) of this section.
The Department received a significant amount of comment on its
proposed tenant protections that represented a spectrum of participants
in the HOME program including PJs, owners, CHDOs, tenant rights and
advocacy organizations, fair housing and civil rights organizations,
and associations. These comments ranged from unqualified support to
complete opposition. The Department considered the comments and
determined that the vast majority of its proposed text was appropriate
for a rental housing tenancy addendum. However, based on public comment
and the reorganization of the regulation, the Department did make a
number of revisions since the proposed rule stage.
The introductory text in Sec. 92.253(b) has been clarified to
indicate that the tenancy addendum being described is the HOME ``rental
housing'' tenancy addendum. The second sentence was also revised to
include addenda from local affordable housing programs in addition to
other Federal or State affordable housing programs. The Department did
not intend to inadvertently exclude HOME-assisted tenants from
receiving other forms of local affordable housing assistance and
believes this revision is responsive to public comments that warned HUD
not to create conflicts with local programs. Paragraph (b)(1)(ii)(A) is
being revised to clarify that with respect to maintenance and repairs
to a housing unit, the owner shall provide tenants with written
expected timeframes for maintaining or repairing units as soon as
practicable. A written record is more protective of a participating
jurisdiction, owner, and tenant alike, as it provides each clear
evidence of when work is expected to occur.
The Department is revising paragraph (b)(2)(i) because while it is
true that a family may reside in the unit with a foster child, foster
adult, or live-in aide, the family must still comply with all
applicable occupancy requirements when living in HOME-assisted rental
housing. The Department did not intend to preempt or override State or
local occupancy laws or HUD's own occupancy restrictions in other
programs whose assistance may be combined with HOME assistance, such as
Section 8 project-based rental assistance. The Department notes that
any reasonable accommodations must still be made in accordance with all
applicable laws regarding nondiscrimination and accessibility. In Sec.
92.253(b)(5), the owner is separately agreeing not to interfere with or
retaliate against the tenant for asserting their rights, which include
the right to request a reasonable accommodation for a live-in aide. In
Sec. 92.253(b)(8), the owner is also agreeing to operate HOME rental
housing in accordance with all applicable nondiscrimination and equal
opportunity requirements pursuant to Sec. 92.350. As a result, the
Department does not believe that this revision will negatively impact
tenant protections. This revision was made in response to public
comments that requested HUD reexamine the tenant protections to
determine that they did not conflict with State or local law or with
other Federal programs.
The Department is revising the term ``dwelling'' to ``housing'' in
Sec. 92.253(b)(2)(iii), (b)(2)(iii)(A), and (b)(2)(iii)(C). The
Department is also revising Sec. 92.253(b)(2)(iii)(C) in response to
public comment urging HUD to require that owners provide tenants with
written notice of the date, time, and purpose of the owner's entry if
the owner must enter the housing without advance notification when
there is reasonable cause to believe that an emergency requiring entry
to the unit exists. The commenter was supportive of this approach and
believed it would be protective for the tenant. The Department agrees
and believes this provision will improve communication between owners
and tenants of HOME-rental housing.
In response to public comment, the Department is revising Sec.
92.253(b)(3)(i) to require that owners provide tenants with written
accessible notice of the specific grounds for proposed adverse actions
by the owner against the tenant before taking such actions. The
[[Page 760]]
Department had proposed to provide this as simply a notification
requirement. One commenter recommended that instead, the Department
revise the provision to make the adverse action itself contingent upon
providing the tenant notice. The Department believes this is a sensible
approach and that it may enable tenants to assert any rights or
protections prior to the imposition of any charges or other adverse
actions. In revising Sec. 92.253(b)(3)(i), the Department is also
clarifying that the notification of the adverse action must be
translated if required for the tenant to understand the notice. Tenants
and owners have an existing landlord-tenant relationship and so it
should not be overly burdensome to ensure that tenants are able to read
the written notice in a language they can understand. Similar changes
were made to Sec. 92.253(c)(3)(i).
The Department is also revising Sec. 92.253(b)(3)(ii) to more
clearly state when tenants must be notified of changes in the ownership
and management of the rental housing project. Paragraph Sec.
92.253(b)(3)(ii)(A) will specify that an owner must notify tenants
within 30 calendar days of the impending sale or foreclosure of a
rental housing project. Paragraph Sec. 92.253(b)(3)(ii)(B) specifies
that owners must notify tenants within five business days of a change
in ownership. These requirements were both in the proposed rule. The
Department added as a new requirement that owners not only notify
tenants within five business days of any changes in ownership but also
any changes in property management companies managing the property as
Sec. 92.253(b)(3)(ii)(C). This change, being made to was in response
to public comments that believed that such notification should include
property managers and not just owners. Property managers have
significant involvement in the operation of the property and are agents
or employees acting on behalf of HOME rental housing owners. When an
owner obtains a different property management company, it can have
significant impacts on the daily life of tenants. The Department
believes it is important to keep tenants informed in advance of such
impacts and that this improved communication may help both owners and
tenants. Similar additions are made to Sec. 92.253(c)(3)(ii).
The Department is revising Sec. 92.253(b)(4)(v) to narrow the
instances in which a tenant must pay an owner's attorney fees or other
legal costs as part of a court proceeding. In the proposed rule, the
Department proposed language to allow payment of such costs if the
tenant loses the court proceeding. In response to public comment
stating that the Department should examine local and State laws to
determine that the tenant protections in Sec. 92.253 are not in
conflict with such requirements, the Department determined that this
provision may conflict with State or local laws that would not permit
payment of attorney's fees or other legal costs, even if the tenant
were to lose the matter. Moreover, as courts hearing landlord-tenant
disputes are making findings of fact and law based on the individual
circumstances of each case, it should be up to those courts to
determine whether tenants should pay these costs. Therefore, the
revised requirement will state that a tenant is only required to pay
the owner's attorney fees or other legal costs if the tenant loses the
court proceeding and the court orders the tenant to pay those costs.
The Department is significantly revising Sec. 92.253(b)(5) to
address a number of comments received about the effectiveness of the
provisions in protecting tenants. First, the heading for the section is
being revised to explicitly include ``unreasonable interference'' to be
clear that unreasonable interference with the tenant's safety or
peaceful enjoyment of their property is a subject of the provision and
that the provision is not only prohibiting retaliation. Commenters
reasonably believed that the section was only describing retaliation
because the heading did not specify otherwise. Similarly, unreasonable
interference is now being separately prohibited in Sec.
92.253(b)(5)(i). The terminology is also being revised from the
proposed rule to remove the term ``comfort'' and instead state
``tenant's safety or peaceful enjoyment of a rental unit or the common
areas of the rental housing project.'' The Department recognizes that
there is significant landlord-tenant case law on the term ``peaceful
enjoyment'' and that it is a far more recognized term than
``enjoyment.'' The Department believes this change will improve the
ability for courts to determine the meaning of the provision in
relation to their jurisdictions and governing law. The revision to
address common areas also reflects consistency with protections in
Sec. 92.253 that allow tenants reasonable access to and use of the
common areas of the project (see Sec. 92.253(b)(2)(iv)).
The Department then revised Sec. 92.253(b)(5)(ii) to prohibit an
owner from retaliating against a tenant for taking any action allowable
under the lease and applicable law. The rule provides a variety of
actions that a tenant may take under a lease and the Department
believes that retaliating against a tenant for using any of these
protections is a breach of the lease and of the owner's written
agreement with the participating jurisdiction. Section
92.253(b)(5)(iii) provides a list of actions that evidence unreasonable
interference or retaliation against a tenant. The Department stresses
that this language is providing examples and that it is not a limited
list. The actions taken are the same actions that were prohibited in
the proposed rule, but the list has been redesignated Sec.
92.253(b)(5)(iii)(A)-(E), and Sec. 92.253(b)(5)(iii)(B) has been
revised to add a parenthetical to give an example of what it means to
be increasing obligations of a tenant in a manner that is not in
accordance with 24 CFR part 92. The example given is of new or
increased monetary obligations, such as the addition of new or
increased fees. This is just an example of monetary obligations but
nonmonetary obligations like new property rules could also be
considered retaliatory acts under this regulation under the right
circumstances.
In response to public comments requesting that the Department
specify the consequences of unreasonably interfering with a tenant's
safety or peaceful enjoyment or retaliating against a tenant for
exercising a right under their lease or the law, the Department has
added a new Sec. 92.253(b)(5)(iv). This new provision explains that if
an owner unreasonably interferes or retaliates against a tenant, then
the owner is violating the lease, the HOME program requirements, and
their written agreement with the participating jurisdiction. While the
Department has no authority to require that a participating
jurisdiction establish a grievance process, the participating
jurisdiction is required to address any regulatory violations in
accordance with the applicable provisions contained in Sec. 92.504(a)
and (c). This applicability is made clearer by adding explicit cross
references.
The Department is also revising Sec. 92.253(b)(5)(ii) of the
proposed rule, which is being revised and redesignated as Sec.
92.253(b)(6). The new Sec. 92.253(b)(6) has a revised header that
explains that the section is describing the exercise of rights under
tenancy. The revised first sentence explains that the tenant can
exercise any right of tenancy or protection under their lease and other
applicable Federal, State, or local tenant protections. Then the
Department redesignated Sec. 92.253(b)(5)(ii)(A)(C) as Sec.
92.253(b)(6)(i) through (iii) and revised Sec. 92.253(b)(6)(ii) to
also allow for a tenant to report lease violations in
[[Page 761]]
addition to requesting enforcement of the lease or any tenant
protections. The Department believes that reporting such lease
violations are inherent in requesting enforcement but believes that it
is best to be explicit, given that the provision is also contained in
the lease addendum.
The Department redesignated the proposed Sec. 92.253(b)(6) and (7)
as Sec. 92.253(b)(7) and (8). In response to public comments, the
Department also redesignated Sec. 92.253(c) as Sec. 92.253(b)(9). The
same provision will also be included in Sec. 92.253(c)(9). This
provision, which provides the requirements for security deposits,
should be contained in the tenancy addenda and not contained in a
standalone regulation. As explained earlier in this preamble, the
Department has clear authority to specify the terms and conditions of
the lease under 42 U.S.C. 12755 and security deposits are a material
term of the lease. Therefore, the Department is moving the security
deposit provisions from a standalone section of the regulation and
instead making the language a part of each HOME tenancy addendum. The
Department is also revising Sec. 92.253(b)(9) to state that ``Surety
bonds, security deposit insurance, and instruments similar to surety
bonds or security deposit insurance may not be used in lieu of or in
addition to a security deposit.'' This is a non-substantive
clarification of the text.
Similarly, one of the most important provisions of a lease concerns
termination of tenancy. The Department understands how central these
terms are to a lease and is also including termination of tenancy
provisions in the lease addendum. Section 92.253(d)(1) of the proposed
rule and all its contents are being redesignated as Sec.
92.523(b)(10)(i)-(v) and being revised.
Section 92.253(b)(10)(i) is being revised from the proposed rule to
clarify that good cause includes serious or repeated violation of the
``material'' terms and conditions of the lease. The Department adds the
word ``material'' because good cause is a higher standard and minor
lease violations, especially when easily curable or already cured,
should not provide the basis for a termination of tenancy or refusal to
renew tenancy in a HOME rental housing project. The Department still
believes that serious or repeated violations of the material terms of
the lease, such as nonpayment of rent or intentionally damaging the
project, can form the basis of a termination of tenancy or refusal to
renew.
Section 92.253(b)(10)(i) is also being revised to add a provision
that states that an owner is permitted to terminate the tenancy of any
tenant or household member or refuse to renew the lease of a tenant of
rental housing assisted with HOME funds if the owner is permitted to do
so pursuant to the provisions contained in 24 CFR part 5, subpart I; 24
CFR 882.511; or 24 CFR 982.310. This change is in response to public
comments and to maintain consistency across HUD programs. Owners with
tenants assisted under programs that are subject to these lease
provisions must be allowed to terminate tenancy in accordance with the
U.S. Housing Act of 1937 (42 U.S.C. 1437f) and the Department is
allowing for a consistent approach for termination of tenancy under the
HOME program for those assisted tenants.
Section 92.253(b)(10)(i)(A) is being revised from the proposed
rule. The provision will state that refusal to purchase a HOME rental
housing unit is not good cause to terminate a tenancy. The provision
will provide an exception for when a family fails to purchase housing
pursuant to a lease-purchase agreement. This was in response to public
comment, which pointed out that owners must be able to sell units when
the tenant fails to purchase the home in accordance with their lease-
purchase agreement. The Department agrees and allows for this to be
good cause to terminate a tenancy.
Section 92.253(b)(10)(i)(B) is being restructured to specify other
good cause and then list each ground individually. This was done to
improve readability of this section. Two grounds for good cause were
added and one was significantly revised.
The first form of good cause being added to Sec.
92.253(b)(10)(i)(B)(1) is when a tenant or household member is a direct
threat to the safety of the tenants or employees of the housing or an
imminent and serious threat to the property, which is a statutory
ground that commenters requested be considered in the termination of
tenancy or refusal to renew.\13\ The Department agrees that owners
should be able to terminate tenancy for this reason and is adding this
as a specific ground. The Department requires owners to maintain
records to demonstrate that they complied with the tenant protections
provisions, including records demonstrating there is a reasonable basis
to determine that a person constituted a direct threat to safety of the
tenants or employees of the housing or an imminent and serious threat
to the property. This could include specific threats or acts that took
place on the project site, against other families living in the
project, or against any employees or staff of the owner. The Department
believes that posing a direct threat to the safety of tenants or
employees is a high bar and not satisfied easily. Similarly, forming
the basis for an imminent and serious threat to the property is a
higher bar than just describing past negligent acts alone, and brings
with it an expectation that there is a specific or credible threat or
act made by the tenant or household member against the property.
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\13\ 42 U.S.C. 12755(b) states: ``An owner shall not terminate
the tenancy or refuse to renew the lease of a tenant of rental
housing assisted under this subchapter except for serious or
repeated violation of the terms and conditions of the lease, for
violation of applicable Federal, State, or local law, or for other
good cause. Any termination or refusal to renew must be preceded by
not less than 30 days by the owner's service upon the tenant of a
written notice specifying the grounds for the action. Such 30-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).''
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The second form of good cause added to Sec. 92.253(b)(10)(i)(B)(5)
allows an owner to terminate a tenant's tenancy terminated if the
tenant fails to purchase the housing within the timeframes listed in
the tenant's lease-purchase agreement. The intent of a lease-purchase
program is for the tenant to purchase the unit. If the unit cannot be
purchased pursuant to the lease-purchase agreement within 36 months,
then the owner must be able to sell the unit to an eligible homebuyer
to effectuate the intent of the homeownership development project. The
Department has revised Sec. 92.254(a)(7) to further enable owners to
sell homeownership units that fail to be purchased pursuant to their
lease-purchase agreement and though those changes are not
interdependent with the tenant protections provisions contained in
Sec. 92.253, the Department is maintaining consistency between the
requirements.
One form of good cause was substantively revised since the proposed
rule is contained in the newly redesignated Sec.
92.253(b)(10)(i)(B)(2). This form of good cause was revised to state
that other good cause includes when a tenant unreasonably refuses to
provide the owner access to the unit to allow the owner to repair the
unit. The provision originally contained language permitting
termination of tenancy or refusal to renew tenancy if the tenant
creates a documented nuisance under applicable State or local law. The
comments received for that provision were decidedly negative and there
were significant concerns that this provision
[[Page 762]]
was not only inconsistent with the rest of the tenant protections but
counterproductive to the overall tenant protection scheme by providing
an often-used avenue for discrimination. The Department agrees with
commenters and is removing the provision, thereby clarifying that
owners may not justify termination of tenancy on outdated or
discriminatory concepts of nuisance but instead must rely upon good
cause.
Section 92.253(d)(1)(i)(D) is being redesignated and revised as
Sec. 92.253(b)(10)(i)(C). The provision is also being revised directly
in response to public comment. The public was concerned that the
meaning of a record of conviction of a crime that bears directly on the
tenant's continued tenancy was too vague to be an appropriate legal
standard to apply to landlord-tenant relationships. The commenters
believed that the Department should be more specific to ensure the
regulation and protections are applied correctly. The Department
agrees. Based on the public comment, the Department is revising the
language to specify that the violations of applicable Federal, State,
or local law must be for convictions of a crime that directly threatens
the health, safety, or right to peaceful enjoyment of the premises by
other tenants in the project. The Department continues to believe that
termination of tenancy is a fact-specific matter and that it is
impossible to provide an exhaustive list of all the grounds or
considerations that one must consider prior to termination. Criminal
convictions may impact continued tenancy but only to the extent that
such convictions interfere with the rights of others who live in the
project. Minor violations of law that do not impact people living in
the housing should not form the basis for terminating tenancy or
refusing to renew a lease in the HOME program.
Paragraph Sec. 92.253(d)(1)(ii) is being redesignated as Sec.
92.253(b)(10)(ii) and revised. The first and second sentence are
revised to only provide 30 days' notice prior to termination of tenancy
or refusal to renew, and to specify that the 30-day requirement does
not apply to the statutory grounds for termination relating to tenants
that are a direct threat to the safety of the tenants or employees of
the housing or an imminent and serious threat to the property. The
Department received overwhelmingly negative comments from the public on
the negative effects of requiring a longer notice period before
termination or refusal to renew. Some commenters explained the
variation of eviction timeframes across the country. Others explained
how adding an additional 30 days to the notice period impacted the
average eviction process and the average owner in their jurisdiction.
Organizations that represented owners and affordable housing managers
described how these changes negatively impact the financial feasibility
of current and future HOME projects. There were commenters who
supported the change, and most indicated that it would better assist
tenants in curing or preventing termination of tenancy. The Department
also considered what it had done in other programs and the effort to
make a consistent 30 day notice standard. On the whole, when the
Department considered the potential negative ramifications and how the
extension to 60 days was inconsistent with other Departmental efforts,
the Department decided to withdraw the proposal to extend the notice
period to 60 days and is revising the paragraph accordingly. Paragraphs
Sec. 92.253(d)(1)(iii) through (v) are redesignated as Sec.
92.253(b)(10)(iii) through (v). Paragraph Sec. 92.253(d)(1)(v) is also
being revised to specify that an owner may not create a hostile living
environment or refuse to provide a reasonable accommodation to cause a
tenant to terminate their tenancy. The proposed rule had initially just
stated that the owner cannot refuse to make a reasonable accommodation,
but changes are now being made to cover situations where an owner
refuses to permit a lawful reasonable accommodation with the intent of
constructively evicting a person.
A new paragraph (c) is being added to Sec. 92.253. This section
will provide the tenancy addendum requirements for the HOME tenant-
based rental assistance program. The opening paragraph mirrors the
opening paragraph for Sec. 92.253(b) and specifies that the terms of
the HOME tenant-based rental assistance tenancy addendum shall prevail
over any conflicting provisions of the lease. The terms and conditions
of the written lease, the HOME tenant-based rental assistance tenancy
addendum, the VAWA addendum listed in Sec. 92.253(a), and any addendum
required by another Federal, State, or local affordable housing program
are the sole and entire agreement between the owner and the tenant and
no prior or contemporaneous oral or written representation or agreement
between the owner or tenant shall have legal effect. This is the same
as the new rental housing requirements and provides sufficient
protections to ensure that the owner does not later claim that the
tenant agreed to something that would be prohibited under the tenant
protections or applicable law. Paragraph Sec. 92.253(c) also states
that the HOME tenant-based rental assistance tenancy addendum shall
terminate upon termination of the rental assistance contract.
Initially, the Department had proposed that the lease terminate upon
termination of the rental assistance contract but determined that it
was best left to the owner and tenant as to when the lease shall
terminate. Instead, the tenancy addendum shall terminate, as the tenant
is no longer being assisted with HOME tenant-based rental assistance.
Then the paragraph provides the same list of tenant protections
contained in the HOME rental housing tenancy addendum paragraph (b)
except for:
1. The provision in Sec. 92.253(b)(1)(iii) which requires an owner
to repair a life-threatening deficiency impacting the tenant, and
requires, if the repairs cannot be completed on the day the life-
threatening deficiency is identified, the owner to promptly relocate
the tenant into housing that is decent, safe, sanitary, and in good
repair and that provides the same or a greater level of accessibility,
or other physically suitable lodging, at no additional cost to the
tenant, until the repairs are completed. The Department recognizes that
this type of provision may have a chilling effect on owner
participation in the tenant-based rental assistance program and is
removing the requirement. If participating jurisdictions wish to
provide this requirement as part of the rental assistance contract,
then they still retain discretion to do so.
2. Section 92.253(b)(2)(v) allowing tenants to organize, create
tenant associations, convene meetings, distribute literature, and post
information. This provision may have a chilling effect on owners and
may deter participation in the tenant-based rental assistance program.
Though the Department believes that tenants should have the right to
organize tenant associations, rental assistance provided through HOME
tenant-based rental assistance is not of the same durable nature as
development subsidies provided to owners and developers producing HOME
rental housing. Requiring that owners allow organizing activities when
the participating jurisdiction has far fewer incentives to encourage
owners to comply disadvantages tenants and participating jurisdictions
who are already contending with source of income discrimination in many
jurisdictions.
3. Paragraph Sec. 92.253(c)(9)(iii) will permit tenants that are
already in a lease
[[Page 763]]
before they enter into a rental assistance contract to have fulfilled
the security deposit requirements of paragraph Sec. 92.253(c)(9) even
if the family used an instrument prohibited under paragraph (c)(9)(i).
This was due to comment that rightly explained that tenants under a
lease may have already used surety bonds, security deposit insurance,
or instruments similar to surety bonds and security deposit insurance
before they ever received HOME tenant-based rental assistance. While
the Department does not encourage the use of these instruments and has
determined that they are neither legally security deposits nor is their
use advantageous to either owners or tenants, the Department does not
want to penalize tenants or place obstacles in the way of tenants
attempting to use tenant-based rental assistance.
Other than the above-described protections, Sec. 92.253(c)(1)-(9)
is substantively the same as Sec. 92.253(b)(1)-(9). The Department
believes that this is appropriate. Recipients of tenant-based rental
assistance should have substantively the same protections as tenants in
HOME-assisted rental housing.
The Department did want to highlight that for the retaliation
provision contained in Sec. 92.253(c)(5)(iv), the Department
understands that participating jurisdictions may have limited leverage
to require that owners unreasonably interfering with or retaliating
against individuals with HOME tenant-based rental assistance stop their
actions. The participating jurisdiction must use their best judgment
about how to address such circumstances, including balancing the needs
of the tenant to the continued tenant-based rental assistance and the
participating jurisdiction's obligation to enforce compliance with the
owner's rental assistance contract with the participating jurisdiction.
However, the Department is declining to remove this protection, as it
is a meaningful and necessary tenant protection for all the reasons
given in the proposed rule.
The termination of tenancy provisions that were contained in
paragraph Sec. 92.253(d)(2) are being revised and redesignated from
the proposed rule to be included in Sec. 92.253(c)(10). First, just as
in the HOME rental housing termination provisions in Sec.
92.253(b)(10)(i), the tenant-based rental assistance provisions are
being included in a new paragraph Sec. 92.253(c)(10)(i) that states
that an owner may not terminate the tenancy of any tenant or household
member or refuse to renew the lease of a tenant with tenant-based
rental assistance, except for serious or repeated violation of the
material 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. This mirrors
the HOME rental housing section but does not include the additional
specific grounds that allows owners to terminate the tenancy of any
tenant or household member or refuse to renew the lease of a tenant of
rental housing assisted with HOME funds if the owner is permitted to do
so pursuant to the provisions contained in 24 CFR part 5, subpart I; 24
CFR 882.511; or 24 CFR 982.310. This is because the Department has
determined that this is not applicable to the recipients of HOME
tenant-based rental assistance, who would not be living in units
receiving subsidy or assistance under the Section 8 program.
Similar to Sec. 92.253(b)(10)(i)(A), Sec. 92.253(c)(10)(i)(A)
also states that an increase in the tenant's income or assets, the
amount or type of income or assets the tenant possesses does not
constitute good cause. The section also states that except in the case
of a lease-purchase agreement, other good cause also does not include
refusal of the tenant to purchase the housing. These protections are
substantively the same as the HOME rental housing protections.
The provisions on good cause in Sec. 92.253(c)(10)(i)(B) differ
from the proposed rule in several respects. Section 92.253(d)(2)(i)(A)
and (B) of the proposed rule are being redesignated as Sec.
92.253(c)(10)(i)(B)(2) and (3). Section 92.253(c)(10)(i)(B)(1) is added
and is substantively the same as the statutory grounds for termination
of tenancy and refusal to renew that were added to Sec.
92.253(b)(10)(i)(B)(1). If a tenant or household member constitutes a
direct threat to the safety of tenants or employees of the housing or
an imminent and serious threat to the property, an owner must have the
ability to terminate the tenancy or refuse to renew the lease. For the
reasons given earlier in this preamble, this is a high standard to
meet, and the owner must be able to document how they arrived at this
determination. Section 92.253(d)(2)(i)(C) is being revised and
redesignated as Sec. 92.253(c)(10)(i)(B)(4). The sentence shall now
only describe when a tenant unreasonably refuses to provide an owner
with access to repair the unit. Section 92.253(d)(2)(i)(D) of the
proposed rule is being redesignated as Sec. 92.253(c)(10)(i)(B)(5).
Section 92.253(d)(2)(i)(E) of the proposed rule, which provided the
termination of the rental assistance contract as grounds for
termination of the tenant lease is being removed. The Department
received negative comments on this provision and recognizes that this
is a decision best left to the owner and the tenant. After the rental
assistance contract expires, the tenancy addendum will also terminate.
The owner may continue to lease the unit to the tenant under the terms
of the tenant lease. Section 92.253(d)(2)(i)(F) introductory text and
(d)(2)(i)(F)(1) of the proposed rule are being combined and
redesignated as Sec. 92.253(c)(10)(i)(B)(6). Section
92.253(d)(2)(i)(F)(2) is likewise being revised for readability and
redesignated as Sec. 92.253(c)(10)(i)(B)(7).
The Department added a new ground for good cause in response to
public comment. Section 92.253(c)(10)(i)(B)(8) states that if a tenant
fails to purchase a housing unit within the timeframes of a tenant's
lease purchase agreement, then this shall be good cause to terminate
the tenancy. Commenters requested that this be a ground for termination
because otherwise, the owner would be required to continue to rent to
the family, even though the family would be in breach of their lease
purchase agreement. This would disadvantage owners who wished to sell
the homeownership units after a tenant fails to purchase the housing
and would disincentivize lease-purchases.
Section 92.253(d)(2)(ii) is being redesignated as Sec.
92.253(c)(10)(ii) and revised to remove the 5-business day requirement
for the owner to notify the participating jurisdiction that it has
served a notice to vacate to a tenant. This is because the new tenant-
based rental assistance rental assistance requirements require the
owner and participating jurisdiction to have a rental assistance
contract (see Sec. 92.209(e)). Therefore, instead of requiring a time
period in the regulation, the regulation will defer to the rental
assistance contract or the participating jurisdiction's policies and
procedures to govern the issuance of notice to the participating
jurisdiction. The citation in the last sentence was also revised
because of the redesignation of the paragraph.
Paragraphs Sec. 92.253(d)(2)(iii) and (iv) are being redesignated
as Sec. 92.253(c)(10)(iii) and (iv) without change. Paragraph Sec.
92.253(d) is being added to add security deposit assistance tenancy
addendum requirements. The addendum shall prevail over conflicting
terms of the lease. The terms and conditions of the written lease, the
HOME security deposit assistance tenancy addendum, and any addendum
required by another Federal, State, or
[[Page 764]]
local affordable housing program shall constitute and contain the sole
and entire agreement between the owner and the tenant. The security
deposit assistance tenancy addendum shall prohibit the prohibited lease
terms that are currently contained in Sec. 92.253(b)(1)-(9), except
that Sec. 92.253(d)(8) shall be revised to state that a tenant is only
obligated to pay costs if the tenant loses and the court so orders,
consistent with the revisions made in Sec. 92.253(b)(4)(v) and Sec.
92.253(c)(4)(v).
Paragraph Sec. 92.253(e)(4) is being revised to specify that
participating jurisdictions must not exclude an applicant with Federal,
State, or local tenant-based rental assistance. The proposed rule did
not prohibit discriminating against a person because they were
receiving local rental assistance, just State and Federal tenant-based
rental assistance. In response to comment and consistent with HUD's
position that source of income discrimination must end, the Department
is adding this prohibition to the tenant selection regulations.
Paragraph Sec. 92.253(e)(5) is being revised to remove the
requirement that HUD approve alternative waiting list procedures for
small-scale housing projects. The Department believes that this is best
left to participating jurisdictions. The Department reminds
participating jurisdictions and owners that all Federal, State, and
local nondiscrimination requirements, including the Violence Against
Women Act (VAWA), continue to apply to tenant selection, and any
approved waiting list procedures must comply with all applicable
requirements.
Paragraph Sec. 92.253(f) is being revised to require that the
notification of an environmental, health, or safety hazard be in
writing. The paragraph is also being revised to require that when an
owner becomes aware of such hazards, the owner must notify both the
participating jurisdiction and the tenants instead of just the tenants.
This was requested by commenters and will allow tenants to find out as
quickly as possible if a hazard is affecting their unit or project. The
paragraph is also being revised to add a sentence to explain that when
an owner or participating jurisdiction has notified the tenants, this
satisfies the requirement for the other party.
24 CFR 92.254 Qualification as Affordable Housing: Homeownership
A. Allowing Over-Income In-Place Tenants To Purchase Their Homes
The Department has determined that the Secretary may permit the
period of affordability for a project to be terminated earlier than the
time periods specified in Sec. 92.252 under the circumstances
described in detail below. The Department is revising Sec. 92.254,
which currently prohibits over-income in-place tenants from purchasing
their units. This is in response to public comment requesting that in-
place HOME tenants who are no longer income eligible be permitted to
purchase their housing units, including when former tax credit projects
are converting to homeownership housing units.
It is consistent with the statutory language of the Act, as well as
the purposes of the Act, to allow in-place HOME tenants who have saved
up for a downpayment to use that downpayment to purchase the unit that
they are currently occupying. Developing stable homeownership models
where tenants can live in a housing unit, work towards increasing their
income from very-low income to moderate-income, and eventually purchase
their unit is not only consistent with the intent of the drafter of the
Act but in furtherance of it. As such, the Department is revising Sec.
92.254(a)(3) to add a sentence s allowing HOME-assisted housing to be
purchased by an in-place tenant pursuant to Sec. 92.255 if the
homebuyer's family was low-income at the time the homebuyer's family
began occupying the HOME rental housing unit. This is similar to how
families that entered into lease-purchase agreements may purchase their
housing so long as they were income-eligible when they entered into
their lease-purchase agreement. The Department believes this is in
furtherance of the purposes of the Act and will increase homeownership
opportunities for HOME-assisted tenants.
B. Meeting Property Standards Post-Acquisition
The Department is revising Sec. 92.254(a)(3) to provide clearer
language that explicitly authorizes a participating jurisdiction to
assist a family even if the homeownership unit does not meet the
property standards at acquisition, provided that the written agreement
between the participating jurisdiction and the homebuyer requires the
property to meet the standards within the period specified in Sec.
92.251(c)(3)(ii) and funding is secured to complete the rehabilitation
necessary to comply with the standards. This ensures consistency
between the requirements in Sec. 92.251(c)(3) and Sec. 92.254.
C. Change in Start of Period of Affordability
The Department revised Sec. 92.254(a)(4) in response to public
comments. Commenters had objected to beginning the period of
affordability upon project completion. For homeownership projects,
project completion means that all necessary title transfer requirements
and construction work have been performed; the project complies with
the requirements of this part (including the property standards under
Sec. 92.251); the final drawdown of HOME funds has been disbursed for
the project; and the project completion information has been entered
into the disbursement and information system established by HUD.\14\
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\14\ See 24 CFR 92.2 project completion.
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The Department understands that requiring that a homebuyer's resale
or recapture period only begin to run after the participating
jurisdiction completes all the information in the disbursement and
information system can disadvantage homebuyers, especially for multiple
address projects where completion of the information in the
disbursement and information system can only occur after all housing
units in the project meet the requirements in 24 CFR part 92. The
Department is changing the provision to instead require the period of
affordability begin after execution of the instrument that requires
recapture of the HOME investment or recordation of the resale
restrictions against the property. The Department is further
conditioning the execution of the instrument that requires recapture of
the HOME investment or recordation of the resale restrictions against
the property upon both meeting the property standards in Sec.
92.251(c)(3) and the transfer of the property title to the homebuyer.
The Department believes these are reasonable restrictions because the
property must meet the property standards at the time of purchase, or
within 6 months after purchase, if permitted by the participating
jurisdiction (with the ability to extend up to 12 months after
purchase). If the property does not meet the standards within the
required time period under Sec. 92.251(c)(3), then the participating
jurisdiction would have to repay the investment, and the housing would
not be a HOME-assisted homeownership
[[Page 765]]
unit (and thus should not have resale or recapture provisions applied
to it).
D. Change in Period of Affordability for Homeownership
The Department revised the threshold for the periods of
affordability in the table Sec. 92.254(a)(4) consistent with the
periods of affordability in Sec. 92.252(d)(4). When the homeownership
assistance provided on a per-unit basis is under $25,000, the period of
affordability shall be for a minimum of 5 years. When the homeownership
assistance is $25,000 to $50,000, then the minimum period of
affordability shall be 10 years. If the amount of homeownership
assistance is above $50,000, the minimum period of affordability shall
be 15 years.
The Department believes that it is important to increase the
thresholds for the periods of affordability for the reasons given
earlier. The Department considered that since 1990, the House Price
Index has increased by over 300%.\15\ The need for HOME homeownership
assistance outpaced inflation, as measured by the Consumer Price Index,
and has been a driver in increasing the amount of HOME homeownership
assistance that is provided per family assisted over the course of the
HOME program's history. However, given that the appropriations for the
HOME program have decreased by over 50% in inflation-adjusted dollars
since the 1992 HOME appropriation of $1,500,000,000,\16\ and the need
to maintain affordable homeownership units in accordance with the
purposes of the Act,\17\ the Department adjusted the thresholds to be
consistent with the revisions made in Sec. 92.252.
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\15\ See U.S. Developmental Index; Not Seasonally Adjusted,
which is an excel sheet within the Federal Housing Finance Agency
Housing Price Index Datasets: <a href="https://www.fhfa.gov/data/hpi/datasets?tab=additional-data">https://www.fhfa.gov/data/hpi/datasets?tab=additional-data</a>.
\16\ By one measure, the Consumer Price Index, the dollar has
increased by over 200% since the establishment of the dollar
thresholds used to determine the period of affordability for the
HOME program. See the CPI Inflation Calculator at <a href="https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1%2C000%2C000.00&year1=199201&year2=202310">https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1%2C000%2C000.00&year1=199201&year2=202310</a>.
\17\ See 42 U.S.C. 12722(1) and (7).
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E. Edit for Consistency in 92.504
Consistent with Sec. 92.504, the Department is revising the first
sentence of Sec. 92.254(a)(5)(ii)(A) to state that recapture
provisions must ``require'' that the PJ recoups all or a portion of the
HOME assistance to the homebuyers if the housing does not continue to
be the principal residence of the family for the duration of the period
of affordability. The Department states this as a requirement in other
parts of the rule and is clarifying the provision here for consistency.
A similar revision is made in Sec. 92.254(g)(3).
F. Revising Lease-Purchase Provisions of 24 CFR 92.254(a)(7)
The Department considered a variety of comments on its revisions to
lease-purchase regulations in Sec. 92.254(a)(7). After careful
consideration of the challenges owners encounter when the family fails
to purchase the property pursuant to the lease-purchase agreement, the
Department is substantially revising Sec. 92.254(a)(7). The Department
is revising the introductory sentence of the provision to explain that
acquisition, rehabilitation or new construction of housing to be sold
to eligible low-income homebuyers for lease-purchase is allowable.
The next provision Sec. 92.254(a)(7)(i) explains the statutory
requirement of 42 U.S.C. 12745(b)(2)(B) that a homebuyer must qualify
as a low-income family at the time the lease-purchase agreement is
signed. The regulation is being revised to provide standalone
requirements for lease-purchases within the section. As a result, HUD
revised the regulation to clarify that the current regulation's
requirements that income determinations be made based on the income of
all people living in the homeownership unit are applicable to lease-
purchases.\18\ The Department is also clarifying in Sec.
92.254(a)(7)(i) that if a family is also receiving HOME tenant-based
rental assistance, the PJ is not required to reexamine the family's
income during the term of the lease-purchase agreement. The Department
has received comments that it should reduce income examination when it
is not necessary, and that the Department should move to triennial
income examination. While the Department declined to move to such an
income cycle for the reasons given in the preamble to Sec. 92.209 and
in the applicable responses to public comment, the Department realized
that HOME lease-purchase programs are different. The Act clearly states
that a family's income is to be determined at the signing of the HOME
lease-purchase agreement \19\ and does not require that income be
reexamined prior to the purchase. When a PJ pairs their tenant-based
rental assistance with a HOME-assisted lease-purchase program, the aim
is to allow the family to accumulate money for a downpayment and to
better position themselves for sustainable homeownership when they
acquire the housing. By eliminating the requirement that the family's
income be reexamined during the term of the lease-purchase agreement,
the requirement is more consistent with the Act, the rule better
enables families to save up for the purchase of the home, and it
provides burden relief to PJs that would otherwise be required to
reexamine the tenant's income after 24 months from the date of
execution of the rental assistance contract.
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\18\ See 24 CFR 92.254(a)(3).
\19\ See 42 U.S.C. 12745(b)(1)(B).
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Paragraph Sec. 92.254(a)(7)(ii) explains that the owner and
homebuyer must execute a lease-purchase agreement prior to the family
occupying the unit and that the lease-purchase program must require the
family to purchase the housing within 36 months of the execution of the
lease-purchase agreement. The provision also retains language from the
proposed rule explaining that owners and homebuyers that have entered
into a lease-purchase agreement are subject to the affordability
requirements in the homeownership section unless the housing is not
purchased within the timeframes described in Sec. 92.254(a)(7) in
accordance with the lease-purchase agreement.
The Department is adding Sec. 92.254(a)(7)(iii) in response to
public comments that requested that owners be able to sell units to an
eligible homebuyer if the family that entered into the lease-purchase
agreement fails to purchase the housing pursuant to the agreement. The
new Sec. 92.254(a)(7)(iii) provides that if the first homebuyer does
not acquire the housing, then the owner may sell the housing to an
eligible low-income homebuyer within 48 months of execution of the
lease-purchase agreement. This provides owners 12 months from the
expiration of a 36-month lease-purchase agreement to find another
eligible low-income homebuyer and sell the homeownership unit. The
regulation also permits the PJ to provide homeownership assistance to
the next homebuyer identified for the unit but prohibits the owner from
entering into another lease-purchase agreement for the housing.
The Department has concluded that owners should have another chance
to sell the unit as a homeownership unit instead of being required to
operate the housing as rental housing if the lease-purchase agreement
fails to end in the sale of the housing. However, since the lease-
purchase did not succeed the first time, the Department is prohibiting
owners from using the lease-purchase model on a second attempt to sell
the housing. The owner must default to the rules that apply in a
typical homeownership development project.
[[Page 766]]
Section 92.254(a)(7)(iv) has been amended accordingly to provide
owners with additional time to sell the housing once it has failed to
be sold through a lease-purchase agreement by allowing owners 48 months
to complete the sale and transfer the title to an eligible low-income
homebuyer (i.e., 36 months for lease-purchase under a lease-purchase
agreement and 12 months to sell the housing from the expiration of the
36-month lease-purchase agreement). This change to allow 12 months to
sell the housing from the expiration of the 36-month lease-purchase
agreement is consistent with the Department's extension of the period
in which an owner may sell homeownership housing from 9 months to 12
months (see Sec. 92.254(a)(3)).
The Department inadvertently omitted paragraph (a)(8) in the
publication of the proposed rule. It was not the Department's intent to
delete paragraph (a)(8), and the Department noted some confusion over
the use of this provision in the public comments. In the final rule,
the Department is retaining the language from Sec. 92.254(a)(8) from
the current rule without change.
In response to public comment explaining that it is very difficult
to purchase housing with a right of first refusal, bring the property
into compliance with the PJ's property standards, and resell it to an
eligible homebuyer within 6 months, the Department is revising Sec.
92.254(b)(1)(i) and Sec. 92.254(b)(3)(ii) to allow PJs and CLTs with
up to 12 months to sell the housing to the next eligible low-income
homebuyer.
G. Preserving Affordability of HOME Projects
The Department is adding an additional clarifying sentence to Sec.
92.254(b)(2)(v) to explain that while sales proceeds can be used to
reimburse up to one-hundred percent of the administrative funds used by
a PJ to preserve the affordability, any sales proceeds exceeding that
amount shall be program income for the PJ.
H. Assisting Homebuyers in Projects Developed by Community Land Trusts
In response to public comments requesting that CLTs or PJs be
allowed to assist homebuyers when a CLT exercises a right of first
refusal or preemptive purchase rights in accordance with Sec.
92.254(b)(3), the Department is revising Sec. 92.254(b)(3)(iv) to
explicitly permit the PJ to provide homeownership assistance to the
next eligible homebuyer. PJ always has the flexibility to assist a
homebuyer through a homeownership assistance program, regardless of
whether the unit the homebuyer wishes to purchase was originally
purchased by another HOME-assisted homebuyer. Since the Department is
revising Sec. 92.254(b)(3)(iv) to explicitly permit PJs to assist the
next homebuyer, the Department is also clarifying both Sec.
92.254(b)(3)(iii) and (iv) to state that if a homebuyer is provided
assistance by the PJ, the period of affordability shall be calculated
in accordance with Sec. 92.254(b)(1)(iii) and Sec. 92.254(b)(1)(iv),
and if no additional assistance is provided to the homebuyer, then the
period of affordability shall be equal to remaining period of
affordability on the property.
However, the Department does not believe the statute permits the PJ
to award HOME funds to the CLT to provide homeownership assistance to
the next eligible homebuyer. The statute specifically states that when
HOME ``funds provided in prior and subsequent appropriations acts that
were or are used by community land trusts for the development of
affordable homeownership housing pursuant to section 215(b) of such
Act,'' then the community land trusts could retain the right to
purchase the housing without violating the period of affordability
requirements contained in section 215(b)(3)(A). This type of relief was
to allow for a unit to temporarily cease to be used as affordable
housing, as long as the housing was rededicated to that purpose shortly
thereafter. It did not establish a new eligible activity or new
eligible costs but gave CLTs the ability to exercise their purchase
rights without violating the affordability requirements and triggering
repayment of the HOME investment by the PJ. As such, the Department is
revising the regulation to allow the PJ to assist the next eligible
homebuyer.
24 CFR 92.255 Purchase of HOME Units by In-Place Tenants
The Department received public comments requesting that in-place
HOME tenants who are no longer income eligible still be permitted to
purchase their housing units. While regulations currently do not permit
over-income in-place tenants to purchase their units, the Department
has determined that the Secretary may permit the period of
affordability for a project to be terminated earlier under certain
circumstances. See 42 U.S.C. 12742(a)(1)(E) (noting that rental housing
qualifies as affordable housing under this subchapter only if the
housing will remain affordable, according to binding commitments
satisfactory to the Secretary, for the remaining useful life of the
property).
The Department believes that it is consistent with the purposes of
the Act to allow in-place HOME tenants who have saved up for a
downpayment to use that downpayment to purchase the unit that they are
currently occupying. Developing stable homeownership models where
tenants can live in a housing unit, work towards increasing their
income from very-low income to moderate-income, and eventually purchase
their unit is not only consistent with the intent of the Act but in
furtherance of it.
As such, the Department is revising Sec. 92.255(b) to state that
if the tenant's family is no longer low-income at the time of the
purchase, then the family may still purchase the home. The provision is
also being revised to state that the family must occupy the housing as
their principal residence in accordance with Sec. 92.254(a)(3) and
must agree to the imposition of resale restrictions on the housing, in
accordance with Sec. 92.254(a)(5), for the remaining period of
affordability of the housing unit. By adding these requirements, it
ensures that the intent of the Act is fulfilled because the family,
which began their participation in the HOME program as low- or very
low-income, must own and occupy the housing for the full period of
affordability or be subject to the very same resale restrictions that
all other income-eligible families must comply with in the event that
the family sells or transfers the property within the housing's
original period of affordability.
Paragraph Sec. 92.255(c) is similarly revised to explain that
though an in-place HOME tenant may purchase their unit even if the
tenant's family is no longer low-income, additional HOME funds cannot
be provided to assist that family because the family is not income
eligible for homeownership assistance.
24 CFR 92.300 Set-Aside for Community Housing Development Organizations
(CHDOs)
In the proposed rule, HUD proposed to revise the text of Sec.
92.300. The Department is making further revisions to Sec.
92.300(a)(2) to clarify that rental housing owned by a CHDO is rental
housing if it is ``leased'' to low-income tenants. The Department had
inadvertently removed necessary words from the provision in the
proposed rule and is clarifying text. HUD also determined that it is
necessary to further revise the text of Sec. 92.300(a)(2) and (3) in
order to clarify when a community housing development organization is
[[Page 767]]
considered to be an owner of rental housing. The Department is
clarifying that if a community housing development organization has
site control of a project through a long-term ground lease, such lease
must run for the full period of affordability in Sec. 92.252. If an
owner does not have site control for the entire period of
affordability, then they do not really own the housing for the full
period of affordability and cannot enforce 24 CFR part 92 requirements
in accordance with this section. Accordingly, Sec. 92.300(a)(2) and
(3) are being revised to more clearly explain the ground lease
requirements that must be met for a community housing development
organization to be considered an owner of rental housing.
In response to public comments, HUD is also making additional
changes to Sec. 92.300(a)(3). HUD received public comments requesting
that 92.300(a)(3) more clearly describe how a community housing
development organization is intended to be in charge of the development
process when it acts as a ``developer'' under that provision. The
Department is adding a clarifying sentence that explains that the
requirement that a CHDO be in charge of all aspects of the development
must be evidenced by an enforceable written agreement between the CHDO
and the other entities sharing responsibility in the development of the
housing. The Department also provided examples of different types of
written agreements that may meet the requirements, including joint
venture agreements and master development agreements.
Additionally, multiple commenters questioned whether the
Department's removal of the requirement that rental housing developed
by a CHDO be owned by the CHDO during development and for the full
period of the affordability would allow a loophole for CHDOs to sell
CHDO developed units to for-profit organizations. The Department
recognized that this provision could inadvertently be used for that
purpose. As a result, the Department revised Sec. 92.300(a)(3) to
require that the housing be owned by a CHDO unless the PJ documents
that that the CHDO no longer has the capacity to own and manage the
housing for the full period of affordability and there are no other
CHDOs with capacity to own and manage the project for the full period
of affordability. If the PJ authorizes the transfer of the housing,
then it may only be sold to a nonprofit. By requiring that the PJ
attempt to find another CHDO to own the housing unless the PJ cannot
identify a CHDO that is capable of owning and managing the housing in
accordance with the requirements of part 92 for the full period of
affordability, the regulation is more consistent with the purposes of
the Act and the intent of the CHDO set-aside. It also provides adequate
safeguards to ensure that the CHDO set-aside is not being used for the
enrichment of private for-profit businesses.
The Department is withdrawing its proposed language for the first
sentence of Sec. 92.300(a)(4)(i), which would have barred wholly-owned
for-profit CHDO subsidiaries from being considered a CHDO or valid CHDO
subsidiary for purposes of meeting the CHDO project set-aside
requirements. The Department recognizes that this is a model that CHDOs
may be using and does not wish to reduce the ways CHDOs can participate
in HOME projects.
Commenters welcomed changing the term ``downpayment assistance'' to
``homeownership assistance'' in Sec. 92.300(a)(6)(i) and elsewhere.
Many commenters noted that the new term is broader and could include
assistance for closing costs and mortgage rate buy-downs. The
Department believes that it in addition to changing the term
``downpayment assistance'' to ``homeownership assistance,'' it will
also be helpful to revise Sec. 92.300(a)(6)(i) to provide additional
examples of the kinds of homeownership assistance that CHDOs can
provide.
24 CFR 92.353 Displacement, Relocation, and Acquisition
The Department is revising the reference to Sec. 92.253(d) in
Sec. 92.353(c)(2)(ii)(A) to remove the pinpoint citation, as the
termination of tenancy provisions are now contained in Sec.
92.253(b)(10) and Sec. 92.253(c)(10).
24 CFR 92.356 Conflict of Interest
HUD is clarifying language in Sec. 92.356(d)(1). The Department
recognizes that there may be some confusion over what constitutes a
``combination'' of conflict of interest disclosure methods provided in
the proposed rule. The Department is clarifying in the final rule that
a disclosure of a conflict of interest is a combination of ``at least
two'' of the communication methods provided in paragraph (d)(1).
24 CFR 92.504 Participating Jurisdiction Responsibilities; Written
Agreements
The Department made revisions to Sec. 92.504(c)(1)(v) and Sec.
92.504(c)(2)(xii) to revise the written agreement requirements to
require that for projects involving rental housing, tenant-based rental
assistance, or security deposit assistance, the written agreement
between the PJ and the State Recipient or Subrecipient, as applicable,
must require that the HOME tenancy addendum that applies to the type of
project is used for all HOME-assisted units or tenants. The Department
is also making technical revisions to Sec. 92.504(c)(3)(ii)(A) to
revise the first sentence to read in the singular instead of the
plural. This was done to be consistent with the rest of the surrounding
provisions.
The Department is revising Sec. 92.504(c)(3)(i) to add the
requirement contained in Sec. 92.206(d)(1) into the written agreement
between the PJ and the owner of HOME rental housing. Paragraph Sec.
92.206(d)(1) requires that if HOME funds will be reimbursing expenses
that were incurred no more than twenty-four months before the date of
the commitment, the written agreement must explicitly permit the use of
the funds for those purposes.
The Department is making technical corrections to Sec.
92.504(c)(3)(ii)(A) to read in the singular instead of the plural,
consistent with how the rest of Sec. 92.504(c)(3) is written. The
Department is also adding a new sentence to the end of the paragraph
that explicitly requires that the written agreement contain the option
the PJ selected for calculating income in accordance with Sec.
92.203(b)(1). This information should already have been included in the
written agreement pursuant to Sec. 92.203 but the Department is now
including this language in the written agreement provisions for
consistency.
The Department is making technical edits to Sec.
92.504(c)(5)(i)(A) to add parenthesis around examples of allowable
forms of assistance that a PJ may provide a homebuyer, homeowner, or
tenant or owner receiving tenant-based rental assistance.
The Department made technical revisions to Sec. 92.504(c)(5)(iii)
to add the word ``assistance'' after ``security deposit'' to align with
provisions in Sec. 9.253(d) that describe security deposit assistance.
The Department is also making a minor technical edit to Sec.
92.504(c)(6)(i)(A) to add a comma after the regulatory citation to
Sec. 92.300(a)(2)-(5).
The Department is revising Sec. 92.504(c)(6)(i)(B) in response to
public comments questioning whether the Department was proposing to
change the treatment of recaptured funds in CHDO homeownership
projects. The Department is clarifying that PJs may permit CHDOs to
retain recaptured funds for additional HOME projects pursuant to the
written agreement. The Department is also adding a descriptive
[[Page 768]]
header to the section Retaining proceeds and recaptured funds.
The Department recognized that it permits CHDOs to provide
homeownership assistance to families as part of HOME homeownership
housing developed by the CHDO. This amount of assistance is limited to
10 percent of the overall amount of HOME funds provided to the project.
The Department is adding Sec. 92.504(c)(6)(i)(B)(2) to more clearly
establish the written agreement requirements for the provision of this
assistance. The agreement must provide the amount of funds for
homeownership assistance, the number of homebuyers to receive the
assistance, any matching contributions, and the period of the
agreement. The 10 percent limitation is also added, as is the
requirement that the CHDO's agreement with the homebuyer meet the
written agreement requirements in Sec. 92.504(c)(5)(i) that apply to
agreements providing HOME homeownership assistance to eligible
homebuyers.
24 CFR 92.505 Applicability of Uniform Administrative Requirements
The Department revised Sec. 92.505 to explain that 2 CFR 200.344
is applicable to HOME as provided in Sec. 92.507. Originally, the
Department had said that 2 CFR 200.344 was not applicable to HOME PJs,
State recipients, and subrecipients but this is confusing because Sec.
92.507 does make most of 2 CFR 200.344 applicable to them. By adding
the caveat that 2 CFR 200.344 is not applicable, except as provided in
Sec. 92.507, this clarifies that it is applicable and that Sec.
92.507 will explain how.
24 CFR 92.507 Closeout
In the proposed rule, HUD proposed to revise Sec. 92.507 in order
to specify the procedures and actions that must be completed by a PJ
and HUD to close out a grant. In this final rule, the Department is
further revising Sec. 92.507 for clarity and consistency with 2 CFR
part 200. The Department is adding a second sentence to the
introductory provision in Sec. 92.507. This explains that the
requirements of 2 CFR 200.344 apply to closeouts in the HOME program,
with the exception where such requirements conflict with the
requirements in Sec. 92.507. The Department was concerned that its
language was confusing because in various parts of Sec. 92.507, such
as in Sec. 92.507(b)(10)(v) and (vi), the regulation requires that PJs
comply with 2 CFR 200.344. By adding this sentence, the Department is
clarifying that PJs must follow 2 CFR 200.344 unless it conflicts with
the HOME regulations.
The Department is revising Sec. 92.507(a)(1) to clarify that HUD
will close out a grant after the period of performance has ended
instead of when HUD determines that PJ has completed all required
activities and closeout actions. HUD is not limiting its discretion
here, given under separate legal authorities (including the Act,
individual appropriations laws, and provisions within 2 CFR part 200)
to close out a HOME grant. Additional clarification is also being added
to specify that the PJ must complete all required activities and
closeout activities for the grant, as required by HUD. The revised
provision directly states the PJ's closeout responsibilities under the
HOME program.
The Department is revising Sec. 92.507(a)(2) to explain that to
prepare for closeout, before the end of the budget period of the grant,
the PJ shall review all eligible activities under the grant and
reconcile its accounts by drawing funds down in a timely manner and
refunding the proper accounts of any previously disbursed balances of
unobligated cash paid in advance. This is clearer language that is more
legally accurate than the proposed rule, which did not explain that
these actions were to prepare for closeout, did not condition each
provision on being taken during the budget period, and did not specify
how refunds would be performed in sufficient detail.
The Department is redesignating Sec. 92.507(a)(2)(ii) of the
proposed rule by redesignating it as paragraph (a)(3) and by explaining
that after the end of the grant budget period, no additional activities
may be undertaken with that particular HOME grant and that there are no
additional eligible costs incurred after the budget period. The
provision also explains that unused funds shall be returned to the U.S.
Treasury by HUD, and that the PJ must promptly refund any unused grant
funds not authorized to be retained in accordance with HUD's
instructions. These clarifications more directly state the requirements
and the conditions without using problematic terminology like
``recapture'' which has a different statutory meaning in the HOME
program than in appropriations law.
The Department is revising Sec. 92.507(a)(4)(ii) in order to
remove a reference to FAPIIS and instead add a reference to <a href="http://SAM.gov">SAM.gov</a>,
the current system being used for reporting. The Department is revising
Sec. 92.507(b)(2) to state that a PJ must demonstrate that it has
fulfilled all programmatic and administrative requirements for the
project (i.e., property inspections, obtaining certificates of
occupancy, etc.) within the period of performance in accordance with 2
CFR 200.344(a). The proposed rule's provision stated that the PJ must
complete all activities for which the funds were expended. This may
have been confusing to the PJs as HOME funds are not to be used after
the budget period. As such, HUD revised the language to appropriately
characterize the PJ's actions as providing HUD with information
demonstrating it has completed all the programmatic and administrative
requirements within the period of performance and not that HUD was
allowing for completion of activities after the budget period had
expired.
The Department is revising Sec. 92.507(b)(3) to remove the word
``remaining'' when characterizing the data to be entered into the
computerized disbursement and information system established by HUD.
This was for clarity. Similarly, the Department is revising both
paragraph (b)(5) and (b)(10) to improve the grammatical structure of
each provision by removing ``the participating jurisdiction must.''
This is because the lead-in sentence in Sec. 92.507(b) already states
that the PJ must take the following actions to close out a grant and
therefore it is unnecessary to repeat the words in those provisions.
The Department is revising Sec. 92.507(b)(10)(i) to specify that
instead of cancelling the unused grant funds, those funds shall be
returned to the U.S. Treasury. This is clearer language and more
directly states the mechanics of what is occurring during closeout.
Paragraph Sec. 92.507(b)(10)(iv) and Sec. 92.507(c)(6) are both being
revised to include both a State and a consortium in the list of
entities that qualify as a PJ. If a jurisdiction is not a PJ as a
metropolitan city, urban county, State, consortium, or consortium
member when it receives program income, recaptured funds, or repayments
in accordance with Sec. 92.503, then the funds are not subject to the
requirements of 24 CFR part 92. The proposed rule inadvertently
excluded States and consortia, both of which are types of PJs. The
Department is also revising Sec. 92.507(c)(8) to remove the
parenthetical citation at the end because it was unnecessary and
confusing.
The Department is making a technical revision to Sec.
92.507(b)(10)(viii) to specify that the PJ's certification acknowledges
that future monitoring by HUD will occur, ``including'' that findings
of noncompliance may be taken into account by HUD as unsatisfactory
performance of the PJ and in any risk-based assessment of any future
grant
[[Page 769]]
award under the HOME program in the future.
The Department also revised the reference to recordkeeping
requirements in 2 CFR part 200 that are applicable to PJs to ``2 CFR
200.345, as applicable.'' The provision references applicable
provisions in 2 CFR 200.337 through 2 CFR 200.345, as had been provided
in the proposed rule, and therefore is a non-substantive change.
24 CFR 92.508 Recordkeeping
The Department is revising the first sentence to Sec.
92.508(a)(3)(vii) to state that PJs must maintain records demonstrating
that each rental housing project met the affordability and income
targeting requirements of Sec. 92.252 for the required period or met
the requirements in Sec. 92.255 for conversion to homeownership for
in-place tenants. This aligns with changes made to Sec. 92.254(a) and
Sec. 92.255(b) and provides a recordkeeping requirement that
contemplates conversion of rental housing units to homeownership units
for in-place tenants in accordance with Sec. 92.255.
Consistent with changes made by the Department to other sections
requiring that there be a minimum level of tenant protections for
families receiving security deposit assistance, HUD is adding
``security deposit assistance'' to Sec. 92.508(a)(3)(ix) to require
that the PJ maintain records demonstrating that each family receiving
such assistance had a lease that included a HOME security deposit
assistance addendum in accordance with Sec. 92.253(d).
24 CFR 570.200 General Policies
In the proposed rule, HUD proposed to revise the introductory text
of Sec. 570.200(h). However, HUD's proposed revisions would have
decoupled the effective date of a grant agreement from a grantee's
program year start date and would have subjected many grantees to pre-
award costs on an annual basis. After considering public comments, HUD
has determined the need to maintain the connection between the grant
agreement effective date and program year start dates to reserve pre-
award costs to those incurred before a program year start date and,
therefore, is retaining the existing introductory text to Sec.
570.200(h). Instead, HUD is adding a new Sec. 570.200(h)(3) to make
the effective date of the grant agreement, in a year when an annual
appropriation occurs less than ninety days before a grant recipient's
program year start date, the earlier of either the program year start
date or the date that the consolidated plan is received by HUD. This
change better aligns CDBG with the new HOME program regulation at Sec.
91.212(b)(2) and continues practices implemented through annual
waivers.
IV. Public Comments
General Comments
A. Comments in Support for the Proposed Rule
Multiple commenters expressed general support for the regulatory
proposals described in the proposed rule. Commenters stated that they
support the regulatory proposals described in the proposed rule because
they will simplify and align programs to create more affordable housing
for persons needing housing assistance. One commenter stated that the
proposed rule's changes would improve housing stability of low-income
households. Another said it would promote program flexibility, HUD's
mission, and clarity and alignment with other Federal programs. One
commenter expressed support for the proposed rule because it will make
the HOME program more accessible and user-friendly in rural places. One
commenter stated that they support the proposed changes because they
may lead to shorter waiting periods to receive housing. Another
commenter stated that the proposed rule would help to more effectively
use resources to narrow the racial homeownership and wealth gaps.
HUD Response: HUD thanks the commenters for reviewing and is moving
forward with a final rule.
B. The Rule Increases Program Alignment
Commenters supported HUD's proposed changes to streamline HOME
program requirements to align with the CDBG and Section 8 programs
because the commenter believes it would ensure consistency with the
implementation of changes to the HOME program.
HUD Response: HUD thanks the commenters for reviewing the proposed
rule. The Department further aligned the HOME regulations with the CDBG
and Section 8 programs in this final rule.
C. The Rule Should Be Revised To Account for Manufactured Housing
One commenter urged HUD to explicitly address manufactured homes
and manufactured home communities in the rule and guidance. The
commenter's suggestions included explicitly clarifying that
manufactured homes are a permissible HOME housing type, that
manufactured housing titled as real property or personal property are
eligible for HOME assistance, that permissible land tenure types
include manufactured home on land that is owned by the homeowner or
leased in manufactured home communities, that manufactured home
communities are explicitly named as permissible for affordable housing
preservation, that non-profit shared-equity cooperatives are explicitly
named as being eligible for HOME funding as is the water and sewer
infrastructure they own.
HUD Response: Manufactured homes and lots are explicitly included
in the definition of ``housing'' in Sec. 92.2. To be considered a
homeowner for purposes of the HOME program, a manufactured homeowner
must only have a ground lease as long as the period of affordability
required in accordance with Sec. 92.254.\20\ This is more flexible
than the 50-year ground lease required to constitute homeownership on
Indian trust lands and land held by CLTs, and is the most flexible
definition of homeownership in the HOME program.
---------------------------------------------------------------------------
\20\ See paragraph (1) of the definition of homeownership in 24
CFR 92.2.
---------------------------------------------------------------------------
While the Department is not explicitly revising its regulations to
change the definition of homeownership for manufactured homeowners, HUD
notes that if manufactured home communities structure their ground
leases or ownership in accordance with the HOME homeownership
requirements, then purchasers may be eligible under the HOME
regulations. When designing their HOME programs, participating
jurisdictions are required to consider the housing needs within their
jurisdiction, including the needs of those who own or wish to purchase
a manufactured home.
D. The Rule Is More Burdensome
Another commenter stated that, while supportive of some of the
rule's proposed changes, the proposed rule would increase
administrative burden and that this adds to other administrative costs
from Section 3, BABA, and VAWA.
HUD Response: The Department believes that the requirements
contained in this final rule will reduce burden and compliance will be
less costly than the current requirements. The Department understands
that Section 3; Build America, Buy America; and Violence Against Women
Act requirements each may add different requirements on HUD grantees.
These requirements may change the way that the participating
jurisdiction contracts for goods and services, or how the participating
jurisdiction assist survivors of domestic violence, dating violence,
sexual assault, stalking, or human trafficking. However, these
requirements are not within the scope of this rulemaking. The
[[Page 770]]
Department will continue to assess ways to further reduce the burdens
of compliance with various independent statutory requirements.
E. HUD Should Further Streamline the Requirements of the HOME Program
A commenter stated that HUD's rulemaking should seek to further
streamline the HOME program and reduce regulatory and compliance
burdens because these burdens detract from the value of limited
resources provided to HOME-assisted projects.
HUD Response: The Department agrees with the commenter and engaged
in further streamlining of HOME requirements including but not limited
to income examinations, physical condition inspections, and rent
determinations.
F. Legislative Reform Necessary
Commenters supported legislative reform of modernization of the
HOME program overall or particular statutory provisions. One commenter
recommended that HUD continue to work with Congress to develop and pass
legislation to reauthorize and further modernize the HOME program.
HUD Response: The Department thanks the commenters for sharing
their view and notes that it also has called for legislative reform of
HOME in recent HUD Budget Requests.
G. Technical Assistance, Training, and Guidance
Several commenters requested technical assistance, guidance, or
training on various topics in the regulation.
HUD Response: The Department agrees with commenters that it must
provide significant training, guidance, and technical assistance on
this final rule to assist participating jurisdictions and other program
participants comply with new requirements and exercise new
flexibilities.
Streamlining Terminology
A. Replacing ``Downpayment Assistance'' With ``Homeownership
Assistance''
Commenters supported HUD's proposal to change the definition of
``downpayment assistance'' to ``homeownership assistance.'' Two
commenters said this change would provide participating jurisdictions
and HUD regional offices with the clarity needed to understand the full
breadth of homeownership-related activities that are allowable using
HOME funding in addition to downpayment assistance. One commenter said
that this change would increase affordable housing supply by
facilitating the use of HOME funds by developers to construct or
rehabilitate owner-occupied housing. One commenter suggested that a
clear assertion that HOME covers more than downpayment assistance alone
will more easily allow affordable housing developers to use these funds
to construct or rehabilitate more owner-occupied housing, adding more
units to a dwindling affordable supply.
One commenter stated that HUD has several instances where the term
``downpayment assistance'' is used instead of ``homeowner assistance''
despite the noted substitution, which has resulted in confusion. The
commenter noted the following instances of ``downpayment assistance''
appearing in several other locations within the text of the rule
including Sec. Sec. 92.203(d); 92.209(c)(2)(iv); 92.250(b)(4); Sec.
92.251(c)(3); 92.300(a)(6)(i); 92.351(a)(1); 92.504(c)(1)(i);
92.504(c)(2)(i).
HUD Response: HUD thanks the commenters for reviewing and is moving
forward with this change. In examining the regulation and comments, the
Department determined that there were numerous instances where the term
``downpayment assistance'' persisted and has made revisions to the term
in Sec. Sec. 92.203, 92.209, 92.250, 92.251, 92.300, 92.351, and
92.504.
B. Replacing ``Dwelling'' With ``Housing''
A commenter stated that they support the proposed change of
replacing the term ``dwelling'' with ``housing'' for the HOME program,
TBRA program, and income targeting for homeownership.
HUD Response: HUD thanks the commenters for reviewing. HUD will
move forward with replacing the term ``dwelling'' with ``housing''
where the Department determines that this is accurate terminology. The
Department did note that in relation to HOME regulations implementing
the Uniform Relocation Assistance and Real Property Acquisition
Policies Act (URA) (42 U.S.C. 4601 et seq.), and its regulations at 49
CFR part 24, as amended, and Section 104(d) of the Housing and
Community Development Act (42 U.S.C. 5304(d)) and its regulations at 24
CFR part 42, the term ``dwelling'' is more consistent with the
underlying statutory and regulatory terminology and will be maintaining
the usage of the term in that area of the HOME regulations. Similarly,
the Department will be retaining the use of this terminology in
relation to accessibility requirements, which refer to applicable
definitions outside of 24 CFR part 92. In performing its review, the
Department determined there were additional areas whether the term
``housing'' was more appropriate than ``dwelling'' including in
Sec. Sec. 92.2, 92.219, 92.253, 92.254, and 92.258. The Department is
revising these regulations accordingly.
C. Replacing ``Affordability Period'' With ``Period of Affordability''
Commenters supported HUD's proposed definition of ``period of
affordability.'' One commenter supported the consistent use of the term
but noted that the old term persists in certain places in the
regulation.
HUD Response: HUD thanks the commenters for reviewing and is moving
forward with the revised term ``period of affordability.'' The
Department has also revised the remaining references to ``affordability
period'' to read as ``period of affordability'' to maintain consistent
terminology.
D. Replacing ``Single-Family'' With ``Single Family''
One commenter thanked the Department for streamlining the term
single family while another commenter noted places where certain
terminology was not corrected.
HUD Response: The Department noted that there were instances in
which the term was not corrected and is making changes to Sec. 92.2.
and Sec. 92.220.
Sec. 92.2--Commitment Definition
A. General Support
One commenter supported changing the language of the definition of
``commitment'' from ``official'' to ``officials'' And from
``downpayment assistance'' to homeownership assistance.
HUD Response: HUD appreciates the commenter's support and will move
forward with these changes.
B. Paragraph (2) of the Commitment Definition--Commit to a Specific
Local Project--Opposition to Requirement To Secure All Project
Financing Before Commitment
One commenter stated that HUD should consider revising paragraph
(2)(i) of the definition of ``commitment'' in Sec. 92.2 because
requiring applicants to secure all project funding before receiving a
commitment of HOME funds is overly burdensome, particularly for
nonprofit developers. The commenter explained that this upfront secured
funding requirement could result in fewer applications for HOME funding
and should be removed. The commenter also suggested expanding the
meaning
[[Page 771]]
of construction to include incurring typical pre-development costs such
as architectural and engineering costs.
HUD Response: Commenters urged HUD to revise the definition of
commit to a specific local project by removing the requirement that all
project financing be secured before commitment. The Department did not
propose a change to these requirements and declines to make these
proposed changes at the final rule stage. HUD believes these
requirements to be essential to ensuring that HOME funds are not
committed to and used for projects that have not secured all the
financing necessary to enable the project to be successfully and timely
completed. The Department is not defining construction or expanding the
meaning of construction to include pre-development activities such as
architectural and engineering costs. The type of costs that the
commenter is describing are project-related soft costs.
Under the current regulation, project related soft costs, which
include architectural and engineering costs, may be reimbursed if they
are 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 these costs in the
written agreement committing the funds to the project. The proposed
rule added the cost of environmental reviews and studies to this
provision.
The Department received several comments on HUD's revision to Sec.
92.206(d)(1) to allow HUD environmental review or other environmental
studies or assessments to be reimbursable costs incurred prior to when
funds were committed to a project. Those commenters urged the
Department to consider expanding the types of costs that would be
allowed to be incurred to include ``pre-development'' or other related
soft costs. The Department agrees with the commenters and is expanding
the project soft costs that may be incurred prior to a commitment to
include costs to process and settle financing for the project,
including private lender origination fees, credit reports, fees for
title evidence, legal fees, private appraisal fees, and fees for
independent cost estimates. These were all contained in paragraph
(d)(2) but will now be deleted from paragraph (d)(2) and added to
paragraph (d)(1). While the Department is moving these provisions to
paragraph (d)(2), the Department determined that several provisions
could not be moved because there is no reasonable expectation that they
should occur prior to commitment. These provisions include obtaining
building permits, which require HUD environmental review; fees for
recordation and filing of legal documents, as recorded documents
relating to an acquisition, rehabilitation, or new construction project
should occur after commitment of HOME funds; and builders or developers
fees, as those fees should not be earned and chargeable to the HOME
grant for work performed prior to the environmental review and
commitment of the HOME funds to the project.
Additionally, because of specific public comment, the Department
also added ``accounting fees'', ``filing fees for zoning or planning
review and approval'', and ``other lender-required third-party
reporting fees'' to paragraph (d)(1). By moving or adding the soft
costs into paragraph (d)(1), HUD is allowing the above-described costs
to be paid as long as they were incurred no more than 24 months before
the date of commitment, and they were included in the written agreement
committing the funds.
C. Paragraph (2) of the Commitment Definition--Commit to a Specific
Local Project--Opposition to Requirement That Construction Must Be
Scheduled To Start Within Twelve Months of the Agreement Date
Commenters urged HUD to lengthen the time between commitment and
the start of construction from the current 12 months. One commenter
proposed extending the timeframe to 24 months because of the extensive
backlog of construction work and the loss of available and qualified
contractors. Another commenter stated that HUD's 12-month timeline
could be challenging if the construction cycle is tied to hard costs or
providing additional guidance for circumstances in which the 12-month
deadline is missed.
HUD Response: HUD appreciates the commenter's review of the
proposed rule and this recommendation. The Department did not propose a
change to the 12-month time period between the date of the written
agreement and the start of construction on a HOME-assisted project. The
12-month requirement has been in the commitment definition since 1991
and ensures that HOME funds are not prematurely committed to projects
that are not ready to move to construction. HUD declines to adopt the
suggested change. In addition, HUD notes that the 12 months is not a
deadline; the current rule states that a participating jurisdiction
must have a reasonable expectation that construction will begin within
12 months when committing HOME funds to a specific local project. This
expectation can be demonstrated by the construction schedule appended
to the written agreement committing the funds.
Sec. 92.2--Community Housing Development Organization Definition
A. General Comments
Many commenters supported the changes and stated that the proposed
rule would create more opportunities for nonprofits to become CHDOs,
expand the nonprofit affordable housing delivery system, expand the
capacity of CHDOs, and make it easier for participating jurisdictions
to use their CHDO set-aside funds. Other comments expressed concern
about or opposition to HUD's proposed changes, particularly changes
aimed at increasing eligible CHDOs in rural areas. One commenter stated
that, despite having concerns about certain HUD proposals, it
appreciates HUD's efforts to make CHDO designation easier to attain and
retain particularly in areas with few or no CHDOs. Another commenter
stated that while the commenter is supportive of the proposed changes
that would create opportunities for organizations to participate in
housing development and build their own capacity, HUD should consider
additional policy safeguards to preserve the purpose of the set-aside
and ensure that unintended consequences, such as bad actors meeting the
letter of the requirements but ``not the spirit of the designation,''
do not outweigh the benefits. One commenter stated that it appreciates
HUD's effort to expand options for meeting the low-income board
requirement but does not believe it will make a significant difference
in the number of organizations that will seek the CHDO designation. The
commenter stated that meeting the 15 percent CHDO set-aside requirement
will continue to be a challenge for many participating jurisdictions
irrespective of the proposed changes.
HUD Response: HUD believes that there are appropriate safeguards in
place in the final rule because the designees of nonprofit
organizations that may serve on the board only count towards the one-
third board representation requirement if they represent organizations
that ``address the housing or supportive service needs of low-income
residents or residents of low-income neighborhoods.'' This connection
to the community, and the list of examples HUD provides to further
elaborate on the types of groups and the role they must play within the
community, demonstrate that the intent
[[Page 772]]
is not to water down a CHDO's ties to the community but to strengthen
them. Promoting board representation for victim service providers,
homeless providers, organizations involved in promoting or defending
civil rights, disability advoca
[…truncated; see source link]Indexed from Federal Register on January 6, 2025.
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.